[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 18 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                 S. 18

To provide improved access to health care, enhance informed individual 
choice regarding health care services, lower health care costs through 
 the use of appropriate providers, improve the quality of health care, 
       improve access to long-term care, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 4, 1995

  Mr. Specter introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To provide improved access to health care, enhance informed individual 
choice regarding health care services, lower health care costs through 
 the use of appropriate providers, improve the quality of health care, 
       improve access to long-term care, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Health Care 
Assurance Act of 1995''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
                TITLE I--HEALTH CARE INSURANCE COVERAGE

                        Subtitle A--Definitions

Sec. 100. Definitions.
  Subtitle B--Increased Availability and Continuity of Health Coverage

   Part 1--Reform of Health Insurance Marketplace for Small Employers

                   Subpart A--Insurance Market Reform

Sec. 111. Requirement for insurers to offer qualified health insurance 
                            plans.
Sec. 112. Actuarial equivalence in benefits permitted.
Sec. 113. Establishment of health insurance plan standards.
 Subpart B--Additional Standards for Health Insurance Plans Offered to 
                            Small Employers

Sec. 121. General issuance requirements.
Sec. 122. Rating limitations for community-rated market.
Sec. 123. Rating practices and payment of premiums.
              Subpart C--Small Employer Purchasing Groups

Sec. 131. Qualified small employer purchasing groups.
Sec. 132. Agreements with small employers.
Sec. 133. Enrolling eligible employees, eligible individuals, and 
                            certain uninsured individuals in qualified 
                            health insurance plans.
Sec. 134. Receipt of premiums.
Sec. 135. Marketing activities.
Sec. 136. Grants to States and qualified small employer purchasing 
                            groups.
Sec. 137. Qualified small employer purchasing groups established by a 
                            State.
       Part 2--Standards Applicable to All Health Insurance Plans

Sec. 141. Coverage requirements.
      Part 3--Enforcement of Standards for Health Insurance Plans

Sec. 151. Enforcement by excise tax on insurers.
                        Part 4--Effective Dates

Sec. 161. Effective dates.
   Subtitle C--Required Coverage Options for Eligible Employees and 
                     Dependents of Small Employers

Sec. 171. Requiring small employers to offer coverage for eligible 
                            individuals.
Sec. 172. Compliance with applicable requirements through multiple 
                            employer health arrangements.
Sec. 173. Enforcement by excise tax on small employers.
 Subtitle D--Required Coverage Options for Individuals Insured Through 
                           Association Plans

                  Part 1--Qualified Association Plans

Sec. 181. Treatment of qualified association plans.
Sec. 182. Qualified association plan defined.
Sec. 183. Definitions and special rules.
 Part 2--Special Rule for Church, Multiemployer, and Cooperative Plans

Sec. 191. Special rule for church, multiemployer, and cooperative 
                            plans.
                          Part 3--Enforcement

Sec. 1001. Enforcement by excise tax on qualified associations.
            Subtitle E--1-Year Extension of Medicare Select

Sec. 1011. 1-year extension of period for issuance of medicare select 
                            policies.
                       Subtitle F--Tax Provisions

Sec. 1021. Deduction for health insurance costs of self-employed 
                            individuals.
Sec. 1022. Amendments to COBRA.
             TITLE II--PRIMARY AND PREVENTIVE CARE SERVICES

Sec. 201. Grants to States for healthy start initiatives.
Sec. 202. Reauthorization of certain programs providing primary and 
                            preventive care.
Sec. 203. Comprehensive school health education program.
Sec. 204. Comprehensive early childhood health education program.
        TITLE III--PATIENT'S RIGHT TO DECLINE MEDICAL TREATMENT

Sec. 301. Patient's right to decline medical treatment.
            TITLE IV--PRIMARY AND PREVENTIVE CARE PROVIDERS

Sec. 401. Expanded coverage of certain nonphysician providers under the 
                            medicare program.
Sec. 402. Requiring coverage of certain nonphysician providers under 
                            the medicaid program.
Sec. 403. Medical student tutorial program grants.
Sec. 404. General medical practice grants.
                       TITLE V--COST CONTAINMENT

Sec. 501. New drug clinical trials program.
Sec. 502. Medical treatment effectiveness.
Sec. 503. National health insurance data and claims system.
Sec. 504. Health care cost containment and quality information program.
                        TITLE VI--LONG-TERM CARE

    Subtitle A--Tax Treatment of Qualified Long-Term Care Insurance 
                         Policies and Services

Sec. 601. Amendment of 1986 Code.
Sec. 602. Qualified long-term care services treated as medical care.
Sec. 603. Definition of qualified long-term care insurance policy.
Sec. 604. Treatment of qualified long-term care insurance as accident 
                            and health insurance for purposes of 
                            taxation of insurance companies.
Sec. 605. Treatment of accelerated death benefits under life insurance 
                            contracts.
  Subtitle B--Tax Incentives for Purchase of Qualified Long-Term Care 
                               Insurance

Sec. 611. Credit for qualified long-term care premiums.
Sec. 612. Exclusion from gross income of benefits received under 
                            qualified long-term care insurance 
                            policies.
Sec. 613. Employer deduction for contributions made for long-term care 
                            insurance.
Sec. 614. Inclusion of qualified long-term care insurance in cafeteria 
                            plans.
Sec. 615. Exclusion from gross income for amounts received on 
                            cancellation of life insurance policies and 
                            used for qualified long-term care insurance 
                            policies.
Sec. 616. Use of gain from sale of principal residence for purchase of 
                            qualified long-term health care insurance.

                TITLE I--HEALTH CARE INSURANCE COVERAGE

                        Subtitle A--Definitions

SEC. 100. DEFINITIONS.

    For purposes of this title:
            (1) Dependent.--The term ``dependent'' means, with respect 
        to any individual, any person who is--
                    (A) the spouse or surviving spouse of the 
                individual; or
                    (B) under regulations of the Secretary, a child 
                (including an adopted child) of such individual and--
                            (i) under 19 years of age; or
                            (ii) under 25 years of age and a full-time 
                        student.
            (2) Eligible employee.--The term ``eligible employee'' 
        means, with respect to an employer, an employee who normally 
        performs on a monthly basis at least 30 hours of service per 
        week for that employer.
            (3) Eligible individual.--The term ``eligible individual'' 
        means, with respect to an eligible employee, such employee, and 
        any dependent of such employee.
            (4) Employer.--The term ``employer'' shall have the meaning 
        given such term in section 3(5) of the Employee Retirement 
        Income Security Act of 1974.
            (5) Group health plan.--The term ``group health plan'' 
        means an employee welfare benefit plan providing medical care 
        (as defined in section 213(d) of the Internal Revenue Code of 
        1986) to participants or beneficiaries directly or through 
        insurance, reimbursement, or otherwise, but does not include 
        any type of coverage excluded from the definition of a health 
        insurance plan under paragraph (6)(B).
            (6) Health insurance plan.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the term ``health insurance plan'' means any 
                hospital or medical service policy or certificate, 
                hospital, or medical service plan contract, or health 
                maintenance organization group contract offered by an 
                insurer.
                    (B) Exception.--Such term does not include any of 
                the following:
                            (i) Coverage only for accident, dental, 
                        vision, disability income, or long-term care 
                        insurance, or any combination thereof.
                            (ii) Medicare supplemental health 
                        insurance.
                            (iii) Coverage issued as a supplement to 
                        liability insurance.
                            (iv) Worker's compensation or similar 
                        insurance.
                            (v) Automobile medical-payment insurance.
                            (vi) Any combination of the insurance 
                        described in clauses (i) through (v).
            (7) Health maintenance organization.--The term ``health 
        maintenance organization'' includes an organization recognized 
        under State law as a health maintenance organization or managed 
        care organization or a similar organization regulated under 
        State law for solvency that offers to provide health services 
        on a prepaid, at-risk basis primarily through a defined set of 
        providers.
            (8) Insurer.--The term ``insurer'' means any person that 
        offers a health insurance plan including--
                    (A) a licensed insurance company;
                    (B) a prepaid hospital or medical service plan;
                    (C) a health maintenance organization;
                    (D) a self-insurer carrier;
                    (E) a reinsurance carrier; and
                    (F) a multiple small employer welfare arrangement 
                (a combination of small employers associated for the 
                purpose of providing health insurance plan coverage for 
                their employees).
            (9) NAIC.--The term ``NAIC'' means the National Association 
        of Insurance Commissioners.
            (10) Qualified health insurance plan.--The term ``qualified 
        health insurance plan'' shall have the meaning given such term 
        in section 111(b).
            (11) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (12) Small employer.--The term ``small employer'' means, 
        with respect to a calendar year, an employer that normally 
        employs more than 1 but not more than 50 eligible employees on 
        a typical business day. For the purposes of this paragraph, the 
        term ``employee'' includes a self-employed individual. For 
        purposes of determining if an employer is a small employer, 
        rules similar to the rules of subsection (b) and (c) of section 
        414 of the Internal Revenue Code of 1986 shall apply.
            (13) State.--The term ``State'' means the 50 States, the 
        District of Columbia, Puerto Rico, the Virgin Islands, Guam, 
        and American Samoa.

  Subtitle B--Increased Availability and Continuity of Health Coverage

   PART 1--REFORM OF HEALTH INSURANCE MARKETPLACE FOR SMALL EMPLOYERS

                   Subpart A--Insurance Market Reform

SEC. 111. REQUIREMENT FOR INSURERS TO OFFER QUALIFIED HEALTH INSURANCE 
              PLANS.

    (a) Requirement To Offer.--Each insurer that makes available a 
health insurance plan to a small employer in a State shall make 
available to each small employer in the State a qualified health 
insurance plan (as defined in subsection (b)).
    (b) Qualified Health Insurance Plan.--The term ``qualified health 
insurance plan'' means a health insurance plan (whether a managed-care 
plan, indemnity plan, or other plan) that is designed to provide 
standard coverage (consistent with section 112(b)).
    (c) Marketing Requirements.--The requirements of subsection (a) are 
not met unless the plan described in subsection (a) is made available 
to small employers using at least the marketing methods and other sales 
practices which are used in selling other health insurance plans within 
the same class of business made available by the insurer.

SEC. 112. ACTUARIAL EQUIVALENCE IN BENEFITS PERMITTED.

    (a) Set of Rules of Actuarial Equivalence.--
            (1) Initial determination.--The NAIC is requested to submit 
        to the Secretary, within 6 months after the date of the 
        enactment of this Act, a set of rules which the NAIC determines 
        is sufficient for determining, in the case of any health 
        insurance plan and for purposes of this section, the actuarial 
        value of the coverage offered by the plan.
            (2) Certification.--If the Secretary determines that the 
        NAIC has submitted a set of rules that comply with the 
        requirements of paragraph (1), the Secretary shall certify such 
        set of rules for use under this subtitle. If the Secretary 
        determines that such a set of rules has not been submitted or 
        does not comply with such requirements, the Secretary shall 
        promptly establish a set of rules that meets such requirements.
    (b) Standard Coverage.--
            (1) In general.--A health insurance plan is considered to 
        provide standard coverage consistent with this subsection if 
        the benefits are determined, in accordance with the set of 
        actuarial equivalence rules certified under subsection (a), to 
        have a value that is within 5 percentage points of the target 
        actuarial value for standard coverage established under 
        paragraph (2).
            (2) Initial determination of target actuarial value for 
        standard coverage.--
                    (A) Initial determination.--
                            (i) In general.--The NAIC is requested to 
                        submit to the Secretary, within 6 months after 
                        the date of the enactment of this Act, a target 
                        actuarial value for standard coverage equal to 
                        the average actuarial value of the coverage 
                        described in clause (ii). No specific procedure 
                        or treatment, or classes thereof, is required 
                        to be considered in such determination by this 
                        Act or through regulations. The determination 
                        of such value shall be based on a 
                        representative distribution of the population 
                        of eligible employees offered such coverage and 
                        a single set of standardized utilization and 
                        cost factors.
                            (ii) Coverage described.--The coverage 
                        described in this clause is coverage for 
                        medically necessary and appropriate services 
                        consisting of medical and surgical services, 
                        medical equipment, preventive services, and 
                        emergency transportation in frontier areas. No 
                        specific procedure or treatment, or classes 
                        thereof, is required to be covered in such a 
                        plan, by this Act or through regulations.
                    (B) Certification.--If the Secretary determines 
                that the NAIC has submitted a target actuarial value 
                for standard coverage that complies with the 
                requirements of subparagraph (A), the Secretary shall 
                certify such value for use under this subtitle. If the 
                Secretary determines that a target actuarial value has 
                not been submitted or does not comply with the 
                requirements of subparagraph (A), the Secretary shall 
                promptly determine a target actuarial value that meets 
                such requirements.
    (c) Subsequent Revisions.--
            (1) NAIC.--The NAIC may submit from time to time to the 
        Secretary revisions of the set of rules of actuarial 
        equivalence and target actuarial values previously established 
        or determined under this section if the NAIC determines that 
        revisions are necessary to take into account changes in the 
        relevant types of health benefits provisions or in demographic 
        conditions which form the basis for the set of rules of 
        actuarial equivalence or the target actuarial values. The 
        provisions of subsection (a)(2) shall apply to such a revision 
        in the same manner as they apply to the initial determination 
        of the set of rules.
            (2) Secretary.--The Secretary may by regulation revise the 
        set of rules of actuarial equivalence and target actuarial 
        values from time to time if the Secretary determines such 
        revisions are necessary to take into account changes described 
        in paragraph (1).

SEC. 113. ESTABLISHMENT OF HEALTH INSURANCE PLAN STANDARDS.

    (a) Establishment of General Standards.--
            (1) Role of naic.--The NAIC is requested to submit to the 
        Secretary, within 9 months after the date of the enactment of 
        this Act, model regulations that specify standards with respect 
        to the requirement, under section 111(a), that insurers make 
        available qualified health insurance plans. If the NAIC 
        develops recommended regulations specifying such standards 
        within such period, the Secretary shall review the standards. 
        Such review shall be completed within 60 days after the date 
        the regulations are developed. Unless the Secretary determines 
        within such period that the standards do not meet the 
        requirement under section 111(a), such standards shall serve as 
        the standards under this section, with such amendments as the 
        Secretary deems necessary.
            (2) Contingency.--If the NAIC does not develop such model 
        regulations within the period described in paragraph (1), or 
        the Secretary determines that such regulations do not specify 
        standards that meet the requirement under section 111(a), the 
        Secretary shall specify, within 15 months after the date of the 
        enactment of this Act, standards to carry out such requirement.
            (3) Effective date.--The standards specified in the model 
        regulations shall apply to health insurance plans in a State on 
        or after the respective date the standards are implemented in 
        the State under subsection (b).
            (4) No preemption of state law.--A State may implement 
        standards for health insurance plans made available to small 
        employers that are more stringent than the requirements under 
        this section, except that a State may not implement standards 
        that prevent the offering by an insurer of at least one health 
        insurance plan that provides standard coverage (as described in 
        section 112(b)).
    (b) Application of Standards Through States.--
            (1) In general.--Each State shall submit to the Secretary, 
        by the deadline specified in paragraph (2), a report on the 
        steps the State is taking to implement and enforce the 
        standards with respect to insurers, and qualified health 
        insurance plans offered, not later than such deadline.
            (2) Deadline for report.--
                    (A) 1 year after standards established.--Subject to 
                subparagraph (B), the deadline under this paragraph is 
                1 year after the date the standards are established 
                under subsection (a).
                    (B) Exception for legislation.--In the case of a 
                State which the Secretary identifies, in consultation 
                with the NAIC, as--
                            (i) requiring State legislation (other than 
                        legislation appropriating funds) in order for 
                        insurers and qualified health insurance plans 
                        offered to meet the standards established under 
                        subsection (a), but
                            (ii) having a legislature which is not 
                        scheduled to meet in 1997 in a legislative 
                        session in which such legislation may be 
                        considered,
                the date specified in this paragraph is the first day 
                of the first calendar quarter beginning after the close 
                of the first legislative session of the State 
                legislature that begins on or after January 1, 1998. 
                For purposes of the previous sentence, in the case of a 
                State that has a 2-year legislative session, each year 
                of such session shall be deemed to be a separate 
                regular session of the State legislature.
            (3) Federal role.--If the Secretary determines that a State 
        has failed to submit a report by the deadline specified under 
        paragraph (1) or finds that the State has not implemented and 
        provided adequate enforcement of the standards under such 
        paragraph, the Secretary shall notify the State and provide the 
        State a period of 60 days in which to submit the report or to 
        implement and enforce the standards. If, after that 60-day 
        period, the Secretary finds that the failure has not been 
        corrected, the Secretary shall provide for the implementation 
        and enforcement of the standards in the State in such a way as 
        the Secretary determines to be appropriate. Such implementation 
        and enforcement shall take effect with respect to insurers and 
        qualified health insurance plans offered or renewed on or after 
        3 months after the date of the Secretary's finding under the 
        previous sentence and until the date the Secretary finds that 
        such a failure has been corrected.

 Subpart B--Additional Standards for Health Insurance Plans Offered to 
                            Small Employers

SEC. 121. GENERAL ISSUANCE REQUIREMENTS.

    (a) General Rule.--Any insurer offering a health insurance plan to 
a small employer shall meet the following requirements:
            (1) The guaranteed issue requirements of subsection (b).
            (2) The mandatory registration and disclosure requirements 
        of subsection (c).
    (b) Guaranteed Issue.--
            (1) In general.--The requirements of this subsection are 
        met if the insurer offering a health insurance plan to small 
        employers in the State--
                    (A) accepts every small employer in the State that 
                applies for coverage under the plan; and
                    (B) accepts for enrollment under the plan every 
                eligible individual who applies for enrollment on a 
                timely basis (consistent with paragraph (3)).
            (2) Special rules for health maintenance organizations.--In 
        the case of a plan offered by a health maintenance 
        organization, the plan may--
                    (A) limit the employers that may apply for coverage 
                to those with eligible individuals residing in the 
                service area of the plan;
                    (B) limit the individuals who may be enrolled under 
                the plan to those who reside in the service area of the 
                plan; and
                    (C) within the service area of the plan, deny 
                coverage to such employers if the plan demonstrates 
                that--
                            (i) it will not have the capacity to 
                        deliver services adequately to enrollees of any 
                        additional groups because of its obligations to 
                        existing group contract holders and enrollees; 
                        and
                            (ii) it is applying this subparagraph 
                        uniformly to all employers without regard to 
                        the health status, claims experience, or 
                        duration of coverage of those employers and 
                        their employees.
            (3) Clarification of timely enrollment.--
                    (A) General initial enrollment requirement.--Except 
                as provided in this paragraph, a health insurance plan 
                may consider enrollment of an eligible individual not 
                to be timely if the eligible employee or dependent 
                fails to enroll in the plan during an initial 
                enrollment period, if such period is at least 30 days 
                long.
                    (B) Enrollment due to loss of previous employer 
                coverage.--Enrollment in a health insurance plan is 
                considered to be timely in the case of an eligible 
                individual who--
                            (i) was covered under another health 
                        insurance plan or group health plan at the time 
                        of the individual's initial enrollment period;
                            (ii) stated at the time of the initial 
                        enrollment period that coverage under a health 
                        insurance plan or a group health plan was the 
                        reason for declining enrollment;
                            (iii) lost coverage under another health 
                        insurance plan or group health plan (as a 
                        result of the termination of the other plan's 
                        coverage, termination or reduction of 
                        employment, or other reason); and
                            (iv) requests enrollment within 30 days 
                        after termination of such coverage.
                    (C) Requirement applies during open enrollment 
                periods.--Each health insurance plan shall provide for 
                at least one period (of not less than 30 days) each 
                year during which enrollment under the plan shall be 
                considered to be timely.
                    (D) Exception for court orders.--Enrollment of a 
                spouse or minor child of an employee shall be 
                considered to be timely if--
                            (i) a court has ordered that coverage be 
                        provided for the spouse or child under a 
                        covered employee's group health plan; and
                            (ii) a request for enrollment is made 
                        within 30 days after the date the court issues 
                        the order.
                    (E) Enrollment of spouses and dependents.--
                            (i) In general.--Enrollment of the spouse 
                        (including a child of the spouse) and any 
                        dependent child of an eligible employee shall 
                        be considered to be timely if a request for 
                        enrollment is made either--
                                    (I) within 30 days of the date of 
                                the marriage or of the date of the 
                                birth or adoption of a child, if family 
                                coverage is available as of such date; 
                                or
                                    (II) within 30 days of the date 
                                family coverage is first made 
                                available.
                            (ii) Coverage.--If a plan makes family 
                        coverage available and enrollment is made under 
                        the plan on a timely basis under clause (i)(I), 
                        the coverage shall become effective not later 
                        than the first day of the first month beginning 
                        after the date of the marriage or the date of 
                        birth or adoption of the child (as the case may 
                        be).
            (4) Financial capacity exception.--Paragraph (1) shall not 
        require any insurer to issue a health insurance plan to the 
        extent that the issuance of such plan would result in such 
        insurer violating the financial solvency standards (if any) 
        established by the State in which such plan is to be issued.
            (5) Delivery capacity exception.--
                    (A) In general.--Paragraph (1) shall not prohibit 
                an insurer from ceasing enrollment under a health 
                insurance plan if--
                            (i) the insurer ceases to enroll any new 
                        small employers under the plan; and
                            (ii) the insurer can demonstrate to the 
                        Secretary that its provider capacity to serve 
                        previously covered groups or individuals (and 
                        additional individuals who will be expected to 
                        enroll because of affiliation with such 
                        previously covered groups or individuals) will 
                        be impaired if it is required to enroll other 
                        small employers.
                    (B) First-come-first-served.--An insurer is only 
                eligible to exercise the exceptions provided for in 
                subparagraph (A) if such insurer provides for 
                enrollment on a first-come-first-served basis (except 
                in the case of additional individuals described in 
                subparagraph (A)(ii)).
            (6) Additional exceptions.--Paragraph (1) shall not apply 
        to a failure to issue a health insurance plan to a small 
        employer if--
                    (A) such employer is unable to pay the premium for 
                such contract; or
                    (B) in the case of a small employer with fewer than 
                15 employees, such employer fails to enroll a minimum 
                percentage of the employer's employees for coverage 
                under such plan, so long as such percentage is enforced 
                uniformly for all small employers of comparable size.
            (7) Exception for alternative state programs.--
                    (A) In general.--Paragraph (1) shall not apply if 
                the State in which the health insurance plan is 
                issued--
                            (i) has a program which--
                                    (I) assures the availability of 
                                health insurance plans to small 
                                employers through the equitable 
                                distribution of high risk groups among 
                                all insurers offering such contracts to 
                                such small employers; and
                                    (II) is consistent with a model 
                                program developed by the NAIC;
                            (ii) has a qualified State-run reinsurance 
                        program; or
                            (iii) has a program which the Secretary has 
                        determined assures all small employers in the 
                        State an opportunity to purchase a health 
                        insurance plan without regard to any risk 
                        characteristic.
                    (B) Reinsurance program.--
                            (i) Program requirements.--For purposes of 
                        subparagraph (A)(ii), a State-run reinsurance 
                        program is qualified if such program is one of 
                        the NAIC reinsurance program models developed 
                        under clause (ii) or is a variation of one of 
                        such models, as approved by the Secretary.
                            (ii) Models.--Not later than 120 days after 
                        the date of the enactment of this Act, the NAIC 
                        shall develop several models for a reinsurance 
                        program, including options for program funding.
    (c) Mandatory Registration Requirements.--The requirements of this 
subsection are met if the insurer offering health insurance plans to 
small employers in any State registers with the State commissioner or 
superintendent of insurance or other State authority responsible for 
regulation of health insurance.

SEC. 122. RATING LIMITATIONS FOR COMMUNITY-RATED MARKET.

    (a) Standard Premiums With Respect to Community-Rated Eligible 
Employees and Eligible Individuals.--
            (1) In general.--Each health insurance plan offered to a 
        small employer shall establish within each community rating 
        area in which the plan is to be offered, a standard premium for 
        enrollment of eligible employees and eligible individuals for 
        the standard coverage (as defined under section 112(b)).
            (2) Establishment of community rating area.--
                    (A) In general.--Not later than January 1, 1996, 
                each State shall, in accordance with subparagraph (B), 
                provide for the division of the State into 1 or more 
                community rating areas. The State may revise the 
                boundaries of such areas from time to time consistent 
                with this paragraph.
                    (B) Geographic area variations.--For purposes of 
                subparagraph (A), a State--
                            (i) may not identify an area that divides a 
                        3-digit zip code, a county, or all portions of 
                        a metropolitan statistical area;
                            (ii) shall not permit premium rates for 
                        coverage offered in a portion of an interstate 
                        metropolitan statistical area to vary based on 
                        the State in which the coverage is offered; and
                            (iii) may, upon agreement with one or more 
                        adjacent States, identify multi-State 
                        geographic areas consistent with clauses (i) 
                        and (ii).
            (3) Eligible individuals.--For purposes of this section, 
        the term ``eligible individuals'' includes certain uninsured 
        individuals (as described in section 133).
    (b) Uniform Premiums Within Community Rating Areas.--
            (1) In general.--Subject to paragraphs (2) and (3), the 
        standard premium for each health insurance plan shall be the 
        same, but shall not include the costs of premium processing and 
        enrollment that may vary depending on whether the method of 
        enrollment is through a qualified small employer purchasing 
        group (established under subpart C), through a small employer, 
        or through a broker.
            (2) Application to enrollees.--
                    (A) In general.--The premium charged for coverage 
                in a health insurance plan which covers eligible 
                employees and eligible individuals shall be the product 
                of--
                            (i) the standard premium (established under 
                        paragraph (1));
                            (ii) in the case of enrollment other than 
                        individual enrollment, the family adjustment 
                        factor specified under subparagraph (B); and
                            (iii) the age adjustment factor (specified 
                        under subparagraph (C)).
                    (B) Family adjustment factor.--
                            (i) In general.--The standards established 
                        under section 113 shall specify family 
                        adjustment factors that reflect the relative 
                        actuarial costs of benefit packages based on 
                        family classes of enrollment (as compared with 
                        such costs for individual enrollment).
                            (ii) Classes of enrollment.--For purposes 
                        of this Act, there are 4 classes of enrollment:
                                    (I) Coverage only of an individual 
                                (referred to in this Act as the 
                                ``individual'' enrollment or class of 
                                enrollment).
                                    (II) Coverage of a married couple 
                                without children (referred to in this 
                                Act as the ``couple-only'' enrollment 
                                or class of enrollment).
                                    (III) Coverage of an individual and 
                                one or more children (referred to in 
                                this Act as the ``single parent'' 
                                enrollment or class of enrollment).
                                    (IV) Coverage of a married couple 
                                and one or more children (referred to 
                                in this Act as the ``dual parent'' 
                                enrollment or class of enrollment).
                            (iii) References to family and couple 
                        classes of enrollment.--In this subtitle:
                                    (I) Family.--The terms ``family 
                                enrollment'' and ``family class of 
                                enrollment'' refer to enrollment in a 
                                class of enrollment described in any 
                                subclause of clause (ii) (other than 
                                subclause (I)).
                                    (II) Couple.--The term ``couple 
                                class of enrollment'' refers to 
                                enrollment in a class of enrollment 
                                described in subclause (II) or (IV) of 
                                clause (ii).
                            (iv) Spouse; married; couple.--
                                    (I) In general.--In this subtitle, 
                                the terms ``spouse'' and ``married'' 
                                mean, with respect to an individual, 
                                another individual who is the spouse 
                                of, or is married to, the individual, 
                                as determined under applicable State 
                                law.
                                    (II) Couple.--The term ``couple'' 
                                means an individual and the 
                                individual's spouse.
                    (C) Age adjustment factor.--The Secretary, in 
                consultation with the NAIC, shall specify uniform age 
                categories and maximum rating increments for age 
                adjustment factors that reflect the relative actuarial 
                costs of benefit packages among enrollees. For 
                individuals who have attained age 18 but not age 65, 
                the highest age adjustment factor may not exceed 3 
                times the lowest age adjustment factor.
            (3) Administrative charges.--
                    (A) In general.--In accordance with the standards 
                established under section 113, a health insurance plan 
                which covers eligible employees and eligible 
                individuals may add a separately-stated administrative 
                charge which is based on identifiable differences in 
                legitimate administrative costs and which is applied 
                uniformly for individuals enrolling through the same 
                method of enrollment. Nothing in this subparagraph may 
                be construed as preventing a qualified small employer 
                purchasing group from negotiating a unique 
                administrative charge with an insurer for a health 
                insurance plan.
                    (B) Enrollment through a qualified small employer 
                purchasing group.--In the case of an administrative 
                charge under subparagraph (A) for enrollment through a 
                qualified small employer purchasing group, such charge 
                may not exceed the lowest charge of such plan for 
                enrollment other than through a qualified small 
                employer purchasing group in such area.
    (c) Treatment of Negotiated Rate as Community Rate.--
Notwithstanding any other provision of this section, an insurer which 
negotiates a premium rate (exclusive of any administrative charge 
described in subsection (b)(3)) with a qualified small employer 
purchasing group in a community rating area shall charge the same 
premium rate to all eligible employees and eligible individuals.

SEC. 123. RATING PRACTICES AND PAYMENT OF PREMIUMS.

    (a) Full Disclosure of Rating Practices.--
            (1) In general.--An insurer shall fully disclose rating 
        practices for such plan to the appropriate certifying authority 
        (as determined under section 121(c)).
            (2) Notice on expiration.--An insurer shall provide for 
        notice of the terms for renewal of a health insurance plan at 
        the time of the offering of the plan and at least 90 days 
        before the date of expiration of the plan.
            (3) Actuarial certification.--Each insurer shall file 
        annually with the appropriate certifying authority a written 
        statement by a member of the American Academy of Actuaries (or 
        other individual acceptable to such authority) who is not an 
        employee of the insurer certifying that, based upon an 
        examination by the individual which includes a review of the 
        appropriate records and of the actuarial assumptions of such 
        insurer and methods used by the insurer in establishing premium 
        rates and administrative charges for health insurance plans--
                    (A) such insurer is in compliance with the 
                applicable provisions of this subtitle; and
                    (B) the rating methods are actuarially sound.
        Each insurer shall retain a copy of such statement at its 
        principal place of business for examination by any individual.
    (b) Payment of Premiums.--
            (1) In general.--With respect to a new enrollee in a health 
        insurance plan, the plan may require advanced payment of an 
        amount equal to the monthly applicable premium for the plan at 
        the time such individual is enrolled.
            (2) Notification of failure to receive premium.--If a 
        health insurance plan fails to receive payment on a premium due 
        with respect to an eligible employee or eligible individual 
        covered under the plan, the plan shall provide notice of such 
        failure to the employee or individual within the 20-day period 
        after the date on which such premium payment was due. A plan 
        may not terminate the enrollment of an eligible employee or 
        eligible individual unless such employee or individual has been 
        notified of any overdue premiums and has been provided a 
        reasonable opportunity to respond to such notice.

              Subpart C--Small Employer Purchasing Groups

SEC. 131. QUALIFIED SMALL EMPLOYER PURCHASING GROUPS.

    (a) Qualified Small Employer Purchasing Groups Described.--
            (1) In general.--A qualified small employer purchasing 
        group is an entity that--
                    (A) is a nonprofit entity certified under State 
                law;
                    (B) has a membership consisting solely of small 
                employers;
                    (C) is administered solely under the authority and 
                control of its member employers;
                    (D) with respect to each State in which its members 
                are located, consists of not fewer than the number of 
                small employers established by the State as appropriate 
                for such a group;
                    (E) offers a program under which qualified health 
                insurance plans are offered to eligible employees and 
                eligible individuals through its member employers and 
                to certain uninsured individuals in accordance with 
                section 122; and
                    (F) an insurer, agent, broker, or any other 
                individual or entity engaged in the sale of insurance--
                            (i) does not form or underwrite; and
                            (ii) does not hold or control any right to 
                        vote with respect to.
            (2) State certification.--A qualified small employer 
        purchasing group formed under this section shall submit an 
        application to the State for certification. The State shall 
        determine whether to issue a certification and otherwise ensure 
        compliance with the requirements of this Act.
            (3) Special rule.--Notwithstanding paragraph (1)(B), an 
        employer member of a small employer purchasing group that has 
        been certified by the State as meeting the requirements of 
        paragraph (1) may retain its membership in the group if the 
        number of employees of the employer increases such that the 
        employer is no longer a small employer.
    (b) Board of Directors.--Each qualified small employer purchasing 
group established under this section shall be governed by a board of 
directors or have active input from an advisory board consisting of 
individuals and businesses participating in the group.
    (c) Domiciliary State.--For purposes of this section, a qualified 
small employer purchasing group operating in more than one State shall 
be certified by the State in which the group is domiciled.
    (d) Membership.--
            (1) In general.--A qualified small employer purchasing 
        group shall accept all small employers and certain uninsured 
        individuals residing within the area served by the group as 
        members if such employers or individuals request such 
        membership.
            (2) Voting.--Members of a qualified small employer 
        purchasing group shall have voting rights consistent with the 
        rules established by the State.
    (e) Duties of Qualified Small Employer Purchasing Groups.--Each 
qualified small employer purchasing group shall--
            (1) enter into agreements with insurers offering qualified 
        health insurance plans;
            (2) enter into agreements with small employers under 
        section 132;
            (3) enroll only eligible employees, eligible individuals, 
        and certain uninsured individuals in qualified health insurance 
        plans, in accordance with section 133;
            (4) provide enrollee information to the State;
            (5) meet the marketing requirements under section 135; and
            (6) carry out other functions provided for under this Act.
    (f) Limitation on Activities.--A qualified small employer 
purchasing group shall not--
            (1) perform any activity involving approval or enforcement 
        of payment rates for providers;
            (2) perform any activity (other than the reporting of 
        noncompliance) relating to compliance of qualified health 
        insurance plans with the requirements of this Act;
            (3) assume financial risk in relation to any such health 
        plan; or
            (4) perform other activities identified by the State as 
        being inconsistent with the performance of its duties under 
        this Act.
    (g) Rules of Construction.--
            (1) Establishment not required.--Nothing in this section 
        shall be construed as requiring--
                    (A) that a State organize, operate or otherwise 
                establish a qualified small employer purchasing group, 
                or otherwise require the establishment of purchasing 
                groups; and
                    (B) that there be only one qualified small employer 
                purchasing group established with respect to a 
                community rating area.
            (2) Single organization serving multiple areas and 
        states.--Nothing in this section shall be construed as 
        preventing a single entity from being a qualified small 
        employer purchasing group in more than one community rating 
        area or in more than one State.
            (3) Voluntary participation.--Nothing in this section shall 
        be construed as requiring any individual or small employer to 
        purchase a qualified health insurance plan exclusively through 
        a qualified small employer purchasing group.

SEC. 132. AGREEMENTS WITH SMALL EMPLOYERS.

    (a) In General.--A qualified small employer purchasing group shall 
offer to enter into an agreement under this section with each small 
employer that employs eligible employees in the area served by the 
group.
    (b) Payroll Deduction.--
            (1) In general.--Under an agreement under this section 
        between a small employer and a qualified small employer 
        purchasing group, the small employer shall deduct premiums from 
        an eligible employee's wages.
            (2) Additional premiums.--If the amount withheld under 
        paragraph (1) is not sufficient to cover the entire cost of the 
        premiums, the eligible employee shall be responsible for paying 
        directly to the qualified small employer purchasing group the 
        difference between the amount of such premiums and the amount 
        withheld.

SEC. 133. ENROLLING ELIGIBLE EMPLOYEES, ELIGIBLE INDIVIDUALS, AND 
              CERTAIN UNINSURED INDIVIDUALS IN QUALIFIED HEALTH 
              INSURANCE PLANS.

    (a) In General.--Each qualified small employer purchasing group 
shall offer--
            (1) eligible employees,
            (2) eligible individuals, and
            (3) certain uninsured individuals,
the opportunity to enroll in any qualified health insurance plan which 
has an agreement with the qualified small employer purchasing group for 
the community rating area in which such employees and individuals 
reside.
    (b) Uninsured individuals.--For purposes of this section, an 
individual is described in subsection (a)(3) if such individual is an 
uninsured individual who is not an eligible employee of a small 
employer that is a member of a qualified small employer purchasing 
group or a dependent of such individual.

SEC. 134. RECEIPT OF PREMIUMS.

    (a) Enrollment Charge.--The amount charged by a qualified small 
employer purchasing group for coverage under a qualified health 
insurance plan shall be equal to the sum of--
            (1) the premium rate offered by such health plan;
            (2) the administrative charge for such health plan; and
            (3) the purchasing group administrative charge for 
        enrollment of eligible employees, eligible individuals and 
        certain uninsured individuals through the group.
    (b) Disclosure of Premium Rates and Administrative Charges.--Each 
qualified small employer purchasing group shall, prior to the time of 
enrollment, disclose to enrollees and other interested parties the 
premium rate for a qualified health insurance plan, the administrative 
charge for such plan, and the administrative charge of the group, 
separately.

SEC. 135. MARKETING ACTIVITIES.

    Each qualified small employer purchasing group shall market 
qualified health insurance plans to members through the entire 
community rating area served by the purchasing group.

SEC. 136. GRANTS TO STATES AND QUALIFIED SMALL EMPLOYER PURCHASING 
              GROUPS.

    (a) In General.--The Secretary shall award grants to States and 
small employer purchasing groups to assist such States and groups in 
planning, developing, and operating qualified small employer purchasing 
groups.
    (b) Application Requirements.--To be eligible to receive a grant 
under this section, a State or small employer purchasing group shall 
prepare and submit to the Secretary an application in such form, at 
such time, and containing such information, certifications, and 
assurances as the Secretary shall reasonably require.
    (c) Use of Funds.--Amounts awarded under this section may be used 
to finance the costs associated with planning, developing, and 
operating a qualified small employer purchasing group. Such costs may 
include the costs associated with--
            (1) engaging in education and outreach efforts to inform 
        small employers, insurers, and the public about the small 
        employer purchasing group;
            (2) soliciting bids and negotiating with insurers to make 
        available health care benefit plans;
            (3) preparing the documentation required to receive 
        certification by the Secretary as a qualified small employer 
        purchasing group; and
            (4) such other activities determined appropriate by the 
        Secretary.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated for awarding grants under this subsection such sums as may 
be necessary.

SEC. 137. QUALIFIED SMALL EMPLOYER PURCHASING GROUPS ESTABLISHED BY A 
              STATE.

    A State may establish a system in all or part of the State under 
which qualified small employer purchasing groups are the sole mechanism 
through which health care coverage for the eligible employees of small 
employers shall be purchased or provided.

       PART 2--STANDARDS APPLICABLE TO ALL HEALTH INSURANCE PLANS

SEC. 141. COVERAGE REQUIREMENTS.

    (a) General Rule.--Any insurer offering a health insurance plan 
shall meet the coverage requirements of subsection (b).
    (b) Coverage Requirements.--
            (1) In general.--The requirements of this subsection are 
        met with respect to any health insurance plan if, under the 
        terms and operation of the plan, the following requirements are 
        met:
                    (A) Guaranteed eligibility.--No individual (and any 
                dependent of the individual eligible for coverage) may 
                be denied, limited, conditioned, or excluded from 
                coverage under (or benefits of) the plan for any 
                reason, including health status, medical condition, 
                claims experience, receipt of health care, medical 
                history, anticipated need for health care expenses, 
                disability, or lack of evidence of insurability, of the 
                individual.
                    (B) Limitations on coverage of preexisting 
                conditions.--Any limitation under the plan on any 
                preexisting condition--
                            (i) may not extend beyond the 6-month 
                        period beginning with the date an insured is 
                        first covered by the plan;
                            (ii) may only apply to preexisting 
                        conditions which manifested themselves, or for 
                        which medical care or advice was sought or 
                        recommended, during the 3-month period 
                        preceding the date an insured is first covered 
                        by the plan;
                            (iii) may not extend to an individual who, 
                        as of the date of birth, was covered under the 
                        plan; and
                            (iv) may not relate to pregnancy.
                    (C) Guaranteed renewability.--
                            (i) In general.--The plan must be renewed 
                        at the election of the insured unless the plan 
                        is terminated for cause.
                            (ii) Cause.--For purposes of this 
                        subparagraph, the term ``cause'' means--
                                    (I) nonpayment of the required 
                                premiums;
                                    (II) fraud or misrepresentation of 
                                the insured or their representatives;
                                    (III) noncompliance with the plan's 
                                minimum participation requirements;
                                    (IV) noncompliance with the plan's 
                                employer contribution requirements; or
                                    (V) repeated misuse of a provider 
                                network provision in the plan.
            (2) Waiting periods.--Paragraph (1)(A) shall not apply to 
        any period an employee is excluded from coverage under the plan 
        solely by reason of a requirement applicable to all employees 
        that a minimum period of service with the employer is required 
        before the employee is eligible for such coverage.
            (3) Determination of periods for rules relating to 
        preexisting conditions.--For purposes of paragraph (1)(B), the 
        date on which an insured is first covered by a plan shall be 
        the earlier of--
                    (A) the date on which coverage under such plan 
                begins; or
                    (B) the first day of any continuous period--
                            (i) during which the insured was covered 
                        under one or more other health insurance 
                        arrangements; and
                            (ii) in the case of an employee, which does 
                        not end more than 120 days before the date 
                        employment with the employer begins.
            (4) Cessation of business.--
                    (A) In general.--Except as otherwise provided in 
                this paragraph, an insurer shall not be treated as 
                failing to meet the requirements of paragraph (1)(C) if 
                such insurer terminates the class of business which 
                includes the health insurance plan.
                    (B) Notice requirement.--Subparagraph (A) shall 
                apply only if the insurer gives notice of the decision 
                to terminate at least 90 days before the expiration of 
                the plan.
                    (C) 5-year moratorium.--If, within 5 years of the 
                year in which an insurer terminates a class of business 
                under subparagraph (A), such insurer establishes a new 
                class of business, the issuance of plans in that year 
                shall be treated as a failure to which this section 
                applies.
                    (D) Transfers.--If, upon a failure to renew a plan 
                to which subparagraph (A) applies, an insurer offers to 
                transfer such plan to another class of business, such 
                transfer must be made without regard to risk 
                characteristics.
            (5) Class of business.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the term ``class of business'' means, with respect 
                to health care insurance provided to persons, all 
                health care insurance provided to such persons.
                    (B) Establishment of groupings.--
                            (i) In general.--An issuer may establish 
                        separate classes of business with respect to 
                        health care insurance provided to all persons 
                        but only if such classes are based on one or 
                        more of the following:
                                    (I) Business marketed and sold 
                                through insurers not participating in 
                                the marketing and sale of such 
                                insurance to other persons.
                                    (II) Business acquired from other 
                                insurers as a distinct grouping.
                                    (III) Business provided through an 
                                association of not less than 20 small 
                                employers which was established for 
                                purposes other than obtaining 
                                insurance.
                                    (IV) Business related to managed 
                                care plans.
                                    (V) Any other business which the 
                                Secretary determines needs to be 
                                separately grouped to prevent a 
                                substantial threat to the solvency of 
                                the insurer.
                            (ii) Exception allowed.--Except as provided 
                        in subparagraph (C), an insurer may not 
                        establish more than one distinct group of 
                        persons for each category specified in clause 
                        (i).
                    (C) Special rule.--An insurer may establish up to 2 
                groups under each category in subparagraph (A) or (B) 
                to account for differences in characteristics (other 
                than differences in plan benefits) of health insurance 
                plans that are expected to produce substantial 
                variation in health care costs.

      PART 3--ENFORCEMENT OF STANDARDS FOR HEALTH INSURANCE PLANS

SEC. 151. ENFORCEMENT BY EXCISE TAX ON INSURERS.

    (a) In General.--Chapter 43 of the Internal Revenue Code of 1986 
(relating to qualified pension, etc., plans) is amended by adding at 
the end the following new section:

``SEC. 4980C. FAILURE OF INSURER TO COMPLY WITH CERTAIN STANDARDS FOR 
              HEALTH INSURANCE PLANS.

    ``(a) Imposition of Tax.--
            ``(1) In general.--There is hereby imposed a tax on the 
        failure of an insurer to comply with the requirements 
        applicable to such insurer under parts 1 and 2 of subtitle B of 
        title I of the Health Care Assurance Act of 1995.
            ``(2) Exception.--Paragraph (1) shall not apply to a 
        failure by an insurer in a State if the Secretary of Health and 
        Human Services determines that the State has in effect a 
        regulatory enforcement mechanism that provides adequate 
        sanctions with respect to such a failure by such an insurer.
    ``(b) Amount of Tax.--
            ``(1)  In general.--Subject to paragraph (2), the amount of 
        the tax imposed by subsection (a) shall be $100 for each day 
        during which such failure persists for each person to which 
        such failure relates. A rule similar to the rule of section 
        4980B(b)(3) shall apply for purposes of this section.
            ``(2) Limitation.--The amount of the tax imposed by 
        subsection (a) for an insurer with respect to a health 
        insurance plan shall not exceed 25 percent of the amounts 
        received under the plan for coverage during the period such 
        failure persists.
    ``(c) Liability for Tax.--The tax imposed by this section shall be 
paid by the insurer.
    ``(d) Limitations on Amount of Tax.--
            ``(1) Tax not to apply to failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) on any failure 
        if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected during the 30-day 
                period (or such period as the Secretary may determine 
                appropriate) beginning on the first date the insurer 
                knows, or exercising reasonable diligence could have 
                known, that such failure existed.
            ``(2) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.
    ``(e) Definitions.--For purposes of this section, the terms `health 
insurance plan' and `insurer' have the meanings given such terms in 
section 100 of the Health Care Assurance Act of 1995.''.
    (b) Clerical Amendment.--The table of sections for such chapter 43 
is amended by adding at the end the following new item:

                              ``Sec. 4980C. Failure of insurer to 
                                        comply with certain standards 
                                        for health insurance plans.''.

                        PART 4--EFFECTIVE DATES

SEC. 161. EFFECTIVE DATES.

    (a) In General.--Except as provided in this subtitle, the 
provisions of this subtitle are effective on the date of the enactment 
of this Act.
    (b) Exception.--The provisions of section 121(b) shall apply to 
contracts which are issued, or renewed, after the date which is 18 
months after the date of the enactment of this Act.

   Subtitle C--Required Coverage Options for Eligible Employees and 
                     Dependents of Small Employers

SEC. 171. REQUIRING SMALL EMPLOYERS TO OFFER COVERAGE FOR ELIGIBLE 
              INDIVIDUALS.

    (a) Requirement To Offer.--Each small employer shall make available 
with respect to each eligible employee a group health plan under 
which--
            (1) coverage of each eligible individual with respect to 
        such an eligible employee may be elected on an annual basis for 
        each plan year;
            (2) coverage is provided for at least the standard coverage 
        specified in section 112(b); and
            (3) each eligible employee electing such coverage may elect 
        to have any premiums owed by the employee collected through 
        payroll deduction.
    (b) No Employer Contribution Required.--An employer is not required 
under subsection (a) to make any contribution to the cost of coverage 
under a group health plan described in such subsection.
    (c) Special Rules.--
            (1) Exclusion of new employers and certain very small 
        employers.--Subsection (a) shall not apply to any small 
        employer for any plan year if, as of the beginning of such plan 
        year--
                    (A) such employer (including any predecessor 
                thereof) has been an employer for less than 2 years;
                    (B) such employer has no more than 2 eligible 
                employees; or
                    (C) no more than 2 eligible employees are not 
                covered under any group health plan.
            (2) Exclusion of family members.--Under such procedures as 
        the Secretary may prescribe, any relative of a small employer 
        may be, at the election of the employer, excluded from 
        consideration as an eligible employee for purposes of applying 
        the requirements of subsection (a). In the case of a small 
        employer that is not an individual, an employee who is a 
        relative of a key employee (as defined in section 416(i)(1) of 
        the Internal Revenue Code of 1986) of the employer may, at the 
        election of the key employee, be considered a relative 
        excludable under this paragraph.
            (3) Optional application of waiting period.--A group health 
        plan shall not be treated as failing to meet the requirements 
        of subsection (a) solely because a period of service by an 
        eligible employee of not more than 60 days is required under 
        the plan for coverage under the plan of eligible individuals 
        with respect to such employee.
    (d) Construction.--Nothing in this section shall be construed as 
limiting the group health plans, or types of coverage under such a 
plan, that an employer may offer to an employee.

SEC. 172. COMPLIANCE WITH APPLICABLE REQUIREMENTS THROUGH MULTIPLE 
              EMPLOYER HEALTH ARRANGEMENTS.

    (a) In General.--In any case in which an eligible employee is, for 
any plan year, a participant in a group health plan which is a 
multiemployer plan, the requirements of section 171(a) shall be deemed 
to be met with respect to such employee for such plan year if the 
employer requirements of subsection (b) are met with respect to the 
eligible employee, irrespective of whether, or to what extent, the 
employer makes employer contributions on behalf of the eligible 
employee.
    (b) Employer Requirements.--The employer requirements of this 
subsection are met under a plan with respect to an eligible employee 
if--
            (1) the employee is eligible under the plan to elect 
        coverage on an annual basis and is provided a reasonable 
        opportunity to make the election in such form and manner and at 
        such times as are provided by the plan;
            (2) coverage is provided for at least the standard coverage 
        specified in section 112(b);
            (3) the employer facilitates collection of any employee 
        contributions under the plan and permits the employee to elect 
        to have employee contributions under the plan collected through 
        payroll deduction; and
            (4) in the case of a plan to which part 1 of subtitle B of 
        title I of the Employee Retirement Income Security Act of 1974 
        does not otherwise apply, the employer provides to the employee 
        a summary plan description described in section 102(a)(1) of 
        such Act in the form and manner and at such times as are 
        required under such part 1 with respect to employee welfare 
        benefit plans.

SEC. 173. ENFORCEMENT BY EXCISE TAX ON SMALL EMPLOYERS.

    (a) In General.--Chapter 47 of the Internal Revenue Code of 1986 
(relating to excise taxes on certain group health plans) is amended by 
inserting after section 5000 the following new section:

``SEC. 5000A. SMALL EMPLOYER REQUIREMENTS.

    ``(a) General Rule.--There is hereby imposed a tax on the failure 
of any small employer to comply with the requirements of subtitle C of 
title I of the Health Care Assurance Act of 1995.
    ``(b) Amount of Tax.--The amount of tax imposed by subsection (a) 
shall be equal to $100 for each day for each individual for which such 
a failure occurs.
    ``(c) Limitation on Tax.--
            ``(1) Tax not to apply where failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) with respect 
        to any failure if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected during the 30-day 
                period (or such period as the Secretary may determine 
                appropriate) beginning on the 1st date any of the 
                individuals on whom the tax is imposed knew, or 
                exercising reasonable diligence would have known, that 
                such failure existed.
            ``(2) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.''.
    (b) Clerical Amendment.--The table of sections for such chapter 47 
is amended by adding at the end the following new item:

                              ``Sec. 5000A. Small employer 
                                        requirements.''.

 Subtitle D--Required Coverage Options for Individuals Insured Through 
                           Association Plans

                  PART 1--QUALIFIED ASSOCIATION PLANS

SEC. 181. TREATMENT OF QUALIFIED ASSOCIATION PLANS.

    (a) General Rule.--For purposes of this subtitle, in the case of a 
qualified association plan--
            (1) except as otherwise provided in this part, the plan 
        shall meet all applicable requirements of subpart A of part 1 
        and part 2 of subtitle B and subtitle C for group health plans 
        offered to and by small employers;
            (2) if such plan is certified as meeting such requirements 
        and the requirements of this part, such plan shall be treated 
        as a plan established and maintained by a small employer, and 
        individuals enrolled in such plan shall be treated as eligible 
        employees; and
            (3) any individual who is a member of the association not 
        enrolling in the plan shall not be treated as an eligible 
employee solely by reason of membership in such association.
    (b) Election To Be Treated as Purchasing Cooperative.--Subsection 
(a) shall not apply to a qualified association plan if--
            (1) the health plan sponsor makes an irrevocable election 
        to be treated as a qualified small employer purchasing group 
        for purposes of subpart C of subtitle B; and
            (2) such sponsor meets all requirements of this title 
        applicable to a purchasing cooperative.

SEC. 182. QUALIFIED ASSOCIATION PLAN DEFINED.

    (a) General Rule.--For purposes of this part, a plan is a qualified 
association plan if the plan is a multiple employer welfare arrangement 
or similar arrangement--
            (1) which is maintained by a qualified association;
            (2) which has at least 500 participants in the United 
        States;
            (3) under which the benefits provided consist solely of 
        medical care (as defined in section 213(d) of the Internal 
        Revenue Code of 1986);
            (4) which may not condition participation in the plan, or 
        terminate coverage under the plan, on the basis of the health 
        status or health claims experience of any employee or member or 
        dependent of either;
            (5) which provides for bonding, in accordance with 
        regulations providing rules similar to the rules under section 
        412 of the Employee Retirement Income Security Act of 1974, of 
        all persons operating or administering the plan or involved in 
        the financial affairs of the plan; and
            (6) which notifies each participant or provider that it is 
        certified as meeting the requirements of this subtitle 
        applicable to it.
    (b) Self-Insured Plans.--In the case of a plan which is not fully 
insured (within the meaning of section 514(b)(6)(D) of the Employee 
Retirement Income Security Act of 1974), the plan shall be treated as a 
qualified association plan only if--
            (1) the plan meets minimum financial solvency and cash 
        reserve requirements for claims which are established by the 
        Secretary of Labor and which shall be in lieu of any other such 
        requirements under this subtitle;
            (2) the plan provides an annual funding report (certified 
        by an independent actuary) and annual financial statements to 
        the Secretary of Labor and other interested parties; and
            (3) the plan appoints a plan sponsor who is responsible for 
        operating the plan and ensuring compliance with applicable 
        Federal and State laws.
    (c) Certification.--
            (1) In general.--A plan shall not be treated as a qualified 
        association plan for any period unless there is in effect a 
        certification by the Secretary of Labor that the plan meets the 
        requirements of this part. For purposes of this subtitle, the 
        Secretary of Labor shall be the appropriate certifying 
        authority with respect to the plan.
            (2) Fee.--The Secretary of Labor shall require a $5,000 fee 
        for the original certification under paragraph (1) and may 
        charge a reasonable annual fee to cover the costs of processing 
        and reviewing the annual statements of the plan.
            (3) Expedited procedures.--The Secretary of Labor may by 
        regulation provide for expedited registration, certification, 
        and comment procedures.
            (4) Agreements.--The Secretary of Labor may enter into 
        agreements with the States to carry out the Secretary's 
        responsibilities under this part.
    (d) Availability.--Notwithstanding any other provision of this 
subtitle, a qualified association plan may limit coverage to 
individuals who are members of the qualified association establishing 
or maintaining the plan, an employee of such member, or a dependent of 
either.
    (e) Special Rules for Existing Plans.--In the case of a plan in 
existence on January 1, 1995--
            (1) the requirements of subsection (a) (other than 
        paragraph (4), (5), and (6) thereof) shall not apply;
            (2) no original certification shall be required under this 
        part; and
            (3) no annual report or funding statement shall be required 
        before January 1, 1997, but the plan shall file with the 
        Secretary of Labor a description of the plan and the name of 
        the plan sponsor.

SEC. 183. DEFINITIONS AND SPECIAL RULES.

    (a) Qualified Association.--For purposes of this part, the term 
``qualified association'' means any organization which--
            (1) is organized and maintained in good faith by a trade 
        association, an industry association, a professional 
        association, a chamber of commerce, a religious organization, a 
        public entity association, or other business association 
        serving a common or similar industry;
            (2) is organized and maintained for substantial purposes 
        other than to provide a health plan;
            (3) has a constitution, bylaws, or other similar governing 
        document which states its purpose; and
            (4) receives a substantial portion of its financial support 
        from its active, affiliated, or federation members.
    (b) Multiple Employer Welfare Arrangement.--For purposes of this 
subchapter, the term ``multiple employer welfare arrangement'' has the 
meaning given such term by section 3(40) of the Employee Retirement 
Income Security Act of 1974.
    (c) Coordination With Part 2.--The term ``qualified association 
plan'' shall not include a plan to which part 2 applies.

 PART 2--SPECIAL RULE FOR CHURCH, MULTIEMPLOYER, AND COOPERATIVE PLANS

SEC. 191. SPECIAL RULE FOR CHURCH, MULTIEMPLOYER, AND COOPERATIVE 
              PLANS.

    (a) General Rule.--For purposes of this subtitle, in the case of a 
group health plan to which this section applies--
            (1) except as otherwise provided in this part, the plan 
        shall be required to meet all applicable requirements of 
        subpart A of part 1 and part 2 of subtitle B and subtitle C for 
        group health plans offered to and by small employers;
            (2) if such plan is certified as meeting such requirements, 
        such plan shall be treated as a plan established and maintained 
        by a small employer and individuals enrolled in such plan shall 
        be treated as eligible employees; and
            (3) any individual eligible to enroll in the plan who does 
        not enroll in the plan shall not be treated as an eligible 
        employee solely by reason of being eligible to enroll in the 
        plan.
    (b) Modified Standards.--
            (1) Certifying authority.--For purposes of this subtitle, 
        the Secretary of Labor shall be the appropriate certifying 
        authority with respect to a plan to which this section applies.
            (2) Availability.--Rules similar to the rules of subsection 
        (e) of section 182 shall apply to a plan to which this section 
        applies.
            (3) Access.--An employer which, pursuant to a collective 
        bargaining agreement, offers an employee the opportunity to 
        enroll in a plan described in subsection (c)(2) shall not be 
        required to make any other plan available to the employee.
            (4) Treatment under state laws.--A church plan described in 
        subsection (c)(1) which is certified as meeting the 
        requirements of this section shall not be deemed to be a 
        multiple employer welfare arrangement or an insurance company 
        or other insurer, or to be engaged in the business of 
        insurance, for purposes of any State law purporting to regulate 
        insurance companies or insurance contracts.
    (c) Plans to Which Section Applies.--This section shall apply to a 
health plan which--
            (1) is a church plan (as defined in section 414(e) of the 
        Internal Revenue Code of 1986) which has at least 100 
        participants in the United States;
            (2) is a multiemployer plan (as defined in section 3(37) of 
        the Employee Retirement Income Security Act of 1974) which is 
        maintained by a health plan sponsor described in section 
        3(16)(B)(iii) of such Act and which has at least 500 
        participants in the United States; or
            (3) is a plan which is maintained by a rural electric 
        cooperative or a rural telephone cooperative association 
        (within the meaning of section 3(40) of such Act) and which has 
        at least 500 participants in the United States.

                          PART 3--ENFORCEMENT

SEC. 1001. ENFORCEMENT BY EXCISE TAX ON QUALIFIED ASSOCIATIONS.

    (a) In General.--Chapter 43 of the Internal Revenue Code of 1986 
(relating to qualified pension, etc., plans), as amended by section 
151, is amended by adding at the end the following new section:

``SEC. 4980D. FAILURE OF QUALIFIED ASSOCIATIONS, ETC., TO COMPLY WITH 
              CERTAIN STANDARDS FOR HEALTH INSURANCE PLANS.

    ``(a) Imposition of Tax.--
            ``(1) In general.--There is hereby imposed a tax on the 
        failure of a qualified association (as defined in section 183 
        of the Health Care Assurance Act of 1995), church plan (as 
        defined in section 414(e) of the Internal Revenue Code of 
        1986), multiemployer plan (as defined in section 3(37) of the 
        Employee Retirement Income Security Act of 1974), or plan 
        maintained by a rural electric cooperative or a rural telephone 
        cooperative association (within the meaning of section 3(40) of 
        such Act) to comply with the requirements applicable to such 
        association or plans under parts 1 and 2 of subtitle D of title 
        I of the Health Care Assurance Act of 1995.
            ``(2) Exception.--Paragraph (1) shall not apply to a 
        failure by a qualified association, church plan, multiemployer 
        plan, or plan maintained by a rural electric cooperative or a 
        rural telephone cooperative association in a State if the 
        Secretary of Health and Human Services determines that the 
        State has in effect a regulatory enforcement mechanism that 
        provides adequate sanctions with respect to such a failure by 
        such a qualified association or plan.
    ``(b) Amount of Tax.--The amount of the tax imposed by subsection 
(a) shall be $100 for each day during which such failure persists for 
each person to which such failure relates. A rule similar to the rule 
of section 4980B(b)(3) shall apply for purposes of this section.
    ``(c) Liability for Tax.--The tax imposed by this section shall be 
paid by the qualified association or plan.
    ``(d) Limitations on Amount of Tax.--
            ``(1) Tax not to apply to failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) on any failure 
        if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected during the 30-day 
                period (or such period as the Secretary may determine 
                appropriate) beginning on the first date the qualified 
                association, church plan, multiemployer plan, or plan 
                maintained by a rural electric cooperative or a rural 
                telephone cooperative association knows, or exercising 
                reasonable diligence could have known, that such 
                failure existed.
            ``(2) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.''.
    (b) Clerical Amendment.--The table of sections for such chapter 43, 
as amended by section 151, is amended by adding at the end the 
following new item:

                              ``Sec. 4980D. Failure of qualified 
                                        associations, etc., to comply 
                                        with certain standards for 
                                        health insurance plans.''.

            Subtitle E--1-Year Extension of Medicare Select

SEC. 1011. 1-YEAR EXTENSION OF PERIOD FOR ISSUANCE OF MEDICARE SELECT 
              POLICIES.

    (a) In General.--Section 4358(c) of the Omnibus Budget 
Reconciliation Act of 1990 (42 U.S.C. 1320c-3 note) is amended by 
striking ``3\1/2\-year'' and inserting ``4\1/2\-year''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect as if included in the enactment of the Omnibus Budget 
Reconciliation Act of 1990.

                       Subtitle F--Tax Provisions

SEC. 1021. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED 
              INDIVIDUALS.

    (a) Phase-in Deduction.--Section 162(l) of the Internal Revenue 
Code of 1986 (relating to special rules for health insurance costs of 
self-employed individuals) is amended--
            (1) by striking paragraph (6); and
            (2) by striking paragraph (1) and inserting the following:
            ``(1) Allowance of deduction.--
                    ``(A) In general.--In the case of an individual who 
                is an employee within the meaning of section 401(c)(1), 
                there shall be allowed as a deduction under this 
                section an amount equal to the applicable percentage of 
                the amount paid during the taxable year for insurance 
                which constitutes medical care for the taxpayer, his 
                spouse, and dependents.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage shall be 
                determined as follows:

                    ``If the taxable year
                                                         The applicable
                      begins in:
                                                         percentage is:
                          1994 or 1995...............        25 percent
                          1996 or 1997...............        50 percent
                          1998 or 1999...............        75 percent
                          2000 or thereafter.........      100 percent.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

SEC. 1022. AMENDMENTS TO COBRA.

    (a) Lower Cost Coverage Options.--Subparagraph (A) of section 
4980B(f)(2) of the Internal Revenue Code of 1986 (relating to 
continuation coverage requirements of group health plans) is amended to 
read as follows:
                    ``(A) Type of benefit coverage.--The coverage must 
                consist of coverage which, as of the time the coverage 
                is being provided--
                            ``(i) is identical to the coverage provided 
                        under the plan to similarly situated 
                        beneficiaries under the plan with respect to 
                        whom a qualifying event has not occurred,
                            ``(ii) is so identical, except such 
                        coverage is offered with an annual $1,000 
                        deductible, and
                            ``(iii) is so identical, except such 
                        coverage is offered with an annual $3,000 
                        deductible.
                If coverage under the plan is modified for any group of 
                similarly situated beneficiaries, the coverage shall 
                also be modified in the same manner for all individuals 
                who are qualified beneficiaries under the plan pursuant 
                to this subsection in connection with such group.''.
    (b) Termination of COBRA Coverage After Eligible for Employer-Based 
Coverage for 90 Days.--Clause (iv) of section 4980B(f)(2)(B) of such 
Code (relating to period of coverage) is amended--
            (1) by striking ``or'' at the end of subclause (I),
            (2) by redesignating subclause (II) as subclause (III), and
            (3) by inserting after subclause (I) the following new 
        subclause:
                                    ``(II) eligible for such employer-
                                based coverage for more than 90 days, 
                                or''.
    (c) Reduction of Period of Coverage.--Clause (i) of section 
4980B(f)(2)(B) of such Code (relating to period of coverage) is amended 
by striking ``18 months'' each place it appears and inserting ``24 
months''.
    (d) Effective Date.--The amendments made by this section shall 
apply to qualifying events occurring after the date of the enactment of 
this Act.

             TITLE II--PRIMARY AND PREVENTIVE CARE SERVICES

SEC. 201. GRANTS TO STATES FOR HEALTHY START INITIATIVES.

    (a) In General.--The Secretary shall make grants to States with 
applications approved under this section in order to significantly 
reduce infant mortality and low birth weight births and improve the 
health and well-being of pregnant women, mothers, infants, and their 
families over a 5-year period through accelerated implementation of 
innovative strategies.
    (b) Projects Described.--
            (1) In general.--In order to achieve the purposes described 
        in subsection (a), grant funds under this section shall be used 
        to conduct projects in eligible project areas (as defined in 
        paragraph (3)). A project under this section shall be conducted 
        by a community-based consortium (as defined in paragraph (4)) 
        located in such eligible project area.
            (2) Certain activities.--A community-based consortium 
        conducting a project under this section shall--
                    (A) have the ability to maximize and coordinate 
                existing Federal, State, and local resources and 
                acquire additional resources;
                    (B) ensure substantial involvement in State and 
                local maternal and child health agencies and other 
                agencies;
                    (C) have a demonstrated ability to effectively 
                manage the project's fiscal resources;
                    (D) have the leadership capability to achieve the 
                project goals and objectives; and
                    (E) target communities in which problems are most 
                severe, resources can be concentrated, implementation 
                is manageable, and progress can be measured.
            (3) Eligible project area.--The term ``eligible project 
        area'' means an area which is composed of one or more 
        contiguous or noncontiguous geographic areas which have--
                    (A) an average annual infant mortality rate of 150 
                percent of the State's average annual infant mortality 
                rate based upon an average of the most recently 
                available official vital statistics data for the 
                previous 5-year period; and
                    (B) at least 50 infant deaths per year, but not 
                more than 200 infant deaths per year.
            (4) Community-based consortium.--The term ``community-based 
        consortium'' means a group of project area providers and 
consumers, including public health departments, community and migrant 
health centers, hospitals, local professional associations, medical 
schools, grant-making foundations, civic groups, schools, churches, 
social and fraternal organizations, and residents of areas to be 
served.
            (5) Duration.--A project receiving funds under this section 
        shall operate for no more than 5 years.
    (c) Application.--
            (1) In general.--To be eligible to receive a grant under 
        this section a State shall prepare and submit to the Secretary 
        for approval an application at such time, in such manner, and 
        containing such information, as the Secretary may require, 
        including a description of the use to which the State will 
        apply any amounts received under the grant and the information 
        required under paragraph (3). A State may submit only one 
        application under this subsection.
            (2) Applications on behalf of consortia.--Applications for 
        grant funds shall be submitted under paragraph (1) on behalf of 
        a community-based consortium located in an eligible project 
        area. Such applications shall be approved by the highest 
        elected official of the city or county in which the consortium 
        is based.
            (3) Information required.--The information required is a 
        detailed description of the following:
                    (A) The extent to which the State has justified and 
                documented the need for the project to be funded by the 
                grant and developed measurable goals and objectives for 
                meeting the need.
                    (B) The level of community commitment and 
                involvement with the project.
                    (C) The extent to which the community-based 
                consortium operating in the project area has 
                demonstrated plans for coordinating and maximizing 
                existing and proposed Federal, State, and local and 
                private resources.
                    (D) The extent of the involvement of State and 
                local providers of primary care and public health 
                services in the project.
                    (E) The State's approach to planning for a public 
                education campaign to address the maintenance of early 
                and continuous prenatal care and of preventive health 
                practices during pregnancy and infancy.
                    (F) Other factors which the Secretary determines 
                will increase the potential of projects to reduce by 50 
                percent the rate of infant mortality.
    (d) Funding.--
            (1) Authorization of appropriations.--For the purposes of 
        carrying out this section, there are authorized to be 
        appropriated $150,000,000 for fiscal year 1996, $250,000,000 
        for fiscal year 1997, and $300,000,000 for fiscal years 1998 
        through 2001.
            (2) Distribution of funds.--
                    (A) In general.--For a fiscal year, each State 
                shall be allocated an amount equal to the applicable 
                percentage determined under subparagraph (B) of the 
                total amount available under this section for all 
                States.
                    (B) Applicable percentage.--The applicable 
                percentage for a State for a fiscal year is the amount 
                (expressed as a percentage) equal to--
                            (i) the amount available to the State in 
                        the preceding fiscal year under title V of the 
                        Social Security Act; divided by
                            (ii) the total amount available to all 
                        States in the preceding fiscal year under such 
                        title.

SEC. 202. REAUTHORIZATION OF CERTAIN PROGRAMS PROVIDING PRIMARY AND 
              PREVENTIVE CARE.

    (a) Immunization Programs.--Section 317(j)(1)(A) of the Public 
Health Service Act (42 U.S.C. 247b(j)(1)(A)) is amended--
            (1) by striking ``and such sums'' and inserting ``such 
        sums''; and
            (2) by striking ``each of the fiscal years 1992 through 
        1995'' and inserting ``each of the fiscal years 1992 through 
        1995, $600,000,000 for fiscal years 1996 and 1997, and such 
        sums as may be necessary for each of the fiscal years 1998 
        through 2000''.
    (b) Tuberculosis Prevention Grants.--Section 317(j)(2) of the 
Public Health Service Act (42 U.S.C. 247b(j)(2)) is amended--
            (1) by striking ``and such sums'' and inserting ``such 
        sums''; and
            (2) by striking ``each of the fiscal years 1992 through 
        1995'' and inserting ``each of the fiscal years 1992 through 
        1995, $150,000,000 for fiscal year 1996, and such sums as may 
        be necessary for each of the fiscal years 1997 through 1999''.
    (c) Sexually Transmitted Diseases.--Section 318(d)(1) of the Public 
Health Service Act (42 U.S.C. 247c(d)(1)) is amended--
            (1) by striking ``and such sums'' and inserting ``such 
        sums''; and
            (2) by inserting before the first period the following: 
        ``$125,000,000 for fiscal years 1996 and 1997, and such sums as 
        may be necessary for each of the fiscal years 1998 through 
        2000''.
    (d) Migrant Health Centers.--Section 329(h)(1)(A) of the Public 
Health Service Act (42 U.S.C. 254b(h)(1)(A)) is amended by striking 
``and 1991, and such sums as may be necessary for each of the fiscal 
years 1992 through 1994'' and inserting ``through 1995, $80,000,000 for 
fiscal year 1996, and such sums as may be necessary for each of the 
fiscal years 1997 through 1999''.
    (e) Community Health Centers.--Section 330(g)(1)(A) of the Public 
Health Service Act (42 U.S.C. 254c(g)(1)(A)) is amended by striking 
``and 1991, and such sums as may be necessary for each of the fiscal 
years 1992 through 1994'' and inserting ``through 1995, $700,000,000 
for fiscal year 1996, and such sums as may be necessary for each of the 
fiscal years 1997 through 1999''.
    (f) Health Care Services for the Homeless.--Section 340(q)(1) of 
the Public Health Service Act (42 U.S.C. 256(q)(1)) is amended--
            (1) by striking ``and such'' and inserting ``such''; and
            (2) by striking ``and 1994.'' and inserting ``through 1995, 
        $90,000,000 for fiscal years 1996 and 1997, and such sums as 
        may be necessary for each of the fiscal years 1998 through 
        2000.''.
    (g) Family Planning Project Grants.--Section 1001(d) of the Public 
Health Service Act (42 U.S.C. 300(d)) is amended--
            (1) by striking ``and $158,400,000'' and inserting 
        ``$158,400,000''; and
            (2) by inserting before the period the following: ``; 
        $200,000,000 for fiscal year 1996, and such sums as may be 
        necessary for each of the fiscal years 1997 through 1999''.
    (h) Breast and Cervical Cancer Prevention.--Section 1509(a) of the 
Public Health Service Act (42 U.S.C. 300n-5(a)) is amended--
            (1) by striking ``and such sums'' and inserting ``such 
        sums''; and
            (2) by striking ``for each of the fiscal years 1992 and 
        1993'' and inserting ``for each of the fiscal years 1992 
        through 1995, $100,000,000 for fiscal year 1996, and such sums 
        as may be necessary for each of the fiscal years 1997 through 
        1999''.
    (i) Preventive Health and Health Services Block Grant.--Section 
1901(a) of the Public Health Service Act (42 U.S.C. 300w(a)) is amended 
by striking ``$205,000,000'' and inserting ``$235,000,000''.
    (j) HIV Early Intervention.--Section 2655 of the Public Health 
Service Act (42 U.S.C. 300ff-55) is amended--
            (1) by striking ``and such sums'' and inserting ``such 
        sums''; and
            (2) by inserting before the period ``, $650,000,000 for 
        fiscal year 1996, and such sums as may be necessary for each of 
        the fiscal years 1997 through 1999''.
    (k) Maternal and Child Health Services Block Grant.--Section 501(a) 
of the Social Security Act (42 U.S.C. 701(a)) is amended by striking 
``$705,000,000 for fiscal year 1994 and each fiscal year thereafter'' 
and inserting ``$705,000,000 for fiscal years 1994 and 1995, 
$800,000,000 for fiscal year 1996, and such sums as may be necessary in 
each of the fiscal years 1997 through 1999''.

SEC. 203. COMPREHENSIVE SCHOOL HEALTH EDUCATION PROGRAM.

    (a) Purpose.--It is the purpose of this section to establish a 
comprehensive school health education and prevention program for 
elementary and secondary school students.
    (b) Program Authorized.--The Secretary of Education (referred to in 
this section as the ``Secretary''), through the Office of Comprehensive 
School Health Education established in subsection (e), shall award 
grants to States from allotments under subsection (c) to enable such 
States to--
            (1) award grants to local or intermediate educational 
        agencies, and consortia thereof, to enable such agencies or 
        consortia to establish, operate, and improve local programs of 
        comprehensive health education and prevention, early health 
        intervention, and health education, in elementary and secondary 
        schools (including preschool, kindergarten, intermediate, and 
        junior high schools); and
            (2) develop training, technical assistance, and 
        coordination activities for the programs assisted pursuant to 
        paragraph (1).
    (c) Reservations and State Allotments.--
            (1) Reservations.--From the sums appropriated pursuant to 
        the authority of subsection (f) for any fiscal year, the 
        Secretary shall reserve--
                    (A) 1 percent for payments to Guam, American Samoa, 
                the Virgin Islands, the Republic of the Marshall 
                Islands, the Federated States of Micronesia, the 
                Northern Mariana Islands, and the Republic of Palau, to 
                be allotted in accordance with their respective needs; 
                and
                    (B) 1 percent for payments to the Bureau of Indian 
                Affairs.
            (2) State allotments.--From the remainder of the sums not 
        reserved under paragraph (1), the Secretary shall allot to each 
        State an amount which bears the same ratio to the amount of 
        such remainder as the school-age population of the State bears 
        to the school-age population of all States, except that no 
        State shall be allotted less than an amount equal to 0.5 
        percent of such remainder.
            (3) Reallotment.--The Secretary may reallot any amount of 
        any allotment to a State to the extent that the Secretary 
        determines that the State will not be able to obligate such 
        amount within 2 years of allotment. Any such reallotment shall 
        be made on the same basis as an allotment under paragraph (2).
    (d) Use of Funds.--Grant funds provided to local or intermediate 
educational agencies, or consortia thereof, under this section may be 
used to improve elementary and secondary education in the areas of--
            (1) personal health and fitness;
            (2) prevention of chronic diseases;
            (3) prevention and control of communicable diseases;
            (4) nutrition;
            (5) substance use and abuse;
            (6) accident prevention and safety;
            (7) community and environmental health;
            (8) mental and emotional health;
            (9) parenting and the challenges of raising children; and
            (10) the effective use of the health services delivery 
        system.
    (e) Office of Comprehensive School Health Education.--The Secretary 
shall establish within the Office of the Secretary an Office of 
Comprehensive School Health Education which shall have the following 
responsibilities:
            (1) To recommend mechanisms for the coordination of school 
        health education programs conducted by the various departments 
        and agencies of the Federal Government.
            (2) To advise the Secretary on formulation of school health 
        education policy within the Department of Education.
            (3) To disseminate information on the benefits to health 
        education of utilizing a comprehensive health curriculum in 
        schools.
    (f) Authorization of Appropriations.--
            (1) In general.--There are authorized to be appropriated 
        $50,000,000 for fiscal year 1996 and such sums as may be 
        necessary for each of the fiscal years 1997 and 1998 to carry 
        out this section.
            (2) Availability.--Funds appropriated pursuant to the 
        authority of paragraph (1) in any fiscal year shall remain 
        available for obligation and expenditure until the end of the 
        fiscal year succeeding the fiscal year for which such funds 
        were appropriated.

SEC. 204. COMPREHENSIVE EARLY CHILDHOOD HEALTH EDUCATION PROGRAM.

    (a) Purpose.--It is the purpose of this section to establish a 
comprehensive early childhood health education program.
    (b) Program.--The Secretary of Health and Human Services (referred 
to in this section as the ``Secretary'') shall conduct a program of 
awarding grants to agencies conducting Head Start training to enable 
such agencies to provide training and technical assistance to Head 
Start teachers and other child care providers. Such program shall--
            (1) establish a training system through the Head Start 
        agencies and organizations conducting Head Start training for 
        the purpose of enhancing teacher skills and providing 
        comprehensive early childhood health education curriculum;
            (2) enable such agencies and organizations to provide 
        training to day care providers in order to strengthen the 
        skills of the early childhood workforce in providing health 
        education;
            (3) provide technical support for health education programs 
        and curricula; and
            (4) provide cooperation with other early childhood 
        providers to ensure coordination of such programs and the 
        transition of students into the public school environment.
    (c) Use of Funds.--Grant funds under this section may be used to 
provide training and technical assistance in the areas of--
            (1) personal health and fitness;
            (2) prevention of chronic diseases;
            (3) prevention and control of communicable diseases;
            (4) dental health;
            (5) nutrition;
            (6) substance use and abuse;
            (7) accident prevention and safety;
            (8) community and environmental health;
            (9) mental and emotional health; and
            (10) strengthening the role of parent involvement.
    (d) Reservation for Innovative Programs.--The Secretary shall 
reserve 5 percent of the funds appropriated pursuant to the authority 
of subsection (e) in each fiscal year for the development of innovative 
model health education programs or curricula.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated $40,000,000 for fiscal year 1996 and such sums as may be 
necessary for each of the fiscal years 1997 and 1998 to carry out this 
section.

        TITLE III--PATIENT'S RIGHT TO DECLINE MEDICAL TREATMENT

SEC. 301. PATIENT'S RIGHT TO DECLINE MEDICAL TREATMENT.

    (a) Right To Decline Medical Treatment.--
            (1) Rights of competent adults.--
                    (A) In general.--Except as provided in subparagraph 
                (B), a State may not restrict the right of a competent 
                adult to consent to, or to decline, medical treatment.
                    (B) Limitations.--
                            (i) Affect on third parties.--A State may 
                        impose limitations on the right of a competent 
                        adult to decline treatment if such limitations 
                        protect third parties (including minor 
                        children) from harm.
                            (ii) Treatment which is not medically 
                        indicated.--Nothing in this subsection shall be 
                        construed to require that any individual be 
                        offered, or to state that any individual may 
                        demand, medical treatment which the health care 
                        provider does not have available, or which is, 
                        under prevailing medical standards, either 
                        futile or otherwise not medically indicated.
            (2) Rights of incapacitated adults.--
                    (A) In general.--Except as provided in subparagraph 
                (B)(i) of paragraph (1), States may not restrict the 
                right of an incapacitated adult to consent to, or to 
                decline, medical treatment as exercised through the 
                documents specified in this paragraph, or through 
                similar documents or other written methods of directive 
                which evidence the adult's treatment choices.
                    (B) Advance directives and powers of attorney.--
                            (i) In general.--In order to facilitate the 
                        communication, despite incapacity, of an 
                        adult's treatment choices, the Secretary, in 
                        consultation with the Attorney General, shall 
                        develop a national advance directive form 
                        that--
                                    (I) shall not limit or otherwise 
                                restrict, except as provided in 
                                subparagraph (B)(i) of paragraph (1), 
                                an adult's right to consent to, or to 
                                decline, medical treatment; and
                                    (II) shall, at minimum--
                                            (aa) provide the means for 
                                        an adult to declare such 
                                        adult's own treatment choices 
                                        in the event of a terminal 
                                        condition;
                                            (bb) provide the means for 
                                        an adult to declare, at such 
                                        adult's option, treatment 
                                        choices in the event of other 
                                        conditions which are medically 
                                        incurable, and from which such 
                                        adult likely will not recover; 
                                        and
                                            (cc) provide the means by 
                                        which an adult may, at such 
                                        adult's option, declare such 
                                        adult's wishes with respect to 
                                        all forms of medical treatment, 
                                        including forms of medical 
                                        treatment such as the provision 
                                        of nutrition and hydration by 
                                        artificial means which may be, 
                                        in some circumstances, 
                                        relatively nonburden- some.
                            (ii)  National durable power of attorney 
                        form.--The Secretary, in consultation with the 
                        Attorney General, shall develop a national 
                        durable power of attorney form for health care 
                        decisionmaking. The form shall provide a means 
                        for any adult to designate another adult or 
                        adults to exercise the same decisionmaking 
                        powers which would otherwise be exercised by 
                        the patient if the patient were competent.
                            (iii) Honored by all health care 
                        providers.--The national advance directive and 
                        durable power of attorney forms developed by 
                        the Secretary shall be honored by all health 
                        care providers.
                            (iv) Limitations.--No individual shall be 
                        required to execute an advance directive. This 
                        section makes no presumption concerning the 
                        intention of an individual who has not executed 
                        an advance directive. An advance directive 
                        shall be sufficient, but not necessary, proof 
                        of an adult's treatment choices with respect to 
                        the circumstances addressed in the advance 
                        directive.
                    (C) Definition.--For purposes of this paragraph, 
                the term ``incapacity'' means the inability to 
                understand or to communicate concerning the nature and 
                consequences of a health care decision (including the 
                intended benefits and foreseeable risks of, and 
                alternatives to, proposed treatment options), and to 
                reach an informed decision concerning health care.
            (3) Health care providers.--
                    (A) In general.--No health care provider may 
                provide treatment to an adult contrary to the adult's 
                wishes as expressed personally, by an advance directive 
                as provided for in paragraph (2)(B), or by a similar 
                written advance directive form or another written 
                method of directive which clearly and convincingly 
                evidence the adult's treatment choices. A health 
                provider who acts in good faith pursuant to the 
                preceding sentence shall be immune from criminal or 
                civil liability or discipline for professional 
                misconduct.
                    (B) Health care providers under the medicare and 
                medicaid programs.--Any health care provider who 
                knowingly provides services to an adult contrary to the 
                adult's wishes as expressed personally, by an advance 
                directive as provided for in paragraph (2)(B), or by a 
                similar written advance directive form or another 
                written method of directive which clearly and 
                convincingly evidence the adult's treatment choices, 
                shall be denied payment for such services under titles 
                XVIII and XIX of the Social Security Act.
                    (C) Transfers.--Health care providers who object to 
                the provision of medical care in accordance with an 
                adult's wishes shall transfer the adult to the care of 
                another health care provider.
            (4)  Definition.--For purposes of this subsection, the term 
        ``adult'' means--
                    (A) an individual who is 18 years of age or older; 
                or
                    (B) an emancipated minor.
    (b) Federal Right Enforceable in Federal Courts.--The rights 
recognized in this section may be enforced by filing a civil action in 
an appropriate district court of the United States.
    (c) Suicide and Homicide.--Nothing in this section shall be 
construed to permit, condone, authorize, or approve suicide or mercy 
killing, or any affirmative act to end a human life.
    (d) Rights Granted by States.--Nothing in this section shall impair 
or supersede rights granted by State law which exceed the rights 
recognized by this section.
    (e) Effect on Other Laws.--
            (1) In general.--Except as specified in paragraph (2), 
        written policies and written information adopted by health care 
        providers pursuant to sections 4206 and 4751 of the Omnibus 
        Budget Reconciliation Act of 1990 (Public Law 101-508), shall 
        be modified within 6 months after the enactment of this section 
        to conform to the provisions of this section.
            (2) Delay period for uniform forms.--Health care providers 
        shall modify any written forms distributed as written 
        information under sections 4206 and 4751 of the Omnibus Budget 
        Reconciliation Act of 1990 (Public Law 101-508) not later than 
        6 months after promulgation of the forms referred to in clauses 
        (i) and (ii) of subsection (a)(2)(B) by the Secretary.
    (f) Information Provided to Certain Individuals.--The Secretary 
shall provide on a periodic basis written information regarding an 
individual's right to consent to, or to decline, medical treatment as 
provided in this section to individuals who are beneficiaries under 
titles II, XVI, XVIII, and XIX of the Social Security Act.
    (g) Recommendations to Congress on Issues Relating to a Patient's 
Right of Self-Determination.--Not later than 180 days after the date of 
the enactment of this Act, and annually thereafter for a period of 3 
years, the Secretary shall provide recommendations to Congress 
concerning the medical, legal, ethical, social, and educational issues 
related to in this section. In developing recommendations under this 
subsection the Secretary shall address the following issues:
            (1) The contents of the forms referred to in clauses (i) 
        and (ii) of subsection (a)(2)(B).
            (2) Issues pertaining to the education and training of 
        health care professionals concerning patients' self-
        determination rights.
            (3) Issues pertaining to health care professionals' duties 
        with respect to patients' rights, and health care 
        professionals' roles in identifying, assessing, and presenting 
        for patient consideration medically indicated treatment 
        options.
            (4) Issues pertaining to the education of patients 
        concerning their rights to consent to, and decline, treatment, 
        including how individuals might best be informed of such rights 
        prior to hospitalization and how uninsured individuals, and 
        individuals not under the regular care of a physician or 
        another provider, might best be informed of their rights.
            (5) Issues relating to appropriate standards to be adopted 
        concerning decisionmaking by incapacitated adult patients whose 
        treatment choices are not known.
            (6) Such other issues as the Secretary may identify.
    (h) Effective Date.--
            (1) In general.--This section shall take effect on the date 
        that is 6 months after the date of enactment of this Act.
            (2) Subsection (g).--The provisions of subsection (g) shall 
        take effect on the date of enactment of this Act.

            TITLE IV--PRIMARY AND PREVENTIVE CARE PROVIDERS

SEC. 401. EXPANDED COVERAGE OF CERTAIN NONPHYSICIAN PROVIDERS UNDER THE 
              MEDICARE PROGRAM.

    (a) In General.--Section 1833(a)(1) of the Social Security Act (42 
U.S.C. 1395l(a)(1)) is amended--
            (1) in subparagraph (K), by striking ``80 percent'' and all 
        that follows through ``physician)'' and inserting ``85 percent 
        of the fee schedule amount provided under section 1848 for the 
        same service performed by a physician''; and
            (2) by amending subparagraph (O) to read as follows: ``(O) 
        with respect to services described in section 1861(s)(2)(K) 
        (relating to services provided by a nurse practitioner, 
        clinical nurse specialist, or physician assistant) the amounts 
        paid shall be 85 percent of the fee schedule amount provided 
        under section 1848 for the same service performed by a 
        physician, and''.
    (b) Nurse Practitioners and Physician Assistants.--Section 
1842(b)(12) of the Social Security Act (42 U.S.C. 1395u(b)(12)) is 
amended to read as follows:
    ``(12) With respect to services described in clause (i), (ii), or 
(iv) of section 1861(s)(2)(K) (relating to physician assistants and 
nurse practitioners)--
            ``(A) payment under this part may only be made on an 
        assignment-related basis; and
            ``(B) the prevailing charges determined under paragraph (3) 
        shall not exceed--
                    ``(i) in the case of services performed as an 
                assistant at surgery, 85 percent of the amount that 
                would otherwise be recognized if performed by a 
                physician who is serving as an assistant at surgery, or
                    ``(ii) in other cases, 85 percent of the fee 
                schedule amount specified in section 1848 for such 
                services performed by physicians who are not 
                specialists.''.
    (c) Direct Payment for All Nurse Practitioners or Clinical Nurse 
Specialists.--(1) Section 1832(a)(2)(B)(iv) of the Social Security Act 
(42 U.S.C. 1395k(a)(2)(B)(iv)) is amended by striking ``provided in a 
rural area (as defined in section 1886(d)(2)(D))''.
    (2) Subparagraph (C) of section 1842(b)(6) of such Act (42 U.S.C. 
1395u(b)(6)) is amended by striking ``shall'' and inserting ``may''.
    (d) Removal of Restrictions on Settings.--Section 1861(s)(2)(K) of 
the Social Security Act (42 U.S.C. 1395x(s)(2)(K)) is amended--
            (1) in clause (i), by striking ``(I) in a hospital'' and 
        all that follows through ``professional shortage area,'';
            (2) in clause (ii), by striking ``in a skilled'' and all 
        that follows through ``1919(a)''; and
            (3) in clause (iii), by striking ``in a rural'' and all 
        that follows through ``(d)(2)(D))''.

SEC. 402. REQUIRING COVERAGE OF CERTAIN NONPHYSICIAN PROVIDERS UNDER 
              THE MEDICAID PROGRAM.

    Section 1905(a) of the Social Security Act (42 U.S.C. 1396d(a)) is 
amended--
            (1) by striking ``and'' at the end of paragraph (24),
            (2) by redesignating paragraph (25) as paragraph (26), and
            (3) by inserting after paragraph (24) the following new 
        paragraph:
            ``(25) services furnished by a physician assistant, nurse 
        practitioner, clinical nurse specialist (as defined in section 
        1861(aa)(5)), and certified registered nurse anesthetist (as 
        defined in section 1861(bb)(2)); and''.

SEC. 403. MEDICAL STUDENT TUTORIAL PROGRAM GRANTS.

    Part C of title VII of the Public Health Service Act is amended by 
adding at the end thereof the following new section:

``SEC. 753. MEDICAL STUDENT TUTORIAL PROGRAM GRANTS.

    ``(a) Establishment.--The Secretary shall establish a program to 
award grants to eligible schools of medicine or osteopathic medicine to 
enable such schools to provide medical students for tutorial programs 
or as participants in clinics designed to interest high school or 
college students in careers in general medical practice.
    ``(b) Application.--To be eligible to receive a grant under this 
section, a school of medicine or osteopathic medicine shall prepare and 
submit to the Secretary an application at such time, in such manner, 
and containing such information as the Secretary may require, including 
assurances that the school will use amounts received under the grant in 
accordance with subsection (c).
    ``(c) Use of Funds.--
            ``(1) In general.--Amounts received under a grant awarded 
        under this section shall be used to--
                    ``(A) fund programs under which students of the 
                grantee are provided as tutors for high school and 
                college students in the areas of mathematics, science, 
                health promotion and prevention, first aide, nutrition 
                and prenatal care;
                    ``(B) fund programs under which students of the 
                grantee are provided as participants in clinics and 
                seminars in the areas described in paragraph (1); and
                    ``(C) conduct summer institutes for high school and 
                college students to promote careers in medicine.
            ``(2) Design of programs.--The programs, institutes, and 
        other activities conducted by grantees under paragraph (1) 
        shall be designed to--
                    ``(A) give medical students desiring to practice 
                general medicine access to the local community;
                    ``(B) provide information to high school and 
                college students concerning medical school and the 
                general practice of medicine; and
                    ``(C) promote careers in general medicine.
    ``(d) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, $5,000,000 for fiscal year 
1996, and such sums as may be necessary for fiscal year 1997.''.

SEC. 404. GENERAL MEDICAL PRACTICE GRANTS.

    Part C of title VII of the Public Health Service Act (as amended by 
section 403) is further amended by adding at the end thereof the 
following new section:

``SEC. 754. GENERAL MEDICAL PRACTICE GRANTS.

    ``(a) Establishment.--The Secretary shall establish a program to 
award grants to eligible public or private nonprofit schools of 
medicine or osteopathic medicine, hospitals, residency programs in 
family medicine or pediatrics, or to a consortium of such entities, to 
enable such entities to develop effective strategies for recruiting 
medical students interested in the practice of general medicine and 
placing such students into general practice positions upon graduation.
    ``(b) Application.--To be eligible to receive a grant under this 
section, an entity of the type described in subsection (a) shall 
prepare and submit to the Secretary an application at such time, in 
such manner, and containing such information as the Secretary may 
require, including assurances that the entity will use amounts received 
under the grant in accordance with subsection (c).
    ``(c) Use of Funds.--Amounts received under a grant awarded under 
this section shall be used to fund programs under which effective 
strategies are developed and implemented for recruiting medical 
students interested in the practice of general medicine and placing 
such students into general practice positions upon graduation.
    ``(d) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, $25,000,000 for each of the 
fiscal years 1996 through 2000, and such sums as may be necessary for 
fiscal years thereafter.''.

                       TITLE V--COST CONTAINMENT

SEC. 501. NEW DRUG CLINICAL TRIALS PROGRAM.

    Part B of title IV of the Public Health Service Act (42 U.S.C. 284 
et seq.) is amended by adding at the end the following new section:

``SEC. 409B. NEW DRUG CLINICAL TRIALS PROGRAM.

    ``(a) In General.--The Director of the National Institutes of 
Health (referred to in this section as the `Director') is authorized to 
establish and implement a program for the conduct of clinical trials 
with respect to new drugs and disease treatments determined to be 
promising by the Director. In determining the drugs and disease 
treatments that are to be the subject of such clinical trials, the 
Director shall give priority to those drugs and disease treatments 
targeted toward the diseases determined--
            ``(1) to be the most costly to treat;
            ``(2) to have the highest mortality; or
            ``(3) to affect the greatest number of individuals.
    ``(b) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, $120,000,000 for fiscal year 
1996, and such sums as may be necessary for each of the fiscal years 
1997 through 2000.''.

SEC. 502. MEDICAL TREATMENT EFFECTIVENESS.

    (a) Research on Cost-Effective Methods of Health Care.--Section 926 
of the Public Health Service Act (42 U.S.C. 299c-5) is amended--
            (1) in subsection (a), by striking ``and'' and inserting 
        ``and such sums as may be necessary for each of the fiscal 
        years 1996 through 1998''; and
            (2) by adding at the end the following new subsection:
    ``(f) Use of Additional Appropriations.--Within amounts 
appropriated under subsection (a) for each of the fiscal years 1995 
through 1997 that are in excess of the amounts appropriated under such 
subsection for fiscal year 1993, the Secretary shall give priority to 
expanding research conducted to determine the most cost-effective 
methods of health care and for developing and disseminating new 
practice guidelines related to such methods. In utilizing such amounts, 
the Secretary shall give priority to diseases and disorders that the 
Secretary determines are the most costly to the United States and 
evidence a wide variation in current medical practice.''.
    (b) Research on Medical Treatment Outcomes.--
            (1) Imposition of tax on health insurance policies.--
                    (A) In general.--Chapter 36 of the Internal Revenue 
                Code of 1986 (relating to certain other excise taxes) 
                is amended by adding at the end thereof the following 
                new subchapter:

            ``Subchapter G--Tax on Health Insurance Policies

                              ``Sec. 4501. Imposition of tax.
                              ``Sec. 4502. Liability for tax.

``SEC. 4501. IMPOSITION OF TAX.

    ``(a) General Rule.--There is hereby imposed a tax equal to .001 
cent on each dollar, or fractional part thereof, of the premium paid on 
a policy of health insurance.
    ``(b) Definition.--For purposes of subsection (a), the term `policy 
of health insurance' means any policy or other instrument by whatever 
name called whereby a contract of insurance is made, continued, or 
renewed with respect to the health of an individual or group of 
individuals.

``SEC. 4502. LIABILITY FOR TAX.

    ``The tax imposed by this subchapter shall be paid, on the basis of 
a return, by any person who makes, signs, issues, or sells any of the 
documents and instruments subject to the tax, or for whose use or 
benefit the same are made, signed, issued, or sold. The United States 
or any agency or instrumentality thereof shall not be liable for the 
tax.''.
                    (B) Conforming amendment.--The table of subchapters 
                for chapter 36 of the Internal Revenue Code of 1986 is 
                amended by adding at the end thereof the following new 
                item:

                              ``Subchapter G. Tax on health insurance 
                                        policies.''.
            (2) Establishment of trust fund.--
                    (A) In general.--Subchapter A of chapter 98 of such 
                Code (relating to trust fund code) is amended by adding 
                at the end thereof the following new section:

``SEC. 9512. TRUST FUND FOR MEDICAL TREATMENT OUTCOMES RESEARCH.

    ``(a) Creation of Trust Fund.--There is established in the Treasury 
of the United States a trust fund to be known as the `Trust Fund for 
Medical Treatment Outcomes Research' (referred to in this section as 
the `Trust Fund'), consisting of such amounts as may be appropriated or 
credited to the Trust Fund as provided in this section or section 
9602(b).
    ``(b) Transfers to Trust Fund.--There is hereby appropriated to the 
Trust Fund an amount equivalent to the taxes received in the Treasury 
under section 4501 (relating to tax on health insurance policies).
    ``(c) Distribution of Amounts in Trust Fund.--On an annual basis 
the Secretary shall distribute the amounts in the Trust Fund to the 
Secretary of Health and Human Services. Such amounts shall be available 
to the Secretary of Health and Human Services to pay for research 
activities related to medical treatment outcomes.''.
                    (B) Conforming amendment.--The table of sections 
                for subchapter A of chapter 98 of such Code is amended 
                by adding at the end thereof the following new item:

                              ``Sec. 9512. Trust Fund for Medical 
                                        Treatment Outcomes Research.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to policies issued after December 31, 1995.

SEC. 503. NATIONAL HEALTH INSURANCE DATA AND CLAIMS SYSTEM.

    (a) In General.--Using advanced technologies to the maximum extent 
practicable, the Secretary of Health and Human Services (referred to in 
this section as the ``Secretary'') shall establish and maintain a 
national health insurance data and claims system, which shall be 
comprised of--
            (1) a centralized national data base for health insurance 
        and health outcomes information;
            (2) a standardized, universal mechanism for electronically 
        processing health insurance and health outcomes data; and
            (3) a standardized system for uniform claims and uniform 
        transmission of claims.
    (b) National Data Base for Health Insurance Information.--The 
national data base for health insurance and health outcomes information 
shall--
            (1) be centrally located;
            (2) rely on advanced technologies to the maximum extent 
        practicable; and
            (3) be readily accessible for data input and retrieval.
    (c) Standardized System for Uniform Claims and Transmission of 
Claims.--
            (1) Consultation with the naic.--The Secretary shall 
        consult with the National Association of Insurance 
        Commissioners in connection with the establishment of the 
        system under subsection (a)(3).
            (2) Use of recognized standards.--The Secretary shall, to 
        the maximum extent practicable, establish standards for the 
        system under subsection (a)(3) that are consistent with 
        standards that are widely recognized and adopted.
            (3) Timing for establishment of system.--
                    (A) In general.--Not later than 12 months after the 
                date of the enactment of this Act, the Secretary shall 
                establish standards for the system under subsection 
                (a)(3).
                    (B) Review.--Not later than 24 months after 
                standards have been established under subparagraph (A), 
                the Secretary shall review such standards and make any 
                modifications determined appropriate by the Secretary.
    (d) Confidentiality.--The Secretary shall ensure that all patient 
information collected under this section is managed so that 
confidentiality is protected.
    (e) Authorization of Appropriations.--There shall be authorized to 
be appropriated such sums as may be necessary to carry out the purposes 
of this section.

SEC. 504. HEALTH CARE COST CONTAINMENT AND QUALITY INFORMATION PROGRAM.

    (a) Grant Program.--
            (1) In general.--The Secretary of Health and Human Services 
        (referred to in this section as the ``Secretary'') shall make 
        grants to States that establish or operate health care cost 
        containment and quality information systems (as defined in 
        subsection (f)(1)). In order to be eligible for a grant under 
        this section, a State must establish or operate a system which, 
        at a minimum, meets the Federal standards established under 
        subsection (c).
            (2) Use of funds.--States may use grant funds received 
        under this section only to establish a health care cost 
        containment and quality information system or to improve an 
        existing system operated by the State.
    (b) Submission of Applications.--To be eligible for a grant under 
this section, a State must submit an application to the Secretary 
within 2 years after the date of the enactment of this section. Such 
application shall be submitted in a manner determined appropriate by 
the Secretary and shall include the designation of a State agency that 
will operate the health care cost containment and quality information 
system for the State. The Secretary shall approve or disapprove a State 
application within 6 months after its submission.
    (c) Minimum Federal Standards.--Not later than 6 months after the 
date of the enactment of this section, the Secretary, after 
consultation with the Agency for Health Care Policy and Research, other 
Federal agencies, the Joint Commission on Accreditation of Hospitals, 
States, health care providers, consumers, insurers, health maintenance 
organizations, businesses, academic health centers, and labor 
organizations that purchase health care, shall establish Federal 
standards for the operation of health care cost containment and quality 
information systems by States receiving grants under this section.
    (d) Collection and Public Dissemination of Information by States.--
            (1) In general.--A State receiving a grant under this 
        section shall require that a health care cost containment and 
        quality information system will collect at least the 
        information described in paragraph (2) and publicly disseminate 
        such information in a useful format to appropriate persons such 
        as businesses, consumers of health care services, labor 
        organizations, health plans, hospitals, and other States.
            (2) Information described.--The information described in 
        this paragraph is the following:
                    (A) Information on hospital charges.
                    (B) Clinical data.
                    (C) Demographic data.
                    (D) Information regarding treatment of individuals 
                by particular health care providers.
            (3) Electronic transmission of information.--The State 
        program under this section shall provide that any information 
        described in paragraph (2) with respect to which the Secretary 
        has established standards for data elements and information 
        transactions under section 503 shall be transmitted to the 
        State health care cost containment and quality information 
        system in accordance with such standards.
            (4) Privacy and confidentiality.--The State cost 
        containment and quality information system shall ensure that 
        patient privacy and confidentiality is protected at all times.
    (e) Compliance.--If the Secretary determines that a State receiving 
grant funds under this section has failed to operate a system in 
accordance with the terms of its approved application, the Secretary 
may withhold payment of such funds until the State remedies such 
noncompliance.
    (f) Definitions.--For purposes of this section--
            (1) the term ``health care cost containment and quality 
        information system'' means a system which is established or 
        operated by a State in order to collect and disseminate the 
        information described in subsection (d)(2) in accordance with 
        subsection (d)(1) for the purpose of providing information on 
        health care costs and outcomes in the State; and
            (2) the term ``State'' means a State, the District of 
        Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, 
        Guam, American Samoa, and includes the Commonwealth of the 
Northern Mariana Islands.
    (g) Authorization.--
            (1) In general.--There are authorized to be appropriated 
        for the purpose of carrying out this section not more than 
        $150,000,000 for fiscal years 1996 through 1998, and such sums 
        as may be necessary thereafter, to remain available until 
        expended.
            (2) Allocation to states.--The Secretary shall allocate the 
        amounts available for grants under this section in any fiscal 
        year in accordance with a formula developed by the Secretary 
        which takes into account--
                    (A) the number of hospitals in a State relative to 
                the total number of hospitals in all States;
                    (B) the population of the State relative to the 
                total population of all States; and
                    (C) the type of system operated or intended to be 
                operated by the State, including whether the State 
                establishes an independent State agency to operate the 
                system.

                        TITLE VI--LONG-TERM CARE

    Subtitle A--Tax Treatment of Qualified Long-Term Care Insurance 
                         Policies and Services

SEC. 601. 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.

SEC. 602. 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 subsection (g)), or''.
    (b) Qualified Long-Term Care Services Defined.--Section 213 
(relating to the deduction for medical, dental, etc., expenses) is 
amended by adding at the end the following new subsections:
    ``(g) Qualified Long-Term Care Services.--For purposes of this 
section--
            ``(1) In general.--The term `qualified long-term care 
        services' means necessary diagnostic, curing, mitigating, 
        treating, preventive, therapeutic, and rehabilitative services, 
        and maintenance and personal care services (whether performed 
        in a residential or nonresidential setting) which--
                    ``(A) are required by an individual during any 
                period the individual is an incapacitated individual 
                (as defined in paragraph (2)),
                    ``(B) have as their primary purpose--
                            ``(i) the provision of needed assistance 
                        with 1 or more activities of daily living (as 
                        defined in paragraph (3)), or
                            ``(ii) protection from threats to health 
                        and safety due to severe cognitive impairment, 
                        and
                    ``(C) are provided pursuant to a continuing plan of 
                care prescribed by a licensed professional (as defined 
                in paragraph (4)).
            ``(2) Incapacitated individual.--The term `incapacitated 
        individual' means any individual who--
                    ``(A) is unable to perform, without substantial 
                assistance from another individual (including 
                assistance involving cueing or substantial 
                supervision), at least 2 activities of daily living as 
                defined in paragraph (3), or
                    ``(B) has severe cognitive impairment as defined by 
                the Secretary in consultation with the Secretary of 
                Health and Human Services.
        Such term shall not include any individual otherwise meeting 
        the requirements of the preceding sentence unless a licensed 
        professional within the preceding 12-month period has certified 
        that such individual meets such requirements.
            ``(3) Activities of daily living.--Each of the following is 
        an activity of daily living:
                    ``(A) Eating.
                    ``(B) Toileting.
                    ``(C) Transferring.
                    ``(D) Bathing.
                    ``(E) Dressing.
            ``(4) Licensed professional.--The term `licensed 
        professional' means--
                    ``(A) a physician or registered professional nurse, 
                or
                    ``(B) any other individual who meets such 
                requirements as may be prescribed by the Secretary 
                after consultation with the Secretary of Health and 
                Human Services.
            ``(5) Certain services not included.--The term `qualified 
        long-term care services' shall not include any services 
        provided to an individual--
                    ``(A) by a relative (directly or through a 
                partnership, corporation, or other entity) unless the 
                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 paragraphs (1) through (8) of section 152(a).
    ``(h) Special Rule for Certain Long-Term Care Expenses.--For 
purposes of subsection (a), the term `dependent' shall include any 
parent or grandparent of the taxpayer for whom the taxpayer has 
expenses for qualified long-term care services described in subsection 
(g), but only to the extent of such expenses.''.
    (c) Technical Amendments.--
            (1) Subparagraph (D) of section 213(d)(1) (as redesignated 
        by subsection (a)) is amended to read as follows:
                    ``(D) for insurance (including amounts paid as 
                premiums under part B of title XVIII of the Social 
                Security Act, relating to supplementary medical 
                insurance for the aged) covering medical care referred 
                to in--
                            ``(i) subparagraphs (A) and (B), or
                            ``(ii) subparagraph (C), but only if such 
                        insurance is provided under a qualified long-
                        term care insurance policy (as defined in 
                        section 7705(a)) and the amount paid for such 
                        insurance is not disallowed under section 
                        7705(b).''
            (2) Paragraph (6) of section 213(d) is amended--
                    (A) by striking ``subparagraphs (A) and (B)'' and 
                inserting ``subparagraph (A), (B), and (C)'', and
                    (B) by striking ``paragraph (1)(C)'' in 
                subparagraph (A) and inserting ``paragraph (1)(D)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 603. DEFINITION OF QUALIFIED LONG-TERM CARE INSURANCE POLICY.

    (a) In General.--Chapter 79 (relating to definitions) is amended by 
adding at the end the following new section:

``SEC. 7705. QUALIFIED LONG-TERM CARE INSURANCE POLICY.

    ``(a) Qualified Long-Term Care Insurance Policy.--For purposes of 
this title--
            ``(1) In general.--The term `qualified long-term care 
        insurance policy' means any long-term care policy that--
                    ``(A) limits benefits under such policy to 
                individuals who are certified by a licensed 
                professional (as defined in section 213(g)(4)) within 
                the preceding 12-month period--
                            ``(i) as being unable to perform, without 
                        substantial assistance from another individual 
                        (including assistance involving cueing or 
                        substantial supervision), 2 or more activities 
                        of daily living (as defined in section 
                        213(g)(3)), or
                            ``(ii) having a severe cognitive impairment 
                        (as defined in section 213(g)(2)(B)), and
                    ``(B) satisfies the requirements of paragraphs (2), 
                (3), (4), (5), and (6).
            ``(2) Premium requirements.--The requirements of this 
        paragraph are met with respect to a policy if such policy 
        provides that premium payments may not be made earlier than the 
        date such payments would have been made if the contract 
        provided for level annual payments over the life expectancy of 
        the insured or 20 years, whichever is shorter. A policy shall 
        not be treated as failing to meet the requirements of the 
        preceding sentence solely by reason of a provision in the 
        policy providing for a waiver of premiums if the insured 
        becomes an individual certified in accordance with paragraph 
        (1)(A).
            ``(3) Prohibition of cash value.--The requirements of this 
        paragraph are met if the policy does not provide for a cash 
        value or other money that can be paid, assigned, pledged as 
        collateral for a loan, or borrowed, other than as provided in 
        paragraph (4).
            ``(4) Refunds of premiums and dividends.--The requirements 
        of this paragraph are met with respect to a policy if such 
        policy provides that--
                    ``(A) policyholder dividends are required to be 
                applied as a reduction in future premiums or, to the 
                extent permitted under paragraph (6), to increase 
                benefits described in subsection (a)(2),
                    ``(B) refunds of premiums upon a partial surrender 
                or a partial cancellation are required to be applied as 
                a reduction in future premiums, and
                    ``(C) any refund on the death of the insured, or on 
                a complete surrender or cancellation of the policy, 
                cannot exceed the aggregate premiums paid under the 
                contract.
        Any refund on a complete surrender or cancellation of the 
        policy shall be includible in gross income to the extent that 
        any deduction or exclusion was allowable with respect to the 
        premiums.
            ``(5) Coordination with other entitlements.--The 
        requirements of this paragraph are met with respect to a policy 
        if such policy does not pay, or provide reimbursement for, 
        expenses incurred to the extent that such expenses are also 
        paid or reimbursed under title XVIII of the Social Security Act 
        or are paid or reimbursed under a qualified health insurance 
        plan (as defined in section 100(10) of the Health Care 
        Assurance Act of 1995).
            ``(6) Maximum benefit.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if the benefits payable under the 
                policy for any period (whether on a periodic basis or 
                otherwise) may not exceed the dollar amount in effect 
                for such period.
                    ``(B) Nonreimbursement payments permitted.--
                Benefits shall include all payments described in 
                subsection (a)(2) to or on behalf of an insured 
                individual without regard to the expenses incurred 
                during the period to which the payments relate. For 
                purposes of section 213(a), such payments shall be 
                treated as compensation for expenses paid for medical 
                care.
                    ``(C) Dollar amount.--The dollar amount in effect 
                under this paragraph shall be $150 per day (or the 
                equivalent amount within the calendar year in the case 
                of payments on other than a per diem basis).
                    ``(D) Adjustments for increased costs.--
                            ``(i) In general.--In the case of any 
                        calendar year after 1996, the dollar amount in 
                        effect under subparagraph (C) for any period or 
                        portion thereof occurring during such calendar 
                        year shall be equal to the sum of--
                                    ``(I) the amount in effect under 
                                subparagraph (C) for the preceding 
                                calendar year (after application of 
                                this subparagraph), plus
                                    ``(II) the product of the amount 
                                referred to in subclause (I) multiplied 
                                by the cost-of-living adjustment for 
                                the calendar year.
                            ``(ii) Cost-of-living adjustment.--For 
                        purposes of clause (i), the cost-of-living 
                        adjustment for any calendar year is the 
                        percentage (if any) by which the cost index 
                        under clause (iii) for the preceding calendar 
                        year exceeds such index for the second 
                        preceding calendar year.
                            ``(iii) Cost index.--The Secretary, in 
                        consultation with the Secretary of Health and 
                        Human Services, shall before January 1, 1997, 
                        establish a cost index to measure increases in 
                        costs of nursing home and similar facilities. 
                        The Secretary may from time to time revise such 
                        index to the extent necessary to accurately 
                        measure increases or decreases in such costs.
                            ``(iv) Special rule for calendar year 
                        1997.--Notwithstanding clause (ii), for 
                        purposes of clause (i), the cost-of-living 
                        adjustment for calendar year 1997 is the sum of 
                        1.5 percent plus the percentage by which the 
                        CPI for calendar year 1996 (as defined in 
                        section 1(f)(4)) exceeds the CPI for calendar 
                        year 1995 (as so defined).
                    ``(E) Period.--For purposes of this paragraph, a 
                period begins on the date that an individual has a 
                condition which would qualify for certification under 
                subsection (b)(1)(A) and ends on the earlier of the 
                date upon which--
                            ``(i) such individual has not been so 
                        certified within the preceding 12-months, or
                            ``(ii) the individual's condition ceases to 
                        be such as to qualify for certification under 
                        subsection (b)(1)(A).
                    ``(F) Aggregation rule.--For purposes of this 
                paragraph, all policies issued with respect to the same 
                insured shall be treated as one policy.
    ``(b) Treatment of Coverage Provided as Part of a Life Insurance 
Contract.--No deduction shall be allowed under section 213(a) for 
charges against a life insurance contract's cash surrender value 
(within the meaning of section 7702(f)(2)(A)), unless such charges are 
includible in income as a result of the application of section 
72(e)(10) and the coverage provided by the rider is a qualified long-
term care insurance policy under subsection (a).''.
    (b) Clerical Amendment.--The table of sections for chapter 79 is 
amended by inserting after the item relating to section 7704 the 
following new item:

                              ``Sec. 7705. Qualified long-term care 
                                        insurance.''.

SEC. 604. TREATMENT OF QUALIFIED LONG-TERM CARE INSURANCE AS ACCIDENT 
              AND HEALTH INSURANCE FOR PURPOSES OF TAXATION OF 
              INSURANCE COMPANIES.

    (a) In General.--Section 818 (relating to other definitions and 
special rules) is amended by adding at the end the following new 
subsection:
    ``(g) Qualified Long-Term Care Insurance Treated as Accident or 
Health Insurance.--For purposes of this subchapter, any reference to 
noncancellable accident or health insurance contracts shall be treated 
as including a reference to qualified long-term care insurance.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1995.

SEC. 605. TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE INSURANCE 
              CONTRACTS.

    (a) Exclusion of Amounts Received.--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, any amount 
        paid to an individual under a life insurance contract on the 
        life of an insured who is a terminally ill individual, who has 
        a dread disease, or who has been permanently confined to a 
        nursing home shall be treated as an amount paid by reason of 
        the death of such insured.
            ``(2) Terminally ill individual.--For purposes of this 
        subsection, the term `terminally ill individual' means an 
        individual who has been certified by a physician, licensed 
        under State law, as having an illness or physical condition 
        which can reasonably be expected to result in death in 12 
        months or less.
            ``(3) Dread disease.--For purposes of this subsection, the 
        term `dread disease' means a medical condition which has been 
        certified by a physician as having required or requiring 
        extraordinary medical intervention without which the insured 
        would die, or a medical condition which would, in the absence 
        of extensive or extraordinary medical treatment, result in a 
        drastically limited life span.
            ``(4) Permanently confined to a nursing home.--For purposes 
        of this subsection, an individual has been permanently confined 
        to a nursing home if the individual is presently confined to a 
        nursing home and has been certified by a physician, licensed 
        under State law, as having an illness or cognitive impairment 
        or loss of functional capacity which can reasonably be expected 
        to result in the individual remaining in a nursing home for the 
        rest of the individual's life.''.
    (b) Treatment of Qualified Accelerated Death Benefit Riders as Life 
Insurance.--
            (1) In general.--Section 818 (relating to other definitions 
        and special rules), as amended by section 603, is amended by 
adding at the end the following new subsection:
    ``(h) 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 rider.--For 
        purposes of this subsection, the term `qualified accelerated 
        death benefit rider' means any rider or addendum on, or other 
        provision of, a life insurance contract which provides for 
        payments to an individual on the life of an insured upon such 
        insured becoming a terminally ill individual (as defined in 
        section 101(g)(2)), incurring a dread disease (as defined in 
        section 101(g)(3)), or being permanently confined to a nursing 
        home (as defined in section 101(g)(4)).''.
            (2) Definitions of life insurance and modified endowment 
        contracts.--
                    (A) Rider treated as qualified additional 
                benefit.--Subparagraph (A) of section 7702(f)(5) 
                (relating to definition of life insurance contract) is 
                amended by striking ``or'' at the end of clause (iv), 
                by redesignating clause (v) as clause (vi), and by 
                inserting after clause (iv) the following new clause:
                            ``(v) any qualified accelerated death 
                        benefit rider (as defined in section 
                        818(h)(2)), or any qualified long-term care 
                        insurance which reduces the death benefit, 
                        or''.
                    (B) Transitional rule.--For purposes of applying 
                section 7702 or 7702A of the Internal Revenue Code of 
                1986 to any contract (or determining whether either 
                such section applies to such contract), the issuance of 
                a rider or addendum on, or other provision of, a life 
                insurance contract permitting the acceleration of death 
                benefits (as described in section 101(g)) or for 
                qualified long-term care insurance shall not be treated 
                as a modification or material change of such contract.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

  Subtitle B--Tax Incentives for Purchase of Qualified Long-Term Care 
                               Insurance

SEC. 611. CREDIT FOR QUALIFIED LONG-TERM CARE PREMIUMS.

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

``SEC. 35. LONG-TERM CARE INSURANCE CREDIT.

    ``(a) General Rule.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this subtitle for the 
taxable year an amount equal to the applicable percentage of the 
premiums for a qualified long-term care insurance policy (as defined in 
section 7705(a)) paid during such taxable year for such individual or 
the spouse of such individual.
    ``(b) Applicable Percentage.--
            ``(1) In general.--For purposes of this section, the term 
        `applicable percentage' means 28 percent reduced (but not below 
        zero) by 1 percentage point for each $1,000 (or fraction 
        thereof) by which the taxpayer's adjusted gross income for the 
        taxable year exceeds the base amount.
            ``(2) Base amount.--For purposes of paragraph (1) the term 
        `base amount' means--
                    ``(A) except as otherwise provided in this 
                paragraph, $25,000,
                    ``(B) $40,000 in the case of a joint return, and
                    ``(C) zero in the case of a taxpayer who--
                            ``(i) is married at the close of the 
                        taxable year (within the meaning of section 
                        7703) but does not file a joint return for such 
                        taxable year, and
                            ``(ii) does not live apart from his or her 
                        spouse at all times during the taxable year.
    ``(c) Coordination With Medical Expense Deduction.--Any amount 
allowed as a credit under this section shall not be taken into account 
under section 213.''.
    (b) Clerical Amendment.--The table of sections for subpart C of 
part IV of subchapter A of chapter 1 is amended by striking the item 
relating to section 35 and inserting the following:

                              ``Sec. 35. Long-term care insurance 
                                        credit.
                              ``Sec. 36. Overpayments of tax.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 612. EXCLUSION FROM GROSS INCOME OF BENEFITS RECEIVED UNDER 
              QUALIFIED LONG-TERM CARE INSURANCE POLICIES.

    (a) In General.--Section 105 (relating to amounts received under 
accident and health plans) is amended by adding at the end the 
following new subsection:
    ``(j) Special Rules Relating to Qualified Long-Term Care Insurance 
Policy.--For purposes of section 104, this section, and section 106--
            ``(1) Benefits treated as payable for sickness, etc.--Any 
        benefit received through a qualified long-term care insurance 
        policy shall be treated as amounts received through accident or 
        health insurance for personal injuries or sickness.
            ``(2) Expenses for which reimbursement provided under 
        qualified long-term care insurance policy treated as incurred 
        for medical care or functional loss.--
                    ``(A) Expenses.--Expenses incurred by the taxpayer 
                or spouse, or by the dependent, parent, or grandparent 
                of either, to the extent of benefits paid under a 
                qualified long-term care insurance policy shall be 
                treated for purposes of subsection (b) as incurred for 
                medical care (as defined in section 213(d)).
                    ``(B) Benefits.--Benefits received under a 
                qualified long-term care insurance policy shall be 
                treated for purposes of subsection (c) as payment for 
                the permanent loss or loss of use of a member or 
                function of the body or the permanent disfigurement of 
                the taxpayer or spouse, or the dependent, parent, or 
                grandparent of either.
            ``(3) References to accident and health plans.--Any 
        reference to an accident or health plan shall be treated as 
        including a reference to a plan providing qualified long-term 
        care services (as defined in section 213(a)).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1995.

SEC. 613. EMPLOYER DEDUCTION FOR CONTRIBUTIONS MADE FOR LONG-TERM CARE 
              INSURANCE.

    (a) In General.--Subparagraph (B) of section 404(b)(2) (relating to 
plans providing certain deferred benefits) is amended to read as 
follows:
                    ``(B) Exceptions.--Subparagraph (A) shall not apply 
                to--
                            ``(i) any benefit provided through a 
                        welfare benefit fund (as defined in section 
                        419(e)), or
                            ``(ii) any benefit provided under a 
                        qualified long-term care insurance policy 
                        through the payment (in whole or in part) of 
                        premiums for such policy by an employer 
                        pursuant to a plan for its active or retired 
                        employees, but only if any refund or premium is 
                        applied to reduce the future costs of the plan 
                        or increase benefits under the plan.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1995.

SEC. 614. INCLUSION OF QUALIFIED LONG-TERM CARE INSURANCE IN CAFETERIA 
              PLANS.

    (a) In General.--Paragraph (2) of section 125(d) (relating to the 
exclusion of deferred compensation) is amended by adding at the end the 
following new subparagraph:
                    ``(D) Exception for qualified long-term care 
                insurance policies.--For purposes of subparagraph (A), 
                amounts paid or incurred for any qualified long-term 
                care insurance policy shall not be treated as deferred 
                compensation to the extent section 404(b)(2)(A) does 
                not apply to such amounts by reason of section 
                404(b)(2)(B)(ii).''.
    (b) Conforming Amendment.--Subsection (f) of section 125 (relating 
to qualified benefits) is amended by striking ``and such term 
includes'' and inserting the following: ``, qualified long-term care 
insurance policies, and''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 615. EXCLUSION FROM GROSS INCOME FOR AMOUNTS RECEIVED ON 
              CANCELLATION OF LIFE INSURANCE POLICIES AND USED FOR 
              QUALIFIED LONG-TERM CARE INSURANCE POLICIES.

    (a) In General.--
            (1) Exclusion from gross income.--
                    (A) In general.--Part III of subchapter B of 
                chapter 1 (relating to items specifically excluded from 
                gross income) is amended by redesignating section 136 
                as section 137 and by inserting after section 135 the 
                following new section:

``SEC. 136. AMOUNTS RECEIVED ON CANCELLATION, ETC. OF LIFE INSURANCE 
              CONTRACTS AND USED TO PAY PREMIUMS FOR QUALIFIED LONG-
              TERM CARE INSURANCE.

    ``No amount (which but for this section would be includible in the 
gross income of an individual) shall be included in gross income on the 
whole or partial surrender, cancellation, or exchange of any life 
insurance contract during the taxable year if--
            ``(1) such individual has attained age 59\1/2\ on or before 
        the date of the transaction, and
            ``(2) the amount otherwise includible in gross income is 
        used during such year to pay for any qualified long-term care 
        insurance policy which--
                    ``(A) is for the benefit of such individual or the 
                spouse of such individual if such spouse has attained 
                age 59\1/2\ on or before the date of the transaction, 
                and
                    ``(B) may not be surrendered for cash.''.
                    (B) Clerical amendment.--The table of sections for 
                such part III is amended by striking the last item and 
                inserting the following new items:

                              ``Sec. 136. Amounts received on 
                                        cancellation, etc. of life 
                                        insurance contracts and used to 
                                        pay premiums for qualified 
                                        long-term care insurance.
                              ``Sec. 137. Cross references to other 
                                        Acts.''.
            (2) Certain exchanges not taxable.--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) in the case of an individual who has attained age 
        59\1/2\, a contract of life insurance or an endowment or 
        annuity contract for a qualified long-term care insurance 
        policy, if such policy may not be surrendered for cash.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 616. USE OF GAIN FROM SALE OF PRINCIPAL RESIDENCE FOR PURCHASE OF 
              QUALIFIED LONG-TERM HEALTH CARE INSURANCE.

    (a) In General.--Subsection (d) of section 121 (relating to 1-time 
exclusion of gain from sale of principal residence by individual who 
has attained age 55) is amended by adding at the end the following new 
paragraph:
            ``(10) Eligibility of home equity conversion sale-leaseback 
        transaction for exclusion.--
                    ``(A) In general.--For purposes of this section, 
                the term `sale or exchange' includes a home equity 
                conversion sale-leaseback transaction.
                    ``(B) Home equity conversion sale-leaseback 
                transaction.--For purposes of subparagraph (A), the 
                term `home equity conversion sale-leaseback' means a 
                transaction in which--
                            ``(i) the seller-lessee--
                                    ``(I) has attained the age of 55 
                                before the date of the transaction,
                                    ``(II) sells property which during 
                                the 5-year period ending on the date of 
                                the transaction has been owned and used 
                                as a principal residence by such 
                                seller-lessee for periods aggregating 3 
                                years or more,
                                    ``(III) uses a portion of the 
                                proceeds from such sale to purchase a 
                                qualified long-term care insurance 
                                policy, which policy may not be 
                                surrendered for cash,
                                    ``(IV) obtains occupancy rights in 
                                such property pursuant to a written 
                                lease requiring a fair rental, and
                                    ``(V) receives no option to 
                                repurchase the property at a price less 
                                than the fair market price of the 
                                property unencumbered by any leaseback 
                                at the time such option is exercised, 
                                and
                            ``(ii) the purchaser-lessor--
                                    ``(I) is a person,
                                    ``(II) is contractually responsible 
                                for the risks and burdens of ownership 
                                and receives the benefits of ownership 
                                (other than the seller-lessee's 
                                occupancy rights) after the date of 
                                such transaction, and
                                    ``(III) pays a purchase price for 
                                the property that is not less than the 
                                fair market price of such property 
                                encumbered by a leaseback, and taking 
                                into account the terms of the lease.
                    ``(C) Additional definitions.--For purposes of 
                subparagraph (B)--
                            ``(i) Occupancy rights.--The term 
                        `occupancy rights' means the right to occupy 
                        the property for any period of time, including 
                        a period of time measured by the life of the 
                        seller-lessee on the date of the sale-leaseback 
                        transaction (or the life of the surviving 
                        seller-lessee, in the case of jointly held 
                        occupancy rights), or a periodic term subject 
                        to a continuing right of renewal by the seller-
                        lessee (or by the surviving seller-lessee, in 
                        the case of jointly held occupancy rights).
                            ``(ii) Fair rental.--The term `fair rental' 
                        means a rental for any subsequent year which 
                        equals or exceeds the rental for the first year 
                        of a sale-leaseback transaction.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to sales after December 31, 1995, in taxable years beginning after such 
date.
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