[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3103 Engrossed Amendment Senate (EAS)]
In the Senate of the United States,
April 23, 1996.
Resolved, That the bill from the House of Representatives (H.R.
3103) entitled ``An Act to amend the Internal Revenue Code of 1986 to
improve portability and continuity of health insurance coverage in the
group and individual markets, to combat waste, fraud, and abuse in
health insurance and health care delivery, to promote the use of
medical savings accounts, to improve access to long-term care services
and coverage, to simplify the administration of health insurance, and
for other purposes'', do pass with the following
AMENDMENT:
Strike out all after the enacting clause and insert:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Health Insurance
Reform Act of 1996''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
TITLE I--HEALTH CARE ACCESS, PORTABILITY, AND RENEWABILITY
Subtitle A--Group Market Rules
Sec. 101. Guaranteed availability of health coverage.
Sec. 102. Guaranteed renewability of health coverage.
Sec. 103. Portability of health coverage and limitation on preexisting
condition exclusions.
Sec. 104. Special enrollment periods.
Sec. 105. Disclosure of information.
Subtitle B--Individual Market Rules
Sec. 110. Individual health plan portability.
Sec. 111. Guaranteed renewability of individual health coverage.
Sec. 112. State flexibility in individual market reforms.
Sec. 113. Definition.
Subtitle C--COBRA Clarifications
Sec. 121. COBRA clarifications.
Subtitle D--Private Health Plan Purchasing Cooperatives
Sec. 131. Private health plan purchasing cooperatives.
TITLE II--APPLICATION AND ENFORCEMENT OF STANDARDS
Sec. 201. Applicability.
Sec. 202. Enforcement of standards.
TITLE III--MISCELLANEOUS PROVISIONS
Sec. 301. HMOs allowed to offer plans with deductibles to individuals
with medical savings accounts.
Sec. 302. Health coverage availability study.
Sec. 303. Reimbursement of telemedicine.
Sec. 304. Sense of the Committee concerning medicare.
Sec. 305. Parity for mental health services.
Sec. 306. Waiver of foreign country residence requirement with respect
to international medical graduates.
Sec. 307. Organ and tissue donation information included with income
tax refund payments.
Sec. 308. Sense of the Senate regarding adequate health care coverage
for all children and pregnant women.
Sec. 309. Sense of the Senate regarding available treatments.
Sec. 310. Medical volunteers.
Sec. 311. Effective date.
Sec. 312. Severability.
TITLE IV--TAX-RELATED HEALTH PROVISIONS
Sec. 400. Short title; amendment of 1986 Code.
Subtitle A--Increase in Deduction for Health Insurance Costs of Self-
Employed Individuals
Sec. 401. Increase in self-employed individuals' deduction for health
insurance costs.
Subtitle B--Long-Term Care Provisions
Chapter 1--Long-Term Care Services and Contracts
subchapter a--general provisions
Sec. 411. Treatment of long-term care insurance.
Sec. 412. Qualified long-term care services treated as medical care.
Sec. 413. Certain exchanges of life insurance contracts for qualified
long-term care insurance contracts not
taxable.
Sec. 414. Exception from penalty tax for amounts withdrawn from certain
retirement plans for qualified long-term
care insurance.
Sec. 415. Reposubchapter b--consumer protection provisions
Sec. 421. Policy requirements.
Sec. 422. Requirements for issuers of long-term care insurance
policies.
Sec. 423. Coordination with State requirements.
Sec. 424. Effective dates.
Chapter 2--Treatment Of Accelerated Death Benefits
Sec. 431. Treatment of accelerated death benefits by recipient.
Sec. 432. Tax treatment of companies issuing qualified accelerated
death benefit riders.
Subtitle C--High-Risk Pools
Sec. 451. Exemption from income tax for State-sponsored organizations
providing health coverage for high-risk
individuals.
Subtitle D--Penalty-Free IRA Distributions
Sec. 461. Distributions from certain plans may be used without penalty
to pay financially devastating medical
expenses.
Subtitle E--Revenue Offsets
Chapter 1--Treatment Of Individuals Who Expatriate
Sec. 471. Revision of tax rules on expatriation.
Sec. 472. Information on individuals expatriating.
Sec. 473. Report on tax compliance by United States citizens and
residents living abroad.
Chapter 2--Company-Owned Insurance
Sec. 495. Denial of deduction for interest on loans with respect to
company-owned insurance.
TITLE V--HEALTH CARE FRAUD AND ABUSE PREVENTION
Sec. 500. Amendments.
Subtitle A--Fraud and Abuse Control Program
Sec. 501. Fraud and abuse control program.
Sec. 502. Medicare integrity program.
Sec. 503. Beneficiary incentive programs.
Sec. 504. Application of certain health anti-fraud and abuse sanctions
to fraud and abuse against Federal health
care programs.
Sec. 505. Guidance regarding application of health care fraud and abuse
sanctions.
Subtitle B--Revisions to Current Sanctions for Fraud and Abuse
Sec. 511. Mandatory exclusion from participation in medicare and State
health care programs.
Sec. 512. Establishment of minimum period of exclusion for certain
individuals and entities subject to
permissive exclusion from medicare and
State health care programs.
Sec. 513. Permissive exclusion of individuals with ownership or control
interest in sanctioned entities.
Sec. 514. Sanctions against practitioners and persons for failure to
comply with statutory obligations.
Sec. 515. Intermediate sanctions for medicare health maintenance
organizations.
Sec. 516. Additional exceptions to anti-kickback penalties for risk-
sharing arrangements.
Sec. 517. Effective date.
Subtitle C--Data Collection and Miscellaneous Provisions
Sec. 521. Establishment of the health care fraud and abuse data
collection program.
Subtitle D--Civil Monetary Penalties
Sec. 531. Social Security Act civil monetary penalties.
Subtitle E--Amendments to Criminal Law
Sec. 541. Health care fraud.
Sec. 542. Forfeitures for Federal health care offenses.
Sec. 543. Injunctive relief relating to Federal health care offenses.
Sec. 544. False statements.
Sec. 545. Obstruction of criminal investigations of Federal health care
offenses.
Sec. 546. Theft or embezzlement.
Sec. 547. Laundering of monetary instruments.
Sec. 548. Authorized investigative demand procedures.
TITLE VI--INTERNAL REVENUE CODE AND OTHER PROVISIONS
Sec. 600. References.
Subtitle A--Foreign Trust Tax Compliance
Sec. 601. Improved information reporting on foreign trusts.
Sec. 602. Modifications of rules relating to foreign trusts having one
or more United States beneficiaries.
Sec. 603. Foreign persons not to be treated as owners under grantor
trust rules.
Sec. 604. Information reporting regarding foreign gifts.
Sec. 605. Modification of rules relating to foreign trusts which are
not grantor trusts.
Sec. 606. Residence of estates and trusts, etc.
Subtitle B--Repeal of Bad Debt Reserve Method for Thrift Savings
Associations
Sec. 611. Repeal of bad debt reserve method for Thrift Savings
Associations.
Subtitle C--Other Provisions
Sec. 621. Extension of medicare secondary payor provisions.
Sec. 622. Annual adjustment factors for operating costs only; restraint
on rent increases.
Sec. 623. Foreclosure avoidance and borrower assistance.
SEC. 2. DEFINITIONS.
As used in this Act:
(1) Beneficiary.--The term ``beneficiary'' has the meaning
given such term under section 3(8) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1002(8)).
(2) Employee.--The term ``employee'' has the meaning given
such term under section 3(6) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(6)).
(3) Employer.--The term ``employer'' has the meaning given
such term under section 3(5) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(5)), except that such term
shall include only employers of two or more employees.
(4) Employee health benefit plan.--
(A) In general.--The term ``employee health benefit
plan'' means any employee welfare benefit plan,
governmental plan, or church plan (as defined under
paragraphs (1), (32), and (33) of section 3 of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1002 (1), (32), and (33))), or any health
benefit plan under section 5(e) of the Peace Corps Act
(22 U.S.C. 2504(e)), that provides or pays for health
benefits (such as provider and hospital benefits) for
participants and beneficiaries whether--
(i) directly;
(ii) through a group health plan offered by
a health plan issuer as defined in paragraph
(8); or
(iii) otherwise.
(B) Rule of construction.--An employee health
benefit plan shall not be construed to be a group
health plan, an individual health plan, or a health
plan issuer.
(C) Arrangements not included.--Such term does not
include the following, or any combination thereof:
(i) Coverage only for accident, or
disability income insurance, or any combination
thereof.
(ii) Medicare supplemental health insurance
(as defined under section 1882(g)(1) of the
Social Security Act).
(iii) Coverage issued as a supplement to
liability insurance.
(iv) Liability insurance, including general
liability insurance and automobile liability
insurance.
(v) Workers compensation or similar
insurance.
(vi) Automobile medical payment insurance.
(vii) Coverage for a specified disease or
illness.
(viii) Hospital or fixed indemnity
insurance.
(ix) Short-term limited duration insurance.
(x) Credit-only, dental-only, or vision-
only insurance.
(xi) A health insurance policy providing
benefits only for long-term care, nursing home
care, home health care, community-based care,
or any combination thereof.
(5) Family.--
(A) In general.--The term ``family'' means an
individual, the individual's spouse, and the child of
the individual (if any).
(B) Child.--For purposes of subparagraph (A), the
term ``child'' means any individual who is a child
within the meaning of section 151(c)(3) of the Internal
Revenue Code of 1986.
(6) Group health plan.--
(A) In general.--The term ``group health plan''
means any contract, policy, certificate or other
arrangement offered by a health plan issuer to a group
purchaser that provides or pays for health benefits
(such as provider and hospital benefits) in connection
with an employee health benefit plan.
(B) Arrangements not included.--Such term does not
include the following, or any combination thereof:
(i) Coverage only for accident, or
disability income insurance, or any combination
thereof.
(ii) Medicare supplemental health insurance
(as defined under section 1882(g)(1) of the
Social Security Act).
(iii) Coverage issued as a supplement to
liability insurance.
(iv) Liability insurance, including general
liability insurance and automobile liability
insurance.
(v) Workers compensation or similar
insurance.
(vi) Automobile medical payment insurance.
(vii) Coverage for a specified disease or
illness.
(viii) Hospital or fixed indemnity
insurance.
(ix) Short-term limited duration insurance.
(x) Credit-only, dental-only, or vision-
only insurance.
(xi) A health insurance policy providing
benefits only for long-term care, nursing home
care, home health care, community-based care,
or any combination thereof.
(7) Group purchaser.--The term ``group purchaser'' means
any person (as defined under paragraph (9) of section 3 of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1002(9)) or entity that purchases or pays for health benefits
(such as provider or hospital benefits) on behalf of two or
more participants or beneficiaries in connection with an
employee health benefit plan. A health plan purchasing
cooperative established under section 131 shall not be
considered to be a group purchaser.
(8) Health plan issuer.--The term ``health plan issuer''
means any entity that is licensed (prior to or after the date
of enactment of this Act) by a State to offer a group health
plan or an individual health plan.
(9) Participant.--The term ``participant'' has the meaning
given such term under section 3(7) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1002(7)).
(10) Plan sponsor.--The term ``plan sponsor'' has the
meaning given such term under section 3(16)(B) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1002(16)(B)).
(11) Secretary.--The term ``Secretary'', unless
specifically provided otherwise, means the Secretary of Labor.
(12) State.--The term ``State'' means each of the several
States, the District of Columbia, Puerto Rico, the United
States Virgin Islands, Guam, American Samoa, and the
Commonwealth of the Northern Mariana Islands.
TITLE I--HEALTH CARE ACCESS, PORTABILITY, AND RENEWABILITY
Subtitle A--Group Market Rules
SEC. 101. GUARANTEED AVAILABILITY OF HEALTH COVERAGE.
(a) In General.--
(1) Nondiscrimination.--Except as provided in subsection
(b), section 102 and section 103--
(A) a health plan issuer offering a group health
plan may not decline to offer whole group coverage to a
group purchaser desiring to purchase such coverage; and
(B) an employee health benefit plan or a health
plan issuer offering a group health plan may establish,
under the terms of such plan, eligibility, enrollment,
or premium contribution requirements for individual
participants or beneficiaries, except that such
requirements shall not be based on health status,
medical condition, claims experience, receipt of health
care, medical history, evidence of insurability
(including conditions arising out of acts of domestic
violence), genetic information, or disability.
(2) Health promotion and disease prevention.--Nothing in
this subsection shall prevent an employee health benefit plan
or a health plan issuer from establishing premium discounts or
modifying otherwise applicable copayments or deductibles in
return for adherence to programs of health promotion and
disease prevention.
(b) Application of Capacity Limits.--
(1) In general.--Subject to paragraph (2), a health plan
issuer offering a group health plan may cease offering coverage
to group purchasers under the plan if--
(A) the health plan issuer ceases to offer coverage
to any additional group purchasers; and
(B) the health plan issuer can demonstrate to the
applicable certifying authority (as defined in section
202(d)), if required, that its financial or provider
capacity to serve previously covered participants and
beneficiaries (and additional participants and
beneficiaries who will be expected to enroll because of
their affiliation with a group purchaser or such
previously covered participants or beneficiaries) will
be impaired if the health plan issuer is required to
offer coverage to additional group purchasers.
Such health plan issuer shall be prohibited from offering
coverage after a cessation in offering coverage under this
paragraph for a 6-month period or until the health plan issuer
can demonstrate to the applicable certifying authority (as
defined in section 202(d)) that the health plan issuer has
adequate capacity, whichever is later.
(2) First-come-first-served.--A health plan issuer offering
a group health plan is only eligible to exercise the
limitations provided for in paragraph (1) if the health plan
issuer offers coverage to group purchasers under such plan on a
first-come-first-served basis or other basis established by a
State to ensure a fair opportunity to enroll in the plan and
avoid risk selection.
(c) Construction.--
(1) Marketing of group health plans.--Nothing in this
section shall be construed to prevent a State from requiring
health plan issuers offering group health plans to actively
market such plans.
(2) Involuntary offering of group health plans.--Nothing in
this section shall be construed to require a health plan issuer
to involuntarily offer group health plans in a particular
market or to require a health plan issuer to involuntarily
issue a group health plan to a group health plan purchaser in a
particular market if the group health plan was specifically
designed for a different market. For the purposes of this
paragraph, the term ``market'' means either the large employer
market or the small employer market (as defined under
applicable State law, or if not so defined, an employer with
more than one employee and not more than 50 employees).
SEC. 102. GUARANTEED RENEWABILITY OF HEALTH COVERAGE.
(a) In General.--
(1) Group purchaser.--Subject to subsections (b) and (c), a
group health plan shall be renewed or continued in force by a
health plan issuer at the option of the group purchaser, except
that the requirement of this subparagraph shall not apply in
the case of--
(A) the nonpayment of premiums or contributions by
the group purchaser in accordance with the terms of the
group health plan or where the health plan issuer has
not received timely premium payments;
(B) fraud or misrepresentation of material fact on
the part of the group purchaser;
(C) the termination of the group health plan in
accordance with subsection (b); or
(D) the failure of the group purchaser to meet
contribution or participation requirements in
accordance with paragraph (3).
(2) Participant.--Subject to subsections (b) and (c),
coverage under an employee health benefit plan or group health
plan shall be renewed or continued in force, if the group
purchaser elects to continue to provide coverage under such
plan, at the option of the participant (or beneficiary where
such right exists under the terms of the plan or under
applicable law), except that the requirement of this paragraph
shall not apply in the case of--
(A) the nonpayment of premiums or contributions by
the participant or beneficiary in accordance with the
terms of the employee health benefit plan or group
health plan or where such plan has not received timely
premium payments;
(B) fraud or misrepresentation of material fact on
the part of the participant or beneficiary relating to
an application for coverage or claim for benefits;
(C) the termination of the employee health benefit
plan or group health plan;
(D) loss of eligibility for continuation coverage
as described in part 6 of subtitle B of title I of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1161 et seq.); or
(E) failure of a participant or beneficiary to meet
requirements for eligibility for coverage under an
employee health benefit plan or group health plan that
are not prohibited by this Act.
(3) Rules of Construction.--Nothing in this subsection, nor
in section 101(a), shall be construed to--
(A) preclude a health plan issuer from establishing
employer contribution rules or group participation
rules for group health plans as allowed under
applicable State law;
(B) preclude a plan defined in section 3(37) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1102(37)) from establishing employer
contribution rules or group participation rules; or
(C) permit individuals to decline coverage under an
employee health benefit plan if such right is not
otherwise available under such plan.
(b) Termination of Group Health Plans.--
(1) Particular type of group health plan not offered.--In
any case in which a health plan issuer decides to discontinue
offering a particular type of group health plan, a group health
plan of such type may be discontinued by the health plan issuer
only if--
(A) the health plan issuer provides notice to each
group purchaser covered under a group health plan of
this type (and participants and beneficiaries covered
under such group health plan) of such discontinuation
at least 90 days prior to the date of the
discontinuation of such plan;
(B) the health plan issuer offers to each group
purchaser covered under a group health plan of this
type, the option to purchase any other group health
plan currently being offered by the health plan issuer;
and
(C) in exercising the option to discontinue a group
health plan of this type and in offering one or more
replacement plans, the health plan issuer acts
uniformly without regard to the health status or
insurability of participants or beneficiaries covered
under the group health plan, or new participants or
beneficiaries who may become eligible for coverage
under the group health plan.
(2) Discontinuance of all group health plans.--
(A) In general.--In any case in which a health plan
issuer elects to discontinue offering all group health
plans in a State, a group health plan may be
discontinued by the health plan issuer only if--
(i) the health plan issuer provides notice
to the applicable certifying authority (as
defined in section 202(d)) and to each group
purchaser (and participants and beneficiaries
covered under such group health plan) of such
discontinuation at least 180 days prior to the
date of the expiration of such plan; and
(ii) all group health plans issued or
delivered for issuance in the State are
discontinued and coverage under such plans is
not renewed.
(B) Application of provisions.--The provisions of
this paragraph and paragraph (3) may be applied
separately by a health plan issuer--
(i) to all group health plans offered to
small employers (as defined under applicable
State law, or if not so defined, an employer
with not more than 50 employees); or
(ii) to all other group health plans
offered by the health plan issuer in the State.
(3) Prohibition on market reentry.--In the case of a
discontinuation under paragraph (2), the health plan issuer may
not provide for the issuance of any group health plan in the
market sector (as described in paragraph (2)(B)) in which
issuance of such group health plan was discontinued in the
State involved during the 5-year period beginning on the date
of the discontinuation of the last group health plan not so
renewed.
(c) Treatment of Network Plans.--
(1) Geographic limitations.--A network plan (as defined in
paragraph (2)) may deny continued participation under such plan
to participants or beneficiaries who neither live, reside, nor
work in an area in which such network plan is offered, but only
if such denial is applied uniformly, without regard to health
status or the insurability of particular participants or
beneficiaries.
(2) Network plan.--As used in paragraph (1), the term
``network plan'' means an employee health benefit plan or a
group health plan that arranges for the financing and delivery
of health care services to participants or beneficiaries
covered under such plan, in whole or in part, through
arrangements with providers.
(d) COBRA Coverage.--Nothing in subsection (a)(2)(E) or subsection
(c) shall be construed to affect any right to COBRA continuation
coverage as described in part 6 of subtitle B of title I of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1161 et
seq.).
SEC. 103. PORTABILITY OF HEALTH COVERAGE AND LIMITATION ON PREEXISTING
CONDITION EXCLUSIONS.
(a) In General.--An employee health benefit plan or a health plan
issuer offering a group health plan may, with respect to a participant
or beneficiary, impose a limitation or exclusion of benefits, otherwise
available under the terms of the plan only if--
(1) such limitation or exclusion is a limitation or
exclusion of benefits relating to the treatment of a
preexisting condition; and
(2) such limitation or exclusion extends for a period of
not more than 12 months after the date of enrollment in the
plan.
(b) Crediting of Previous Qualifying Coverage.--
(1) In general.--Subject to paragraph (4), an employee
health benefit plan or a health plan issuer offering a group
health plan shall provide that if a participant or beneficiary
is in a period of previous qualifying coverage as of the date
of enrollment under such plan, any period of exclusion or
limitation of coverage with respect to a preexisting condition
shall be reduced by 1 month for each month in which the
participant or beneficiary was in the period of previous
qualifying coverage. With respect to a participant or
beneficiary described in subsection (e)(2)(A) who maintains
continuous coverage, no limitation or exclusion of benefits
relating to treatment of a preexisting condition may be applied
to a child within the child's first 12 months of life or within
12 months after the placement of a child for adoption.
(2) Discharge of duty.--An employee health benefit plan
shall provide documentation of coverage to participants and
beneficiaries whose coverage is terminated under the plan.
Pursuant to regulations promulgated by the Secretary, the duty
of an employee health benefit plan to verify previous
qualifying coverage with respect to a participant or
beneficiary is effectively discharged when such employee health
benefit plan provides documentation to a participant or
beneficiary that includes the following information:
(A) the dates that the participant or beneficiary
was covered under the plan; and
(B) the benefits and cost-sharing arrangement
available to the participant or beneficiary under such
plan.
An employee health benefit plan shall retain the documentation
provided to a participant or beneficiary under subparagraphs
(A) and (B) for at least the 12-month period following the date
on which the participant or beneficiary ceases to be covered
under the plan. Upon request, an employee health benefit plan
shall provide a second copy of such documentation to such
participant or beneficiary within the 12-month period following
the date of such ineligibility.
(3) Definitions.--As used in this section:
(A) Previous qualifying coverage.--The term
``previous qualifying coverage'' means the period
beginning on the date--
(i) a participant or beneficiary is
enrolled under an employee health benefit plan
or a group health plan, and ending on the date
the participant or beneficiary is not so
enrolled; or
(ii) an individual is enrolled under an
individual health plan (as defined in section
113) or under a public or private health plan
established under Federal or State law, and
ending on the date the individual is not so
enrolled;
for a continuous period of more than 30 days (without
regard to any waiting period).
(B) Limitation or exclusion of benefits relating to
treatment of a preexisting condition.--The term
``limitation or exclusion of benefits relating to
treatment of a preexisting condition'' means a
limitation or exclusion of benefits imposed on an
individual based on a preexisting condition of such
individual.
(4) Effect of previous coverage.--An employee health
benefit plan or a health plan issuer offering a group health
plan may impose a limitation or exclusion of benefits relating
to the treatment of a preexisting condition, subject to the
limits in subsection (a), only to the extent that such service
or benefit was not previously covered under the group health
plan, employee health benefit plan, or individual health plan
in which the participant or beneficiary was enrolled
immediately prior to enrollment in the plan involved.
(c) Late Enrollees.--Except as provided in section 104, with
respect to a participant or beneficiary enrolling in an employee health
benefit plan or a group health plan during a time that is other than
the first opportunity to enroll during an enrollment period of at least
30 days, coverage with respect to benefits or services relating to the
treatment of a preexisting condition in accordance with subsections (a)
and (b) may be excluded, except the period of such exclusion may not
exceed 18 months beginning on the date of coverage under the plan.
(d) Affiliation Periods.--With respect to a participant or
beneficiary who would otherwise be eligible to receive benefits under
an employee health benefit plan or a group health plan but for the
operation of a preexisting condition limitation or exclusion, if such
plan does not utilize a limitation or exclusion of benefits relating to
the treatment of a preexisting condition, such plan may impose an
affiliation period on such participant or beneficiary not to exceed 60
days (or in the case of a late participant or beneficiary described in
subsection (c), 90 days) from the date on which the participant or
beneficiary would otherwise be eligible to receive benefits under the
plan. An employee health benefit plan or a health plan issuer offering
a group health plan may also use alternative methods to address adverse
selection as approved by the applicable certifying authority (as
defined in section 202(d)). During such an affiliation period, the plan
may not be required to provide health care services or benefits and no
premium shall be charged to the participant or beneficiary.
(e) Preexisting Condition.--
(1) In general.--For purposes of this section, the term
``preexisting condition'' means a condition, regardless of the
cause of the condition, for which medical advice, diagnosis,
care, or treatment was recommended or received within the 6-
month period ending on the day before the effective date of the
coverage (without regard to any waiting period).
(2) Birth, adoption and pregnancy excluded.--The term
``preexisting condition'' does not apply to--
(A) an individual who, within 30 days of the date
of the birth or placement for adoption of a child (as
determined under section 609(c)(3)(B) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1169(c)(3)(B)), was covered under the plan; or
(B) pregnancy.
(f) State Flexibility.--Nothing in this section shall be construed
to preempt State laws that--
(1) require health plan issuers to impose a limitation or
exclusion of benefits relating to the treatment of a
preexisting condition for periods that are shorter than those
provided for under this section; or
(2) allow individuals, participants, and beneficiaries to
be considered to be in a period of previous qualifying coverage
if such individual, participant, or beneficiary experiences a
lapse in coverage that is greater than the 30-day period
provided for under subsection (b)(3); or
(3) require health plan issuers to have a lookback period
that is shorter than the period described in subsection (e)(1);
unless such laws are preempted by section 514 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1144).
SEC. 104. SPECIAL ENROLLMENT PERIODS.
In the case of a participant, beneficiary or family member who--
(1) through marriage, separation, divorce, death, birth or
placement of a child for adoption, experiences a change in
family composition affecting eligibility under a group health
plan, individual health plan, or employee health benefit plan;
(2) experiences a change in employment status, as described
in section 603(2) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1163(2)), that causes the loss of
eligibility for coverage, other than COBRA continuation
coverage under a group health plan, individual health plan, or
employee health benefit plan; or
(3) experiences a loss of eligibility under a group health
plan, individual health plan, or employee health benefit plan
because of a change in the employment status of a family
member;
each employee health benefit plan and each group health plan shall
provide for a special enrollment period extending for a reasonable time
after such event that would permit the participant to change the
individual or family basis of coverage or to enroll in the plan if
coverage would have been available to such individual, participant, or
beneficiary but for failure to enroll during a previous enrollment
period. Such a special enrollment period shall ensure that a child born
or placed for adoption shall be deemed to be covered under the plan as
of the date of such birth or placement for adoption if such child is
enrolled within 30 days of the date of such birth or placement for
adoption.
SEC. 105. DISCLOSURE OF INFORMATION.
(a) Disclosure of Information by Health Plan Issuers.--
(1) In general.--In connection with the offering of any
group health plan to a small employer (as defined under
applicable State law, or if not so defined, an employer with
not more than 50 employees), a health plan issuer shall make a
reasonable disclosure to such employer, as part of its
solicitation and sales materials, of--
(A) the provisions of such group health plan
concerning the health plan issuer's right to change
premium rates and the factors that may affect changes
in premium rates;
(B) the provisions of such group health plan
relating to renewability of coverage;
(C) the provisions of such group health plan
relating to any preexisting condition provision; and
(D) descriptive information about the benefits and
premiums available under all group health plans for
which the employer is qualified.
Information shall be provided to small employers under this
paragraph in a manner determined to be understandable by the
average small employer, and shall be sufficiently accurate and
comprehensive to reasonably inform small employers,
participants and beneficiaries of their rights and obligations
under the group health plan.
(2) Exception.--With respect to the requirement of
paragraph (1), any information that is proprietary and trade
secret information under applicable law shall not be subject to
the disclosure requirements of such paragraph.
(3) Construction.--Nothing in this subsection shall be
construed to preempt State reporting and disclosure
requirements to the extent that such requirements are not
preempted under section 514 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1144).
(b) Disclosure of Information to Participants and Beneficiaries.--
(1) In general.--Section 104(b)(1) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1024(b)(1))
is amended in the matter following subparagraph (B)--
(A) by striking ``102(a)(1),'' and inserting
``102(a)(1) that is not a material reduction in covered
services or benefits provided,''; and
(B) by adding at the end thereof the following new
sentences: ``If there is a modification or change
described in section 102(a)(1) that is a material
reduction in covered services or benefits provided, a
summary description of such modification or change
shall be furnished to participants not later than 60
days after the date of the adoption of the modification
or change. In the alternative, the plan sponsors may
provide such description at regular intervals of not
more than 90 days. The Secretary shall issue
regulations within 180 days after the date of enactment
of the Health Insurance Reform Act of 1996, providing
alternative mechanisms to delivery by mail through
which employee health benefit plans may notify
participants of material reductions in covered services
or benefits.''.
(2) Plan description and summary.--Section 102(b) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1022(b)) is amended--
(A) by inserting ``including the office or title of
the individual who is responsible for approving or
denying claims for coverage of benefits'' after ``type
of administration of the plan'';
(B) by inserting ``including the name of the
organization responsible for financing claims'' after
``source of financing of the plan''; and
(C) by inserting ``including the office, contact,
or title of the individual at the Department of Labor
through which participants may seek assistance or
information regarding their rights under this Act and
the Health Insurance Reform Act of 1996 with respect to
health benefits that are not offered through a group
health plan.'' after ``benefits under the plan''.
Subtitle B--Individual Market Rules
SEC. 110. INDIVIDUAL HEALTH PLAN PORTABILITY.
(a) Limitation on Requirements.--
(1) In general.--Except as provided in subsections (c) and
(d), a health plan issuer described in paragraph (3) may not,
with respect to an eligible individual (described in subsection
(b)) desiring to enroll in an individual health plan--
(A) decline to offer coverage to, or deny
enrollment of, such individual; or
(B) impose a limitation or exclusion of benefits,
otherwise available under such plan, for which coverage
was available under the group health plan or employee
health benefit plan in which the individual was
previously enrolled.
(2) Health promotion and disease prevention.--Nothing in
this subsection shall be construed to prevent a health plan
issuer offering an individual health plan from establishing
premium discounts or modifying otherwise applicable copayments
or deductibles in return for adherence to programs of health
promotion or disease prevention.
(3) Health plan issuer.--A health plan issuer described in
this paragraph is a health plan issuer that issues or renews
individual health plans.
(4) Premiums.--Nothing in this subsection shall be
construed to affect the determination of a health plan issuer
as to the amount of the premium payable under an individual
health plan under applicable State law.
(b) Definition of Eligible Individual.--As used in subsection
(a)(1), the term ``eligible individual'' means an individual who--
(1) was a participant or beneficiary enrolled under one or
more group health plans or employee health benefit plans for
not less than 18 months (without a lapse of more than 30 days)
immediately prior to the date on which such individual applies
for enrollment in the individual health plan;
(2) is not eligible for coverage under a group health plan
or an employee health benefit plan;
(3) has not had coverage terminated under a group health
plan or employee health benefit plan for failure to make
required premium payments or contributions, or for fraud or
misrepresentation of material fact; and
(4) has, if applicable, elected coverage and exhausted the
maximum period of coverage as described in section 602(2)(A) of
the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1162(2)(A)) or under a State program providing an extension of
such coverage.
(c) Application of Capacity Limits.--
(1) In general.--Subject to paragraph (2), a health plan
issuer offering coverage to individuals under an individual
health plan may cease enrolling individuals under the plan if--
(A) the health plan issuer ceases to enroll any new
individuals; and
(B) the health plan issuer can demonstrate to the
applicable certifying authority (as defined in section
202(d)), if required, that its financial or provider
capacity to serve previously covered individuals will
be impaired if the health plan issuer is required to
enroll additional individuals.
Such a health plan issuer shall be prohibited from offering
coverage after a cessation in offering coverage under this
paragraph for a 6-month period or until the health plan issuer
can demonstrate to the applicable certifying authority (as
defined in section 202(d)) that the health plan issuer has
adequate capacity, whichever is later.
(2) First-come-first-served.--A health plan issuer offering
coverage to individuals under an individual health plan is only
eligible to exercise the limitations provided for in paragraph
(1) if the health plan issuer provides for enrollment of
individuals under such plan on a first-come-first-served basis
or other basis established by a State to ensure a fair
opportunity to enroll in the plan and avoid risk selection.
(d) Market Requirements.--
(1) In general.--The provisions of subsection (a) shall not
be construed to require that a health plan issuer offering
group health plans to group purchasers offer individual health
plans to individuals.
(2) Conversion policies.--A health plan issuer offering
group health plans to group purchasers under this Act shall not
be deemed to be a health plan issuer offering an individual
health plan solely because such health plan issuer offers a
conversion policy.
(3) Marketing of plans.--Nothing in this section shall be
construed to prevent a State from requiring health plan issuers
offering coverage to individuals under an individual health
plan to actively market such plan.
(4) Construction.--Nothing in this Act shall be construed
to require that a State replace or dissolve high risk pools or
other similar State mechanisms which are designed to provide
individuals in such State with access to health benefits.
SEC. 111. GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH COVERAGE.
(a) In General.--Subject to subsections (b) and (c), coverage for
individuals under an individual health plan shall be renewed or
continued in force by a health plan issuer at the option of the
individual, except that the requirement of this subsection shall not
apply in the case of--
(1) the nonpayment of premiums or contributions by the
individual in accordance with the terms of the individual
health plan or where the health plan issuer has not received
timely premium payments;
(2) fraud or misrepresentation of material fact on the part
of the individual; or
(3) the termination of the individual health plan in
accordance with subsection (b).
(b) Termination of Individual Health Plans.--
(1) Particular type of individual health plan not
offered.--In any case in which a health plan issuer decides to
discontinue offering a particular type of individual health
plan to individuals, an individual health plan may be
discontinued by the health plan issuer only if--
(A) the health plan issuer provides notice to each
individual covered under the plan of such
discontinuation at least 90 days prior to the date of
the expiration of the plan;
(B) the health plan issuer offers to each
individual covered under the plan the option to
purchase any other individual health plan currently
being offered by the health plan issuer to individuals;
and
(C) in exercising the option to discontinue the
individual health plan and in offering one or more
replacement plans, the health plan issuer acts
uniformly without regard to the health status or
insurability of particular individuals.
(2) Discontinuance of all individual health plans.--In any
case in which a health plan issuer elects to discontinue all
individual health plans in a State, an individual health plan
may be discontinued by the health plan issuer only if--
(A) the health plan issuer provides notice to the
applicable certifying authority (as defined in section
202(d)) and to each individual covered under the plan
of such discontinuation at least 180 days prior to the
date of the discontinuation of the plan; and
(B) all individual health plans issued or delivered
for issuance in the State are discontinued and coverage
under such plans is not renewed.
(3) Prohibition on market reentry.--In the case of a
discontinuation under paragraph (2), the health plan issuer may
not provide for the issuance of any individual health plan in
the State involved during the 5-year period beginning on the
date of the discontinuation of the last plan not so renewed.
(c) Treatment of Network Plans.--
(1) Geographic limitations.--A health plan issuer which
offers a network plan (as defined in paragraph (2)) may deny
continued participation under the plan to individuals who
neither live, reside, nor work in an area in which the
individual health plan is offered, but only if such denial is
applied uniformly, without regard to health status or the
insurability of particular individuals.
(2) Network plan.--As used in paragraph (1), the term
``network plan'' means an individual health plan that arranges
for the financing and delivery of health care services to
individuals covered under such health plan, in whole or in
part, through arrangements with providers.
SEC. 112. STATE FLEXIBILITY IN INDIVIDUAL MARKET REFORMS.
(a) Adoption of Alternative Mechanisms.--
(1) In general.--A State, in accordance with this section,
may adopt alternative mechanisms (public or private) that are
designed to provide access to affordable health benefits for
individuals meeting the requirements of sections 110(b) and 111
(such as mechanisms providing for guaranteed issue, open
enrollment by one or more health plan issuers, high-risk pools,
mandatory conversion policies, or any combination thereof).
(2) Procedure for state election.--If, not later than 6
months after the date of enactment of this Act, the Governor of
a State notifies the Secretary of Health and Human Services
that--
(A) the State has adopted an alternative mechanism
that achieves the goals of sections 110 and 111; or
(B) the State intends to implement an alternative
mechanism that is designed to achieve the goals of
sections 110 and 111;
such State alternative mechanism shall, except as provided in
paragraphs (3) and (4), apply in lieu of the standards
described in sections 110 and 111.
(3) Nonapplication of mechanism.--A State alternative
mechanism adopted under paragraph (1) shall be presumed to
achieve the goals of sections 110 and 111 and shall apply in
lieu of such sections, unless the Secretary of Health and Human
Services, in consultation with the Governor and Insurance
Commissioner or chief insurance regulatory official of the
State, finds that the State alternative mechanism fails to--
(A) offer coverage to those individuals who meet
the requirements of sections 110(b) and 111;
(B) prohibit a limitation or exclusion of benefits
relating to treatment of a preexisting condition that
was covered under the previous group health plan or
employee health benefit plan of an individual who meets
the requirements of sections 110(b) and 111;
(C) offer individuals who meet the requirements of
sections 110(b) and 111 a choice of individual health
plans, including at least one plan comparable to
comprehensive plans offered in the individual market in
such State or a plan comparable to a standard option
plan available under the group or individual health
insurance laws of such State; or
(D) except as provided in paragraph (4), implement
a risk spreading mechanism, cross subsidy mechanism,
risk adjustment mechanism, rating limitation or other
mechanism (such as mechanisms described in the NAIC
Model Health Plan for Uninsurable Individuals Act)
designed to reduce the variation among the cost of such
plans and other individual health plans offered by the
carrier or available in such State.
(4) Choice of plans.--The Secretary of Health and Human
Services shall waive the requirement in subparagraph (D) of
paragraph (3) with respect to a State if individuals who meet
the requirements of sections 110(b) and 111 in such State are
provided with a choice of all individual health plans otherwise
available in the individual market.
(5) Future adoption of mechanisms.--With respect to a State
that implements an alternative mechanism under paragraph (1)
after the period referred to in paragraph (2)--
(A) the State shall provide notice to the Secretary
that such alternative mechanism achieves the goals of
sections 110 and 111;
(B) the State alternative mechanism shall apply in
lieu of sections 110 and 111;
(C) except as provided in subsections (d) and (e),
the Secretary may make a determination as provided for
in paragraph (3); and
(D) the procedures described in subsection (c)
shall apply.
(b) Timeframe for Secretarial Determination.--
(1) In general.--With respect to a State election under
subsection (a)(2)(B), the Secretary of Health and Human
Services shall not make a determination under subsection (a)(3)
until the expiration of the 12-month period beginning on the
date on which such notification is made, or until January 1,
1998, whichever is later.
(2) Rule applicable to certain states.--With respect to a
State that makes an election under subsection (a)(2)(B) and
that has a legislature that does not meet within the 12-month
period beginning on the date of enactment of this Act, the
Secretary of Health and Human Services shall not make a
determination under subsection (a) prior to January 1, 1999.
(c) Notice to State.--If the Secretary of Health and Human Services
determines that a State alternative mechanism fails to meet the
criteria described in subsection (a)(3), or that such mechanism is no
longer being implemented, the Secretary of Health and Human Services
shall notify the Governor of such State of such preliminary
determination and permit the State a reasonable opportunity in which to
modify the alternative mechanism or to adopt another mechanism that is
designed to meet the goals of sections 110 and 111. If, after an
opportunity to modify such State alternative mechanism, the mechanism
fails to meet the criteria described in subsection (a)(3), the
Secretary shall notify the Governor of such State that sections 110 and
111 shall apply in the State.
(d) Adoption of NAIC Model.--If, not later than 9 months after the
date of enactment of this Act--
(1) the National Association of Insurance Commissioners
(hereafter referred to as the ``NAIC''), through a process
which the Secretary of Health and Human Services determines has
included consultation with representatives of the insurance
industry and consumer groups, has adopted a model act or acts
including provisions addressing portability from a group health
plan or employee health benefit plan into the individual health
insurance market; and
(2) the Secretary of Health and Human Services determines,
within 30 days of the adoption of such NAIC model act or acts,
that such act or acts comply with the goals of sections 110 and
111;
a State that elects to adopt such model act or acts shall be deemed to
have met the requirements of sections 110 and 111 and shall not be
subject to a determination under subsection (a)(3).
(e) State High Risk Pools Deemed in Compliance.--If the Governor of
a State notifies the Secretary of Health and Human Services in a
timeframe consistent with either subsection (a)(2) or (a)(5) that such
State has a high risk pool open to those individuals meeting the
requirements of sections 110(b) and 111, that limits preexisting
condition waiting periods consistent with section 110(a)(1)(B) and that
with respect to premium rates and covered benefits is consistent with
standards included in the NAIC Model Health Plan for Uninsurable
Individuals Act, such State high risk pool shall be deemed to have met
the requirements of sections 110 and 111 and shall not be subject to a
determination under subsection (a)(3).
SEC. 113. DEFINITION.
(a) In General.--As used in this title, the term ``individual
health plan'' means any contract, policy, certificate or other
arrangement offered to individuals by a health plan issuer that
provides or pays for health benefits (such as provider and hospital
benefits) and that is not a group health plan under section 2(6).
(b) Arrangements Not Included.--Such term does not include the
following, or any combination thereof:
(1) Coverage only for accident, or disability income
insurance, or any combination thereof.
(2) Medicare supplemental health insurance (as defined
under section 1882(g)(1) of the Social Security Act).
(3) Coverage issued as a supplement to liability insurance.
(4) Liability insurance, including general liability
insurance and automobile liability insurance.
(5) Workers' compensation or similar insurance.
(6) Automobile medical payment insurance.
(7) Coverage for a specified disease or illness.
(8) Hospital or fixed indemnity insurance.
(9) Short-term limited duration insurance.
(10) Credit-only, dental-only, or vision-only insurance.
(11) A health insurance policy providing benefits only for
long-term care, nursing home care, home health care, community-
based care, or any combination thereof.
Subtitle C--COBRA Clarifications
SEC. 121. COBRA CLARIFICATIONS.
(a) Public Health Service Act.--
(1) Period of coverage.--Section 2202(2) of the Public
Health Service Act (42 U.S.C. 300bb-2(2)) is amended--
(A) in subparagraph (A)--
(i) by transferring the sentence
immediately preceding clause (iv) so as to
appear immediately following such clause (iv);
and
(ii) in the last sentence (as so
transferred)--
(I) by inserting ``, or a
beneficiary-family member of the
individual,'' after ``an individual'';
and
(II) by striking ``at the time of a
qualifying event described in section
2203(2)'' and inserting ``at any time
during the initial 18-month period of
continuing coverage under this title'';
(B) in subparagraph (D)(i), by inserting before ``,
or'' the following: ``, except that the exclusion or
limitation contained in this clause shall not be
considered to apply to a plan under which a preexisting
condition or exclusion does not apply to an individual
otherwise eligible for continuation coverage under this
section because of the provision of the Health
Insurance Reform Act of 1996''; and
(C) in subparagraph (E), by striking ``at the time
of a qualifying event described in section 2203(2)''
and inserting ``at any time during the initial 18-month
period of continuing coverage under this title''.
(2) Notices.--Section 2206(3) of the Public Health Service
Act (42 U.S.C. 300bb-6(3)) is amended by striking ``at the time
of a qualifying event described in section 2203(2)'' and
inserting ``at any time during the initial 18-month period of
continuing coverage under this title''.
(3) Birth or adoption of a child.--Section 2208(3)(A) of
the Public Health Service Act (42 U.S.C. 300bb-8(3)(A)) is
amended by adding at the end thereof the following new flush
sentence:
``Such term shall also include a child who is born to or placed
for adoption with the covered employee during the period of
continued coverage under this title.''.
(b) Employee Retirement Income Security Act of 1974.--
(1) Period of coverage.--Section 602(2) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1162(2)) is
amended--
(A) in the last sentence of subparagraph (A)--
(i) by inserting ``, or a beneficiary-
family member of the individual,'' after ``an
individual''; and
(ii) by striking ``at the time of a
qualifying event described in section 603(2)''
and inserting ``at any time during the initial
18-month period of continuing coverage under
this part'';
(B) in subparagraph (D)(i), by inserting before ``,
or'' the following: ``, except that the exclusion or
limitation contained in this clause shall not be
considered to apply to a plan under which a preexisting
condition or exclusion does not apply to an individual
otherwise eligible for continuation coverage under this
section because of the provision of the Health
Insurance Reform Act of 1996''; and
(C) in subparagraph (E), by striking ``at the time
of a qualifying event described in section 603(2)'' and
inserting ``at any time during the initial 18-month
period of continuing coverage under this part''.
(2) Notices.--Section 606(3) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1166(3)) is amended by
striking ``at the time of a qualifying event described in
section 603(2)'' and inserting ``at any time during the initial
18-month period of continuing coverage under this part''.
(3) Birth or adoption of a child.--Section 607(3)(A) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1167(3)) is amended by adding at the end thereof the following
new flush sentence:
``Such term shall also include a child who is born to or placed
for adoption with the covered employee during the period of
continued coverage under this part.''.
(c) Internal Revenue Code of 1986.--
(1) Period of coverage.--Section 4980B(f)(2)(B) of the
Internal Revenue Code of 1986 is amended--
(A) in the last sentence of clause (i) by striking
``at the time of a qualifying event described in
paragraph (3)(B)'' and inserting ``at any time during
the initial 18-month period of continuing coverage
under this section'';
(B) in clause (iv)(I), by inserting before ``, or''
the following: ``, except that the exclusion or
limitation contained in this subclause shall not be
considered to apply to a plan under which a preexisting
condition or exclusion does not apply to an individual
otherwise eligible for continuation coverage under this
subsection because of the provision of the Health
Insurance Reform Act of 1995''; and
(C) in clause (v), by striking ``at the time of a
qualifying event described in paragraph (3)(B)'' and
inserting ``at any time during the initial 18-month
period of continuing coverage under this section''.
(2) Notices.--Section 4980B(f)(6)(C) of the Internal
Revenue Code of 1986 is amended by striking ``at the time of a
qualifying event described in paragraph (3)(B)'' and inserting
``at any time during the initial 18-month period of continuing
coverage under this section''.
(3) Birth or adoption of a child.--Section 4980B(g)(1)(A)
of the Internal Revenue Code of 1986 is amended by adding at
the end thereof the following new flush sentence:
``Such term shall also include a child who is
born to or placed for adoption with the covered
employee during the period of continued
coverage under this section.''.
(d) Effective Date.--The amendments made by this section shall
apply to qualifying events occurring on or after the date of the
enactment of this Act for plan years beginning after December 31, 1997.
(e) Notification of Changes.--Not later than 60 days prior to the
date on which this section becomes effective, each group health plan
(covered under title XXII of the Public Health Service Act, part 6 of
subtitle B of title I of the Employee Retirement Income Security Act of
1974, and section 4980B(f) of the Internal Revenue Code of 1986) shall
notify each qualified beneficiary who has elected continuation coverage
under such title, part or section of the amendments made by this
section.
Subtitle D--Private Health Plan Purchasing Cooperatives
SEC. 131. PRIVATE HEALTH PLAN PURCHASING COOPERATIVES.
(a) Definition.--As used in this Act, the term ``health plan
purchasing cooperative'' means a group of employees or a group of
individuals and employers that, on a voluntary basis and in accordance
with this section, form a cooperative for the purpose of purchasing
individual health plans or group health plans offered by health plan
issuers.
(b) Certification.--
(1) Requirement.--If a group described in subsection (a),
desires to form a health plan purchasing cooperative in
accordance with this section and such group appropriately
notifies the State and the Secretary of such desire, the State,
upon a determination that such group meets the requirements of
this section, shall certify the group as a health plan
purchasing cooperative. The State shall make a determination of
whether such group meets the requirements of this section in a
timely fashion and shall oversee the operations of such
cooperative in order to ensure continued compliance with the
requirements of this section. Each such cooperative shall also
be registered with the Secretary.
(2) State refusal to certify.--
(A) In general.--If a State fails to implement a
program for certifying health plan purchasing
cooperatives in accordance with the standards under
this Act, the Secretary shall certify and oversee the
operations of such cooperatives in such State.
(B) Exception.--The Secretary shall not certify a
health plan purchasing cooperative described in this
section if, upon the submission of an application by
the State to the Secretary, the Secretary determines
that under a State law in effect on the date of
enactment of this Act, all small employers have a means
readily available that ensures--
(i) that individuals and employees have a
choice of multiple, unaffiliated health plan
issuers;
(ii) that health plan coverage is subject
to State premium rating requirements that are
not based on the factors described in
subsection (f)(3) and that contains a mandatory
minimum loss ratio; and
(iii) that comparative health plan
materials are disseminated consistent with
subsection (e)(1)(D);
and that otherwise meets the objectives of this Act.
(3) Interstate cooperatives.--For purposes of this section,
a health plan purchasing cooperative operating in more than one
State shall be certified by the State in which the cooperative
is domiciled. States may enter into cooperative agreements for
the purpose of overseeing the operation of such cooperatives.
For purposes of this subsection, a cooperative shall be
considered to be domiciled in the State in which most of the
members of the cooperative reside.
(c) Board of Directors.--
(1) In general.--Each health plan purchasing cooperative
shall be governed by a Board of Directors that shall be
responsible for ensuring the performance of the duties of the
cooperative under this section. The Board shall be composed of
a broad cross-section of representatives of employers,
employees, and individuals participating in the cooperative.
(2) Limitation on compensation.--A health plan purchasing
cooperative may not provide compensation to members of the
Board of Directors. The cooperative may provide reimbursements
to such members for the reasonable and necessary expenses
incurred by the members in the performance of their duties as
members of the Board.
(d) Membership and Marketing Area.--
(1) Membership.--A health plan purchasing cooperative may
establish limits on the maximum size of employers who may
become members of the cooperative, and may determine whether to
permit individuals to become members. Upon the establishment of
such membership requirements, the cooperative shall, except as
provided in subparagraph (B), accept all employers (or
individuals) residing within the area served by the cooperative
who meet such requirements as members on a first come, first-
served basis, or on another basis established by the State to
ensure equitable access to the cooperative.
(2) Marketing area.--A State may establish rules regarding
the geographic area that must be served by health plan
purchasing cooperatives to ensure that cooperatives do not
discriminate on the basis of the health status or insurability
of the populations that reside in the area served. A State may
not use such rules to arbitrarily limit the number of health
plan purchasing cooperatives.
(e) Duties and Responsibilities.--
(1) In general.--A health plan purchasing cooperative
shall--
(A) objectively evaluate potential health plan
issuers and enter into agreements with multiple,
unaffiliated health plan issuers, except that the
requirement of this subparagraph shall not apply in
regions (such as remote or frontier areas) in which
compliance with such requirement is not possible;
(B) enter into agreements with employers and
individuals who become members of the cooperative;
(C) participate in any program of risk-adjustment
or reinsurance, or any similar program, that is
established by the State;
(D) prepare and disseminate comparative health plan
materials (including information about cost, quality,
benefits, and other information concerning group health
plans and individual health plans offered through the
cooperative);
(E) broadly solicit and actively market to all
eligible employers and individuals residing within the
service area; and
(F) act as an ombudsman for group health plan or
individual health plan enrollees.
(2) Permissible activities.--A health plan purchasing
cooperative may perform such other functions as necessary to
further the purposes of this Act, including--
(A) collecting and distributing premiums and
performing other administrative functions;
(B) collecting and analyzing surveys of enrollee
satisfaction;
(C) charging membership fee to enrollees (such fees
may not be based on health status) and charging
participation fees to health plan issuers;
(D) cooperating with (or accepting as members)
employers who provide health benefits directly to
participants and beneficiaries only for the purpose of
negotiating with providers; and
(E) negotiating with health care providers and
health plan issuers.
(f) Limitations on Cooperative Activities.--A health plan
purchasing cooperative shall not--
(1) perform any activity relating to the licensing of
health plan issuers;
(2) assume financial risk directly or indirectly on behalf
of members of a health plan purchasing cooperative relating to
any group health plan or individual health plan;
(3) establish eligibility, enrollment, or premium
contribution requirements for individual participants or
beneficiaries based on health status, medical condition, claims
experience, receipt of health care, medical history, evidence
of insurability, genetic information, or disability;
(4) operate on a for-profit or other basis where the legal
structure of the cooperative permits profits to be made and not
returned to the members of the cooperative, except that a for-
profit health plan purchasing cooperative may be formed by a
nonprofit organization or organizations--
(A) in which membership in such organization is not
based on health status, medical condition, claims
experience, receipt of health care, medical history,
evidence of insurability, genetic information, or
disability; and
(B) that accepts as members all employers or
individuals on a first-come, first-served basis,
subject to any established limit on the maximum size of
an employer that may become a member; or
(5) perform any other activities that conflict or are
inconsistent with the performance of its duties under this Act.
(g) Conflict of Interest.--
(1) Prohibition.--No individual, partnership, or
corporation shall serve on the board of a health plan
purchasing cooperative, be employed by such a cooperative,
receive compensation from such a cooperative, or initiate or
finance such a cooperative if such individual, partnership, or
corporation--
(A) fails to discharge the duties and
responsibilities of such individual, partnership or
corporation in a manner that is solely in the interest
of the members of the cooperative; or
(B) derives personal benefit (other than in the
form of ordinary compensation received) from the sale
of, or has a financial interest in, health plans,
services or products sold by or distributed through
that cooperative.
(2) Contracts with third parties.--Nothing in paragraph (1)
shall be construed to prohibit the board of directors of a
health plan purchasing cooperative, or its officers, at the
initiative and under this direction of the board, from
contracting with third parties to provide administrative,
marketing, consultive, or other services to the cooperative.
(h) Limited Preemption of Certain State Laws.--
(1) In general.--With respect to a health plan purchasing
cooperative that meets the requirements of this section, State
fictitious group laws shall be preempted.
(2) Health plan issuers.--
(A) Rating.--Except as provided in subparagraph
(B), a health plan issuer offering a group health plan
or individual health plan through a health plan
purchasing cooperative that meets the requirements of
this section shall comply with all State rating
requirements that would otherwise apply if the health
plan were offered outside of the cooperative.
(B) Exception.--A State shall permit a health plan
issuer to reduce premium rates negotiated with a health
plan purchasing cooperative that meets the requirements
of this section to reflect savings derived from
administrative costs, marketing costs, profit margins,
economies of scale, or other factors, except that any
such reduction in premium rates may not be based on the
health status, demographic factors, industry type,
duration, or other indicators of health risk of the
members of the cooperative.
(C) Benefits.--Except as provided in subparagraph
(D), a health plan issuer offering a group health plan
or individual health plan through a health plan
purchasing cooperative shall comply with all State
mandated benefit laws that require the offering of any
services, category of care, or services of any class or
type of provider.
(D) Exception.--In those States that have enacted
laws authorizing the issuance of alternative benefit
plans to small employers, health plan issuers may offer
such alternative benefit plans through a health plan
purchasing cooperative that meets the requirements of
this section.
(i) Rules of Construction.--Nothing in this section shall be
construed to--
(1) require that a State organize, operate, or otherwise
create health plan purchasing cooperatives;
(2) otherwise require the establishment of health plan
purchasing cooperatives;
(3) require individuals, plan sponsors, or employers to
purchase group health plans or individual health plans through
a health plan purchasing cooperative;
(4) preempt a State from requiring licensure for
individuals who are involved in directly supplying advice or
selling health plans on behalf of a purchasing cooperative;
(5) require that a health plan purchasing cooperative be
the only type of purchasing arrangement permitted to operate in
a State;
(6) confer authority upon a State that the State would not
otherwise have to regulate health plan issuers or employee
health benefits plans;
(7) confer authority upon a State (or the Federal
Government) that the State (or Federal Government) would not
otherwise have to regulate group purchasing arrangements,
coalitions, association plans, or other similar entities that
do not desire to become a health plan purchasing cooperative in
accordance with this section; or
(8) except as specifically provided otherwise in this
subsection, prevent the application of State laws and
regulations otherwise applicable to health plan issuers
offering group health plans or individual health plans through
a health plan purchasing cooperative.
(j) Application of ERISA.--For purposes of enforcement only, the
requirements of parts 4 and 5 of subtitle B of title I of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1101) shall apply to
a health plan purchasing cooperative as if such plan were an employee
welfare benefit plan.
TITLE II--APPLICATION AND ENFORCEMENT OF STANDARDS
SEC. 201. APPLICABILITY.
(a) Construction.--
(1) Enforcement.--
(A) In general.--A requirement or standard imposed
under this Act on a group health plan or individual
health plan offered by a health plan issuer shall be
deemed to be a requirement or standard imposed on the
health plan issuer. Such requirements or standards
shall be enforced by the State insurance commissioner
for the State involved or the official or officials
designated by the State to enforce the requirements of
this Act. In the case of a group health plan offered by
a health plan issuer in connection with an employee
health benefit plan, the requirements or standards
imposed under this Act shall be enforced with respect
to the health plan issuer by the State insurance
commissioner for the State involved or the official or
officials designated by the State to enforce the
requirements of this Act.
(B) Limitation.--Except as provided in subsection
(c), the Secretary shall not enforce the requirements
or standards of this Act as they relate to health plan
issuers, group health plans, or individual health
plans. In no case shall a State enforce the
requirements or standards of this Act as they relate to
employee health benefit plans.
(2) Preemption of state law.--Nothing in this Act shall be
construed to prevent a State from establishing, implementing,
or continuing in effect standards and requirements--
(A) not prescribed in this Act; or
(B) related to the issuance, renewal, or
portability of health insurance or the establishment or
operation of group purchasing arrangements, that are
consistent with, and are not in direct conflict with,
this Act and provide greater protection or benefit to
participants, beneficiaries or individuals.
(b) Rule of Construction.--Nothing in this Act shall be construed
to affect or modify the provisions of section 514 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1144).
(c) Continuation.--Nothing in this Act shall be construed as
requiring a group health plan or an employee health benefit plan to
provide benefits to a particular participant or beneficiary, to all
participants or beneficiaries, or to any class or group of participants
or beneficiaries, in excess of or other than those provided under the
terms of such plan.
SEC. 202. ENFORCEMENT OF STANDARDS.
(a) Health Plan Issuers.--Each State shall require that each group
health plan and individual health plan issued, sold, renewed, offered
for sale or operated in such State by a health plan issuer meet the
standards established under this Act pursuant to an enforcement plan
filed by the State with the Secretary. A State shall submit such
information as required by the Secretary demonstrating effective
implementation of the State enforcement plan.
(b) Employee Health Benefit Plans.--With respect to employee health
benefit plans, the Secretary shall enforce the reform standards
established under this Act in the same manner as provided for under
sections 502, 504, 506, and 510 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1132, 1134, 1136, and 1140). The civil
penalties contained in paragraphs (1) and (2) of section 502(c) of such
Act (29 U.S.C. 1132(c)(1) and (2)) shall apply to any information
required by the Secretary to be disclosed and reported under this
section.
(c) Failure to Implement Plan.--In the case of the failure of a
State to substantially enforce the standards and requirements set forth
in this Act with respect to group health plans and individual health
plans as provided for under the State enforcement plan filed under
subsection (a), the Secretary, in consultation with the Secretary of
Health and Human Services, shall implement an enforcement plan meeting
the standards of this Act in such State. In the case of a State that
fails to substantially enforce the standards and requirements set forth
in this Act, each health plan issuer operating in such State shall be
subject to civil enforcement as provided for under sections 502, 504,
506, and 510 of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1132, 1134, 1136, and 1140). The civil penalties contained in
paragraphs (1) and (2) of section 502(c) of such Act (29 U.S.C.
1132(c)(1) and (2)) shall apply to any information required by the
Secretary to be disclosed and reported under this section.
(d) Applicable Certifying Authority.--As used in this title, the
term ``applicable certifying authority'' means, with respect to--
(1) health plan issuers, the State insurance commissioner
or official or officials designated by the State to enforce the
requirements of this Act for the State involved; and
(2) an employee health benefit plan, the Secretary.
(e) Regulations.--The Secretary may promulgate such regulations as
may be necessary or appropriate to carry out this Act.
(f) Technical Amendment.--Section 508 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1138) is amended by inserting
``and under the Health Insurance Reform Act of 1996'' before the
period.
TITLE III--MISCELLANEOUS PROVISIONS
SEC. 301. HMOS ALLOWED TO OFFER PLANS WITH DEDUCTIBLES TO INDIVIDUALS
WITH MEDICAL SAVINGS ACCOUNTS.
(a) In General.--Section 1301(b) of the Public Health Service Act
(42 U.S.C. 300e(b)) is amended by adding at the end the following new
paragraph:
``(6)(A) If a member certifies that a medical savings
account has been established for the benefit of such member, a
health maintenance organization may, at the request of such
member reduce the basic health services payment otherwise
determined under paragraph (1) by requiring the payment of a
deductible by the member for basic health services.
``(B) For purposes of this paragraph, the term `medical
savings account' means an account which, by its terms, allows
the deposit of funds and the use of such funds and income
derived from the investment of such funds for the payment of
the deductible described in subparagraph (A).''.
(b) Medical Savings Accounts.--It is the sense of the Committee on
Labor and Human Resources of the Senate that the establishment of
medical savings accounts, including those defined in section
1301(b)(6)(B) of the Public Health Service Act (42 U.S.C.
300e(b)(6)(B)), should be encouraged as part of any health insurance
reform legislation passed by the Senate through the use of tax
incentives relating to contributions to, the income growth of, and the
qualified use of, such accounts.
(c) Sense of the Senate.--It is the sense of the Senate that the
Congress should take measures to further the purposes of this Act,
including any necessary changes to the Internal Revenue Code of 1986 to
encourage groups and individuals to obtain health coverage, and to
promote access, equity, portability, affordability, and security of
health benefits.
SEC. 302. HEALTH COVERAGE AVAILABILITY STUDY.
(a) In General.--The Secretary of Health and Human Services, in
consultation with the Secretary, representatives of State officials,
consumers, and other representatives of individuals and entities that
have expertise in health insurance and employee benefits, shall conduct
a three-part study, and prepare and submit reports, in accordance with
this section.
(b) Evaluation of Availability.--Not later than January 1, 1998,
the Secretary of Health and Human Services shall prepare and submit to
the appropriate committees of Congress a report, concerning--
(1) an evaluation, based on the experience of States,
expert opinions, and such additional data as may be available,
of the various mechanisms used to ensure the availability of
reasonably priced health coverage to employers purchasing group
coverage and to individuals purchasing coverage on a non-group
basis; and
(2) whether standards that limit the variation in premiums
will further the purposes of this Act.
(c) Evaluation of Effectiveness.--Not later than January 1, 1999,
the Secretary of Health and Human Services shall prepare and submit to
the appropriate committees of Congress a report, concerning the
effectiveness of the provisions of this Act and the various State laws,
in ensuring the availability of reasonably priced health coverage to
employers purchasing group coverage and individuals purchasing coverage
on a non-group basis.
(d) Evaluation of Access and Choice.--Not later than June 1, 1998,
the Secretary of Health and Human Services shall prepare and submit to
the appropriate committees of Congress a report concerning--
(1) an evaluation of the extent to which patients have
direct access to, and choice of, health care provider,
including specialty providers, within a network of providers,
as well as the opportunity to utilize providers outside of the
network, under the various types of coverage offered under the
provisions of this Act;
(2) an evaluation of the cost to the insurer of providing
out-of-network access to providers, and the feasibility of
providing out-of-network access in all health plans offered
under provisions of this Act; and
(3) an evaluation of the percent of premium dollar utilized
for medical care and administration of the various types of
coverage offered, including coverage which permits out-of-
network access and choice of provider, under provisions of this
Act.
SEC. 303. REIMBURSEMENT OF TELEMEDICINE.
The Health Care Financing Administration is directed to complete
their ongoing study of reimbursement of all telemedicine services and
submit a report to Congress with a proposal for reimbursement of fee-
for-service medicine by March 1, 1997. The report shall utilize data
compiled from the current demonstration projects already under review
and gather data from other ongoing telemedicine networks. This report
shall include an analysis of the cost of services provided via
telemedicine.
SEC. 304. SENSE OF THE COMMITTEE CONCERNING MEDICARE.
(a) Findings.--The Committee on Labor and Human Resources of the
Senate finds that the Public Trustees of Medicare concluded in their
1995 Annual Report that--
(1) the Medicare program is clearly unsustainable in its
present form;
(2) ``the Hospital Insurance Trust Fund, which pays
inpatient hospital expenses, will be able to pay benefits for
only about 7 years and is severely out of financial balance in
the long range''; and
(3) the Public Trustees ``strongly recommend that the
crisis presented by the financial condition of the Medicare
trust fund be urgently addressed on a comprehensive basis,
including a review of the programs's financing methods, benefit
provisions, and delivery mechanisms''.
(b) Sense of the Committee.--It is the Sense of the Committee on
Labor and Human Resources of the Senate that the Senate should take
measures necessary to reform the Medicare program, to provide increased
choice for seniors, and to respond to the findings of the Public
Trustees by protecting the short-term solvency and long-term
sustainability of the Medicare program.
SEC. 305. PARITY FOR MENTAL HEALTH SERVICES.
(a) Prohibition.--An employee health benefit plan, or a health plan
issuer offering a group health plan or an individual health plan, shall
not impose treatment limitations or financial requirements on the
coverage of mental health services if similar limitations or
requirements are not imposed on coverage for services for other
conditions.
(b) Rule of Construction.--Nothing in subsection (a) shall be
construed as prohibiting an employee health benefit plan, or a health
plan issuer offering a group health plan or an individual health plan,
from requiring preadmission screening prior to the authorization of
services covered under the plan or from applying other limitations that
restrict coverage for mental health services to those services that are
medically necessary.
SEC. 306. WAIVER OF FOREIGN COUNTRY RESIDENCE REQUIREMENT WITH RESPECT
TO INTERNATIONAL MEDICAL GRADUATES.
(a) Extension of Waiver Program.--Section 220(c) of the Immigration
and Nationality Technical Corrections Act of 1994 (8 U.S.C. 1182 note)
is amended by striking ``June 1, 1996'' and inserting ``June 1, 2002''.
(b) Conditions on Federally Requested Waivers.--Section 212(e) of
the Immigration and Nationality Act (8 U.S.C. 1184(e)) is amended by
inserting after ``except that in the case of a waiver requested by a
State Department of Public Health or its equivalent'' the following:
``or in the case of a waiver requested by an interested United States
Government agency on behalf of an alien described in clause (iii)''.
(c) Restrictions on Federally Requested Waivers.--Section 214(k) (8
U.S.C. 1184(k)) is amended to read as follows:
``(k)(1) In the case of a request by an interested State agency or
by an interested United States Government agency for a waiver of the
two-year foreign residence requirement under section 212(e) with
respect to an alien described in clause (iii) of that section, the
Attorney General shall not grant such waiver unless--
``(A) in the case of an alien who is otherwise
contractually obligated to return to a foreign country, the
government of such country furnishes the Director of the United
States Information Agency with a statement in writing that it
has no objection to such waiver; and
``(B)(i) in the case of a request by an interested State
agency--
``(I) the alien demonstrates a bona fide offer of
full-time employment, agrees to begin employment with
the health facility or organization named in the waiver
application within 90 days of receiving such waiver,
and agrees to work for a total of not less than three
years (unless the Attorney General determines that
extenuating circumstances exist, such as closure of the
facility or hardship to the alien would justify a
lesser period of time); and
``(II) the alien's employment continues to benefit
the public interest; or
``(ii) in the case of a request by an interested United
States Government agency--
``(I) the alien demonstrates a bona fide offer of
full-time employment that has been found to be in the
public interest, agrees to begin employment with the
health facility or organization named in the waiver
application within 90 days of receiving such waiver,
and agrees to work for a total of not less than three
years (unless the Attorney General determines that
extenuating circumstances exist, such as closure of the
facility or hardship to the alien would justify a
lesser period of time); and
``(II) the alien's employment continues to benefit
the public interest;
``(C) in the case of a request by an interested State
agency, the alien agrees to practice medicine in accordance
with paragraph (2) for a total of not less than three years
only in the geographic area or areas which are designated by
the Secretary of Health and Human Services as having a shortage
of health care professionals; and
``(D) in the case of a request by an interested State
agency, the grant of such a waiver would not cause the number
of waivers allotted for that State for that fiscal year to
exceed 20.
``(2)(A) Notwithstanding section 248(2) the Attorney General may
change the status of an alien that qualifies under this subsection and
section 212(e) to that of an alien described in section
101(a)(15)(H)(i)(b).
``(B) No person who has obtained a change of status under
subparagraph (A) and who has failed to fulfill the terms of the
contract with the health facility or organization named in the waiver
application shall be eligible to apply for an immigrant visa, for
permanent residence, or for any other change of nonimmigrant status
until it is established that such person has resided and been
physically present in the country of his nationality or his last
residence for an aggregate of at least two years following departure
from the United States.
``(3) Notwithstanding any other provisions of this subsection, the
two-year foreign residence requirement under section 212(e) shall apply
with respect to an alien in clause (iii) of that section who has not
otherwise been accorded status under section 101(a)(27)(H)--
``(A) in the case of a request by an interested State
agency, if at any time the alien practices medicine in an area
other than an area described in paragraph (1)(C); and
``(B) in the case of a request by an interested United
States Government agency, if at any time the alien engages in
employment for a health facility or organization not named in
the waiver application.''.
SEC. 307. ORGAN AND TISSUE DONATION INFORMATION INCLUDED WITH INCOME
TAX REFUND PAYMENTS.
(a) In General.--The Secretary of the Treasury shall include with
any payment of a refund of individual income tax made during the period
beginning on February 1, 1997, and ending on June 30, 1997, a copy of
the document described in subsection (b).
(b) Text of Document.--The Secretary of the Treasury shall, after
consultation with the Secretary of Health and Human Services and
organizations promoting organ and tissue (including eye) donation,
prepare a document suitable for inclusion with individual income tax
refund payments which--
(1) encourages organ and tissue donation;
(2) includes a detachable organ and tissue donor card; and
(3) urges recipients to--
(A) sign the organ and tissue donor card;
(B) discuss organ and tissue donation with family
members and tell family members about the recipient's
desire to be an organ and tissue donor if the occasion
arises; and
(C) encourage family members to request or
authorize organ and tissue donation if the occasion
arises.
SEC. 308. SENSE OF THE SENATE REGARDING ADEQUATE HEALTH CARE COVERAGE
FOR ALL CHILDREN AND PREGNANT WOMEN.
(a) Findings.--The Senate finds the following:
(1) The health care coverage of mothers and children in the
United States is unacceptable, with more than 9,300,000
children and 500,000 expectant mothers having no health
insurance.
(2) Among industrial nations, the United States ranks 1st
in wealth but 18th in infant mortality, and 14th among such
nations in maternal mortality.
(3) 22 percent of pregnant women do not have prenatal care
in the first trimester, and 22 percent of all poor children are
uninsured, despite the medicaid program under title XIX of the
Social Security Act.
(4) Of the 1,100,000 net increase in uninsured persons from
1992 to 1993, 84 percent or 922,500 were children.
(5) Since 1987, the number of children covered by
employment based health insurance has decreased, and many
children lack health insurance despite the relative
affordability of providing insurance for children.
(6) Health care coverage for children is relatively
inexpensive and in 1993 the medicaid program spent an average
of $1,012 per child compared to $8,220 per elderly adult.
(7) Uninsured children are generally children of lower
income workers, who are less likely than higher income workers
to have health insurance for their families because they are
less likely to work for a firm that offers insurance, and if
such insurance is offered, it is often too costly for lower
income workers to purchase.
(8) In 1993, 61 percent of uninsured children were in
families with at least one parent working full time for the
entire year the child was uninsured, and about 57 percent of
uninsured children had a family income at or below 150 percent
of the Federal poverty level.
(9) If Congress eliminates the Federal guarantee of
medicaid, an estimated 4,900,000 children may lose their
guarantee of health care coverage, and those same children may
be added to the currently projected 12,600,000 children who
will be uninsured by the year 2002.
(10) Studies have shown that uninsured children are less
likely than insured children to receive needed health and
preventive care, which can affect their health status adversely
throughout their lives, with such children less likely to have
routine doctor visits, receive care for injuries, and have a
regular source of medical care.
(11) The families of uninsured children are more likely to
take the children to an emergency room than to a private
physician or health maintenance organization.
(12) Children without health insurance are less likely to
be appropriately immunized or receive other preventive care for
childhood illnesses.
(13) Ensuring the health of children clearly increases
their chances to become productive members of society and
averts more serious or more expensive health conditions later
in life, and ensuring that all pregnant women receive competent
prenatal care also saves social costs.
(14) Although the United States has made great improvements
in health care coverage through the medicaid program, it is
still the only developed nation that does not ensure that all
of its children and pregnant women have health care coverage.
(15) The United States should not accept a status quo in
which children in many neighborhoods are more likely to have
access to drugs and guns than to doctors, or accept a status
quo in which health care is ensured for all prisoners but not
for all children.
(b) Sense of the Senate.--It is the sense of the Senate that the
issue of adequate health care for our mothers and children is important
to the future of the United States, and in consideration of the
importance of such issue, the Senate should pass health care
legislation that will ensure health care coverage for all of the United
States's pregnant women and children.
SEC. 309. SENSE OF THE SENATE REGARDING AVAILABLE TREATMENTS.
It is the sense of the Senate that the Senate finds that patients
deserve to know the full range of treatments available to them and
Congress should thoughtfully examine these issues to ensure that all
patients get the care they deserve.
SEC. 310. MEDICAL VOLUNTEERS.
(a) Short Title.--This title may be cited as the ``Medical
Volunteer Act''.
(b) Tort Claim Immunity.--
(1) General rule.--A health care professional who provides
a health care service to a medically underserved person without
receiving compensation for such health care service, shall be
regarded, for purposes of any medical malpractice claim that
may arise in connection with the provision of such service, as
an employee of the Federal Government for purposes of the
Federal tort claims provisions in title 28, United States Code.
(2) Compensation.--For purposes of paragraph (1), a health
care professional shall be deemed to have provided a health
care service without compensation only if, prior to furnishing
a health care service, the health care professional--
(A) agrees to furnish the health care service
without charge to any person, including any health
insurance plan or program under which the recipient is
covered; and
(B) provides the recipient of the health care
service with adequate notice (as determined by the
Secretary) of the limited liability of the health care
professional with respect to the service.
(c) Preemption.--The provisions of this section shall preempt any
State law to the extent that such law is inconsistent with such
provisions. The provisions of this section shall not preempt any State
law that provides greater incentives or protections to a health care
professional rendering a health care service.
(d) Definitions.--For purposes of this section:
(1) Health care professional.--The term ``health care
professional'' means a person who, at the time the person
provides a health care service, is licensed or certified by the
appropriate authorities for practice in a State to furnish
health care services.
(2) Health care service.--The term ``health care service''
means any medical assistance to the extent it is included in
the plan submitted under title XIX of the Social Security Act
for the State in which the service was provided.
(3) Medically underserved person.--The term ``medically
underserved person'' means a person who resides in--
(A) a medically underserved area as defined for
purposes of determining a medically underserved
population under section 330 of the Public Health
Service Act (42 U.S.C. 254c); or
(B) a health professional shortage area as defined
in section 332 of such Act (42 U.S.C. 254e);
and who receives care in a health care facility substantially
comparable to any of those designated in the Federally
Supported Health Centers Assistance Act (42 U.S.C. 233 et
seq.), as shall be determined in regulations promulgated by the
Secretary.
(4) Secretary.--The term ``Secretary'' means the Secretary
of the Department of Health and Human Services.
SEC. 311. EFFECTIVE DATE.
Except as otherwise provided for in this Act, the provisions of
this Act shall apply as follows:
(1) With respect to group health plans, such provisions
shall apply to plans offered, sold, issued, renewed, in effect,
or operated on or after January 1, 1997.
(2) With respect to individual health plans, such
provisions shall apply to plans offered, sold, issued, renewed,
in effect, or operated on or after the date that is 6 months
after the date of enactment of this Act, or January 1, 1997,
whichever is later.
(3) With respect to employee health benefit plans, such
provisions shall apply to such plans on the first day of the
first plan year beginning on or after January 1, 1997.
SEC. 312. SEVERABILITY.
If any provision of this Act or the application of such provision
to any person or circumstance is held to be unconstitutional, the
remainder of this Act and the application of the provisions of such to
any person or circumstance shall not be affected thereby.
TITLE IV--TAX-RELATED HEALTH PROVISIONS
SEC. 400. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) Short Title.--This title may be cited as the ``Health Insurance
and Long-Term Care Affordability Act of 1996''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this title an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
Subtitle A--Increase in Deduction for Health Insurance Costs of Self-
Employed Individuals
SEC. 401. INCREASE IN SELF-EMPLOYED INDIVIDUALS' DEDUCTION FOR HEALTH
INSURANCE COSTS.
(a) In General.--Section 162(l) (relating to special rules for
health insurance costs of self-employed individuals) is amended--
(1) by striking ``30 percent'' in paragraph (1) and
inserting ``the applicable percentage'', and
(2) by adding at the end the following new paragraph:
``(6) Applicable percentage.--For purposes of this
subsection, the term `applicable percentage' means the
percentage determined in accordance with the following table:
``In the case of taxable years The applicable
beginning in: percentage is:
1997.......................................... 35
1998.......................................... 40
1999.......................................... 45
2000.......................................... 50
2001.......................................... 55
2002.......................................... 60
2003.......................................... 65
2004.......................................... 70
2005.......................................... 75
2006 and thereafter........................... 80.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1996.
Subtitle B--Long-Term Care Provisions
CHAPTER 1--LONG-TERM CARE SERVICES AND CONTRACTS
Subchapter A--General Provisions
SEC. 411. TREATMENT OF LONG-TERM CARE INSURANCE.
(a) General Rule.--Chapter 79 (relating to definitions) is amended
by inserting after section 7702A the following new section:
``SEC. 7702B. TREATMENT OF QUALIFIED LONG-TERM CARE INSURANCE.
``(a) In General.--For purposes of this title--
``(1) a qualified long-term care insurance contract shall
be treated as an accident and health insurance contract,
``(2) amounts (other than policyholder dividends, as
defined in section 808, or premium refunds) received under a
qualified long-term care insurance contract shall be treated as
amounts received for personal injuries and sickness and shall
be treated as reimbursement for expenses actually incurred for
medical care (as defined in section 213(d)),
``(3) any plan of an employer providing coverage under a
qualified long-term care insurance contract shall be treated as
an accident and health plan with respect to such coverage,
``(4) except as provided in subsection (e)(3), amounts paid
for a qualified long-term care insurance contract providing the
benefits described in subsection (b)(2)(A) shall be treated as
payments made for insurance for purposes of section
213(d)(1)(D), and
``(5) a qualified long-term care insurance contract shall
be treated as a guaranteed renewable contract subject to the
rules of section 816(e).
``(b) Qualified Long-Term Care Insurance Contract.--For purposes of
this title--
``(1) In general.--The term `qualified long-term care
insurance contract' means any insurance contract if--
``(A) the only insurance protection provided under
such contract is coverage of qualified long-term care
services,
``(B) such contract does not pay or reimburse
expenses incurred for services or items to the extent
that such expenses are reimbursable under title XVIII
of the Social Security Act or would be so reimbursable
but for the application of a deductible or coinsurance
amount,
``(C) such contract is guaranteed renewable,
``(D) such contract does not provide for a cash
surrender value or other money that can be--
``(i) paid, assigned, or pledged as
collateral for a loan, or
``(ii) borrowed,
other than as provided in subparagraph (E) or paragraph
(2)(C), and
``(E) all refunds of premiums, and all policyholder
dividends or similar amounts, under such contract are
to be applied as a reduction in future premiums or to
increase future benefits.
``(2) Special rules.--
``(A) Per diem, etc. payments permitted.--A
contract shall not fail to be described in subparagraph
(A) or (B) of paragraph (1) by reason of payments being
made on a per diem or other periodic basis without
regard to the expenses incurred during the period to
which the payments relate.
``(B) Special rules relating to medicare.--
``(i) Paragraph (1)(B) shall not apply to
expenses which are reimbursable under title
XVIII of the Social Security Act only as a
secondary payor.
``(ii) No provision of law shall be
construed or applied so as to prohibit the
offering of a qualified long-term care
insurance contract on the basis that the
contract coordinates its benefits with those
provided under such title.
``(C) Refunds of premiums.--Paragraph (1)(E) shall
not apply to any refund on the death of the insured, or
on a complete surrender or cancellation of the
contract, which cannot exceed the aggregate premiums
paid under the contract. Any refund on a complete
surrender or cancellation of the contract shall be
includible in gross income to the extent that any
deduction or exclusion was allowable with respect to
the premiums.
``(c) Qualified Long-Term Care Services.--For purposes of this
section--
``(1) In general.--The term `qualified long-term care
services' means necessary diagnostic, preventive, therapeutic,
curing, treating, mitigating, and rehabilitative services, and
maintenance or personal care services, which--
``(A) are required by a chronically ill individual,
and
``(B) are provided pursuant to a plan of care
prescribed by a licensed health care practitioner.
``(2) Chronically ill individual.--
``(A) In general.--The term `chronically ill
individual' means any individual who has been certified
by a licensed health care practitioner as--
``(i) being unable to perform (without
substantial assistance from another individual)
at least 2 activities of daily living for a
period of at least 90 days due to a loss of
functional capacity,
``(ii) having a level of disability similar
(as determined by the Secretary in consultation
with the Secretary of Health and Human
Services) to the level of disability described
in clause (i), or
``(iii) requiring substantial supervision
to protect such individual from threats to
health and safety due to severe cognitive
impairment.
Such term shall not include any individual otherwise
meeting the requirements of the preceding sentence
unless within the preceding 12-month period a licensed
health care practitioner has certified that such
individual meets such requirements.
``(B) Activities of daily living.--For purposes of
subparagraph (A), each of the following is an activity
of daily living:
``(i) Eating.
``(ii) Toileting.
``(iii) Transferring.
``(iv) Bathing.
``(v) Dressing.
``(vi) Continence.
Nothing in this section shall be construed to require a
contract to take into account all of the preceding
activities of daily living.
``(3) Maintenance or personal care services.--The term
`maintenance or personal care services' means any care the
primary purpose of which is the provision of needed assistance
with any of the disabilities as a result of which the
individual is a chronically ill individual (including the
protection from threats to health and safety due to severe
cognitive impairment).
``(4) Licensed health care practitioner.--The term
`licensed health care practitioner' means any physician (as
defined in section 1861(r)(1) of the Social Security Act (42
U.S.C. 1395x(r)(1)) and any registered professional nurse,
licensed social worker, or other individual who meets such
requirements as may be prescribed by the Secretary.
``(d) Aggregate Payments in Excess of Limits.--
``(1) In general.--If the aggregate amount of periodic
payments under all qualified long-term care insurance contracts
with respect to an insured for any period exceeds the dollar
amount in effect for such period under paragraph (3), such
excess payments shall be treated as made for qualified long-
term care services only to the extent of the costs incurred by
the payee (not otherwise compensated for by insurance or
otherwise) for qualified long-term care services provided
during such period for such insured.
``(2) Periodic payments.--For purposes of paragraph (1),
the term `periodic payment' means any payment (whether on a
periodic basis or otherwise) made without regard to the extent
of the costs incurred by the payee for qualified long-term care
services.
``(3) Dollar amount.--The dollar amount in effect under
this subsection shall be $175 per day (or the equivalent amount
in the case of payments on another periodic basis).
``(4) Inflation adjustment.--In the case of a calendar year
after 1997, the dollar amount contained in paragraph (3) shall
be increased at the same time and in the same manner as amounts
are increased pursuant to section 213(d)(11).
``(e) Treatment of Coverage Provided as Part of a Life Insurance
Contract.--Except as otherwise provided in regulations prescribed by
the Secretary, in the case of any long-term care insurance coverage
(whether or not qualified) provided by a rider on or as a part of a
life insurance contract--
``(1) In general.--This section shall apply as if the
portion of the contract providing such coverage is a separate
contract.
``(2) Application of 7702.--Section 7702(c)(2) (relating to
the guideline premium limitation) shall be applied by
increasing the guideline premium limitation with respect to a
life insurance contract, as of any date--
``(A) by the sum of any charges (but not premium
payments) against the life insurance contract's cash
surrender value (within the meaning of section
7702(f)(2)(A)) for such coverage made to that date
under the contract, less
``(B) any such charges the imposition of which
reduces the premiums paid for the contract (within the
meaning of section 7702(f)(1)).
``(3) Application of section 213.--No deduction shall be
allowed under section 213(a) for charges against the life
insurance contract's cash surrender value described in
paragraph (2), unless such charges are includible in income as
a result of the application of section 72(e)(10) and the rider
is a qualified long-term care insurance contract under
subsection (b).
``(4) Portion defined.--For purposes of this subsection,
the term `portion' means only the terms and benefits under a
life insurance contract that are in addition to the terms and
benefits under the contract without regard to the coverage
under a qualified long-term care insurance contract.''.
(b) Reserve Method.--Clause (iii) of section 807(d)(3)(A) is
amended by inserting ``(other than a qualified long-term care insurance
contract, as defined in section 7702B(b))'' after ``insurance
contract''.
(c) Long-Term Care Insurance Not Permitted Under Cafeteria Plans or
Flexible Spending Arrangements.--
(1) Cafeteria plans.--Section 125(f) is amended by adding
at the end the following new sentence: ``Such term shall not
include any long-term care insurance contract (as defined in
section 4980C).''.
(2) Flexible spending arrangements.--The text of section
106 (relating to contributions by employer to accident and
health plans) is amended to read as follows:
``(a) General Rule.--Except as otherwise provided in this section,
gross income of an employee does not include employer-provided coverage
under an accident or health plan.
``(b) Inclusion of Long-Term Care Benefits Provided Through
Flexible Spending Arrangements.--
``(1) In general.--Effective on and after January 1, 1997,
gross income of an employee shall include employer-provided
coverage for qualified long-term care services (as defined in
section 7702B(c)) to the extent that such coverage is provided
through a flexible spending or similar arrangement.
``(2) Flexible spending arrangement.--For purposes of this
subsection, a flexible spending arrangement is a benefit
program which provides employees with coverage under which--
``(A) specified incurred expenses may be reimbursed
(subject to reimbursement maximums and other reasonable
conditions), and
``(B) the maximum amount of reimbursement which is
reasonably available to a participant for such coverage
is less than 500 percent of the value of such coverage.
In the case of an insured plan, the maximum amount reasonably
available shall be determined on the basis of the underlying
coverage.''.
(d) Continuation Coverage Excise Tax Not To Apply.--Subsection (f)
of section 4980B is amended by adding at the end the following new
paragraph:
``(9) Continuation of long-term care coverage not
required.--A group health plan shall not be treated as failing
to meet the requirements of this subsection solely by reason of
failing to provide coverage under any qualified long-term care
insurance contract (as defined in section 7702B(b)).''.
(e) Amounts Paid to Spouse or Relatives Treated as Not Paid for
Medical Care.--Section 213(d) is amended by adding at the end the
following new paragraph:
``(10) Certain payments to spouse or relatives treated as
not paid for medical care.--An amount paid for a qualified
long-term care service (as defined in section 7702B(c))
provided to an individual shall be treated as not paid for
medical care if such service is provided--
``(A) by the spouse of the individual or a relative
(directly or through a partnership, corporation, or
other entity) unless the spouse or relative is a
licensed professional with respect to such services, or
``(B) by a corporation or partnership which is
related (within the meaning of section 267(b) or
707(b)) to the individual.
For purposes of this paragraph, the term `relative' means an
individual bearing a relationship to the individual which is
described in any of paragraphs (1) through (8) of section
152(a). This paragraph shall not apply for purposes of section
105(b) with respect to reimbursements through insurance.''.
(f) Clerical Amendment.--The table of sections for chapter 79 is
amended by inserting after the item relating to section 7702A the
following new item:
``Sec. 7702B. Treatment of qualified long-term care insurance.''.
(g) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to contracts issued after December 31, 1996.
(2) Continuation of existing policies.--In the case of any
contract issued before January 1, 1997, which met the long-term
care insurance requirements of the State in which the contract
was issued at the time the contract was issued--
(A) such contract shall be treated for purposes of
the Internal Revenue Code of 1986 as a qualified long-
term care insurance contract (as defined in section
7702B(b) of such Code), and
(B) services provided under, or reimbursed by, such
contract shall be treated for such purposes as
qualified long-term care services (as defined in
section 7702B(c) of such Code).
(3) Exchanges of existing policies.--If, after the date of
enactment of this Act and before January 1, 1998, a contract
providing for long-term care insurance coverage is exchanged
solely for a qualified long-term care insurance contract (as
defined in section 7702B(b) of such Code), no gain or loss
shall be recognized on the exchange. If, in addition to a
qualified long-term care insurance contract, money or other
property is received in the exchange, then any gain shall be
recognized to the extent of the sum of the money and the fair
market value of the other property received. For purposes of
this paragraph, the cancellation of a contract providing for
long-term care insurance coverage and reinvestment of the
cancellation proceeds in a qualified long-term care insurance
contract within 60 days thereafter shall be treated as an
exchange.
(4) Issuance of certain riders permitted.--For purposes of
applying sections 101(f), 7702, and 7702A of the Internal
Revenue Code of 1986 to any contract--
(A) the issuance of a rider which is treated as a
qualified long-term care insurance contract under
section 7702B, and
(B) the addition of any provision required to
conform any other long-term care rider to be so
treated,
shall not be treated as a modification or material change of
such contract.
SEC. 412. QUALIFIED LONG-TERM CARE SERVICES TREATED AS MEDICAL CARE.
(a) General Rule.--Paragraph (1) of section 213(d) (defining
medical care) is amended by striking ``or'' at the end of subparagraph
(B), by redesignating subparagraph (C) as subparagraph (D), and by
inserting after subparagraph (B) the following new subparagraph:
``(C) for qualified long-term care services (as
defined in section 7702B(c)), or''.
(b) Technical Amendments.--
(1) Subparagraph (D) of section 213(d)(1) (as redesignated
by subsection (a)) is amended by striking ``subparagraphs (A)
and (B)'' and inserting ``subparagraphs (A), (B), and (C)''.
(2)(A) Paragraph (1) of section 213(d) is amended by adding
at the end the following new flush sentence:
``In the case of a qualified long-term care insurance contract
(as defined in section 7702B(b)), only eligible long-term care
premiums (as defined in paragraph (11)) shall be taken into
account under subparagraph (D).''.
(B) Subsection (d) of section 213 is amended by adding at
the end the following new paragraph:
``(11) Eligible long-term care premiums.--
``(A) In general.--For purposes of this section,
the term `eligible long-term care premiums' means the
amount paid during a taxable year for any qualified
long-term care insurance contract (as defined in
section 7702B(b)) covering an individual, to the extent
such amount does not exceed the limitation determined
under the following table:
``In the case of an individual
with an attained age before the
The limitation
close of the taxable year of:
is:
40 or less............... $200
More than 40 but not more 375
than 50.
More than 50 but not more 750
than 60.
More than 60 but not more 2,000
than 70.
More than 70............. 2,500.
``(B) Indexing.--
``(i) In general.--In the case of any
taxable year beginning in a calendar year after
1997, each dollar amount contained in
subparagraph (A) shall be increased by the
medical care cost adjustment of such amount for
such calendar year. If any increase determined
under the preceding sentence is not a multiple
of $10, such increase shall be rounded to the
nearest multiple of $10.
``(ii) Medical care cost adjustment.--For
purposes of clause (i), the medical care cost
adjustment for any calendar year is the
percentage (if any) by which--
``(I) the medical care component of
the Consumer Price Index (as defined in
section 1(f)(5)) for August of the
preceding calendar year, exceeds
``(II) such component for August of
1996.
The Secretary shall, in consultation with the
Secretary of Health and Human Services,
prescribe an adjustment which the Secretary
determines is more appropriate for purposes of
this paragraph than the adjustment described in
the preceding sentence, and the adjustment so
prescribed shall apply in lieu of the
adjustment described in the preceding
sentence.''.
(3) Paragraph (6) of section 213(d) is amended--
(A) by striking ``subparagraphs (A) and (B)'' and
inserting ``subparagraphs (A), (B), and (C)'', and
(B) by striking ``paragraph (1)(C)'' in
subparagraph (A) and inserting ``paragraph (1)(D)''.
(4) Paragraph (7) of section 213(d) is amended by striking
``subparagraphs (A) and (B)'' and inserting ``subparagraphs
(A), (B), and (C)''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1996.
SEC. 413. CERTAIN EXCHANGES OF LIFE INSURANCE CONTRACTS FOR QUALIFIED
LONG-TERM CARE INSURANCE CONTRACTS NOT TAXABLE.
(a) In General.--Subsection (a) of section 1035 (relating to
certain exchanges of insurance contracts) is amended by striking the
period at the end of paragraph (3) and inserting ``; or'', and by
adding at the end the following new paragraph:
``(4) a contract of life insurance or an endowment or
annuity contract for a qualified long-term care insurance
contract (as defined in section 7702B(b)).''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 1997.
SEC. 414. EXCEPTION FROM PENALTY TAX FOR AMOUNTS WITHDRAWN FROM CERTAIN
RETIREMENT PLANS FOR QUALIFIED LONG-TERM CARE INSURANCE.
(a) In General.--Paragraph (2) of section 72(t) is amended by
adding at the end the following new subparagraph:
``(D) Premiums for qualified long-term care
insurance contracts.--Distributions to an individual
from an individual retirement plan, or from amounts
attributable to employer contributions made pursuant to
elective deferrals described in subparagraph (A) or (C)
of section 402(g)(3), to the extent such distributions
do not exceed the premiums for a qualified long-term
care insurance contract (as defined in section
7702B(b)) for such individual or the spouse of such
individual. In applying subparagraph (B), such premiums
shall be treated as amounts not paid for medical
care.''.
(b) Distributions Permitted From Certain Plans To Pay Long-term
Care Premiums.--
(1) Section 401(k)(2)(B)(i) is amended by striking ``or''
at the end of subclause (III), by striking ``and'' at the end
of subclause (IV) and inserting ``or'', and by inserting after
subclause (IV) the following new subclause:
``(V) the date distributions for
premiums for a long-term care insurance
contract (as defined in section
7702B(b)) for coverage of such
individual or the spouse of such
individual are made, and''.
(2) Section 403(b)(11) is amended by striking ``or'' at the
end of subparagraph (A), by striking the period at the end of
subparagraph (B) and inserting ``, or'', and by inserting after
subparagraph (B) the following new subparagraph:
``(C) for the payment of premiums for a long-term
care insurance contract (as defined in section
7702B(b)) for coverage of the employee or the spouse of
the employee.''.
(3) Subparagraph (A) of section 457(d)(1) is amended by
striking ``or'' at the end of clause (ii), by striking ``and''
at the end of clause (iii) and inserting ``or'', and by
inserting after clause (iii) the following new clause:
``(iv) the date distributions for premiums
for a long-term care insurance contract (as
defined in section 7702B(b)) for coverage of
such individual or the spouse of such
individual are made, and''.
(c) Conforming Amendment.--Section 72t(2)(B) is amended by striking
``subparagraph (A) or (C))'' and inserting ``subparagraph (A), (C), or
(D))''.
(d) Effective Date.--The amendments made by this section shall
apply to payments and distributions after December 31, 1996.
SEC. 415. REPORTING REQUIREMENTS.
(a) In General.--Subpart B of part III of subchapter A of chapter
61 is amended by adding at the end the following new section:
``SEC. 6050Q. CERTAIN LONG-TERM CARE BENEFITS.
``(a) Requirement of Reporting.--Any person who pays long-term care
benefits shall make a return, according to the forms or regulations
prescribed by the Secretary, setting forth--
``(1) the aggregate amount of such benefits paid by such
person to any individual during any calendar year, and
``(2) the name, address, and TIN of such individual.
``(b) Statements To Be Furnished to Persons With Respect to Whom
Information Is Required.--Every person required to make a return under
subsection (a) shall furnish to each individual whose name is required
to be set forth in such return a written statement showing--
``(1) the name of the person making the payments, and
``(2) the aggregate amount of long-term care benefits paid
to the individual which are required to be shown on such
return.
The written statement required under the preceding sentence shall be
furnished to the individual on or before January 31 of the year
following the calendar year for which the return under subsection (a)
was required to be made.
``(c) Long-Term Care Benefits.--For purposes of this section, the
term `long-term care benefit' means any amount paid under a long-term
care insurance policy (within the meaning of section 4980C(e)).''.
(b) Penalties.--
(1) Subparagraph (B) of section 6724(d)(1) is amended by
redesignating clauses (ix) through (xiv) as clauses (x) through
(xv), respectively, and by inserting after clause (viii) the
following new clause:
``(ix) section 6050Q (relating to certain
long-term care benefits),''.
(2) Paragraph (2) of section 6724(d) is amended by
redesignating subparagraphs (Q) through (T) as subparagraphs
(R) through (U), respectively, and by inserting after
subparagraph (P) the following new subparagraph:
``(Q) section 6050Q(b) (relating to certain long-
term care benefits),''.
(c) Clerical Amendment.--The table of sections for subpart B of
part III of subchapter A of chapter 61 is amended by adding at the end
the following new item:
``Sec. 6050Q. Certain long-term care benefits.''.
(d) Effective Date.--The amendments made by this section shall
apply to benefits paid after December 31, 1996.
Subchapter B--Consumer Protection Provisions
SEC. 421. POLICY REQUIREMENTS.
Section 7702B (as added by section 411) is amended by adding at the
end the following new subsection:
``(f) Consumer Protection Provisions.--
``(1) In general.--The requirements of this subsection are
met with respect to any contract if any long-term care
insurance policy issued under the contract meets--
``(A) the requirements of the model regulation and
model Act described in paragraph (2),
``(B) the disclosure requirement of paragraph (3),
and
``(C) the requirements relating to
nonforfeitability under paragraph (4).
``(2) Requirements of model regulation and act.--
``(A) In general.--The requirements of this
paragraph are met with respect to any policy if such
policy meets--
``(i) Model regulation.--The following
requirements of the model regulation:
``(I) Section 7A (relating to
guaranteed renewal or
noncancellability), and the
requirements of section 6B of the model
Act relating to such section 7A.
``(II) Section 7B (relating to
prohibitions on limitations and
exclusions).
``(III) Section 7C (relating to
extension of benefits).
``(IV) Section 7D (relating to
continuation or conversion of
coverage).
``(V) Section 7E (relating to
discontinuance and replacement of
policies).
``(VI) Section 8 (relating to
unintentional lapse).
``(VII) Section 9 (relating to
disclosure), other than section 9F
thereof.
``(VIII) Section 10 (relating to
prohibitions against post-claims
underwriting).
``(IX) Section 11 (relating to
minimum standards).
``(X) Section 12 (relating to
requirement to offer inflation
protection), except that any
requirement for a signature on a
rejection of inflation protection shall
permit the signature to be on an
application or on a separate form.
``(XI) Section 23 (relating to
prohibition against preexisting
conditions and probationary periods in
replacement policies or certificates).
``(ii) Model act.--The following
requirements of the model Act:
``(I) Section 6C (relating to
preexisting conditions).
``(II) Section 6D (relating to
prior hospitalization).
``(B) Definitions.--For purposes of this
paragraph--
``(i) Model provisions.--The terms `model
regulation' and `model Act' mean the long-term
care insurance model regulation, and the long-
term care insurance model Act, respectively,
promulgated by the National Association of
Insurance Commissioners (as adopted as of
January 1993).
``(ii) Coordination.--Any provision of the
model regulation or model Act listed under
clause (i) or (ii) of subparagraph (A) shall be
treated as including any other provision of
such regulation or Act necessary to implement
the provision.
``(3) Disclosure requirement.--The requirement of this
paragraph is met with respect to any policy if such policy
meets the requirements of section 4980C(d)(1).
``(4) Nonforfeiture requirements.--
``(A) In general.--The requirements of this
paragraph are met with respect to any level premium
long-term care insurance policy, if the issuer of such
policy offers to the policyholder, including any group
policyholder, a nonforfeiture provision meeting the
requirements of subparagraph (B).
``(B) Requirements of provision.--The nonforfeiture
provision required under subparagraph (A) shall meet
the following requirements:
``(i) The nonforfeiture provision shall be
appropriately captioned.
``(ii) The nonforfeiture provision shall
provide for a benefit available in the event of
a default in the payment of any premiums and
the amount of the benefit may be adjusted
subsequent to being initially granted only as
necessary to reflect changes in claims,
persistency, and interest as reflected in
changes in rates for premium paying policies
approved by the appropriate State regulatory
authority for the same policy form.
``(iii) The nonforfeiture provision shall
provide at least one of the following:
``(I) Reduced paid-up insurance.
``(II) Extended term insurance.
``(III) Shortened benefit period.
``(IV) Other similar offerings
approved by the Secretary.
``(5) Long-term care insurance policy defined.--For
purposes of this subsection, the term `long-term care insurance
policy' has the meaning given such term by section 4980C(e).''.
SEC. 422. REQUIREMENTS FOR ISSUERS OF LONG-TERM CARE INSURANCE
POLICIES.
(a) In General.--Chapter 43 is amended by adding at the end the
following new section:
``SEC. 4980C. REQUIREMENTS FOR ISSUERS OF LONG-TERM CARE INSURANCE
POLICIES.
``(a) General Rule.--There is hereby imposed on any person failing
to meet the requirements of subsection (c) or (d) a tax in the amount
determined under subsection (b).
``(b) Amount.--
``(1) In general.--The amount of the tax imposed by
subsection (a) shall be $100 per policy for each day any
requirements of subsection (c) or (d) are not met with respect
to each long-term care insurance policy.
``(2) Waiver.--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 payment of the tax would be excessive relative to
the failure involved.
``(c) Responsibilities.--The requirements of this subsection are as
follows:
``(1) Requirements of model provisions.--
``(A) Model regulation.--The following requirements
of the model regulation must be met:
``(i) Section 13 (relating to application
forms and replacement coverage).
``(ii) Section 14 (relating to reporting
requirements), except that the issuer shall
also report at least annually the number of
claims denied during the reporting period for
each class of business (expressed as a
percentage of claims denied), other than claims
denied for failure to meet the waiting period
or because of any applicable preexisting
condition.
``(iii) Section 20 (relating to filing
requirements for marketing).
``(iv) Section 21 (relating to standards
for marketing), including inaccurate completion
of medical histories, other than sections
21C(1) and 21C(6) thereof, except that--
``(I) in addition to such
requirements, no person shall, in
selling or offering to sell a long-term
care insurance policy, misrepresent a
material fact; and
``(II) no such requirements shall
include a requirement to inquire or
identify whether a prospective
applicant or enrollee for long-term
care insurance has accident and
sickness insurance.
``(v) Section 22 (relating to
appropriateness of recommended purchase).
``(vi) Section 24 (relating to standard
format outline of coverage).
``(vii) Section 25 (relating to requirement
to deliver shopper's guide).
``(B) Model act.--The following requirements of the
model Act must be met:
``(i) Section 6F (relating to right to
return), except that such section shall also
apply to denials of applications and any refund
shall be made within 30 days of the return or
denial.
``(ii) Section 6G (relating to outline of
coverage).
``(iii) Section 6H (relating to
requirements for certificates under group
plans).
``(iv) Section 6I (relating to policy
summary).
``(v) Section 6J (relating to monthly
reports on accelerated death benefits).
``(vi) Section 7 (relating to
incontestability period).
``(C) Definitions.--For purposes of this paragraph,
the terms `model regulation' and `model Act' have the
meanings given such terms by section 7702B(f)(2)(B).
``(2) Delivery of policy.--If an application for a long-
term care insurance policy (or for a certificate under a group
long-term care insurance policy) is approved, the issuer shall
deliver to the applicant (or policyholder or certificateholder)
the policy (or certificate) of insurance not later than 30 days
after the date of the approval.
``(3) Information on denials of claims.--If a claim under a
long-term care insurance policy is denied, the issuer shall,
within 60 days of the date of a written request by the
policyholder or certificateholder (or representative)--
``(A) provide a written explanation of the reasons
for the denial, and
``(B) make available all information directly
relating to such denial.
``(d) Disclosure.--The requirements of this subsection are met if
the issuer of a long-term care insurance policy discloses in such
policy and in the outline of coverage required under subsection
(c)(1)(B)(ii) that the policy is intended to be a qualified long-term
care insurance contract under section 7702B(b).
``(e) Long-Term Care Insurance Policy Defined.--For purposes of
this section, the term `long-term care insurance policy' means any
product which is advertised, marketed, or offered as long-term care
insurance.''.
(b) Conforming Amendment.--The table of sections for chapter 43 is
amended by adding at the end the following new item:
``Sec. 4980C. Requirements for issuers of long-term care insurance
policies.''.
SEC. 423. COORDINATION WITH STATE REQUIREMENTS.
Nothing in this subchapter shall prevent a State from establishing,
implementing, or continuing in effect standards related to the
protection of policyholders of long-term care insurance policies (as
defined in section 4980C(e) of the Internal Revenue Code of 1986), if
such standards are not in conflict with or inconsistent with the
standards established under such Code.
SEC. 424. EFFECTIVE DATES.
(a) In General.--The provisions of, and amendments made by, this
subchapter shall apply to contracts issued after December 31, 1996. The
provisions of section 411(g) of this Act (relating to transition rule)
shall apply to such contracts.
(b) Issuers.--The amendments made by section 422 shall apply to
actions taken after December 31, 1996.
CHAPTER 2--TREATMENT OF ACCELERATED DEATH BENEFITS
SEC. 431. TREATMENT OF ACCELERATED DEATH BENEFITS BY RECIPIENT.
(a) In General.--Section 101 (relating to certain death benefits)
is amended by adding at the end the following new subsection:
``(g) Treatment of Certain Accelerated Death Benefits.--
``(1) In general.--For purposes of this section, the
following amounts shall be treated as an amount paid by reason
of the death of an insured:
``(A) Any amount received under a life insurance
contract on the life of an insured who is a terminally
ill individual.
``(B) Any amount received under a life insurance
contract on the life of an insured who is a chronically
ill individual (as defined in section 7702B(c)(2)) but
only if such amount is received under a rider or other
provision of such contract which is treated as a
qualified long-term care insurance contract under
section 7702B.
``(2) Treatment of viatical settlements.--
``(A) In general.--In the case of a life insurance
contract on the life of an insured described in
paragraph (1), if--
``(i) any portion of such contract is sold
to any viatical settlement provider, or
``(ii) any portion of the death benefit is
assigned to such a provider,
the amount paid for such sale or assignment shall be
treated as an amount paid under the life insurance
contract by reason of the death of such insured.
``(B) Viatical settlement provider.--The term
`viatical settlement provider' means any person
regularly engaged in the trade or business of
purchasing, or taking assignments of, life insurance
contracts on the lives of insureds described in
paragraph (1) if--
``(i) such person is licensed for such
purposes in the State in which the insured
resides, or
``(ii) in the case of an insured who
resides in a State not requiring the licensing
of such persons for such purposes--
``(I) such person meets the
requirements of sections 8 and 9 of the
Viatical Settlements Model Act of the
National Association of Insurance
Commissioners, and
``(II) meets the requirements of
the Model Regulations of the National
Association of Insurance Commissioners
(relating to standards for evaluation
of reasonable payments) in determining
amounts paid by such person in
connection with such purchases or
assignments.
``(3) Definitions.--For purposes of this subsection--
``(A) Terminally ill individual.--The term
`terminally ill individual' means an individual who has
been certified by a physician as having an illness or
physical condition which can reasonably be expected to
result in death in 24 months or less after the date of
the certification.
``(B) Physician.--The term `physician' has the
meaning given to such term by section 1861(r)(1) of the
Social Security Act (42 U.S.C. 1395x(r)(1)).
``(4) Exception for business-related policies.--This
subsection shall not apply in the case of any amount paid to
any taxpayer other than the insured if such taxpayer has an
insurable interest with respect to the life of the insured by
reason of the insured being a director, officer, or employee of
the taxpayer or by reason of the insured being financially
interested in any trade or business carried on by the
taxpayer.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to amounts received after December 31, 1996.
SEC. 432. TAX TREATMENT OF COMPANIES ISSUING QUALIFIED ACCELERATED
DEATH BENEFIT RIDERS.
(a) Qualified Accelerated Death Benefit Riders Treated as Life
Insurance.--Section 818 (relating to other definitions and special
rules) is amended by adding at the end the following new subsection:
``(g) Qualified Accelerated Death Benefit Riders Treated as Life
Insurance.--For purposes of this part--
``(1) In general.--Any reference to a life insurance
contract shall be treated as including a reference to a
qualified accelerated death benefit rider on such contract.
``(2) Qualified accelerated death benefit riders.--For
purposes of this subsection, the term `qualified accelerated
death benefit rider' means any rider on a life insurance
contract if the only payments under the rider are payments
meeting the requirements of section 101(g).
``(3) Exception for long-term care riders.--Paragraph (1)
shall not apply to any rider which is treated as a long-term
care insurance contract under section 7702B.''.
(b) Effective Date.--
(1) In general.--The amendment made by this section shall
take effect on January 1, 1997.
(2) Issuance of rider not treated as material change.--For
purposes of applying sections 101(f), 7702, and 7702A of the
Internal Revenue Code of 1986 to any contract--
(A) the issuance of a qualified accelerated death
benefit rider (as defined in section 818(g) of such
Code (as added by this Act)), and
(B) the addition of any provision required to
conform an accelerated death benefit rider to the
requirements of such section 818(g),
shall not be treated as a modification or material change of
such contract.
Subtitle C--High-Risk Pools
SEC. 451. EXEMPTION FROM INCOME TAX FOR STATE-SPONSORED ORGANIZATIONS
PROVIDING HEALTH COVERAGE FOR HIGH-RISK INDIVIDUALS.
(a) In General.--Subsection (c) of section 501 (relating to list of
exempt organizations) is amended by adding at the end the following new
paragraph:
``(26) Any membership organization if--
``(A) such organization is established by a State
exclusively to provide coverage for medical care (as
defined in section 213(d)) on a not-for-profit basis to
individuals described in subparagraph (B) through--
``(i) insurance issued by the organization,
or
``(ii) a health maintenance organization
under an arrangement with the organization,
``(B) the only individuals receiving such coverage
through the organization are individuals--
``(i) who are residents of such State, and
``(ii) who, by reason of the existence or
history of a medical condition, are unable to
acquire medical care coverage for such
condition through insurance or from a health
maintenance organization or are able to acquire
such coverage only at a rate which is
substantially in excess of the rate for such
coverage through the membership organization,
``(C) the composition of the membership in such
organization is specified by such State, and
``(D) no part of the net earnings of the
organization inures to the benefit of any private
shareholder or individual.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 1996.
Subtitle D--Penalty-Free IRA Distributions
SEC. 461. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE USED WITHOUT PENALTY
TO PAY FINANCIALLY DEVASTATING MEDICAL EXPENSES.
(a) In General.--Section 72(t)(3)(A) is amended by striking
``(B),''.
(b) Penalty-Free Distributions for Payment of Health Insurance
Premiums of Certain Unemployed Individuals.--Paragraph (2) of section
72(t), as amended by section 414, is amended by adding at the end the
following new subparagraph:
``(E) Distributions to unemployed individuals for
health insurance premiums.--Distributions from an
individual retirement plan to an individual after
separation from employment--
``(i) if such individual has received
unemployment compensation for 12 consecutive
weeks under any Federal or State unemployment
compensation law by reason of such separation,
``(ii) if such distributions are made
during any taxable year during which such
unemployment compensation is paid or the
succeeding taxable year, and
``(iii) to the extent such distributions do
not exceed the amount paid during the taxable
year for insurance described in section
213(d)(1)(D) with respect to the individual and
the individual's spouse and dependents (as
defined in section 152).
To the extent provided in regulations, a self-employed
individual shall be treated as meeting the requirements
of clause (i) if, under Federal or State law, the
individual would have received unemployment
compensation but for the fact the individual was self-
employed.''.
(c) Conforming Amendment.--Subparagraph (B) of section 72(t)(2), as
amended by section 414, is amended by striking ``or (D)'' and inserting
``, (D), or (E)''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1996.
Subtitle E--Revenue Offsets
CHAPTER 1--TREATMENT OF INDIVIDUALS WHO EXPATRIATE
SEC. 471. REVISION OF TAX RULES ON EXPATRIATION.
(a) In General.--Subpart A of part II of subchapter N of chapter 1
is amended by inserting after section 877 the following new section:
``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.
``(a) General Rules.--For purposes of this subtitle--
``(1) Mark to market.--Except as provided in subsection
(f), all property of a covered expatriate to which this section
applies shall be treated as sold on the expatriation date for
its fair market value.
``(2) Recognition of gain or loss.--In the case of any sale
under paragraph (1)--
``(A) notwithstanding any other provision of this
title, any gain arising from such sale shall be taken
into account for the taxable year of the sale unless
such gain is excluded from gross income under part III
of subchapter B, and
``(B) any loss arising from such sale shall be
taken into account for the taxable year of the sale to
the extent otherwise provided by this title, except
that section 1091 shall not apply (and section 1092
shall apply) to any such loss.
``(3) Exclusion for certain gain.--The amount which would
(but for this paragraph) be includible in the gross income of
any individual by reason of this section shall be reduced (but
not below zero) by $600,000. For purposes of this paragraph,
allocable expatriation gain taken into account under subsection
(f)(2) shall be treated in the same manner as an amount
required to be includible in gross income.
``(4) Election to continue to be taxed as united states
citizen.--
``(A) In general.--If an expatriate elects the
application of this paragraph--
``(i) this section (other than this
paragraph) shall not apply to the expatriate,
but
``(ii) the expatriate shall be subject to
tax under this title, with respect to property
to which this section would apply but for such
election, in the same manner as if the
individual were a United States citizen.
``(B) Limitation on amount of estate, gift, and
generation-skipping transfer taxes.--The aggregate
amount of taxes imposed under subtitle B with respect
to any transfer of property by reason of an election
under subparagraph (A) shall not exceed the amount of
income tax which would be due if the property were sold
for its fair market value immediately before the time
of the transfer or death (taking into account the rules
of paragraph (2)).
``(C) Requirements.--Subparagraph (A) shall not
apply to an individual unless the individual--
``(i) provides security for payment of tax
in such form and manner, and in such amount, as
the Secretary may require,
``(ii) consents to the waiver of any right
of the individual under any treaty of the
United States which would preclude assessment
or collection of any tax which may be imposed
by reason of this paragraph, and
``(iii) complies with such other
requirements as the Secretary may prescribe.
``(D) Election.--An election under subparagraph (A)
shall apply to all property to which this section would
apply but for the election and, once made, shall be
irrevocable. Such election shall also apply to property
the basis of which is determined in whole or in part by
reference to the property with respect to which the
election was made.
``(b) Election To Defer Tax.--
``(1) In general.--If the taxpayer elects the application
of this subsection with respect to any property--
``(A) no amount shall be required to be included in
gross income under subsection (a)(1) with respect to
the gain from such property for the taxable year of the
sale, but
``(B) the taxpayer's tax for the taxable year in
which such property is disposed of shall be increased
by the deferred tax amount with respect to the
property.
Except to the extent provided in regulations, subparagraph (B)
shall apply to a disposition whether or not gain or loss is
recognized in whole or in part on the disposition.
``(2) Deferred tax amount.--
``(A) In general.--For purposes of paragraph (1),
the term `deferred tax amount' means, with respect to
any property, an amount equal to the sum of--
``(i) the difference between the amount of
tax paid for the taxable year described in
paragraph (1)(A) and the amount which would
have been paid for such taxable year if the
election under paragraph (1) had not applied to
such property, plus
``(ii) an amount of interest on the amount
described in clause (i) determined for the
period--
``(I) beginning on the 91st day
after the expatriation date, and
``(II) ending on the due date for
the taxable year described in paragraph
(1)(B),
by using the rates and method applicable under
section 6621 for underpayments of tax for such
period.
For purposes of clause (ii), the due date is the date
prescribed by law (determined without regard to
extension) for filing the return of the tax imposed by
this chapter for the taxable year.
``(B) Allocation of losses.--For purposes of
subparagraph (A), any losses described in subsection
(a)(2)(B) shall be allocated ratably among the gains
described in subsection (a)(2)(A).
``(3) Security.--
``(A) In general.--No election may be made under
paragraph (1) with respect to any property unless
adequate security is provided with respect to such
property.
``(B) Adequate security.--For purposes of
subparagraph (A), security with respect to any property
shall be treated as adequate security if--
``(i) it is a bond in an amount equal to
the deferred tax amount under paragraph (2)(A)
for the property, or
``(ii) the taxpayer otherwise establishes
to the satisfaction of the Secretary that the
security is adequate.
``(4) Waiver of certain rights.--No election may be made
under paragraph (1) unless the taxpayer consents to the waiver
of any right under any treaty of the United States which would
preclude assessment or collection of any tax imposed by reason
of this section.
``(5) Dispositions.--For purposes of this subsection, a
taxpayer making an election under this subsection with respect
to any property shall be treated as having disposed of such
property--
``(A) immediately before death if such property is
held at such time, and
``(B) at any time the security provided with
respect to the property fails to meet the requirements
of paragraph (3) and the taxpayer does not correct such
failure within the time specified by the Secretary.
``(6) Elections.--An election under paragraph (1) shall
only apply to property described in the election and, once
made, is irrevocable. An election may be under paragraph (1)
with respect to an interest in a trust with respect to which
gain is required to be recognized under subsection (f)(1).
``(c) Covered Expatriate.--For purposes of this section--
``(1) In general.--The term `covered expatriate' means an
expatriate--
``(A) whose average annual net income tax (as
defined in section 38(c)(1)) for the period of 5
taxable years ending before the expatriation date is
greater than $100,000, or
``(B) whose net worth as of such date is $500,000
or more.
If the expatriation date is after 1996, such $100,000 and
$500,000 amounts shall be increased by an amount equal to such
dollar amount multiplied by the cost-of-living adjustment
determined under section 1(f)(3) for such calendar year by
substituting `1995' for `1992' in subparagraph (B) thereof. Any
increase under the preceding sentence shall be rounded to the
nearest multiple of $1,000.
``(2) Exceptions.--An individual shall not be treated as a
covered expatriate if--
``(A) the individual--
``(i) became at birth a citizen of the
United States and a citizen of another country
and, as of the expatriation date, continues to
be a citizen of, and is taxed as a resident of,
such other country, and
``(ii) has been a resident of the United
States (as defined in section
7701(b)(1)(A)(ii)) for not more than 8 taxable
years during the 15-taxable year period ending
with the taxable year during which the
expatriation date occurs, or
``(B)(i) the individual's relinquishment of United
States citizenship occurs before such individual
attains age 18\1/2\, and
``(ii) the individual has been a resident of the
United States (as so defined) for not more than 5
taxable years before the date of relinquishment.
``(d) Property to Which Section Applies.--For purposes of this
section--
``(1) In general.--Except as otherwise provided by the
Secretary, this section shall apply to--
``(A) any interest in property held by a covered
expatriate on the expatriation date the gain from which
would be includible in the gross income of the
expatriate if such interest had been sold for its fair
market value on such date in a transaction in which
gain is recognized in whole or in part, and
``(B) any other interest in a trust to which
subsection (f) applies.
``(2) Exceptions.--This section shall not apply to the
following property:
``(A) United states real property interests.--Any
United States real property interest (as defined in
section 897(c)(1)), other than stock of a United States
real property holding corporation which does not, on
the expatriation date, meet the requirements of section
897(c)(2).
``(B) Interest in certain retirement plans.--
``(i) In general.--Any interest in a
qualified retirement plan (as defined in
section 4974(c)), other than any interest
attributable to contributions which are in
excess of any limitation or which violate any
condition for tax-favored treatment.
``(ii) Foreign pension plans.--
``(I) In general.--Under
regulations prescribed by the
Secretary, interests in foreign pension
plans or similar retirement
arrangements or programs.
``(II) Limitation.--The value of
property which is treated as not sold
by reason of this subparagraph shall
not exceed $500,000.
``(e) Definitions.--For purposes of this section--
``(1) Expatriate.--The term `expatriate' means--
``(A) any United States citizen who relinquishes
his citizenship, or
``(B) any long-term resident of the United States
who--
``(i) ceases to be a lawful permanent
resident of the United States (within the
meaning of section 7701(b)(6)), or
``(ii) commences to be treated as a
resident of a foreign country under the
provisions of a tax treaty between the United
States and the foreign country and who does not
waive the benefits of such treaty applicable to
residents of the foreign country.
``(2) Expatriation date.--The term `expatriation date'
means--
``(A) the date an individual relinquishes United
States citizenship, or
``(B) in the case of a long-term resident of the
United States, the date of the event described in
clause (i) or (ii) of paragraph (1)(B).
``(3) Relinquishment of citizenship.--A citizen shall be
treated as relinquishing his United States citizenship on the
earliest of--
``(A) the date the individual renounces his United
States nationality before a diplomatic or consular
officer of the United States pursuant to paragraph (5)
of section 349(a) of the Immigration and Nationality
Act (8 U.S.C. 1481(a)(5)),
``(B) the date the individual furnishes to the
United States Department of State a signed statement of
voluntary relinquishment of United States nationality
confirming the performance of an act of expatriation
specified in paragraph (1), (2), (3), or (4) of section
349(a) of the Immigration and Nationality Act (8 U.S.C.
1481(a)(1)-(4)),
``(C) the date the United States Department of
State issues to the individual a certificate of loss of
nationality, or
``(D) the date a court of the United States cancels
a naturalized citizen's certificate of naturalization.
Subparagraph (A) or (B) shall not apply to any individual
unless the renunciation or voluntary relinquishment is
subsequently approved by the issuance to the individual of a
certificate of loss of nationality by the United States
Department of State.
``(4) Long-term resident.--
``(A) In general.--The term `long-term resident'
means any individual (other than a citizen of the
United States) who is a lawful permanent resident of
the United States in at least 8 taxable years during
the period of 15 taxable years ending with the taxable
year during which the expatriation date occurs. For
purposes of the preceding sentence, an individual shall
not be treated as a lawful permanent resident for any
taxable year if such individual is treated as a
resident of a foreign country for the taxable year
under the provisions of a tax treaty between the United
States and the foreign country and does not waive the
benefits of such treaty applicable to residents of the
foreign country.
``(B) Special rule.--For purposes of subparagraph
(A), there shall not be taken into account--
``(i) any taxable year during which any
prior sale is treated under subsection (a)(1)
as occurring, or
``(ii) any taxable year prior to the
taxable year referred to in clause (i).
``(f) Special Rules Applicable to Beneficiaries' Interests in
Trust.--
``(1) In general.--Except as provided in paragraph (2), if
an individual is determined under paragraph (3) to hold an
interest in a trust--
``(A) the individual shall not be treated as having
sold such interest,
``(B) such interest shall be treated as a separate
share in the trust, and
``(C)(i) such separate share shall be treated as a
separate trust consisting of the assets allocable to
such share,
``(ii) the separate trust shall be treated as
having sold its assets immediately before the
expatriation date for their fair market value and as
having distributed all of its assets to the individual
as of such time, and
``(iii) the individual shall be treated as having
recontributed the assets to the separate trust.
Subsection (a)(2) shall apply to any income, gain, or loss of
the individual arising from a distribution described in
subparagraph (C)(ii).
``(2) Special rules for interests in qualified trusts.--
``(A) In general.--If the trust interest described
in paragraph (1) is an interest in a qualified trust--
``(i) paragraph (1) and subsection (a)
shall not apply, and
``(ii) in addition to any other tax imposed
by this title, there is hereby imposed on each
distribution with respect to such interest a
tax in the amount determined under subparagraph
(B).
``(B) Amount of tax.--The amount of tax under
subparagraph (A)(ii) shall be equal to the lesser of--
``(i) the highest rate of tax imposed by
section 1(e) for the taxable year in which the
expatriation date occurs, multiplied by the
amount of the distribution, or
``(ii) the balance in the deferred tax
account immediately before the distribution
determined without regard to any increases
under subparagraph (C)(ii) after the 30th day
preceding the distribution.
``(C) Deferred tax account.--For purposes of
subparagraph (B)(ii)--
``(i) Opening balance.--The opening balance
in a deferred tax account with respect to any
trust interest is an amount equal to the tax
which would have been imposed on the allocable
expatriation gain with respect to the trust
interest if such gain had been included in
gross income under subsection (a).
``(ii) Increase for interest.--The balance
in the deferred tax account shall be increased
by the amount of interest determined (on the
balance in the account at the time the interest
accrues), for periods after the 90th day after
the expatriation date, by using the rates and
method applicable under section 6621 for
underpayments of tax for such periods.
``(iii) Decrease for taxes previously
paid.--The balance in the tax deferred account
shall be reduced--
``(I) by the amount of taxes
imposed by subparagraph (A) on any
distribution to the person holding the
trust interest, and
``(II) in the case of a person
holding a nonvested interest, to the
extent provided in regulations, by the
amount of taxes imposed by subparagraph
(A) on distributions from the trust
with respect to nonvested interests not
held by such person.
``(D) Allocable expatriation gain.--For purposes of
this paragraph, the allocable expatriation gain with
respect to any beneficiary's interest in a trust is the
amount of gain which would be allocable to such
beneficiary's vested and nonvested interests in the
trust if the beneficiary held directly all assets
allocable to such interests.
``(E) Tax deducted and withheld.--
``(i) In general.--The tax imposed by
subparagraph (A)(ii) shall be deducted and
withheld by the trustees from the distribution
to which it relates.
``(ii) Exception where failure to waive
treaty rights.--If an amount may not be
deducted and withheld under clause (i) by
reason of the distributee failing to waive any
treaty right with respect to such
distribution--
``(I) the tax imposed by
subparagraph (A)(ii) shall be imposed
on the trust and each trustee shall be
personally liable for the amount of
such tax, and
``(II) any other beneficiary of the
trust shall be entitled to recover from
the distributee the amount of such tax
imposed on the other beneficiary.
``(F) Disposition.--If a trust ceases to be a
qualified trust at any time, a covered expatriate
disposes of an interest in a qualified trust, or a
covered expatriate holding an interest in a qualified
trust dies, then, in lieu of the tax imposed by
subparagraph (A)(ii), there is hereby imposed a tax
equal to the lesser of--
``(i) the tax determined under paragraph
(1) as if the expatriation date were the date
of such cessation, disposition, or death,
whichever is applicable, or
``(ii) the balance in the tax deferred
account immediately before such date.
Such tax shall be imposed on the trust and each trustee
shall be personally liable for the amount of such tax
and any other beneficiary of the trust shall be
entitled to recover from the covered expatriate or the
estate the amount of such tax imposed on the other
beneficiary.
``(G) Definitions and special rule.--For purposes
of this paragraph--
``(i) Qualified trust.--The term `qualified
trust' means a trust--
``(I) which is organized under, and
governed by, the laws of the United
States or a State, and
``(II) with respect to which the
trust instrument requires that at least
1 trustee of the trust be an individual
citizen of the United States or a
domestic corporation.
``(ii) Vested interest.--The term `vested
interest' means any interest which, as of the
expatriation date, is vested in the
beneficiary.
``(iii) Nonvested interest.--The term
`nonvested interest' means, with respect to any
beneficiary, any interest in a trust which is
not a vested interest. Such interest shall be
determined by assuming the maximum exercise of
discretion in favor of the beneficiary and the
occurrence of all contingencies in favor of the
beneficiary.
``(iv) Adjustments.--The Secretary may
provide for such adjustments to the bases of
assets in a trust or a deferred tax account,
and the timing of such adjustments, in order to
ensure that gain is taxed only once.
``(3) Determination of beneficiaries' interest in trust.--
``(A) Determinations under paragraph (1).--For
purposes of paragraph (1), a beneficiary's interest in
a trust shall be based upon all relevant facts and
circumstances, including the terms of the trust
instrument and any letter of wishes or similar
document, historical patterns of trust distributions,
and the existence of and functions performed by a trust
protector or any similar advisor.
``(B) Other determinations.--For purposes of this
section--
``(i) Constructive ownership.--If a
beneficiary of a trust is a corporation,
partnership, trust, or estate, the
shareholders, partners, or beneficiaries shall
be deemed to be the trust beneficiaries for
purposes of this section.
``(ii) Taxpayer return position.--A
taxpayer shall clearly indicate on its income
tax return--
``(I) the methodology used to
determine that taxpayer's trust
interest under this section, and
``(II) if the taxpayer knows (or
has reason to know) that any other
beneficiary of such trust is using a
different methodology to determine such
beneficiary's trust interest under this
section.
``(g) Termination of Deferrals, Etc.--On the date any property held
by an individual is treated as sold under subsection (a),
notwithstanding any other provision of this title--
``(1) any period during which recognition of income or gain
is deferred shall terminate, and
``(2) any extension of time for payment of tax shall cease
to apply and the unpaid portion of such tax shall be due and
payable at the time and in the manner prescribed by the
Secretary.
``(h) Imposition of Tentative Tax.--
``(1) In general.--If an individual is required to include
any amount in gross income under subsection (a) for any taxable
year, there is hereby imposed, immediately before the
expatriation date, a tax in an amount equal to the amount of
tax which would be imposed if the taxable year were a short
taxable year ending on the expatriation date.
``(2) Due date.--The due date for any tax imposed by
paragraph (1) shall be the 90th day after the expatriation
date.
``(3) Treatment of tax.--Any tax paid under paragraph (1)
shall be treated as a payment of the tax imposed by this
chapter for the taxable year to which subsection (a) applies.
``(4) Deferral of tax.--The provisions of subsection (b)
shall apply to the tax imposed by this subsection to the extent
attributable to gain includible in gross income by reason of
this section.
``(i) Coordination With Estate and Gift Taxes.--If subsection (a)
applies to property held by an individual for any taxable year and--
``(1) such property is includible in the gross estate of
such individual solely by reason of section 2107, or
``(2) section 2501 applies to a transfer of such property
by such individual solely by reason of section 2501(a)(3),
then there shall be allowed as a credit against the additional tax
imposed by section 2101 or 2501, whichever is applicable, solely by
reason of section 2107 or 2501(a)(3) an amount equal to the increase in
the tax imposed by this chapter for such taxable year by reason of this
section.
``(j) Regulations.--The Secretary shall prescribe such regulations
as may be necessary or appropriate to carry out the purposes of this
section, including regulations--
``(1) to prevent double taxation by ensuring that--
``(A) appropriate adjustments are made to basis to
reflect gain recognized by reason of subsection (a) and
the exclusion provided by subsection (a)(3), and
``(B) any gain by reason of a deemed sale under
subsection (a) of an interest in a corporation,
partnership, trust, or estate is reduced to reflect
that portion of such gain which is attributable to an
interest in a trust which a shareholder, partner, or
beneficiary is treated as holding directly under
subsection (f)(3)(B)(i), and
``(2) which provide for the proper allocation of the
exclusion under subsection (a)(3) to property to which this
section applies.
``(k) Cross Reference.--
``For income tax treatment of
individuals who terminate United States citizenship, see section
7701(a)(47).''.
(b) Inclusion in Income of Gifts and Inheritances From Covered
Expatriates.--Section 102 (relating to gifts, etc. not included in
gross income) is amended by adding at the end the following new
subsection:
``(d) Gifts and Inheritances From Covered Expatriates.--Subsection
(a) shall not exclude from gross income the value of any property
acquired by gift, bequest, devise, or inheritance from a covered
expatriate after the expatriation date. For purposes of this
subsection, any term used in this subsection which is also used in
section 877A shall have the same meaning as when used in section
877A.''.
(c) Definition of Termination of United States Citizenship.--
Section 7701(a) is amended by adding at the end the following new
paragraph:
``(47) Termination of united states citizenship.--An
individual shall not cease to be treated as a United States
citizen before the date on which the individual's citizenship
is treated as relinquished under section 877A(e)(3).''.
(d) Conforming Amendments.--
(1) Section 877 is amended by adding at the end the
following new subsection:
``(f) Application.--This section shall not apply to any individual
who relinquishes (within the meaning of section 877A(e)(3)) United
States citizenship on or after February 6, 1995.''.
(2) Section 2107(c) is amended by adding at the end the
following new paragraph:
``(3) Cross reference.--For credit against the tax imposed
by subsection (a) for expatriation tax, see section 877A(i).''.
(3) Section 2501(a)(3) is amended by adding at the end the
following new flush sentence:
``For credit against the tax imposed under this section by
reason of this paragraph, see section 877A(i).''.
(4) Paragraph (10) of section 7701(b) is amended by adding
at the end the following new sentence: ``This paragraph shall
not apply to any long-term resident of the United States who is
an expatriate (as defined in section 877A(e)(1)).''.
(e) Clerical Amendment.--The table of sections for subpart A of
part II of subchapter N of chapter 1 is amended by inserting after the
item relating to section 877 the following new item:
``Sec. 877A. Tax responsibilities of expatriation.''.
(f) Effective Date.--
(1) In general.--Except as provided in this subsection, the
amendments made by this section shall apply to expatriates
(within the meaning of section 877A(e) of the Internal Revenue
Code of 1986, as added by this section) whose expatriation date
(as so defined) occurs on or after February 6, 1995.
(2) Gifts and bequests.--Section 102(d) of the Internal
Revenue Code of 1986 (as added by subsection (b)) shall apply
to amounts received from expatriates (as so defined) whose
expatriation date (as so defined) occurs on and after February
6, 1995.
(3) Special rules relating to certain acts occurring before
february 6, 1995.--In the case of an individual who took an act
of expatriation specified in paragraph (1), (2), (3), or (4) of
section 349(a) of the Immigration and Nationality Act (8 U.S.C.
1481(a) (1)-(4)) before February 6, 1995, but whose
expatriation date (as so defined) occurs after February 6,
1995--
(A) the amendment made by subsection (c) shall not
apply,
(B) the amendment made by subsection (d)(1) shall
not apply for any period prior to the expatriation
date, and
(C) the other amendments made by this section shall
apply as of the expatriation date.
(4) Due date for tentative tax.--The due date under section
877A(h)(2) of such Code shall in no event occur before the 90th
day after the date of the enactment of this Act.
SEC. 472. INFORMATION ON INDIVIDUALS EXPATRIATING.
(a) In General.--Subpart A of part III of subchapter A of chapter
61 is amended by inserting after section 6039E the following new
section:
``SEC. 6039F. INFORMATION ON INDIVIDUALS EXPATRIATING.
``(a) Requirement.--
``(1) In general.--Notwithstanding any other provision of
law, any expatriate (within the meaning of section 877A(e)(1))
shall provide a statement which includes the information
described in subsection (b).
``(2) Timing.--
``(A) Citizens.--In the case of an expatriate
described in section 877(e)(1)(A), such statement shall
be--
``(i) provided not later than the
expatriation date (within the meaning of
section 877A(e)(2)), and
``(ii) provided to the person or court
referred to in section 877A(e)(3).
``(B) Noncitizens.--In the case of an expatriate
described in section 877A(e)(1)(B), such statement
shall be provided to the Secretary with the return of
tax imposed by chapter 1 for the taxable year during
which the event described in such section occurs.
``(b) Information To Be Provided.--Information required under
subsection (a) shall include--
``(1) the taxpayer's TIN,
``(2) the mailing address of such individual's principal
foreign residence,
``(3) the foreign country in which such individual is
residing,
``(4) the foreign country of which such individual is a
citizen,
``(5) in the case of an individual having a net worth of at
least the dollar amount applicable under section 877A(c)(1)(B),
information detailing the assets and liabilities of such
individual, and
``(6) such other information as the Secretary may
prescribe.
``(c) Penalty.--Any individual failing to provide a statement
required under subsection (a) shall be subject to a penalty for each
year during any portion of which such failure continues in an amount
equal to the greater of--
``(1) 5 percent of the additional tax required to be paid
under section 877A for such year, or
``(2) $1,000,
unless it is shown that such failure is due to reasonable cause and not
to willful neglect.
``(d) Information To Be Provided to Secretary.--Notwithstanding any
other provision of law--
``(1) any Federal agency or court which collects (or is
required to collect) the statement under subsection (a) shall
provide to the Secretary--
``(A) a copy of any such statement, and
``(B) the name (and any other identifying
information) of any individual refusing to comply with
the provisions of subsection (a),
``(2) the Secretary of State shall provide to the Secretary
a copy of each certificate as to the loss of American
nationality under section 358 of the Immigration and
Nationality Act which is approved by the Secretary of State,
and
``(3) the Federal agency primarily responsible for
administering the immigration laws shall provide to the
Secretary the name of each lawful permanent resident of the
United States (within the meaning of section 7701(b)(6)) whose
status as such has been revoked or has been administratively or
judicially determined to have been abandoned.
Notwithstanding any other provision of law, not later than 30 days
after the close of each calendar quarter, the Secretary shall publish
in the Federal Register the name of each individual relinquishing
United States citizenship (within the meaning of section 877A(e)(3))
with respect to whom the Secretary receives information under the
preceding sentence during such quarter.
``(e) Exemption.--The Secretary may by regulations exempt any class
of individuals from the requirements of this section if the Secretary
determines that applying this section to such individuals is not
necessary to carry out the purposes of this section.''.
(b) Clerical Amendment.--The table of sections for such subpart A
is amended by inserting after the item relating to section 6039E the
following new item:
``Sec. 6039F. Information on individuals expatriating.''.
(c) Effective Date.--The amendments made by this section shall
apply to individuals to whom section 877A of the Internal Revenue Code
of 1986 applies and whose expatriation date (as defined in section
877A(e)(2)) occurs on or after February 6, 1995, except that no
statement shall be required by such amendments before the 90th day
after the date of the enactment of this Act.
SEC. 473. REPORT ON TAX COMPLIANCE BY UNITED STATES CITIZENS AND
RESIDENTS LIVING ABROAD.
Not later than 90 days after the date of the enactment of this Act,
the Secretary of the Treasury shall prepare and submit to the Committee
on Ways and Means of the House of Representatives and the Committee on
Finance of the Senate a report--
(1) describing the compliance with subtitle A of the
Internal Revenue Code of 1986 by citizens and lawful permanent
residents of the United States (within the meaning of section
7701(b)(6) of such Code) residing outside the United States,
and
(2) recommending measures to improve such compliance
(including improved coordination between executive branch
agencies).
CHAPTER 2--COMPANY-OWNED INSURANCE
SEC. 495. DENIAL OF DEDUCTION FOR INTEREST ON LOANS WITH RESPECT TO
COMPANY-OWNED INSURANCE.
(a) In General.--Paragraph (4) of section 264(a) is amended--
(1) by inserting ``, or any endowment or annuity contracts
owned by the taxpayer covering any individual,'' after ``the
life of any individual'', and
(2) by striking all that follows ``carried on by the
taxpayer'' and inserting a period.
(b) Exception for Contracts Relating to Key Persons; Permissible
Interest Rates.--Section 264 is amended--
(1) by striking ``Any'' in subsection (a)(4) and inserting
``Except as provided in subsection (d), any'', and
(2) by adding at the end the following new subsection:
``(d) Special Rules For Application of Subsection (a)(4).--
``(1) Exception for key persons.--Subsection (a)(4) shall
not apply to any interest paid or accrued on any indebtedness
with respect to policies or contracts covering an individual
who is a key person to the extent that the aggregate amount of
such indebtedness with respect to policies and contracts
covering such individual does not exceed $50,000.
``(2) Interest rate cap on key persons and pre-1986
contracts.--
``(A) In general.--No deduction shall be allowed by
reason of paragraph (1) or the last sentence of
subsection (a) with respect to interest paid or accrued
for any month to the extent the amount of such interest
exceeds the amount which would have been determined if
the applicable rate of interest were used for such
month.
``(B) Applicable rate of interest.--For purposes of
subparagraph (A)--
``(i) In general.--The applicable rate of
interest for any month is the rate of interest
described as Moody's Corporate Bond Yield
Average-Monthly Average Corporates as published
by Moody's Investors Service, Inc., or any
successor thereto, for such month.
``(ii) Pre-1986 contract.--In the case of
indebtedness on a contract to which the last
sentence of subsection (a) applies--
``(I) which is a contract providing
a fixed rate of interest, the
applicable rate of interest for any
month shall be the Moody's rate
described in clause (i) for the month
in which the contract was purchased, or
``(II) which is a contract
providing a variable rate of interest,
the applicable rate of interest for any
month in an applicable period shall be
such Moody's rate for the last month
preceding such period.
For purposes of subclause (II), the taxpayer
shall elect an applicable period for such
contract on its return of tax imposed by this
chapter for its first taxable year ending on or
after October 13, 1995. Such applicable period
shall be for any number of months (not greater
than 12) specified in the election and may not
be changed by the taxpayer without the consent
of the Secretary.
``(3) Key person.--For purposes of paragraph (1), the term
`key person' means an officer or 20-percent owner, except that
the number of individuals who may be treated as key persons
with respect to any taxpayer shall not exceed the greater of--
``(A) 5 individuals, or
``(B) the lesser of 5 percent of the total officers
and employees of the taxpayer or 10 individuals.
``(4) 20-percent owner.--For purposes of this subsection,
the term `20-percent owner' means--
``(A) if the taxpayer is a corporation, any person
who owns directly 20 percent or more of the outstanding
stock of the corporation or stock possessing 20 percent
or more of the total combined voting power of all stock
of the corporation, or
``(B) if the taxpayer is not a corporation, any
person who owns 20 percent or more of the capital or
profits interest in the employer.
``(5) Aggregation rules.--
``(A) In general.--For purposes of paragraph (4)(A)
and applying the $50,000 limitation in paragraph (1)--
``(i) all members of a controlled group
shall be treated as 1 taxpayer, and
``(ii) such limitation shall be allocated
among the members of such group in such manner
as the Secretary may prescribe.
``(B) Controlled group.--For purposes of this
paragraph, all persons treated as a single employer
under subsection (a) or (b) of section 52 or subsection
(m) or (o) of section 414 shall be treated as members
of a controlled group.''.
(c) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to interest paid or accrued after December 31, 1995.
(2) Transition rule for existing indebtedness.--
(A) In general.--In the case of--
(i) indebtedness incurred before January 1,
1996, or
(ii) indebtedness incurred before January
1, 1997 with respect to any contract or policy
entered into in 1994 or 1995,
the amendments made by this section shall not apply to
qualified interest paid or accrued on such indebtedness
after October 13, 1995, and before January 1, 1999.
(B) Qualified interest.--For purposes of
subparagraph (A), the qualified interest with respect
to any indebtedness for any month is the amount of
interest which would be paid or accrued for such month
on such indebtedness if--
(i) in the case of any interest paid or
accrued after December 31, 1995, indebtedness
with respect to no more than 20,000 insured
individuals were taken into account, and
(ii) the lesser of the following rates of
interest were used for such month:
(I) The rate of interest specified
under the terms of the indebtedness as
in effect on October 13, 1995 (and
without regard to modification of such
terms after such date).
(II) The applicable percentage rate
of interest described as Moody's
Corporate Bond Yield Average-Monthly
Average Corporates as published by
Moody's Investors Service, Inc., or any
successor thereto, for such month.
For purposes of clause (i), all persons treated as a
single employer under subsection (a) or (b) of section
52 of the Internal Revenue Code of 1986 or subsection
(m) or (o) of section 414 of such Code shall be treated
as one person.
(C) Applicable percentage.--For purposes of
subparagraph (B), the applicable percentage is as
follows:
For calendar year:
The percentage is:
1995................................. 100 percent
1996................................. 90 percent
1997................................. 80 percent
1998................................. 70 percent.
(3) Special rule for grandfathered contracts.--This section
shall not apply to any contract purchased on or before June 20,
1986, except that section 264(d)(2) of the Internal Revenue
Code of 1986 shall apply to interest paid or accrued after
October 13, 1995.
(d) Spread of Income Inclusion on Surrender, Etc. of Contracts.--
(1) In general.--If any amount is received under any life
insurance policy or endowment or annuity contract described in
paragraph (4) of section 264(a) of the Internal Revenue Code of
1986--
(A) on the complete surrender, redemption, or
maturity of such policy or contract during calendar
year 1996, 1997, or 1998, or
(B) in full discharge during any such calendar year
of the obligation under the policy or contract which is
in the nature of a refund of the consideration paid for
the policy or contract,
then (in lieu of any other inclusion in gross income) such
amount shall be includible in gross income ratably over the 4-
taxable year period beginning with the taxable year such amount
would (but for this paragraph) be includible. The preceding
sentence shall only apply to the extent the amount is
includible in gross income for the taxable year in which the
event described in subparagraph (A) or (B) occurs.
(2) Special rules for applying section 264.--A contract
shall not be treated as--
(A) failing to meet the requirement of section
264(c)(1) of the Internal Revenue Code of 1986, or
(B) a single premium contract under section
264(b)(1) of such Code,
solely by reason of an occurrence described in subparagraph (A)
or (B) of paragraph (1) of this subsection or solely by reason
of no additional premiums being received under the contract by
reason of a lapse occurring after October 13, 1995.
(3) Special rule for deferred acquisition costs.--In the
case of the occurrence of any event described in subparagraph
(A) or (B) of paragraph (1) of this subsection with respect to
any policy or contract--
(A) section 848 of the Internal Revenue Code of
1986 shall not apply to the unamortized balance (if
any) of the specified policy acquisition expenses
attributable to such policy or contract immediately
before the insurance company's taxable year in which
such event occurs, and
(B) there shall be allowed as a deduction to such
company for such taxable year under chapter 1 of such
Code an amount equal to such unamortized balance.
TITLE V--HEALTH CARE FRAUD AND ABUSE PREVENTION
SEC. 500. AMENDMENTS.
Except as otherwise specifically provided, whenever in this title
an amendment is expressed in terms of an amendment to or repeal of a
section or other provision, the reference shall be considered to be
made to that section or other provision of the Social Security Act.
Subtitle A--Fraud and Abuse Control Program
SEC. 501. FRAUD AND ABUSE CONTROL PROGRAM.
(a) Establishment of Program.--Title XI (42 U.S.C. 1301 et seq.) is
amended by inserting after section 1128B the following new section:
``fraud and abuse control program
``Sec. 1128C. (a) Establishment of Program.--
``(1) In general.--Not later than January 1, 1997, the
Secretary, acting through the Office of the Inspector General
of the Department of Health and Human Services, and the
Attorney General shall establish a program--
``(A) to coordinate Federal, State, and local law
enforcement programs to control fraud and abuse with
respect to health plans,
``(B) to conduct investigations, audits,
evaluations, and inspections relating to the delivery
of and payment for health care in the United States,
``(C) to facilitate the enforcement of the
provisions of sections 1128, 1128A, and 1128B and other
statutes applicable to health care fraud and abuse,
``(D) to provide for the modification and
establishment of safe harbors and to issue
interpretative rulings and special fraud alerts
pursuant to section 1128D, and
``(E) to provide for the reporting and disclosure
of certain final adverse actions against health care
providers, suppliers, or practitioners pursuant to the
data collection system established under section 1128E.
``(2) Coordination with health plans.--In carrying out the
program established under paragraph (1), the Secretary and the
Attorney General shall consult with, and arrange for the
sharing of data with representatives of health plans.
``(3) Guidelines.--
``(A) In general.--The Secretary and the Attorney
General shall issue guidelines to carry out the program
under paragraph (1). The provisions of sections 553,
556, and 557 of title 5, United States Code, shall not
apply in the issuance of such guidelines.
``(B) Information guidelines.--
``(i) In general.--Such guidelines shall
include guidelines relating to the furnishing
of information by health plans, providers, and
others to enable the Secretary and the Attorney
General to carry out the program (including
coordination with health plans under paragraph
(2)).
``(ii) Confidentiality.--Such guidelines
shall include procedures to assure that such
information is provided and utilized in a
manner that appropriately protects the
confidentiality of the information and the
privacy of individuals receiving health care
services and items.
``(iii) Qualified immunity for providing
information.--The provisions of section 1157(a)
(relating to limitation on liability) shall
apply to a person providing information to the
Secretary or the Attorney General in
conjunction with their performance of duties
under this section.
``(4) Ensuring access to documentation.--The Inspector
General of the Department of Health and Human Services is
authorized to exercise such authority described in paragraphs
(3) through (9) of section 6 of the Inspector General Act of
1978 (5 U.S.C. App.) as necessary with respect to the
activities under the fraud and abuse control program
established under this subsection.
``(5) Authority of inspector general.--Nothing in this Act
shall be construed to diminish the authority of any Inspector
General, including such authority as provided in the Inspector
General Act of 1978 (5 U.S.C. App.).
``(b) Additional Use of Funds by Inspector General.--
``(1) Reimbursements for investigations.--The Inspector
General of the Department of Health and Human Services is
authorized to receive and retain for current use reimbursement
for the costs of conducting investigations and audits and for
monitoring compliance plans when such costs are ordered by a
court, voluntarily agreed to by the payor, or otherwise.
``(2) Crediting.--Funds received by the Inspector General
under paragraph (1) as reimbursement for costs of conducting
investigations shall be deposited to the credit of the
appropriation from which initially paid, or to appropriations
for similar purposes currently available at the time of
deposit, and shall remain available for obligation for 1 year
from the date of the deposit of such funds.
``(c) Health Plan Defined.--For purposes of this section, the term
`health plan' means a plan or program that provides health benefits,
whether directly, through insurance, or otherwise, and includes--
``(1) a policy of health insurance;
``(2) a contract of a service benefit organization; and
``(3) a membership agreement with a health maintenance
organization or other prepaid health plan.''.
(b) Establishment of Health Care Fraud and Abuse Control Account in
Federal Hospital Insurance Trust Fund.--Section 1817 (42 U.S.C. 1395i)
is amended by adding at the end the following new subsection:
``(k) Health Care Fraud and Abuse Control Account.--
``(1) Establishment.--There is hereby established in the
Trust Fund an expenditure account to be known as the `Health
Care Fraud and Abuse Control Account' (in this subsection
referred to as the `Account').
``(2) Appropriated amounts to trust fund.--
``(A) In general.--There are hereby appropriated to
the Trust Fund--
``(i) such gifts and bequests as may be
made as provided in subparagraph (B);
``(ii) such amounts as may be deposited in
the Trust Fund as provided in sections 541(b)
and 542(c) of the Health Insurance Reform Act
of 1996, and title XI; and
``(iii) such amounts as are transferred to
the Trust Fund under subparagraph (C).
``(B) Authorization to accept gifts.--The Trust
Fund is authorized to accept on behalf of the United
States money gifts and bequests made unconditionally to
the Trust Fund, for the benefit of the Account or any
activity financed through the Account.
``(C) Transfer of amounts.--The Managing Trustee
shall transfer to the Trust Fund, under rules similar
to the rules in section 9601 of the Internal Revenue
Code of 1986, an amount equal to the sum of the
following:
``(i) Criminal fines recovered in cases
involving a Federal health care offense (as
defined in section 982(a)(6)(B) of title 18,
United States Code).
``(ii) Civil monetary penalties and
assessments imposed in health care cases,
including amounts recovered under titles XI,
XVIII, and XXI, and chapter 38 of title 31,
United States Code (except as otherwise
provided by law).
``(iii) Amounts resulting from the
forfeiture of property by reason of a Federal
health care offense.
``(iv) Penalties and damages obtained and
otherwise creditable to miscellaneous receipts
of the general fund of the Treasury obtained
under sections 3729 through 3733 of title 31,
United States Code (known as the False Claims
Act), in cases involving claims related to the
provision of health care items and services
(other than funds awarded to a relator, for
restitution or otherwise authorized by law).
``(3) Appropriated amounts to account for fraud and abuse
control program, etc.--
``(A) Departments of health and human services and
justice.--
``(i) In general.--There are hereby
appropriated to the Account from the Trust Fund
such sums as the Secretary and the Attorney
General certify are necessary to carry out the
purposes described in subparagraph (C), to be
available without further appropriation, in an
amount not to exceed--
``(I) for fiscal year 1997,
$104,000,000, and
``(II) for each of the fiscal years
1998 through 2003, the limit for the
preceding fiscal year, increased by 15
percent; and
``(III) for each fiscal year after
fiscal year 2003, the limit for fiscal
year 2003.
``(ii) Medicare and medicaid activities.--
For each fiscal year, of the amount
appropriated in clause (i), the following
amounts shall be available only for the
purposes of the activities of the Office of the
Inspector General of the Department of Health
and Human Services with respect to the medicare
and medicaid programs--
``(I) for fiscal year 1997, not
less than $60,000,000 and not more than
$70,000,000;
``(II) for fiscal year 1998, not
less than $80,000,000 and not more than
$90,000,000;
``(III) for fiscal year 1999, not
less than $90,000,000 and not more than
$100,000,000;
``(IV) for fiscal year 2000, not
less than $110,000,000 and not more
than $120,000,000;
``(V) for fiscal year 2001, not
less than $120,000,000 and not more
than $130,000,000;
``(VI) for fiscal year 2002, not
less than $140,000,000 and not more
than $150,000,000; and
``(VII) for each fiscal year after
fiscal year 2002, not less than
$150,000,000 and not more than
$160,000,000.
``(B) Federal bureau of investigation.--There are
hereby appropriated from the general fund of the United
States Treasury and hereby appropriated to the Account
for transfer to the Federal Bureau of Investigation to
carry out the purposes described in subparagraph
(C)(i), to be available without further appropriation--
``(i) for fiscal year 1997, $47,000,000;
``(ii) for fiscal year 1998, $56,000,000;
``(iii) for fiscal year 1999, $66,000,000;
``(iv) for fiscal year 2000, $76,000,000;
``(v) for fiscal year 2001, $88,000,000;
``(vi) for fiscal year 2002, $101,000,000;
and
``(vii) for each fiscal year after fiscal
year 2002, $114,000,000.
``(C) Use of funds.--The purposes described in this
subparagraph are to cover the costs (including
equipment, salaries and benefits, and travel and
training) of the administration and operation of the
health care fraud and abuse control program established
under section 1128C(a), including the costs of--
``(i) prosecuting health care matters
(through criminal, civil, and administrative
proceedings);
``(ii) investigations;
``(iii) financial and performance audits of
health care programs and operations;
``(iv) inspections and other evaluations;
and
``(v) provider and consumer education
regarding compliance with the provisions of
title XI.
``(4) Appropriated amounts to account for medicare
integrity program.--
``(A) In general.--There are hereby appropriated to
the Account from the Trust Fund for each fiscal year
such amounts as are necessary to carry out the Medicare
Integrity Program under section 1893, subject to
subparagraph (B) and to be available without further
appropriation.
``(B) Amounts specified.--The amount appropriated
under subparagraph (A) for a fiscal year is as follows:
``(i) For fiscal year 1997, such amount
shall be not less than $430,000,000 and not
more than $440,000,000.
``(ii) For fiscal year 1998, such amount
shall be not less than $490,000,000 and not
more than $500,000,000.
``(iii) For fiscal year 1999, such amount
shall be not less than $550,000,000 and not
more than $560,000,000.
``(iv) For fiscal year 2000, such amount
shall be not less than $620,000,000 and not
more than $630,000,000.
``(v) For fiscal year 2001, such amount
shall be not less than $670,000,000 and not
more than $680,000,000.
``(vi) For fiscal year 2002, such amount
shall be not less than $690,000,000 and not
more than $700,000,000.
``(vii) For each fiscal year after fiscal
year 2002, such amount shall be not less than
$710,000,000 and not more than $720,000,000.
``(5) Annual report.--The Secretary and the Attorney
General shall submit jointly an annual report to Congress on
the amount of revenue which is generated and disbursed, and the
justification for such disbursements, by the Account in each
fiscal year.''.
SEC. 502. MEDICARE INTEGRITY PROGRAM.
(a) Establishment of Medicare Integrity Program.--Title XVIII is
amended by adding at the end the following new section:
``medicare integrity program
``Sec. 1893. (a) Establishment of Program.--There is hereby
established the Medicare Integrity Program (in this section referred to
as the `Program') under which the Secretary shall promote the integrity
of the medicare program by entering into contracts in accordance with
this section with eligible private entities to carry out the activities
described in subsection (b).
``(b) Activities Described.--The activities described in this
subsection are as follows:
``(1) Review of activities of providers of services or
other individuals and entities furnishing items and services
for which payment may be made under this title (including
skilled nursing facilities and home health agencies), including
medical and utilization review and fraud review (employing
similar standards, processes, and technologies used by private
health plans, including equipment and software technologies
which surpass the capability of the equipment and technologies
used in the review of claims under this title as of the date of
the enactment of this section).
``(2) Audit of cost reports.
``(3) Determinations as to whether payment should not be,
or should not have been, made under this title by reason of
section 1862(b), and recovery of payments that should not have
been made.
``(4) Education of providers of services, beneficiaries,
and other persons with respect to payment integrity and benefit
quality assurance issues.
``(5) Developing (and periodically updating) a list of
items of durable medical equipment in accordance with section
1834(a)(15) which are subject to prior authorization under such
section.
``(c) Eligibility of Entities.--An entity is eligible to enter into
a contract under the Program to carry out any of the activities
described in subsection (b) if--
``(1) the entity has demonstrated capability to carry out
such activities;
``(2) in carrying out such activities, the entity agrees to
cooperate with the Inspector General of the Department of
Health and Human Services, the Attorney General of the United
States, and other law enforcement agencies, as appropriate, in
the investigation and deterrence of fraud and abuse in relation
to this title and in other cases arising out of such
activities;
``(3) the entity complies with such conflict of interest
standards as are generally applicable to Federal acquisition
and procurement;
``(4) the entity meets such other requirements as the
Secretary may impose; and
``(5) in the case of any contract entered into for years
prior to 2000, the entity has entered into an agreement under
section 1816 or a contract under section 1842.
In the case of the activity described in subsection (b)(5), an entity
shall be deemed to be eligible to enter into a contract under the
Program to carry out the activity if the entity is a carrier with a
contract in effect under section 1842.
``(d) Process for Entering Into Contracts.--The Secretary shall
enter into contracts under the Program in accordance with such
procedures as the Secretary shall by regulation establish, except that
such procedures shall include the following:
``(1) Procedures for identifying, evaluating, and resolving
organizational conflicts of interest that are generally
applicable to Federal acquisition and procurement.
``(2) Competitive procedures must be used when entering
into new contracts under this section, or at any other time
considered appropriate by the Secretary, except that the
Secretary may contract with entities that are carrying out the
activities described in this section pursuant to agreements
under section 1816 or contracts under section 1842 in effect on
the date of the enactment of this section.
``(3) A contract under this section may be renewed without
regard to any provision of law requiring competition if the
contractor has met or exceeded the performance requirements
established in the current contract.
``(e) Limitation on Contractor Liability.--The Secretary shall by
regulation provide for the limitation of a contractor's liability for
actions taken to carry out a contract under the Program, and such
regulation shall, to the extent the Secretary finds appropriate, employ
the same or comparable standards and other substantive and procedural
provisions as are contained in section 1157.''.
(b) Elimination of FI and Carrier Responsibility for Carrying Out
Activities Subject to Program.--
(1) Responsibilities of fiscal intermediaries under part
a.--Section 1816 (42 U.S.C. 1395h) is amended by adding at the
end the following new subsection:
``(l) No payment may be made for carrying out any activity pursuant
to an agreement under this section to the extent that the activity is
carried out pursuant to a contract under the Medicare Integrity Program
under section 1893.''.
(2) Responsibilities of carriers under part b.--Section
1842(c) (42 U.S.C. 1395u(c)) is amended by adding at the end
the following new paragraph:
``(6) No payment may be made for carrying out any activity pursuant
to a contract under this subsection to the extent that the activity is
carried out pursuant to a contract under the Medicare Integrity Program
under section 1893. The previous sentence shall not apply with respect
to the activity described in section 1893(b)(5) (relating to prior
authorization of certain items of durable medical equipment under
section 1834(a)(15)).''.
SEC. 503. BENEFICIARY INCENTIVE PROGRAMS.
(a) Clarification of Requirement to Provide Explanation of Medicare
Benefits.--The Secretary of Health and Human Services (in this section
referred to as the ``Secretary'') shall provide an explanation of
benefits under the medicare program under title XVIII of the Social
Security Act with respect to each item or service for which payment may
be made under the program which is furnished to an individual, without
regard to whether or not a deductible or coinsurance may be imposed
against the individual with respect to the item or service.
(b) Program to Collect Information on Fraud and Abuse.--
(1) Establishment of program.--Not later than 3 months
after the date of the enactment of this Act, the Secretary
shall establish a program under which the Secretary shall
encourage individuals to report to the Secretary information on
individuals and entities who are engaging or who have engaged
in acts or omissions which constitute grounds for the
imposition of a sanction under section 1128, section 1128A, or
section 1128B of the Social Security Act, or who have otherwise
engaged in fraud and abuse against the medicare program for
which there is a sanction provided under law. The program shall
discourage provision of, and not consider, information which is
frivolous or otherwise not relevant or material to the
imposition of such a sanction.
(2) Payment of portion of amounts collected.--If an
individual reports information to the Secretary under the
program established under paragraph (1) which serves as the
basis for the collection by the Secretary or the Attorney
General of any amount of at least $100 (other than any amount
paid as a penalty under section 1128B of the Social Security
Act), the Secretary may pay a portion of the amount collected
to the individual (under procedures similar to those applicable
under section 7623 of the Internal Revenue Code of 1986 to
payments to individuals providing information on violations of
such Code).
(c) Program to Collect Information on Program Efficiency.--
(1) Establishment of program.--Not later than 3 months
after the date of the enactment of this Act, the Secretary
shall establish a program under which the Secretary shall
encourage individuals to submit to the Secretary suggestions on
methods to improve the efficiency of the medicare program.
(2) Payment of portion of program savings.--If an
individual submits a suggestion to the Secretary under the
program established under paragraph (1) which is adopted by the
Secretary and which results in savings to the program, the
Secretary may make a payment to the individual of such amount
as the Secretary considers appropriate.
SEC. 504. APPLICATION OF CERTAIN HEALTH ANTI-FRAUD AND ABUSE SANCTIONS
TO FRAUD AND ABUSE AGAINST FEDERAL HEALTH CARE PROGRAMS.
(a) In General.--Section 1128B (42 U.S.C. 1320a-7b) is amended as
follows:
(1) In the heading, by striking ``medicare or state health
care programs'' and inserting ``federal health care programs''.
(2) In subsection (a)(1), by striking ``a program under
title XVIII or a State health care program (as defined in
section 1128(h))'' and inserting ``a Federal health care
program''.
(3) In subsection (a)(5), by striking ``a program under
title XVIII or a State health care program'' and inserting ``a
Federal health care program''.
(4) In the second sentence of subsection (a)--
(A) by striking ``a State plan approved under title
XIX'' and inserting ``a Federal health care program'',
and
(B) by striking ``the State may at its option
(notwithstanding any other provision of that title or
of such plan)'' and inserting ``the administrator of
such program may at its option (notwithstanding any
other provision of such program)''.
(5) In subsection (b), by striking ``title XVIII or a State
health care program'' each place it appears and inserting ``a
Federal health care program''.
(6) In subsection (c), by inserting ``(as defined in
section 1128(h))'' after ``a State health care program''.
(7) By adding at the end the following new subsection:
``(f) For purposes of this section, the term `Federal health care
program' means--
``(1) any plan or program that provides health benefits,
whether directly, through insurance, or otherwise, which is
funded directly, in whole or in part, by the United States
Government (other than the health insurance program under
chapter 89 of title 5, United States Code); or
``(2) any State health care program, as defined in section
1128(h).''.
(b) Effective Date.--The amendments made by this section shall take
effect on January 1, 1997.
SEC. 505. GUIDANCE REGARDING APPLICATION OF HEALTH CARE FRAUD AND ABUSE
SANCTIONS.
Title XI (42 U.S.C. 1301 et seq.), as amended by section 501, is
amended by inserting after section 1128C the following new section:
``guidance regarding application of health care fraud and abuse
sanctions
``Sec. 1128D. (a) Solicitation and Publication of Modifications to
Existing Safe Harbors and New Safe Harbors.--
``(1) In general.--
``(A) Solicitation of proposals for safe harbors.--
Not later than January 1, 1997, and not less than
annually thereafter, the Secretary shall publish a
notice in the Federal Register soliciting proposals,
which will be accepted during a 60-day period, for--
``(i) modifications to existing safe
harbors issued pursuant to section 14(a) of the
Medicare and Medicaid Patient and Program
Protection Act of 1987 (42 U.S.C. 1320a-7b
note);
``(ii) additional safe harbors specifying
payment practices that shall not be treated as
a criminal offense under section 1128B(b) and
shall not serve as the basis for an exclusion
under section 1128(b)(7);
``(iii) interpretive rulings to be issued
pursuant to subsection (b); and
``(iv) special fraud alerts to be issued
pursuant to subsection (c).
``(B) Publication of proposed modifications and
proposed additional safe harbors.--After considering
the proposals described in clauses (i) and (ii) of
subparagraph (A), the Secretary, in consultation with
the Attorney General, shall publish in the Federal
Register proposed modifications to existing safe
harbors and proposed additional safe harbors, if
appropriate, with a 60-day comment period. After
considering any public comments received during this
period, the Secretary shall issue final rules modifying
the existing safe harbors and establishing new safe
harbors, as appropriate.
``(C) Report.--The Inspector General of the
Department of Health and Human Services (in this
section referred to as the `Inspector General') shall,
in an annual report to Congress or as part of the year-
end semiannual report required by section 5 of the
Inspector General Act of 1978 (5 U.S.C. App.), describe
the proposals received under clauses (i) and (ii) of
subparagraph (A) and explain which proposals were
included in the publication described in subparagraph
(B), which proposals were not included in that
publication, and the reasons for the rejection of the
proposals that were not included.
``(2) Criteria for modifying and establishing safe
harbors.--In modifying and establishing safe harbors under
paragraph (1)(B), the Secretary may consider the extent to
which providing a safe harbor for the specified payment
practice may result in any of the following:
``(A) An increase or decrease in access to health
care services.
``(B) An increase or decrease in the quality of
health care services.
``(C) An increase or decrease in patient freedom of
choice among health care providers.
``(D) An increase or decrease in competition among
health care providers.
``(E) An increase or decrease in the ability of
health care facilities to provide services in medically
underserved areas or to medically underserved
populations.
``(F) An increase or decrease in the cost to
Federal health care programs (as defined in section
1128B(f)).
``(G) An increase or decrease in the potential
overutilization of health care services.
``(H) The existence or nonexistence of any
potential financial benefit to a health care
professional or provider which may vary based on their
decisions of--
``(i) whether to order a health care item
or service; or
``(ii) whether to arrange for a referral of
health care items or services to a particular
practitioner or provider.
``(I) Any other factors the Secretary deems
appropriate in the interest of preventing fraud and
abuse in Federal health care programs (as so defined).
``(b) Interpretive Rulings.--
``(1) In general.--
``(A) Request for interpretive ruling.--Any person
may present, at any time, a request to the Inspector
General for a statement of the Inspector General's
current interpretation of the meaning of a specific
aspect of the application of sections 1128A and 1128B
(in this section referred to as an `interpretive
ruling').
``(B) Issuance and effect of interpretive ruling.--
``(i) In general.--If appropriate, the
Inspector General shall in consultation with
the Attorney General, issue an interpretive
ruling not later than 90 days after receiving a
request described in subparagraph (A).
Interpretive rulings shall not have the force
of law and shall be treated as an interpretive
rule within the meaning of section 553(b) of
title 5, United States Code. All interpretive
rulings issued pursuant to this clause shall be
published in the Federal Register or otherwise
made available for public inspection.
``(ii) Reasons for denial.--If the
Inspector General does not issue an
interpretive ruling in response to a request
described in subparagraph (A), the Inspector
General shall notify the requesting party of
such decision not later than 60 days after
receiving such a request and shall identify the
reasons for such decision.
``(2) Criteria for interpretive rulings.--
``(A) In general.--In determining whether to issue
an interpretive ruling under paragraph (1)(B), the
Inspector General may consider--
``(i) whether and to what extent the
request identifies an ambiguity within the
language of the statute, the existing safe
harbors, or previous interpretive rulings; and
``(ii) whether the subject of the requested
interpretive ruling can be adequately addressed
by interpretation of the language of the
statute, the existing safe harbor rules, or
previous interpretive rulings, or whether the
request would require a substantive ruling (as
defined in section 552 of title 5, United
States Code) not authorized under this
subsection.
``(B) No rulings on factual issues.--The Inspector
General shall not give an interpretive ruling on any
factual issue, including the intent of the parties or
the fair market value of particular leased space or
equipment.
``(c) Special Fraud Alerts.--
``(1) In general.--
``(A) Request for special fraud alerts.--Any person
may present, at any time, a request to the Inspector
General for a notice which informs the public of
practices which the Inspector General considers to be
suspect or of particular concern under the medicare
program or a State health care program, as defined in
section 1128(h) (in this subsection referred to as a
`special fraud alert').
``(B) Issuance and publication of special fraud
alerts.--Upon receipt of a request described in
subparagraph (A), the Inspector General shall
investigate the subject matter of the request to
determine whether a special fraud alert should be
issued. If appropriate, the Inspector General shall
issue a special fraud alert in response to the request.
All special fraud alerts issued pursuant to this
subparagraph shall be published in the Federal
Register.
``(2) Criteria for special fraud alerts.--In determining
whether to issue a special fraud alert upon a request described
in paragraph (1), the Inspector General may consider--
``(A) whether and to what extent the practices that
would be identified in the special fraud alert may
result in any of the consequences described in
subsection (a)(2); and
``(B) the volume and frequency of the conduct that
would be identified in the special fraud alert.''.
Subtitle B--Revisions to Current Sanctions for Fraud and Abuse
SEC. 511. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDICARE AND STATE
HEALTH CARE PROGRAMS.
(a) Individual Convicted of Felony Relating to Health Care Fraud.--
(1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)) is
amended by adding at the end the following new paragraph:
``(3) Felony conviction relating to health care fraud.--Any
individual or entity that has been convicted after the date of
the enactment of the Health Insurance Reform Act of 1996, under
Federal or State law, in connection with the delivery of a
health care item or service or with respect to any act or
omission in a health care program (other than those
specifically described in paragraph (1)) operated by or
financed in whole or in part by any Federal, State, or local
government agency, of a criminal offense consisting of a felony
relating to fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct.''.
(2) Conforming amendment.--Paragraph (1) of section 1128(b)
(42 U.S.C. 1320a-7(b)) is amended to read as follows:
``(1) Conviction relating to fraud.--Any individual or
entity that has been convicted after the date of the enactment
of the Health Insurance Reform Act of 1996, under Federal or
State law--
``(A) of a criminal offense consisting of a
misdemeanor relating to fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial
misconduct--
``(i) in connection with the delivery of a
health care item or service, or
``(ii) with respect to any act or omission
in a health care program (other than those
specifically described in subsection (a)(1))
operated by or financed in whole or in part by
any Federal, State, or local government agency;
or
``(B) of a criminal offense relating to fraud,
theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct with
respect to any act or omission in a program (other than
a health care program) operated by or financed in whole
or in part by any Federal, State, or local government
agency.''.
(b) Individual Convicted of Felony Relating to Controlled
Substance.--
(1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)), as
amended by subsection (a), is amended by adding at the end the
following new paragraph:
``(4) Felony conviction relating to controlled substance.--
Any individual or entity that has been convicted after the date
of the enactment of the Health Insurance Reform Act of 1996,
under Federal or State law, of a criminal offense consisting of
a felony relating to the unlawful manufacture, distribution,
prescription, or dispensing of a controlled substance.''.
(2) Conforming amendment.--Section 1128(b)(3) (42 U.S.C.
1320a-7(b)(3)) is amended--
(A) in the heading, by striking ``Conviction'' and
inserting ``Misdemeanor conviction''; and
(B) by striking ``criminal offense'' and inserting
``criminal offense consisting of a misdemeanor''.
SEC. 512. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLUSION FOR CERTAIN
INDIVIDUALS AND ENTITIES SUBJECT TO PERMISSIVE EXCLUSION
FROM MEDICARE AND STATE HEALTH CARE PROGRAMS.
Section 1128(c)(3) (42 U.S.C. 1320a-7(c)(3)) is amended by adding
at the end the following new subparagraphs:
``(D) In the case of an exclusion of an individual or entity under
paragraph (1), (2), or (3) of subsection (b), the period of the
exclusion shall be 3 years, unless the Secretary determines in
accordance with published regulations that a shorter period is
appropriate because of mitigating circumstances or that a longer period
is appropriate because of aggravating circumstances.
``(E) In the case of an exclusion of an individual or entity under
subsection (b)(4) or (b)(5), the period of the exclusion shall not be
less than the period during which the individual's or entity's license
to provide health care is revoked, suspended, or surrendered, or the
individual or the entity is excluded or suspended from a Federal or
State health care program.
``(F) In the case of an exclusion of an individual or entity under
subsection (b)(6)(B), the period of the exclusion shall be not less
than 1 year.''.
SEC. 513. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH OWNERSHIP OR CONTROL
INTEREST IN SANCTIONED ENTITIES.
Section 1128(b) (42 U.S.C. 1320a-7(b)) is amended by adding at the
end the following new paragraph:
``(15) Individuals controlling a sanctioned entity.--(A)
Any individual--
``(i) who has a direct or indirect ownership or
control interest in a sanctioned entity and who knows
or should know (as defined in section 1128A(i)(6)) of
the action constituting the basis for the conviction or
exclusion described in subparagraph (B); or
``(ii) who is an officer or managing employee (as
defined in section 1126(b)) of such an entity.
``(B) For purposes of subparagraph (A), the term
`sanctioned entity' means an entity--
``(i) that has been convicted of any offense
described in subsection (a) or in paragraph (1), (2),
or (3) of this subsection; or
``(ii) that has been excluded from participation
under a program under title XVIII or under a State
health care program.''.
SEC. 514. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR FAILURE TO
COMPLY WITH STATUTORY OBLIGATIONS.
(a) Minimum Period of Exclusion for Practitioners and Persons
Failing To Meet Statutory Obligations.--
(1) In general.--The second sentence of section 1156(b)(1)
(42 U.S.C. 1320c-5(b)(1)) is amended by striking ``may
prescribe)'' and inserting ``may prescribe, except that such
period may not be less than 1 year)''.
(2) Conforming amendment.--Section 1156(b)(2) (42 U.S.C.
1320c-5(b)(2)) is amended by striking ``shall remain'' and
inserting ``shall (subject to the minimum period specified in
the second sentence of paragraph (1)) remain''.
(b) Repeal of ``Unwilling or Unable'' Condition for Imposition of
Sanction.--Section 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is amended--
(1) in the second sentence, by striking ``and determines''
and all that follows through ``such obligations,''; and
(2) by striking the third sentence.
SEC. 515. INTERMEDIATE SANCTIONS FOR MEDICARE HEALTH MAINTENANCE
ORGANIZATIONS.
(a) Application of Intermediate Sanctions for any Program
Violations.--
(1) In general.--Section 1876(i)(1) (42 U.S.C.
1395mm(i)(1)) is amended by striking ``the Secretary may
terminate'' and all that follows and inserting ``in accordance
with procedures established under paragraph (9), the Secretary
may at any time terminate any such contract or may impose the
intermediate sanctions described in paragraph (6)(B) or (6)(C)
(whichever is applicable) on the eligible organization if the
Secretary determines that the organization--
``(A) has failed substantially to carry out the
contract;
``(B) is carrying out the contract in a manner
substantially inconsistent with the efficient and
effective administration of this section; or
``(C) no longer substantially meets the applicable
conditions of subsections (b), (c), (e), and (f).''.
(2) Other intermediate sanctions for miscellaneous program
violations.--Section 1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is
amended by adding at the end the following new subparagraph:
``(C) In the case of an eligible organization for which the
Secretary makes a determination under paragraph (1) the basis of which
is not described in subparagraph (A), the Secretary may apply the
following intermediate sanctions:
``(i) Civil money penalties of not more than $25,000 for
each determination under paragraph (1) if the deficiency that
is the basis of the determination has directly adversely
affected (or has the substantial likelihood of adversely
affecting) an individual covered under the organization's
contract.
``(ii) Civil money penalties of not more than $10,000 for
each week beginning after the initiation of procedures by the
Secretary under paragraph (9) during which the deficiency that
is the basis of a determination under paragraph (1) exists.
``(iii) Suspension of enrollment of individuals under this
section after the date the Secretary notifies the organization
of a determination under paragraph (1) and until the Secretary
is satisfied that the deficiency that is the basis for the
determination has been corrected and is not likely to recur.''.
(3) Procedures for imposing sanctions.--Section 1876(i) (42
U.S.C. 1395mm(i)) is amended by adding at the end the following
new paragraph:
``(9) The Secretary may terminate a contract with an eligible
organization under this section or may impose the intermediate
sanctions described in paragraph (6) on the organization in accordance
with formal investigation and compliance procedures established by the
Secretary under which--
``(A) the Secretary first provides the organization with
the reasonable opportunity to develop and implement a
corrective action plan to correct the deficiencies that were
the basis of the Secretary's determination under paragraph (1)
and the organization fails to develop or implement such a plan;
``(B) in deciding whether to impose sanctions, the
Secretary considers aggravating factors such as whether an
organization has a history of deficiencies or has not taken
action to correct deficiencies the Secretary has brought to the
organization's attention;
``(C) there are no unreasonable or unnecessary delays
between the finding of a deficiency and the imposition of
sanctions; and
``(D) the Secretary provides the organization with
reasonable notice and opportunity for hearing (including the
right to appeal an initial decision) before imposing any
sanction or terminating the contract.''.
(4) Conforming amendments.--Section 1876(i)(6)(B) (42
U.S.C. 1395mm(i)(6)(B)) is amended by striking the second
sentence.
(b) Agreements With Peer Review Organizations.--Section
1876(i)(7)(A) (42 U.S.C. 1395mm(i)(7)(A)) is amended by striking ``an
agreement'' and inserting ``a written agreement''.
(c) Effective Date.--The amendments made by this section shall
apply with respect to contract years beginning on or after January 1,
1997.
SEC. 516. ADDITIONAL EXCEPTIONS TO ANTI-KICKBACK PENALTIES FOR RISK-
SHARING ARRANGEMENTS.
(a) In General.--Section 1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)) is
amended--
(1) by striking ``and'' at the end of subparagraph (D);
(2) by striking the period at the end of subparagraph (E)
and inserting ``; and''; and
(3) by adding at the end the following new subparagraph:
``(F) any remuneration between an organization and an
individual or entity providing items or services pursuant to a
written agreement between the organization and the individual
or entity if the organization is an eligible organization under
section 1876, or if the written agreement places the individual
or entity at substantial financial risk for the cost or
utilization of the items or services, or a combination thereof,
which the individual or entity is obligated to provide, whether
through a withhold or capitation, or other similar risk
arrangements which places the individual or entity at
substantial financial risk.''.
(b) Regulations.--Section 1128B(b) (42 U.S.C. 1320a-7b(b)) is
amended by adding at the end the following new paragraph:
``(4) The Secretary, in consultation with the Attorney General, not
later than 1 year after the date of enactment of Health Insurance
Reform Act of 1996, and not less than every 2 years thereafter, shall
promulgate regulations to define substantial financial risk as
necessary to protect against program or patient abuse.''.
SEC. 517. EFFECTIVE DATE.
Except as otherwise provided, the amendments made by this subtitle
shall take effect January 1, 1997.
Subtitle C--Data Collection and Miscellaneous Provisions
SEC. 521. ESTABLISHMENT OF THE HEALTH CARE FRAUD AND ABUSE DATA
COLLECTION PROGRAM.
(a) In General.--Title XI (42 U.S.C. 1301 et seq.), as amended by
sections 501 and 505, is amended by inserting after section 1128D the
following new section:
``health care fraud and abuse data collection program
``Sec. 1128E. (a) General Purpose.--Not later than January 1, 1997,
the Secretary shall establish a national health care fraud and abuse
data collection program for the reporting of final adverse actions (not
including settlements in which no findings of liability have been made)
against health care providers, suppliers, or practitioners as required
by subsection (b), with access as set forth in subsection (c).
``(b) Reporting of Information.--
``(1) In general.--Each Government agency and health plan
shall report any final adverse action (not including
settlements in which no findings of liability have been made)
taken against a health care provider, supplier, or
practitioner.
``(2) Information to be reported.--The information to be
reported under paragraph (1) includes:
``(A) The name and TIN (as defined in section
7701(a)(41) of the Internal Revenue Code of 1986) of
any health care provider, supplier, or practitioner who
is the subject of a final adverse action.
``(B) The name (if known) of any health care entity
with which a health care provider, supplier, or
practitioner is affiliated or associated.
``(C) The nature of the final adverse action and
whether such action is on appeal.
``(D) A description of the acts or omissions and
injuries upon which the final adverse action was based,
and such other information as the Secretary determines
by regulation is required for appropriate
interpretation of information reported under this
section.
``(3) Confidentiality.--In determining what information is
required, the Secretary shall include procedures to assure that
the privacy of individuals receiving health care services is
appropriately protected.
``(4) Timing and form of reporting.--The information
required to be reported under this subsection shall be reported
regularly (but not less often than monthly) and in such form
and manner as the Secretary prescribes. Such information shall
first be required to be reported on a date specified by the
Secretary.
``(5) To whom reported.--The information required to be
reported under this subsection shall be reported to the
Secretary.
``(c) Disclosure and Correction of Information.--
``(1) Disclosure.--With respect to the information about
final adverse actions (not including settlements in which no
findings of liability have been made) reported to the Secretary
under this section respecting a health care provider, supplier,
or practitioner, the Secretary shall, by regulation, provide
for--
``(A) disclosure of the information, upon request,
to the health care provider, supplier, or licensed
practitioner, and
``(B) procedures in the case of disputed accuracy
of the information.
``(2) Corrections.--Each Government agency and health plan
shall report corrections of information already reported about
any final adverse action taken against a health care provider,
supplier, or practitioner, in such form and manner that the
Secretary prescribes by regulation.
``(d) Access to Reported Information.--
``(1) Availability.--The information in this database shall
be available to Federal and State government agencies and
health plans pursuant to procedures that the Secretary shall
provide by regulation.
``(2) Fees for disclosure.--The Secretary may establish or
approve reasonable fees for the disclosure of information in
this database (other than with respect to requests by Federal
agencies). The amount of such a fee shall be sufficient to
recover the full costs of operating the database. Such fees
shall be available to the Secretary or, in the Secretary's
discretion to the agency designated under this section to cover
such costs.
``(e) Protection From Liability for Reporting.--No person or
entity, including the agency designated by the Secretary in subsection
(b)(5) shall be held liable in any civil action with respect to any
report made as required by this section, without knowledge of the
falsity of the information contained in the report.
``(f) Coordination With National Practitioner Data Bank.--The
Secretary shall implement this section in such a manner as to avoid
duplication with the reporting requirements established for the
National Practitioner Data Bank under the Health Care Quality
Improvement Act of 1986 (42 U.S.C. 11101 et seq.).
``(g) Definitions and Special Rules.--For purposes of this section:
``(1) Final adverse action.--
``(A) In general.--The term `final adverse action'
includes:
``(i) Civil judgments against a health care
provider, supplier, or practitioner in Federal
or State court related to the delivery of a
health care item or service.
``(ii) Federal or State criminal
convictions related to the delivery of a health
care item or service.
``(iii) Actions by Federal or State
agencies responsible for the licensing and
certification of health care providers,
suppliers, and licensed health care
practitioners, including--
``(I) formal or official actions,
such as revocation or suspension of a
license (and the length of any such
suspension), reprimand, censure or
probation,
``(II) any other loss of license or
the right to apply for, or renew, a
license of the provider, supplier, or
practitioner, whether by operation of
law, voluntary surrender, non-
renewability, or otherwise, or
``(III) any other negative action
or finding by such Federal or State
agency that is publicly available
information.
``(iv) Exclusion from participation in
Federal or State health care programs due to
program violations.
``(v) Any other adjudicated actions or
decisions that the Secretary shall establish by
regulation.
``(B) Exception.--The term does not include any
action with respect to a malpractice claim.
``(2) Practitioner.--The terms `licensed health care
practitioner', `licensed practitioner', and `practitioner'
mean, with respect to a State, an individual who is licensed or
otherwise authorized by the State to provide health care
services (or any individual who, without authority holds
himself or herself out to be so licensed or authorized).
``(3) Government agency.--The term `Government agency'
shall include:
``(A) The Department of Justice.
``(B) The Department of Health and Human Services.
``(C) Any other Federal agency that either
administers or provides payment for the delivery of
health care services, including, but not limited to the
Department of Defense and the Veterans' Administration.
``(D) State law enforcement agencies.
``(E) State medicaid fraud control units.
``(F) Federal or State agencies responsible for the
licensing and certification of health care providers
and licensed health care practitioners.
``(4) Health plan.--The term `health plan' has the meaning
given such term by section 1128C(c).
``(5) Determination of conviction.--For purposes of
paragraph (1), the existence of a conviction shall be
determined under paragraph (4) of section 1128(i).''.
(b) Improved Prevention in Issuance of Medicare Provider Numbers.--
Section 1842(r) (42 U.S.C. 1395u(r)) is amended by adding at the end
the following new sentence: ``Under such system, the Secretary may
impose appropriate fees on such physicians to cover the costs of
investigation and recertification activities with respect to the
issuance of the identifiers.''.
Subtitle D--Civil Monetary Penalties
SEC. 531. SOCIAL SECURITY ACT CIVIL MONETARY PENALTIES.
(a) General Civil Monetary Penalties.--Section 1128A (42 U.S.C.
1320a-7a) is amended as follows:
(1) In the third sentence of subsection (a), by striking
``programs under title XVIII'' and inserting ``Federal health
care programs (as defined in section 1128B(f)(1))''.
(2) In subsection (f)--
(A) by redesignating paragraph (3) as paragraph
(4); and
(B) by inserting after paragraph (2) the following
new paragraph:
``(3) With respect to amounts recovered arising out of a
claim under a Federal health care program (as defined in
section 1128B(f)), the portion of such amounts as is determined
to have been paid by the program shall be repaid to the
program, and the portion of such amounts attributable to the
amounts recovered under this section by reason of the
amendments made by the Health Insurance Reform Act of 1996 (as
estimated by the Secretary) shall be deposited into the Federal
Hospital Insurance Trust Fund pursuant to section
1817(k)(2)(C).''.
(3) In subsection (i)--
(A) in paragraph (2), by striking ``title V, XVIII,
XIX, or XX of this Act'' and inserting ``a Federal
health care program (as defined in section 1128B(f))'',
(B) in paragraph (4), by striking ``a health
insurance or medical services program under title XVIII
or XIX of this Act'' and inserting ``a Federal health
care program (as so defined)'', and
(C) in paragraph (5), by striking ``title V, XVIII,
XIX, or XX'' and inserting ``a Federal health care
program (as so defined)''.
(4) By adding at the end the following new subsection:
``(m)(1) For purposes of this section, with respect to a Federal
health care program not contained in this Act, references to the
Secretary in this section shall be deemed to be references to the
Secretary or Administrator of the department or agency with
jurisdiction over such program and references to the Inspector General
of the Department of Health and Human Services in this section shall be
deemed to be references to the Inspector General of the applicable
department or agency.
``(2)(A) The Secretary and Administrator of the departments and
agencies referred to in paragraph (1) may include in any action
pursuant to this section, claims within the jurisdiction of other
Federal departments or agencies as long as the following conditions are
satisfied:
``(i) The case involves primarily claims submitted to the
Federal health care programs of the department or agency
initiating the action.
``(ii) The Secretary or Administrator of the department or
agency initiating the action gives notice and an opportunity to
participate in the investigation to the Inspector General of
the department or agency with primary jurisdiction over the
Federal health care programs to which the claims were
submitted.
``(B) If the conditions specified in subparagraph (A) are
fulfilled, the Inspector General of the department or agency initiating
the action is authorized to exercise all powers granted under the
Inspector General Act of 1978 with respect to the claims submitted to
the other departments or agencies to the same manner and extent as
provided in that Act with respect to claims submitted to such
departments or agencies.''.
(b) Excluded Individual Retaining Ownership or Control Interest in
Participating Entity.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is
amended--
(1) by striking ``or'' at the end of paragraph (1)(D);
(2) by striking ``, or'' at the end of paragraph (2) and
inserting a semicolon;
(3) by striking the semicolon at the end of paragraph (3)
and inserting ``; or''; and
(4) by inserting after paragraph (3) the following new
paragraph:
``(4) in the case of a person who is not an organization,
agency, or other entity, is excluded from participating in a
program under title XVIII or a State health care program in
accordance with this subsection or under section 1128 and who,
at the time of a violation of this subsection--
``(i) retains a direct or indirect ownership or
control interest in an entity that is participating in
a program under title XVIII or a State health care
program, and who knows or should know of the action
constituting the basis for the exclusion; or
``(ii) is an officer or managing employee (as
defined in section 1126(b)) of such an entity;''.
(c) Modifications of Amounts of Penalties and Assessments.--Section
1128A(a) (42 U.S.C. 1320a-7a(a)), as amended by subsection (b), is
amended in the matter following paragraph (4)--
(1) by striking ``$2,000'' and inserting ``$10,000'';
(2) by inserting ``; in cases under paragraph (4), $10,000
for each day the prohibited relationship occurs'' after ``false
or misleading information was given''; and
(3) by striking ``twice the amount'' and inserting ``3
times the amount''.
(d) Claim for Item or Service Based on Incorrect Coding or
Medically Unnecessary Services.--Section 1128A(a)(1) (42 U.S.C. 1320a-
7a(a)(1)), as amended by subsection (b), is amended--
(1) in subparagraph (A) by striking ``claimed,'' and
inserting ``claimed, including any person who engages in a
pattern or practice of presenting or causing to be presented a
claim for an item or service that is based on a code that the
person knows or should know will result in a greater payment to
the person than the code the person knows or should know is
applicable to the item or service actually provided,'';
(2) in subparagraph (C), by striking ``or'' at the end;
(3) in subparagraph (D), by striking the semicolon and
inserting ``, or''; and
(4) by inserting after subparagraph (D) the following new
subparagraph:
``(E) is for a medical or other item or service
that a person knows or should know is not medically
necessary; or''.
(e) Sanctions Against Practitioners and Persons for Failure To
Comply With Statutory Obligations.--Section 1156(b)(3) (42 U.S.C.
1320c-5(b)(3)) is amended by striking ``the actual or estimated cost''
and inserting ``up to $10,000 for each instance''.
(f) Procedural Provisions.--Section 1876(i)(6) (42 U.S.C.
1395mm(i)(6)), as amended by section 515(a)(2), is amended by adding at
the end the following new subparagraph:
``(D) The provisions of section 1128A (other than subsections (a)
and (b)) shall apply to a civil money penalty under subparagraph (B)(i)
or (C)(i) in the same manner as such provisions apply to a civil money
penalty or proceeding under section 1128A(a).''.
(g) Prohibition Against Offering Inducements to Individuals
Enrolled Under Programs or Plans.--
(1) Offer of remuneration.--Section 1128A(a) (42 U.S.C.
1320a-7a(a)), as amended by subsection (b), is amended--
(A) by striking ``or'' at the end of paragraph
(1)(D);
(B) by striking the semicolon at the end of
paragraph (4) and inserting ``; or''; and
(C) by inserting after paragraph (4) the following
new paragraph:
``(5) offers to or transfers remuneration to any individual
eligible for benefits under title XVIII of this Act, or under a
State health care program (as defined in section 1128(h)) that
such person knows or should know is likely to influence such
individual to order or receive from a particular provider,
practitioner, or supplier any item or service for which payment
may be made, in whole or in part, under title XVIII, or a State
health care program (as so defined);''.
(2) Remuneration defined.--Section 1128A(i) (42 U.S.C.
1320a-7a(i)) is amended by adding the following new paragraph:
``(6) The term `remuneration' includes the waiver of
coinsurance and deductible amounts (or any part thereof), and
transfers of items or services for free or for other than fair
market value. The term `remuneration' does not include--
``(A) the waiver of coinsurance and deductible
amounts by a person, if--
``(i) the waiver is not offered as part of
any advertisement or solicitation;
``(ii) the person does not routinely waive
coinsurance or deductible amounts; and
``(iii) the person--
``(I) waives the coinsurance and
deductible amounts after determining in
good faith that the individual is in
financial need;
``(II) fails to collect coinsurance
or deductible amounts after making
reasonable collection efforts; or
``(III) provides for any
permissible waiver as specified in
section 1128B(b)(3) or in regulations
issued by the Secretary;
``(B) differentials in coinsurance and deductible
amounts as part of a benefit plan design as long as the
differentials have been disclosed in writing to all
beneficiaries, third party payers, and providers, to
whom claims are presented and as long as the
differentials meet the standards as defined in
regulations promulgated by the Secretary not later than
180 days after the date of the enactment of the Health
Insurance Reform Act of 1996; or
``(C) incentives given to individuals to promote
the delivery of preventive care as determined by the
Secretary in regulations so promulgated.''.
(h) Effective Date.--The amendments made by this section shall take
effect January 1, 1997.
Subtitle E--Amendments to Criminal Law
SEC. 541. HEALTH CARE FRAUD.
(a) In General.--
(1) Fines and imprisonment for health care fraud
violations.--Chapter 63 of title 18, United States Code, is
amended by adding at the end the following new section:
``Sec. 1347. Health care fraud
``Whoever knowingly and willfully executes, or attempts to execute,
a scheme or artifice--
``(1) to defraud any health care program, in connection
with the delivery of or payment for health care benefits,
items, or services; or
``(2) to obtain, by means of false or fraudulent pretenses,
representations, or promises, any of the money or property
owned by, or under the custody or control of, any health care
program in connection with the delivery of or payment for
health care benefits, items, or services;
shall be fined under this title or imprisoned not more than 10 years,
or both. If the violation results in serious bodily injury (as defined
in section 1365(g)(3) of this title), such person may be imprisoned for
any term of years.''.
(2) Clerical amendment.--The table of sections at the
beginning of chapter 63 of title 18, United States Code, is
amended by adding at the end the following:
``1347. Health care fraud.''.
(b) Criminal Fines Deposited in Federal Hospital Insurance Trust
Fund.--The Secretary of the Treasury shall deposit into the Federal
Hospital Insurance Trust Fund pursuant to section 1817(k)(2)(C) of the
Social Security Act, as added by section 501(b), an amount equal to the
criminal fines imposed under section 1347 of title 18, United States
Code (relating to health care fraud).
SEC. 542. FORFEITURES FOR FEDERAL HEALTH CARE OFFENSES.
(a) In General.--Section 982(a) of title 18, United States Code, is
amended by adding after paragraph (5) the following new paragraph:
``(6)(A) The court, in imposing sentence on a person convicted of a
Federal health care offense, shall order the person to forfeit
property, real or personal, that constitutes or is derived, directly or
indirectly, from gross proceeds traceable to the commission of the
offense.
``(B) For purposes of this paragraph, the term `Federal health care
offense' means a violation of, or a criminal conspiracy to violate--
``(i) section 1347 of this title;
``(ii) section 1128B of the Social Security Act; and
``(iii) sections 287, 371, 664, 666, 669, 1001, 1027, 1341,
1343, 1920, or 1954 of this title if the violation or
conspiracy relates to health care fraud.''.
(b) Conforming Amendment.--Section 982(b)(1)(A) of title 18, United
States Code, is amended by inserting ``or (a)(6)'' after ``(a)(1)''.
(c) Property Forfeited Deposited in Federal Hospital Insurance
Trust Fund.--
(1) In general.--After the payment of the costs of asset
forfeiture has been made, and notwithstanding any other
provision of law, the Secretary of the Treasury shall deposit
into the Federal Hospital Insurance Trust Fund pursuant to
section 1817(k)(2)(C) of the Social Security Act, as added by
section 501(b), an amount equal to the net amount realized from
the forfeiture of property by reason of a Federal health care
offense pursuant to section 982(a)(6) of title 18, United
States Code.
(2) Costs of asset forfeiture.--For purposes of paragraph
(1), the term ``payment of the costs of asset forfeiture''
means--
(A) the payment, at the discretion of the Attorney
General, of any expenses necessary to seize, detain,
inventory, safeguard, maintain, advertise, sell, or
dispose of property under seizure, detention, or
forfeited, or of any other necessary expenses incident
to the seizure, detention, forfeiture, or disposal of
such property, including payment for--
(i) contract services,
(ii) the employment of outside contractors
to operate and manage properties or provide
other specialized services necessary to dispose
of such properties in an effort to maximize the
return from such properties; and
(iii) reimbursement of any Federal, State,
or local agency for any expenditures made to
perform the functions described in this
subparagraph;
(B) at the discretion of the Attorney General, the
payment of awards for information or assistance leading
to a civil or criminal forfeiture involving any Federal
agency participating in the Health Care Fraud and Abuse
Control Account;
(C) the compromise and payment of valid liens and
mortgages against property that has been forfeited,
subject to the discretion of the Attorney General to
determine the validity of any such lien or mortgage and
the amount of payment to be made, and the employment of
attorneys and other personnel skilled in State real
estate law as necessary;
(D) payment authorized in connection with remission
or mitigation procedures relating to property
forfeited; and
(E) the payment of State and local property taxes
on forfeited real property that accrued between the
date of the violation giving rise to the forfeiture and
the date of the forfeiture order.
SEC. 543. INJUNCTIVE RELIEF RELATING TO FEDERAL HEALTH CARE OFFENSES.
(a) In General.--Section 1345(a)(1) of title 18, United States
Code, is amended--
(1) by striking ``or'' at the end of subparagraph (A);
(2) by inserting ``or'' at the end of subparagraph (B); and
(3) by adding at the end the following new subparagraph:
``(C) committing or about to commit a Federal
health care offense (as defined in section 982(a)(6)(B)
of this title);''.
(b) Freezing of Assets.--Section 1345(a)(2) of title 18, United
States Code, is amended by inserting ``or a Federal health care offense
(as defined in section 982(a)(6)(B))'' after ``title)''.
SEC. 544. FALSE STATEMENTS.
(a) In General.--Chapter 47 of title 18, United States Code, is
amended by adding at the end the following new section:
``Sec. 1033. False statements relating to health care matters
``Whoever, in any matter involving a health care program, knowingly
and willfully--
``(1) falsifies, conceals, or covers up by any trick,
scheme, or device a material fact, or
``(2) makes any materially false, fictitious, or fraudulent
statement or representation, or makes or uses any materially
false writing or document knowing the same to contain any
materially false, fictitious, or fraudulent statement or entry,
shall be fined under this title or imprisoned not more than 5 years, or
both.''.
(b) Clerical Amendment.--The table of sections at the beginning of
chapter 47 of title 18, United States Code, is amended by adding at the
end the following:
``1033. False statements relating to health care matters.''.
SEC. 545. OBSTRUCTION OF CRIMINAL INVESTIGATIONS OF FEDERAL HEALTH CARE
OFFENSES.
(a) In General.--Chapter 73 of title 18, United States Code, is
amended by adding at the end the following new section:
``Sec. 1518. Obstruction of criminal investigations of Federal health
care offenses
``(a) Whoever willfully prevents, obstructs, misleads, delays or
attempts to prevent, obstruct, mislead, or delay the communication of
information or records relating to a Federal health care offense to a
criminal investigator shall be fined under this title or imprisoned not
more than 5 years, or both.
``(b) As used in this section the term `Federal health care
offense' has the same meaning given such term in section 982(a)(6)(B)
of this title.
``(c) As used in this section the term `criminal investigator'
means any individual duly authorized by a department, agency, or armed
force of the United States to conduct or engage in investigations for
prosecutions for violations of health care offenses.''.
(b) Clerical Amendment.--The table of sections at the beginning of
chapter 73 of title 18, United States Code, is amended by adding at the
end the following:
``1518. Obstruction of Criminal Investigations of Federal Health Care
Offenses.''.
SEC. 546. THEFT OR EMBEZZLEMENT.
(a) In General.--Chapter 31 of title 18, United States Code, is
amended by adding at the end the following new section:
``Sec. 669. Theft or embezzlement in connection with health care
``Whoever willfully embezzles, steals, or otherwise willfully and
unlawfully converts to the use of any person other than the rightful
owner, or intentionally misapplies any of the moneys, funds,
securities, premiums, credits, property, or other assets of a health
care program, shall be fined under this title or imprisoned not more
than 10 years, or both.''.
(b) Clerical Amendment.--The table of sections at the beginning of
chapter 31 of title 18, United States Code, is amended by adding at the
end the following:
``669. Theft or Embezzlement in Connection with Health Care.''.
SEC. 547. LAUNDERING OF MONETARY INSTRUMENTS.
Section 1956(c)(7) of title 18, United States Code, is amended by
adding at the end the following new subparagraph:
``(F) Any act or activity constituting an offense
involving a Federal health care offense as that term is
defined in section 982(a)(6)(B) of this title.''.
SEC. 548. AUTHORIZED INVESTIGATIVE DEMAND PROCEDURES.
(a) In General.--Chapter 233 of title 18, United States Code, is
amended by adding after section 3485 the following new section:
``Sec. 3486. Authorized investigative demand procedures
``(a)(1)(A) In any investigation relating to functions set forth in
paragraph (2), the Attorney General or designee may issue in writing
and cause to be served a subpoena compelling production of any records
(including any books, papers, documents, electronic media, or other
objects or tangible things), which may be relevant to an authorized law
enforcement inquiry, that a person or legal entity may possess or have
care, custody, or control.
``(B) A custodian of records may be required to give testimony
concerning the production and authentication of such records.
``(C) The production of records may be required from any place in
any State or in any territory or other place subject to the
jurisdiction of the United States at any designated place; except that
such production shall not be required more than 500 miles distant from
the place where the subpoena is served.
``(D) Witnesses summoned under this section shall be paid the same
fees and mileage that are paid witnesses in the courts of the United
States.
``(E) A subpoena requiring the production of records shall describe
the objects required to be produced and prescribe a return date within
a reasonable period of time within which the objects can be assembled
and made available.
``(2) Investigative demands utilizing an administrative subpoena
are authorized for any investigation with respect to any act or
activity constituting or involving health care fraud, including a
scheme or artifice--
``(A) to defraud any health care program, in connection
with the delivery of or payment for health care benefits,
items, or services; or
``(B) to obtain, by means of false or fraudulent pretenses,
representations, or promises, any of the money or property
owned by, or under the custody or control of, any health care
program in connection with the delivery of or payment for
health care benefits, items, or services.
``(b)(1) A subpoena issued under this section may be served by any
person designated in the subpoena to serve it.
``(2) Service upon a natural person may be made by personal
delivery of the subpoena to such person.
``(3) Service may be made upon a domestic or foreign association
which is subject to suit under a common name, by delivering the
subpoena to an officer, to a managing or general agent, or to any other
agent authorized by appointment or by law to receive service of
process.
``(4) The affidavit of the person serving the subpoena entered on a
true copy thereof by the person serving it shall be proof of service.
``(c)(1) In the case of contumacy by or refusal to obey a subpoena
issued to any person, the Attorney General may invoke the aid of any
court of the United States within the jurisdiction of which the
investigation is carried on or of which the subpoenaed person is an
inhabitant, or in which such person carries on business or may be
found, to compel compliance with the subpoena.
``(2) The court may issue an order requiring the subpoenaed person
to appear before the Attorney General to produce records, if so
ordered, or to give testimony required under subsection (a)(1)(B).
``(3) Any failure to obey the order of the court may be punished by
the court as a contempt thereof.
``(4) All process in any such case may be served in any judicial
district in which such person may be found.
``(d) Notwithstanding any Federal, State, or local law, any person,
including officers, agents, and employees, receiving a subpoena under
this section, who complies in good faith with the subpoena and thus
produces the materials sought, shall not be liable in any court of any
State or the United States to any customer or other person for such
production or for nondisclosure of that production to the customer.
``(e)(1) Health information about an individual that is disclosed
under this section may not be used in, or disclosed to any person for
use in, any administrative, civil, or criminal action or investigation
directed against the individual who is the subject of the information
unless the action or investigation arises out of and is directly
related to receipt of health care or payment for health care or action
involving a fraudulent claim related to health; or if authorized by an
appropriate order of a court of competent jurisdiction, granted after
application showing good cause therefor.
``(2) In assessing good cause, the court shall weigh the public
interest and the need for disclosure against the injury to the patient,
to the physician-patient relationship, and to the treatment services.
``(3) Upon the granting of such order, the court, in determining
the extent to which any disclosure of all or any part of any record is
necessary, shall impose appropriate safeguards against unauthorized
disclosure.''.
(b) Clerical Amendment.--The table of sections for chapter 223 of
title 18, United States Code, is amended by inserting after the item
relating to section 3405 the following new item:
``3486. Authorized investigative demand procedures.''.
(c) Conforming Amendment.--Section 1510(b)(3)(B) of title 18,
United States Code, is amended by inserting ``or a Department of
Justice subpoena (issued under section 3486),'' after ``subpoena''.
TITLE VI--INTERNAL REVENUE CODE AND OTHER PROVISIONS
SEC. 600. REFERENCES.
Except as otherwise expressly provided, whenever in this title an
amendment or repeal is expressed in terms of an amendment to, or repeal
of, a section or other provision, the reference shall be considered to
be made to a section or other provision of the Internal Revenue Code of
1986.
Subtitle A--Foreign Trust Tax Compliance
SEC. 601. IMPROVED INFORMATION REPORTING ON FOREIGN TRUSTS.
(a) In General.--Section 6048 (relating to returns as to certain
foreign trusts) is amended to read as follows:
``SEC. 6048. INFORMATION WITH RESPECT TO CERTAIN FOREIGN TRUSTS.
``(a) Notice of Certain Events.--
``(1) General rule.--On or before the 90th day (or such
later day as the Secretary may prescribe) after any reportable
event, the responsible party shall provide written notice of
such event to the Secretary in accordance with paragraph (2).
``(2) Contents of notice.--The notice required by paragraph
(1) shall contain such information as the Secretary may
prescribe, including--
``(A) the amount of money or other property (if
any) transferred to the trust in connection with the
reportable event, and
``(B) the identity of the trust and of each trustee
and beneficiary (or class of beneficiaries) of the
trust.
``(3) Reportable event.--For purposes of this subsection--
``(A) In general.--The term `reportable event'
means--
``(i) the creation of any foreign trust by
a United States person,
``(ii) the transfer of any money or
property (directly or indirectly) to a foreign
trust by a United States person, including a
transfer by reason of death, and
``(iii) the death of a citizen or resident
of the United States if--
``(I) the decedent was treated as
the owner of any portion of a foreign
trust under the rules of subpart E of
part I of subchapter J of chapter 1, or
``(II) any portion of a foreign
trust was included in the gross estate
of the decedent.
``(B) Exceptions.--
``(i) Fair market value sales.--
Subparagraph (A)(ii) shall not apply to any
transfer of property to a trust in exchange for
consideration of at least the fair market value
of the transferred property. For purposes of
the preceding sentence, consideration other
than cash shall be taken into account at its
fair market value and the rules of section
679(a)(3) shall apply.
``(ii) Deferred compensation and charitable
trusts.--Subparagraph (A) shall not apply with
respect to a trust which is--
``(I) described in section 402(b),
404(a)(4), or 404A, or
``(II) determined by the Secretary
to be described in section 501(c)(3).
``(4) Responsible party.--For purposes of this subsection,
the term `responsible party' means--
``(A) the grantor in the case of the creation of an
inter vivos trust,
``(B) the transferor in the case of a reportable
event described in paragraph (3)(A)(ii) other than a
transfer by reason of death, and
``(C) the executor of the decedent's estate in any
other case.
``(b) United States Grantor of Foreign Trust.--
``(1) In general.--If, at any time during any taxable year
of a United States person, such person is treated as the owner
of any portion of a foreign trust under the rules of subpart E
of part I of subchapter J of chapter 1, such person shall be
responsible to ensure that--
``(A) such trust makes a return for such year which
sets forth a full and complete accounting of all trust
activities and operations for the year, the name of the
United States agent for such trust, and such other
information as the Secretary may prescribe, and
``(B) such trust furnishes such information as the
Secretary may prescribe to each United States person
(i) who is treated as the owner of any portion of such
trust or (ii) who receives (directly or indirectly) any
distribution from the trust.
``(2) Trusts not having united states agent.--
``(A) In general.--If the rules of this paragraph
apply to any foreign trust, the determination of
amounts required to be taken into account with respect
to such trust by a United States person under the rules
of subpart E of part I of subchapter J of chapter 1
shall be determined by the Secretary.
``(B) United states agent required.--The rules of
this paragraph shall apply to any foreign trust to
which paragraph (1) applies unless such trust agrees
(in such manner, subject to such conditions, and at
such time as the Secretary shall prescribe) to
authorize a United States person to act as such trust's
limited agent solely for purposes of applying sections
7602, 7603, and 7604 with respect to--
``(i) any request by the Secretary to
examine records or produce testimony related to
the proper treatment of amounts required to be
taken into account under the rules referred to
in subparagraph (A), or
``(ii) any summons by the Secretary for
such records or testimony.
The appearance of persons or production of records by
reason of a United States person being such an agent
shall not subject such persons or records to legal
process for any purpose other than determining the
correct treatment under this title of the amounts
required to be taken into account under the rules
referred to in subparagraph (A). A foreign trust which
appoints an agent described in this subparagraph shall
not be considered to have an office or a permanent
establishment in the United States, or to be engaged in
a trade or business in the United States, solely
because of the activities of such agent pursuant to
this subsection.
``(C) Other rules to apply.--Rules similar to the
rules of paragraphs (2) and (4) of section 6038A(e)
shall apply for purposes of this paragraph.
``(c) Reporting by United States Beneficiaries of Foreign Trusts.--
``(1) In general.--If any United States person receives
(directly or indirectly) during any taxable year of such person
any distribution from a foreign trust, such person shall make a
return with respect to such trust for such year which
includes--
``(A) the name of such trust,
``(B) the aggregate amount of the distributions so
received from such trust during such taxable year, and
``(C) such other information as the Secretary may
prescribe.
``(2) Inclusion in income if records not provided.--
``(A) In general.--If adequate records are not
provided to the Secretary to determine the proper
treatment of any distribution from a foreign trust,
such distribution shall be treated as an accumulation
distribution includible in the gross income of the
distributee under chapter 1. To the extent provided in
regulations, the preceding sentence shall not apply if
the foreign trust elects to be subject to rules similar
to the rules of subsection (b)(2)(B).
``(B) Application of accumulation distribution
rules.--For purposes of applying section 668 in a case
to which subparagraph (A) applies, the applicable
number of years for purposes of section 668(a) shall be
\1/2\ of the number of years the trust has been in
existence.
``(d) Special Rules.--
``(1) Determination of whether united states person
receives distribution.--For purposes of this section, in
determining whether a United States person receives a
distribution from a foreign trust, the fact that a portion of
such trust is treated as owned by another person under the
rules of subpart E of part I of subchapter J of chapter 1 shall
be disregarded.
``(2) Domestic trusts with foreign activities.--To the
extent provided in regulations, a trust which is a United
States person shall be treated as a foreign trust for purposes
of this section and section 6677 if such trust has substantial
activities, or holds substantial property, outside the United
States.
``(3) Time and manner of filing information.--Any notice or
return required under this section shall be made at such time
and in such manner as the Secretary shall prescribe.
``(4) Modification of return requirements.--The Secretary
is authorized to suspend or modify any requirement of this
section if the Secretary determines that the United States has
no significant tax interest in obtaining the required
information.''.
(b) Increased Penalties.--Section 6677 (relating to failure to file
information returns with respect to certain foreign trusts) is amended
to read as follows:
``SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT TO CERTAIN
FOREIGN TRUSTS.
``(a) Civil Penalty.--In addition to any criminal penalty provided
by law, if any notice or return required to be filed by section 6048--
``(1) is not filed on or before the time provided in such
section, or
``(2) does not include all the information required
pursuant to such section or includes incorrect information,
the person required to file such notice or return shall pay a penalty
equal to 35 percent of the gross reportable amount. If any failure
described in the preceding sentence continues for more than 90 days
after the day on which the Secretary mails notice of such failure to
the person required to pay such penalty, such person shall pay a
penalty (in addition to the amount determined under the preceding
sentence) of $10,000 for each 30-day period (or fraction thereof)
during which such failure continues after the expiration of such 90-day
period. In no event shall the penalty under this subsection with
respect to any failure exceed the gross reportable amount.
``(b) Special Rules for Returns Under Section 6048(b).--In the case
of a return required under section 6048(b)--
``(1) the United States person referred to in such section
shall be liable for the penalty imposed by subsection (a), and
``(2) subsection (a) shall be applied by substituting `5
percent' for `35 percent'.
``(c) Gross Reportable Amount.--For purposes of subsection (a), the
term `gross reportable amount' means--
``(1) the gross value of the property involved in the event
(determined as of the date of the event) in the case of a
failure relating to section 6048(a),
``(2) the gross value of the portion of the trust's assets
at the close of the year treated as owned by the United States
person in the case of a failure relating to section 6048(b)(1),
and
``(3) the gross amount of the distributions in the case of
a failure relating to section 6048(c).
``(d) Reasonable Cause Exception.--No penalty shall be imposed by
this section on any failure which is shown to be due to reasonable
cause and not due to willful neglect. The fact that a foreign
jurisdiction would impose a civil or criminal penalty on the taxpayer
(or any other person) for disclosing the required information is not
reasonable cause.
``(e) Deficiency Procedures Not To Apply.--Subchapter B of chapter
63 (relating to deficiency procedures for income, estate, gift, and
certain excise taxes) shall not apply in respect of the assessment or
collection of any penalty imposed by subsection (a).''.
(c) Conforming Amendments.--
(1) Paragraph (2) of section 6724(d) is amended by striking
``or'' at the end of subparagraph (S), by striking the period
at the end of subparagraph (T) and inserting ``, or'', and by
inserting after subparagraph (T) the following new
subparagraph:
``(U) section 6048(b)(1)(B) (relating to foreign
trust reporting requirements).''.
(2) The table of sections for subpart B of part III of
subchapter A of chapter 61 is amended by striking the item
relating to section 6048 and inserting the following new item:
``Sec. 6048. Information with respect to certain foreign trusts.''.
(3) The table of sections for part I of subchapter B of
chapter 68 is amended by striking the item relating to section
6677 and inserting the following new item:
``Sec. 6677. Failure to file information with respect to certain
foreign trusts.''.
(d) Effective Dates.--
(1) Reportable events.--To the extent related to subsection
(a) of section 6048 of the Internal Revenue Code of 1986, as
amended by this section, the amendments made by this section
shall apply to reportable events (as defined in such section
6048) occurring after the date of the enactment of this Act.
(2) Grantor trust reporting.--To the extent related to
subsection (b) of such section 6048, the amendments made by
this section shall apply to taxable years of United States
persons beginning after the date of the enactment of this Act.
(3) Reporting by united states beneficiaries.--To the
extent related to subsection (c) of such section 6048, the
amendments made by this section shall apply to distributions
received after the date of the enactment of this Act.
SEC. 602. MODIFICATIONS OF RULES RELATING TO FOREIGN TRUSTS HAVING ONE
OR MORE UNITED STATES BENEFICIARIES.
(a) Treatment of Trust Obligations, Etc.--
(1) Paragraph (2) of section 679(a) is amended by striking
subparagraph (B) and inserting the following:
``(B) Transfers at fair market value.--To any
transfer of property to a trust in exchange for
consideration of at least the fair market value of the
transferred property. For purposes of the preceding
sentence, consideration other than cash shall be taken
into account at its fair market value.''.
(2) Subsection (a) of section 679 (relating to foreign
trusts having one or more United States beneficiaries) is
amended by adding at the end the following new paragraph:
``(3) Certain obligations not taken into account under fair
market value exception.--
``(A) In general.--In determining whether paragraph
(2)(B) applies to any transfer by a person described in
clause (ii) or (iii) of subparagraph (C), there shall
not be taken into account--
``(i) except as provided in regulations,
any obligation of a person described in
subparagraph (C), and
``(ii) to the extent provided in
regulations, any obligation which is guaranteed
by a person described in subparagraph (C).
``(B) Treatment of principal payments on
obligation.--Principal payments by the trust on any
obligation referred to in subparagraph (A) shall be
taken into account on and after the date of the payment
in determining the portion of the trust attributable to
the property transferred.
``(C) Persons described.--The persons described in
this subparagraph are--
``(i) the trust,
``(ii) any grantor or beneficiary of the
trust, and
``(iii) any person who is related (within
the meaning of section 643(i)(2)(B)) to any
grantor or beneficiary of the trust.''.
(b) Exemption of Transfers to Charitable Trusts.--Subsection (a) of
section 679 is amended by striking ``section 404(a)(4) or 404A'' and
inserting ``section 6048(a)(3)(B)(ii)''.
(c) Other Modifications.--Subsection (a) of section 679 is amended
by adding at the end the following new paragraphs:
``(4) Special rules applicable to foreign grantor who later
becomes a united states person.--
``(A) In general.--If a nonresident alien
individual has a residency starting date within 5 years
after directly or indirectly transferring property to a
foreign trust, this section and section 6048 shall be
applied as if such individual transferred to such trust
on the residency starting date an amount equal to the
portion of such trust attributable to the property
transferred by such individual to such trust in such
transfer.
``(B) Treatment of undistributed income.--For
purposes of this section, undistributed net income for
periods before such individual's residency starting
date shall be taken into account in determining the
portion of the trust which is attributable to property
transferred by such individual to such trust but shall
not otherwise be taken into account.
``(C) Residency starting date.--For purposes of
this paragraph, an individual's residency starting date
is the residency starting date determined under section
7701(b)(2)(A).
``(5) Outbound trust migrations.--If--
``(A) an individual who is a citizen or resident of
the United States transferred property to a trust which
was not a foreign trust, and
``(B) such trust becomes a foreign trust while such
individual is alive,
then this section and section 6048 shall be applied as if such
individual transferred to such trust on the date such trust
becomes a foreign trust an amount equal to the portion of such
trust attributable to the property previously transferred by
such individual to such trust. A rule similar to the rule of
paragraph (4)(B) shall apply for purposes of this paragraph.''.
(d) Modifications Relating to Whether Trust Has United States
Beneficiaries.--Subsection (c) of section 679 is amended by adding at
the end the following new paragraph:
``(3) Certain united states beneficiaries disregarded.--A
beneficiary shall not be treated as a United States person in
applying this section with respect to any transfer of property
to foreign trust if such beneficiary first became a United
States person more than 5 years after the date of such
transfer.''.
(e) Technical Amendment.--Subparagraph (A) of section 679(c)(2) is
amended to read as follows:
``(A) in the case of a foreign corporation, such
corporation is a controlled foreign corporation (as
defined in section 957(a)),''.
(f) Regulations.--Section 679 is amended by adding at the end the
following new subsection:
``(d) Regulations.--The Secretary shall prescribe such regulations
as may be necessary or appropriate to carry out the purposes of this
section.''.
(g) Effective Date.--The amendments made by this section shall
apply to transfers of property after February 6, 1995.
SEC. 603. FOREIGN PERSONS NOT TO BE TREATED AS OWNERS UNDER GRANTOR
TRUST RULES.
(a) General Rule.--
(1) Subsection (f) of section 672 (relating to special rule
where grantor is foreign person) is amended to read as follows:
``(f) Subpart Not To Result in Foreign Ownership.--
``(1) In general.--Notwithstanding any other provision of
this subpart, this subpart shall apply only to the extent such
application results in an amount being currently taken into
account (directly or through 1 or more entities) under this
chapter in computing the income of a citizen or resident of the
United States or a domestic corporation.
``(2) Exceptions.--
``(A) Certain revocable and irrevocable trusts.--
Paragraph (1) shall not apply to any trust if--
``(i) the power to revest absolutely in the
grantor title to the trust property is
exercisable solely by the grantor without the
approval or consent of any other person or with
the consent of a related or subordinate party
who is subservient to the grantor, or
``(ii) the only amounts distributable from
such trust (whether income or corpus) during
the lifetime of the grantor are amounts
distributable to the grantor or the spouse of
the grantor.
``(B) Compensatory trusts.--Except as provided in
regulations, paragraph (1) shall not apply to any
portion of a trust distributions from which are taxable
as compensation for services rendered.
``(3) Special rules.--Except as otherwise provided in
regulations prescribed by the Secretary--
``(A) a controlled foreign corporation (as defined
in section 957) shall be treated as a domestic
corporation for purposes of paragraph (1), and
``(B) paragraph (1) shall not apply for purposes of
applying section 1296.
``(4) Recharacterization of purported gifts.--In the case
of any transfer directly or indirectly from a partnership or
foreign corporation which the transferee treats as a gift or
bequest, the Secretary may recharacterize such transfer in such
circumstances as the Secretary determines to be appropriate to
prevent the avoidance of the purposes of this subsection.
``(5) Special rule where grantor is foreign person.--If--
``(A) but for this subsection, a foreign person
would be treated as the owner of any portion of a
trust, and
``(B) such trust has a beneficiary who is a United
States person,
such beneficiary shall be treated as the grantor of such
portion to the extent such beneficiary has made transfers of
property by gift (directly or indirectly) to such foreign
person. For purposes of the preceding sentence, any gift shall
not be taken into account to the extent such gift would be
excluded from taxable gifts under section 2503(b).
``(6) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this subsection, including regulations providing
that paragraph (1) shall not apply in appropriate cases.''.
(2) The last sentence of subsection (c) of section 672 of
such Code is amended by inserting ``subsection (f) and'' before
``sections 674''.
(b) Credit for Certain Taxes.--Paragraph (2) of section 665(d) is
amended by adding at the end the following new sentence: ``Under rules
or regulations prescribed by the Secretary, in the case of any foreign
trust of which the settlor or another person would be treated as owner
of any portion of the trust under subpart E but for section 672(f), the
term `taxes imposed on the trust' includes the allocable amount of any
income, war profits, and excess profits taxes imposed by any foreign
country or possession of the United States on the settlor or such other
person in respect of trust gross income.''.
(c) Distributions by Certain Foreign Trusts Through Nominees.--
(1) Section 643 is amended by adding at the end the
following new subsection:
``(h) Distributions by Certain Foreign Trusts Through Nominees.--
For purposes of this part, any amount paid to a United States person
which is derived directly or indirectly from a foreign trust of which
the payor is not the grantor shall be deemed in the year of payment to
have been directly paid by the foreign trust to such United States
person.''.
(2) Section 665 is amended by striking subsection (c).
(d) Effective Date.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall take effect on the date
of the enactment of this Act.
(2) Exception for certain trusts.--The amendments made by
this section shall not apply to any trust--
(A) which is treated as owned by the grantor or
another person under section 676 or 677 (other than
subsection (a)(3) thereof) of the Internal Revenue Code
of 1986, and
(B) which is in existence on September 19, 1995.
The preceding sentence shall not apply to the portion of any
such trust attributable to any transfer to such trust after
September 19, 1995.
(e) Transitional Rule.--If--
(1) by reason of the amendments made by this section, any
person other than a United States person ceases to be treated
as the owner of a portion of a domestic trust, and
(2) before January 1, 1997, such trust becomes a foreign
trust, or the assets of such trust are transferred to a foreign
trust,
no tax shall be imposed by section 1491 of the Internal Revenue Code of
1986 by reason of such trust becoming a foreign trust or the assets of
such trust being transferred to a foreign trust.
SEC. 604. INFORMATION REPORTING REGARDING FOREIGN GIFTS.
(a) In General.--Subpart A of part III of subchapter A of chapter
61 is amended by inserting after section 6039E the following new
section:
``SEC. 6039F. NOTICE OF GIFTS RECEIVED FROM FOREIGN PERSONS.
``(a) In General.--If the value of the aggregate foreign gifts
received by a United States person (other than an organization
described in section 501(c) and exempt from tax under section 501(a))
during any taxable year exceeds $10,000, such United States person
shall furnish (at such time and in such manner as the Secretary shall
prescribe) such information as the Secretary may prescribe regarding
each foreign gift received during such year.
``(b) Foreign Gift.--For purposes of this section, the term
`foreign gift' means any amount received from a person other than a
United States person which the recipient treats as a gift or bequest.
Such term shall not include any qualified transfer (within the meaning
of section 2503(e)(2)).
``(c) Penalty for Failure To File Information.--
``(1) In general.--If a United States person fails to
furnish the information required by subsection (a) with respect
to any foreign gift within the time prescribed therefor
(including extensions)--
``(A) the tax consequences of the receipt of such
gift shall be determined by the Secretary in the
Secretary's sole discretion from the Secretary's own
knowledge or from such information as the Secretary may
obtain through testimony or otherwise, and
``(B) such United States person shall pay (upon
notice and demand by the Secretary and in the same
manner as tax) an amount equal to 5 percent of the
amount of such foreign gift for each month for which
the failure continues (not to exceed 25 percent of such
amount in the aggregate).
``(2) Reasonable cause exception.--Paragraph (1) shall not
apply to any failure to report a foreign gift if the United
States person shows that the failure is due to reasonable cause
and not due to willful neglect.
``(d) Cost-of-Living Adjustment.--In the case of any taxable year
beginning after December 31, 1996, the $10,000 amount under subsection
(a) shall be increased by an amount equal to the product of such amount
and the cost-of-living adjustment for such taxable year under section
1(f)(3), except that subparagraph (B) thereof shall be applied by
substituting `1995' for `1992'.
``(e) Regulations.--The Secretary shall prescribe such regulations
as may be necessary or appropriate to carry out the purposes of this
section.''.
(b) Clerical Amendment.--The table of sections for such subpart is
amended by inserting after the item relating to section 6039E the
following new item:
``Sec. 6039F. Notice of large gifts received from foreign persons.''.
(c) Effective Date.--The amendments made by this section shall
apply to amounts received after the date of the enactment of this Act
in taxable years ending after such date.
SEC. 605. MODIFICATION OF RULES RELATING TO FOREIGN TRUSTS WHICH ARE
NOT GRANTOR TRUSTS.
(a) Modification of Interest Charge on Accumulation
Distributions.--Subsection (a) of section 668 (relating to interest
charge on accumulation distributions from foreign trusts) is amended to
read as follows:
``(a) General Rule.--For purposes of the tax determined under
section 667(a)--
``(1) Interest determined using underpayment rates.--The
interest charge determined under this section with respect to
any distribution is the amount of interest which would be
determined on the partial tax computed under section 667(b) for
the period described in paragraph (2) using the rates and the
method under section 6621 applicable to underpayments of tax.
``(2) Period.--For purposes of paragraph (1), the period
described in this paragraph is the period which begins on the
date which is the applicable number of years before the date of
the distribution and which ends on the date of the
distribution.
``(3) Applicable number of years.--For purposes of
paragraph (2)--
``(A) In general.--The applicable number of years
with respect to a distribution is the number determined
by dividing--
``(i) the sum of the products described in
subparagraph (B) with respect to each
undistributed income year, by
``(ii) the aggregate undistributed net
income.
The quotient determined under the preceding sentence
shall be rounded under procedures prescribed by the
Secretary.
``(B) Product described.--For purposes of
subparagraph (A), the product described in this
subparagraph with respect to any undistributed income
year is the product of--
``(i) the undistributed net income for such
year, and
``(ii) the sum of the number of taxable
years between such year and the taxable year of
the distribution (counting in each case the
undistributed income year but not counting the
taxable year of the distribution).
``(4) Undistributed income year.--For purposes of this
subsection, the term `undistributed income year' means any
prior taxable year of the trust for which there is
undistributed net income, other than a taxable year during all
of which the beneficiary receiving the distribution was not a
citizen or resident of the United States.
``(5) Determination of undistributed net income.--
Notwithstanding section 666, for purposes of this subsection,
an accumulation distribution from the trust shall be treated as
reducing proportionately the undistributed net income for
undistributed income years.
``(6) Periods before 1996.--Interest for the portion of the
period described in paragraph (2) which occurs before January
1, 1996, shall be determined--
``(A) by using an interest rate of 6 percent, and
``(B) without compounding until January 1, 1996.''.
(b) Abusive Transactions.--Section 643(a) is amended by inserting
after paragraph (6) the following new paragraph:
``(7) Abusive transactions.--The Secretary shall prescribe
such regulations as may be necessary or appropriate to carry
out the purposes of this part, including regulations to prevent
avoidance of such purposes.''.
(c) Treatment of Loans From Trusts.--
(1) In general.--Section 643 (relating to definitions
applicable to subparts A, B, C, and D) is amended by adding at
the end the following new subsection:
``(i) Loans From Foreign Trusts.--For purposes of subparts B, C,
and D--
``(1) General rule.--Except as provided in regulations, if
a foreign trust makes a loan of cash or marketable securities
directly or indirectly to--
``(A) any grantor or beneficiary of such trust who
is a United States person, or
``(B) any United States person not described in
subparagraph (A) who is related to such grantor or
beneficiary,
the amount of such loan shall be treated as a distribution by
such trust to such grantor or beneficiary (as the case may be).
``(2) Definitions and special rules.--For purposes of this
subsection--
``(A) Cash.--The term `cash' includes foreign
currencies and cash equivalents.
``(B) Related person.--
``(i) In general.--A person is related to
another person if the relationship between such
persons would result in a disallowance of
losses under section 267 or 707(b). In applying
section 267 for purposes of the preceding
sentence, section 267(c)(4) shall be applied as
if the family of an individual includes the
spouses of the members of the family.
``(ii) Allocation.--If any person described
in paragraph (1)(B) is related to more than one
person, the grantor or beneficiary to whom the
treatment under this subsection applies shall
be determined under regulations prescribed by
the Secretary.
``(C) Exclusion of tax-exempts.--The term `United
States person' does not include any entity exempt from
tax under this chapter.
``(D) Trust not treated as simple trust.--Any trust
which is treated under this subsection as making a
distribution shall be treated as not described in
section 651.
``(3) Subsequent transactions regarding loan principal.--If
any loan is taken into account under paragraph (1), any
subsequent transaction between the trust and the original
borrower regarding the principal of the loan (by way of
complete or partial repayment, satisfaction, cancellation,
discharge, or otherwise) shall be disregarded for purposes of
this title.''.
(2) Technical amendment.--Paragraph (8) of section 7872(f)
is amended by inserting ``, 643(i),'' before ``or 1274'' each
place it appears.
(d) Effective Dates.--
(1) Interest charge.--The amendment made by subsection (a)
shall apply to distributions after the date of the enactment of
this Act.
(2) Abusive transactions.--The amendment made by subsection
(b) shall take effect on the date of the enactment of this Act.
(3) Loans from trusts.--The amendment made by subsection
(c) shall apply to loans of cash or marketable securities after
September 19, 1995.
SEC. 606. RESIDENCE OF ESTATES AND TRUSTS, ETC.
(a) Treatment as United States Person.--
(1) In general.--Paragraph (30) of section 7701(a) is
amended by striking subparagraph (D) and by inserting after
subparagraph (C) the following:
``(D) any estate or trust if--
``(i) a court within the United States is
able to exercise primary supervision over the
administration of the estate or trust, and
``(ii) in the case of a trust, one or more
United States fiduciaries have the authority to
control all substantial decisions of the
trust.''.
(2) Conforming amendment.--Paragraph (31) of section
7701(a) is amended to read as follows:
``(31) Foreign estate or trust.--The term `foreign estate'
or `foreign trust' means any estate or trust other than an
estate or trust described in section 7701(a)(30)(D).''.
(3) Effective date.--The amendments made by this subsection
shall apply--
(A) to taxable years beginning after December 31,
1996, or
(B) at the election of the trustee of a trust, to
taxable years ending after the date of the enactment of
this Act.
Such an election, once made, shall be irrevocable.
(b) Domestic Trusts Which Become Foreign Trusts.--
(1) In general.--Section 1491 (relating to imposition of
tax on transfers to avoid income tax) is amended by adding at
the end the following new flush sentence:
``If a trust which is not a foreign trust becomes a foreign trust, such
trust shall be treated for purposes of this section as having
transferred, immediately before becoming a foreign trust, all of its
assets to a foreign trust.''.
(2) Penalty.--Section 1494 is amended by adding at the end
the following new subsection:
``(c) Penalty.--In the case of any failure to file a return
required by the Secretary with respect to any transfer described in
section 1491 with respect to a trust, the person required to file such
return shall be liable for the penalties provided in section 6677 in
the same manner as if such failure were a failure to file a return
under section 6048(a).''.
(3) Effective date.--The amendments made by this subsection
shall take effect on the date of the enactment of this Act.
Subtitle B--Repeal of Bad Debt Reserve Method for Thrift Savings
Associations
SEC. 611. REPEAL OF BAD DEBT RESERVE METHOD FOR THRIFT SAVINGS
ASSOCIATIONS.
(a) In General.--Section 593 (relating to reserves for losses on
loans) is hereby repealed.
(b) Conforming Amendments.--
(1) Subsection (d) of section 50 is amended by adding at
the end the following new sentence:
``Paragraphs (1)(A), (2)(A), and (4) of section 46(e) referred to in
paragraph (1) of this subsection shall not apply to any taxable year
beginning after December 31, 1995.''.
(2) Subsection (e) of section 52 is amended by striking
paragraph (1) and by redesignating paragraphs (2) and (3) as
paragraphs (1) and (2), respectively.
(3) Subsection (a) of section 57 is amended by striking
paragraph (4).
(4) Section 246 is amended by striking subsection (f).
(5) Clause (i) of section 291(e)(1)(B) is amended by
striking ``or to which section 593 applies''.
(6) Subparagraph (A) of section 585(a)(2) is amended by
striking ``other than an organization to which section 593
applies''.
(7) Sections 595 and 596 are hereby repealed.
(8) Subsection (a) of section 860E is amended--
(A) by striking ``Except as provided in paragraph
(2), the'' in paragraph (1) and inserting ``The'',
(B) by striking paragraphs (2) and (4) and
redesignating paragraphs (3) and (5) as paragraphs (2)
and (3), respectively, and
(C) by striking in paragraph (2) (as so
redesignated) all that follows ``subsection'' and
inserting a period.
(9) Paragraph (3) of section 992(d) is amended by striking
``or 593''.
(10) Section 1038 is amended by striking subsection (f).
(11) Clause (ii) of section 1042(c)(4)(B) is amended by
striking ``or 593''.
(12) Subsection (c) of section 1277 is amended by striking
``or to which section 593 applies''.
(13) Subparagraph (B) of section 1361(b)(2) is amended by
striking ``or to which section 593 applies''.
(14) The table of sections for part II of subchapter H of
chapter 1 is amended by striking the items relating to sections
593, 595, and 596.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 1995.
(2) Repeal of section 595.--The repeal of section 595 under
subsection (b)(7) shall apply to property acquired in taxable
years beginning after December 31, 1995.
(d) 6-Year Spread of Adjustments.--
(1) In general.--In the case of any taxpayer who is
required by reason of the amendments made by this section to
change its method of computing reserves for bad debts--
(A) such change shall be treated as a change in a
method of accounting,
(B) such change shall be treated as initiated by
the taxpayer and as having been made with the consent
of the Secretary, and
(C) the net amount of the adjustments required to
be taken into account by the taxpayer under section
481(a)--
(i) shall be determined by taking into
account only applicable excess reserves, and
(ii) as so determined, shall be taken into
account ratably over the 6-taxable year period
beginning with the first taxable year beginning
after December 31, 1995.
(2) Applicable excess reserves.--
(A) In general.--For purposes of paragraph (1), the
term `applicable excess reserves' means the excess (if
any) of--
(i) the balance of the reserves described
in section 593(c)(1) of such Code (as in effect
on the day before the date of the enactment of
this Act) as of the close of the taxpayer's
last taxable year beginning before January 1,
1996, over
(ii) the lesser of--
(I) the balance of such reserves as
of the close of the taxpayer's last
taxable year beginning before January
1, 1988, or
(II) the balance of the reserves
described in subclause (I), reduce by
an amount determined in the same manner
as under section 585(b)(2)(B)(ii) on
the basis of the taxable years
described in clause (i) and this
clause.
(B) Special rule for thrifts which become small
banks.--In the case of a bank (as defined in section
581 of such Code) which is not a large bank (as defined
in section 585(c)(2) of such Code) for its first
taxable year beginning after December 31, 1995--
(i) the balance taken into account under
subparagraph (A)(ii) shall not be less than the
amount which would be the balance of such
reserve as of the close of its last taxable
year beginning before January 1, 1996, if the
additions to such reserve for all taxable years
had been determined under section 585(b)(2)(A),
and
(ii) the opening balance of the reserve for
bad debts as of the beginning of such first
taxable year shall be the balance taken into
account under subparagraph (A)(ii) (determined
after the application of clause (i) of this
subparagraph).
The preceding sentence shall not apply for purposes of
paragraphs (5), (6), and (7).
(3) Recapture of pre-1988 reserves where taxpayer ceases to
be bank.--If during any taxable year beginning after December
31, 1995, a taxpayer to which paragraph (1) applied is not a
bank (as defined in section 581), paragraph (1) shall apply to
the reserves described in subparagraph (A)(ii) except that such
reserves shall be taken into account ratably over the 6-taxable
year period beginning with such taxable year.
(4) Suspension of recapture if residential loan requirement
met.--
(A) In general.--In the case of a bank which meets
the residential loan requirement of subparagraph (B)
for a taxable year beginning after December 31, 1995,
and before January 1, 1998--
(i) no adjustment shall be taken into
account under paragraph (1) for such taxable
year, and
(ii) such taxable year shall be disregarded
in determining--
(I) whether any other taxable year
is a taxable year for which an
adjustment is required to be taken into
account under paragraph (1), and
(II) the amount of such adjustment.
(B) Residential loan requirement.--A taxpayer meets
the residential loan requirement of this subparagraph
for any taxable year if the principal amount of the
residential loans made by the taxpayer during such year
is not less than the base amount for such year.
(C) Residential loan.--For purposes of this
paragraph, the term ``residential loan'' means any loan
described in clause (v) of section 7701(a)(19)(C) of
such Code but only if such loan is incurred in
acquiring, constructing, or improving the property
described in such clause.
(D) Base amount.--For purposes of subparagraph (B),
the base amount is the average of the principal amounts
of the residential loans made by the taxpayer during
the 6 most recent taxable years beginning before
January 1, 1996. At the election of the taxpayer who
made such loans during each of such 6 taxable years,
the preceding sentence shall be applied without regard
to the taxable year in which such principal amount was
the highest and the taxable year in such principal
amount was the lowest. Such an election may be made
only for the first taxable year beginning after
December 31, 1995, and, if made for such taxable year,
shall apply to the succeeding taxable year unless
revoked with the consent of the Secretary of the
Treasury or the Secretary's delegate.
(E) Controlled groups.--In the case of a taxpayer
which is a member of any controlled group of
corporations described in section 1563(a)(1) of such
Code, subparagraph (B) shall be applied with respect to
such group.
(5) Continued application of fresh start under section 585
transitional rules.--In the case of a taxpayer to which
paragraph (1) applied and which was not a large bank (as
defined in section 585(c)(2) of such Code) for its first
taxable year beginning after December 31, 1995:
(A) In general.--For purposes of determining the
net amount of adjustments referred to in section
585(c)(3)(A)(iii) of such Code, there shall be taken
into account only the excess of the reserve for bad
debts as of the close of the last taxable year before
the disqualification year over the balance taken into
account by such taxpayer under paragraph (2)(A)(ii) of
this subsection.
(B) Treatment under elective cut-off method.--For
purposes of applying section 585(c)(4) of such Code--
(i) the balance of the reserve taken into
account under subparagraph (B) thereof shall be
reduced by the balance taken into account by
such taxpayer under paragraph (2)(A)(ii) of
this subsection, and
(ii) no amount shall be includible in gross
income by reason of such reduction.
(6) Continued application of section 593(e).--
Notwithstanding the amendments made by this section, in the
case of a taxpayer to which paragraph (1) of this subsection
applies, section 593(e) of such Code (as in effect on the day
before the date of the enactment of this Act) shall continue to
apply to such taxpayer as if such taxpayer were a domestic
building and loan association but the amount of the reserves
taken into account under subparagraphs (B) and (C) of section
593(e)(1) (as so in effect) shall be the balance taken into
account by such taxpayer under paragraph (2)(A)(ii) of this
subsection.
(7) Certain items included as section 381(c) items.--The
balance of the applicable excess reserves, and the balance
taken into account by a taxpayer under paragraph (2)(A)(ii) of
this subsection, shall be treated as items described in section
381(c) of such Code.
(8) Conversions to credit unions.--In the case of a
taxpayer to which paragraph (1) applied which becomes a credit
union described in section 501(c)(14)(A)--
(A) any amount required to be included in the gross
income of the credit union by reason of this subsection
shall be treated as derived from an unrelated trade or
business (as defined in section 513), and
(B) for purposes of paragraph (3), the credit union
shall not be treated as if it were a bank.
(9) Regulations.--The Secretary of the Treasury or the
Secretary's delegate shall prescribe such regulations as may be
necessary to carry out this subsection, including regulations
providing for the application of paragraphs (4) and (6) in the
case of acquisitions, mergers, spin-offs, and other
reorganizations.
Subtitle C--Other Provisions
SEC. 621. EXTENSION OF MEDICARE SECONDARY PAYOR PROVISIONS.
Section 1862(b) of the Social Security Act (42 U.S.C. 1395y(b)) is
amended--
(1) in paragraph (1)--
(A) in subparagraph (B), by striking clause (iii)
and redesignating clause (iv) as clause (iii); and
(B) in the matter following clause (ii) of
subparagraph (C), by striking ``, and before October 1,
1998''; and
(2) in paragraph (5)(C), by striking clause (iii).
SEC. 622. ANNUAL ADJUSTMENT FACTORS FOR OPERATING COSTS ONLY; RESTRAINT
ON RENT INCREASES.
(a) Annual Adjustment Factors for Operating Costs Only.--Section
8(c)(2)(A) of the United States Housing Act of 1937 (42 U.S.C.
1437f(c)(2)(A)) is amended--
(1) by striking ``(2)(A)'' and inserting ``(2)(A)(i)'';
(2) by striking the second sentence and all that follows
through the end of the subparagraph; and
(3) by adding at the end the following new clause:
``(ii) Each assistance contract under this section shall provide
that--
``(I) if the maximum monthly rent for a unit in a new
construction or substantial rehabilitation project to be
adjusted using an annual adjustment factor exceeds 100 percent
of the fair market rent for an existing dwelling unit in the
market area, the Secretary shall adjust the rent using an
operating costs factor that increases the rent to reflect
increases in operating costs in the market area; and
``(II) if the owner of a unit in a project described in
subclause (I) demonstrates that the adjusted rent determined
under subclause (I) would not exceed the rent for an unassisted
unit of similar quality, type, and age in the same market area,
as determined by the Secretary, the Secretary shall use the
otherwise applicable annual adjustment factor.''.
(b) Restraint on Section 8 Rent Increases.--Section 8(c)(2)(A) of
the United States Housing Act of 1937 (42 U.S.C. 1437f(c)(2)(A)), as
amended by subsection (a) of this section, is amended by adding at the
end the following new clause:
``(iii)(I) Subject to subclause (II), with respect to any unit
assisted under this section that is occupied by the same family at the
time of the most recent annual rental adjustment, if the assistance
contract provides for the adjustment of the maximum monthly rent by
applying an annual adjustment factor, and if the rent for the unit is
otherwise eligible for an adjustment based on the full amount of the
annual adjustment factor, 0.01 shall be subtracted from the amount of
the annual adjustment factor, except that the annual adjustment factor
shall not be reduced to less than 1.0.
``(II) With respect to any unit described in subclause (I) that is
assisted under the certificate program, the adjusted rent shall not
exceed the rent for a comparable unassisted unit of similar quality,
type, and age in the market area in which the unit is located.''.
(c) Effective Date.--The amendments made by this section shall be
construed to have become effective on October 1, 1995.
SEC. 623. FORECLOSURE AVOIDANCE AND BORROWER ASSISTANCE.
(a) Effectiveness and Applicability.--Section 407 of The Balanced
Budget Downpayment Act, I (Public Law 104-99) is amended--
(1) in subsection (c)--
(A) by striking ``Except as provided in subsection
(e), the'' and inserting ``The''; and
(B) by striking ``only with respect to mortgages
insured under the National Housing Act that are
originated before October 1, 1995'' and inserting ``to
all mortgages insured under the National Housing Act'';
and
(2) by striking subsection (e).
(b) Technical Amendment.--Section 230(d) of the National Housing
Act (12 U.S.C. 1715u(d)) is amended by striking ``the Departments'' and
all that follows through ``1996'' and inserting ``The Balanced Budget
Downpayment Act, I''.
Attest:
Secretary.
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104th CONGRESS
2d Session
H. R. 3103
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AMENDMENT