[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 525 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 525

To amend the Public Health Service Act to provide access to health care 
                    insurance coverage for children.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 8, 1997

    Mr. Hatch (for himself, Mr. Kennedy, Ms. Snowe, Mr. Kerry, Mr. 
  Jeffords, Mr. Dodd, Mr. Stevens, Mr. Rockefeller, Mr. Bennett, Mr. 
Daschle, Mr. Collins, Mr. Wellstone, Mr. Smith of Oregon, Mr. Bingaman, 
 Mr. Campbell, Mrs. Murray, Mr. Reed, Mrs. Boxer, Mr. Lautenberg, Mr. 
  Durbin, and Mr. Reid) introduced the following bill; which was read 
    twice and referred to the Committee on Labor and Human Resources

_______________________________________________________________________

                                 A BILL


 
To amend the Public Health Service Act to provide access to health care 
                    insurance coverage for children.

    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 ``Child Health 
Insurance and Lower Deficit Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Purposes.
Sec. 3. Amendment to Public Health Service Act.
       ``TITLE XXVIII--CHILDREN'S HEALTH INSURANCE GRANT PROGRAM

                        ``Part A--State Programs

        ``Sec. 2801. Authority to establish.
        ``Sec. 2802. Requirements for qualifying children's policy.
        ``Sec. 2803. Requirements for qualifying children's direct 
                            service benefit option.
        ``Sec. 2804. Other requirements.
                          ``Part B--Assistance

                  ``Subpart 1--Assistance to Families

        ``Sec. 2821. Eligibility determinations.
        ``Sec. 2822. Assistance to families.
        ``Sec. 2823. Penalties for material misrepresentation and false 
                            information.
        ``Sec. 2824. Aggregate Federal grant payments.
        ``Sec. 2825. Authorization of appropriations and deficit 
                            reduction.
   ``Subpart 2--Services for Pregnant Women, New Mothers, and Infants

        ``Sec. 2831. Program for pregnant women and infants.
           ``Part C--Definitions and Miscellaneous Provisions

                        ``Subpart 1--Definitions

        ``Sec. 2841. Definitions.
                 ``Subpart 2--Miscellaneous Provisions

        ``Sec. 2851. Other contributions to premiums.
        ``Sec. 2852. Maintenance of effort.
        ``Sec. 2853. Application of other requirements and State 
                            flexibility.
        ``Sec. 2854. Regulations.
Sec. 4. Conforming amendments.
Sec. 5. Effective date.

SEC. 2. PURPOSES.

    It is the purpose of this Act to benefit American families by--
            (1) providing grants to States to develop and implement a 
        voluntary program to help purchase health coverage for 
        uninsured, needy children; and
            (2) acquiring resources targeted to help reduce the Federal 
        budget deficit that, if unchecked, will require American 
        families to devote an increasing proportion of their tax 
        liability to service the debt.

SEC. 3. AMENDMENT TO PUBLIC HEALTH SERVICE ACT.

    The Public Health Service Act (42 U.S.C. 201 et seq.) is amended by 
adding at the end the following:

       ``TITLE XXVIII--CHILDREN'S HEALTH INSURANCE GRANT PROGRAM

                ``Part A--Voluntary State Grant Programs

``SEC. 2801. AUTHORITY TO ESTABLISH.

    ``(a) State Election.--Each State may elect to establish a 
children's health insurance program that complies with this title.
    ``(b) State Plan.--
            ``(1) In general.--To apply to participate under this part, 
        a State shall, not later than 90 days prior to the beginning of 
        the calendar year in which the State program is to begin, 
        prepare and submit to the Secretary a State plan for the 
        operation of the program.
            ``(2) Approval by secretary.--The State plan submitted by a 
        State under paragraph (1) must be approved by the Secretary in 
        order for the State to be eligible to receive a grant under 
        this title.
    ``(c) Use of Funds.--Under a program under this title, a 
participating State shall provide subsidies, consistent with section 
2822, for coverage under a qualifying children's policy and a 
qualifying children's direct service benefit option.

``SEC. 2802. REQUIREMENTS FOR QUALIFYING CHILDREN'S POLICY.

    ``(a) In General.--Each participating State--
            ``(1) shall contract with health insurance issuers to make 
        qualifying children's policies available to subsidy eligible 
        children in the State;
            ``(2) shall ensure that qualifying children's policies are 
        available to all eligible children in the State and that each 
        eligible child has the opportunity to enroll for coverage under 
        such policies;
            ``(3) shall ensure that a qualifying children's policy 
        provides coverage for the care described in subsections (b) and 
        (c);
            ``(4) shall provide for the payment of premium and cost 
        sharing subsidies (in amounts as defined by the State in 
        accordance with section 2822), that may include vouchers, to or 
        on behalf of subsidy eligible children, except that a State 
        electing to participate may not--
                    ``(A) provide a premium subsidy that is less than 
                95 percent for a subsidy eligible child in a family 
                with a family income below 185 percent of the poverty 
                line for a family of the size involved;
                    ``(B) allow the imposition of cost-sharing 
                requirements for preventive services provided to a 
                subsidy eligible child; or
                    ``(C) enter into a contract with a health insurance 
                issuer offering a qualifying children's policy that 
                requires that a subsidy eligible child (in a family 
                with a family income below 150 percent of the poverty 
                line for a family of the size involved) pay more than 
                20 percent of the cost-sharing otherwise applied under 
                such contract as applied with respect to a particular 
                item or service unless the cost-sharing required under 
                the contract involved has been deemed by the Secretary 
                as not being a barrier to care for children of families 
                below 150 percent of poverty line for a family of the 
                size involved.
    ``(b) Coverage for Medical Care.--For purposes of this title, a 
qualifying children's policy is a policy for an eligible child that 
provides coverage for medical care for such child that is the 
equivalent of the medical assistance available (other than cost 
sharing) to children under the State plan under title XIX of the Social 
Security Act (42 U.S.C. 1396 et seq.).
    ``(c) Access to Speciality Care for Special Needs Children.--Each 
participating State shall assure that each qualifying children's policy 
ensure access to pediatric primary and speciality care providers, 
including centers of pediatric specialized treatment expertise.
    ``(d) Access.--
            ``(1) Access to policies.--In carrying out subsection 
        (a)(1), a participating State shall, subject to the funding 
        limitation described in section 2822(d), ensure that subsidy 
        eligible children have access to a qualifying children's policy 
        provided by a health insurance issuer serving the area in which 
        the eligible child resides. Such policies may be offered to 
        eligible children residing in the State through existing public 
        and private purchasing sponsors.
            ``(2) To traditional providers.--A participating State 
        shall ensure that a qualifying children's policy provides 
        access to traditional providers who have experience in serving 
        populations covered under this title and in areas in which such 
        populations reside.

``SEC. 2803 REQUIREMENTS FOR QUALIFYING CHILDREN'S DIRECT SERVICE 
              BENEFIT OPTION.

    ``(a) In General.--Each participating State--
            ``(1) for each area of the State served by a health center 
        (as defined in section 330), shall contract directly with the 
        health center to provide services under the program under this 
        title for subsidy eligible children who choose to receive 
        services from the health center;
            ``(2) shall ensure that under a qualifying children's 
        direct service benefit option, coverage is provided for the 
        care described in subsections (c) and (d);
            ``(3) shall ensure that services described in subsection 
        (c) which are not made available by a health center are 
        provided either--
                    ``(A) through contracts for direct payment to 
                specific networks of providers; or
                    ``(B) through the purchase of wraparound insurance; 
                and
            ``(4) shall provide for payments in accordance with 
        subsection (b).
    ``(b) Payments.--
            ``(1) In general.--Under a qualifying children's direct 
        service benefit option, a State may not--
                    ``(A) require that a subsidy eligible child in a 
                family with a family income below 185 percent of the 
                poverty line for a family of the size involved pay more 
                than 5 percent of the capitated payment rate;
                    ``(B) allow the imposition of cost-sharing 
                requirements for preventive services provided to a 
                subsidy eligible child;
                    ``(C) enter into a contract that requires that a 
                subsidy eligible child (in a family with a family 
                income below 150 percent of the poverty line for a 
                family of the size involved) pay more than 20 percent 
                of the cost-sharing otherwise applied by the health 
                center, unless the cost-sharing required under the 
                contract involved has been deemed by the Secretary as 
                not being a barrier to care for children of families 
                below 150 percent of the poverty line for a family of 
                the size involved.
    ``(c) Coverage for Medical Care.--For purposes of this title, a 
qualifying children's direct service benefit option is an option for a 
eligible child that provides coverage for medical care for such child 
that is the equivalent of the medical assistance available (other than 
cost sharing) to children under the State plan under title XIX of the 
Social Security Act (42 U.S.C. 1396 et seq.).
    ``(d) Access to Speciality Care for Special Needs Children.--Each 
qualified children's direct service benefit option shall assure access 
to pediatric primary and speciality care providers, including centers 
of pediatric specialized treatment expertise.

``SEC. 2804. OTHER REQUIREMENTS.

    ``(a) In General.--A participating State shall--
            ``(1) take steps to ensure that information about the 
        availability of the program, requirements for family 
        participation in the program, benefits offered, and the 
        application process are disseminated effectively to potential 
        participants;
            ``(2) have in effect an outreach system under which 
        families eligible for assistance under this title are assisted 
        in enrolling in the State program and are enrolled at a wide 
        variety of locations, including through of traditional 
        providers of care;
            ``(3) ensure that every subsidy eligible children have the 
        opportunity to apply for assistance under the State program 
        under this title pursuant to State law;
            ``(4) if the State determines that a child is eligible for 
        cost-sharing assistance under this title, notify the health 
        plan in which such child is participating in a timely manner of 
        such eligibility;
            ``(5) provide to any subsidy eligible child whose claim for 
        assistance under the State program is denied or is not acted on 
        within a reasonable period of time, an opportunity under State 
        law for an administrative hearing on such denial or inaction 
        before the State agency;
            ``(6) provide to the public, a general description of the 
        rules (including the objective criteria used) established by 
        the State for making decisions concerning eligibility for 
        assistance under the State program; and
            ``(7) use funds received under this title only in 
        accordance with the provisions of this title.
    ``(b) Designation of State Agency.--A participating State may 
designate an appropriate State agency to administer the State program 
under this title.

                          ``Part B--Assistance

                  ``Subpart 1--Assistance to Families

``SEC. 2821. ELIGIBILITY DETERMINATIONS.

    ``(a) In General.--The following requirements shall apply with 
respect to eligibility determinations for assistance under this title:
            ``(1) Applications.--A State program shall provide that an 
        individual may file an application for assistance in any manner 
        determined appropriate by the State. Such applications shall--
                    ``(A) be in an understandable form and generally 
                accessible to individuals;
                    ``(B) require the provision of information 
                necessary to make a determination as to whether a child 
                is eligible for assistance; and
                    ``(C) require attachment of such documentation as 
                deemed necessary by the Secretary in order to verify 
                eligibility for assistance.
            ``(2) Term.--The State program may provide for a 
        determination of eligibility under this section to be effective 
        for a 6-month period or longer.
    ``(b) Coordination.--Eligibility determinations made pursuant to 
this section may be coordinated with determinations of eligibility for 
State-administered health programs to the extent that such coordination 
brings about administrative efficiencies.

``SEC. 2822. ASSISTANCE TO FAMILIES.

    ``(a) State Applicable Income Criteria.--For purposes of this 
title, the applicable income criteria used by the State for purposes of 
determining whether a child is a subsidy eligible child, shall be based 
on the income of the family of the subsidy eligible child expressed as 
a percentage of the poverty line for a family of the size involved. In 
establishing the applicable eligibility criteria and subsidy level, the 
State shall give priority to families in the State with the lowest 
family incomes, except that the State shall establish a higher income 
criterion for families with a disabled child.
    ``(b) Payments.--
            ``(1) In general.--The amount of the assistance available 
        to a subsidy eligible child shall be paid directly to--
                    ``(A) in the case of a child enrolled in a 
                qualifying children's policy, the health insurance 
                issuer offering the qualifying children's policy 
                (unless such plan is a group health plan in which case 
                such payment may be made directly to the group health 
                plan or the health insurance issuer offering health 
                insurance coverage through the group health plan, or to 
                the individual); or
                    ``(B) in the case of an individual receiving 
                benefits under a qualifying children's direct service 
                benefit option, to the provider and the health 
                insurance issuer if applicable with whom the State has 
                contracted under section 2803.
            ``(2) Individual responsibility.--An individual shall be 
        responsible for any portion of the premium or cost sharing not 
        subsidized by the State.
    ``(c) Special Rule.--
            ``(1) In general.--If a subsidy eligible child enrolls in a 
        group health plan, a premium subsidy under this title shall be 
        applied only to the amount of the employee contribution for 
        coverage for a subsidy eligible child.
            ``(2) Rule of construction.--Nothing in this section shall 
        be construed to require that an employer provide a qualifying 
        children's policy to an eligible child regardless of whether 
        such child is eligible for a subsidy under this title.
    ``(d) Limitation.--Nothing in this title shall be construed to 
require that a State provide assistance to subsidy eligible children 
under this part in an amount that exceeds the total amount available to 
the State under section 2826 (including State matching funds) for 
carrying out the program under this title. If the State determines that 
such available amount is not sufficient to provide premium subsidies 
and other assistance under this part to all subsidy eligible children 
in the State, the State may adjust the applicable eligibility criteria 
appropriately or adjust the State program in another manner specified 
by the Secretary prior to the program year.

``SEC. 2823. PENALTIES FOR MATERIAL MISREPRESENTATION AND FALSE 
              INFORMATION.

    ``A participating State shall establish penalties to be applied to 
any individual who knowingly and willfully makes a material 
misrepresentation of information or provides false information in an 
application for assistance under this part, and shall otherwise enforce 
the provisions of this title as determined appropriate by the State.

``SEC. 2824. AGGREGATE FEDERAL GRANT PAYMENTS.

    ``(a) Payment Schedule.--
            ``(1) State amount.--
                    ``(A) In general.--A participating State shall be 
                eligible to receive a grant in an amount under this 
                title that bears the same relationship to the amount 
                appropriated for such year under section 2825 (and 
                available after the reservation under paragraph (7)), 
                as the total number of uninsured eligible children in 
                the State in a base year as determined appropriate by 
                the Secretary bears to the total number of uninsured 
                eligible children in all participating States in such 
                base year.
                    ``(B) State allocation adjustments.--
                            ``(i) Study.--Not later than September 30, 
                        1998, the Secretary shall conduct a study, and 
                        prepare and submit to the appropriate 
                        committees of Congress a report, concerning 
                        methodology for providing the State allotment 
                        under subparagraph (A) that takes into account 
                        an equitable adjustment to the formula based on 
                        variations in costs among States.
                            ``(ii) Implementation of methodology.--If 
                        determined appropriate and feasible by the 
                        Secretary, the Secretary shall, not later than 
                        January 1, 1999, implement by regulation a 
                        methodology for the determination of the 
                        maximum amount under subparagraph (A) that 
                        takes into account the relative number of 
                        uninsured eligible children in a State in the 
                        base year described in subparagraph (A) and the 
                        relative cost of the delivery of services to 
                        those children.
            ``(2) Payment.--Subject to paragraph (1), the Secretary 
        shall provide for payment under a grant to each participating 
State for each calendar quarter, beginning with any quarter beginning 
on or after April 1, 1998, of an amount equal to--
                    ``(A)(i) 100 percent of the total amount estimated 
                by the Secretary to have been expended by the State 
                during such prior quarter for premium and cost-sharing 
                assistance under this title for enrollment in 
                qualifying children's policies and for coverage under 
                the qualifying children's direct service benefit option 
                through the programs operated under part A; less
                    ``(ii) the State matching amount as determined 
                under paragraph (3) for such prior quarter; and
                    ``(B) 50 percent of the total amount estimated by 
                the Secretary to be expended by the State during such 
                prior quarter for the proper and efficient 
                administration of the program described in this part.
            ``(3) State matching percentage.--
                    ``(A) In general.--With respect to the calendar 
                quarter for which the payment is to be made under this 
                section, the State will be responsible for contributing 
                an amount equal to 40 percent of the percentage of the 
                amount the State is responsible for expending for 
                medical assistance under title XIX of the Social 
                Security Act, based on the State percentage determined 
                under section 1905(b) of such Act (42 U.S.C. 1396d(b)), 
                for the State for the calendar quarter involved.
                    ``(B) Limitation.--In no case shall the State 
                responsibility under subparagraph (A) for a calendar 
                quarter be less than an amount equal to 10 percent of 
                the amount determined under paragraph (2)(A)(i) for the 
                State for the calendar quarter involved.
                    ``(C) Territories.--In the case of Puerto Rico, the 
                Virgin Islands, Guam, American Samoa, and the Northern 
                Mariana Islands, the State percentage for purposes of 
                determining the State matching amount under 
                subparagraph (A) shall be 20 percent.
            ``(4) Availability of funds.--Except as provided in 
        paragraph (5), amounts provided to a State under this section 
        shall remain available until expended by the State.
            ``(5) Redistribution.--The Secretary shall establish a 
        procedure for the redistribution of any funds--
                    ``(A) not expended by a State under this title; and
                    ``(B) as determined by the Secretary, after 
                consultation with the governor of the State, that are 
                unlikely to be used in the future by the State.
            ``(6) State request for reduction in funds.--Nothing in 
        this section shall be construed to prohibit a State from 
        requesting only a portion of the amount allotted to the State 
        under this section.
            ``(7) Reservation.--
                    ``(A) In general.--Of the amount appropriated to 
                carry out this Act for a fiscal year, the Secretary 
                shall reserve .15 percent of such amount for allocation 
                among the territories described in paragraph (2)(C).
                    ``(B) Allocation.--A territory described in 
                paragraph (2)(C) shall be eligible to receive an amount 
                that bears the same relationship to the amount reserved 
                for such year under subparagraph (A), as the total 
                number of uninsured eligible children in the territory 
                in a base year as determined appropriate by the 
                Secretary bears to the total number of uninsured 
                eligible children in all participating territories in 
                such base year.
    ``(b) Reduction in Payments for Administrative Errors.--
            ``(1) In general.--In the case of administrative errors 
        described in paragraph (2), matching payments available to a 
        State under subsection (a) shall be reduced by an amount 
        determined appropriate by the Secretary.
            ``(2) Administrative errors described.--The administrative 
        errors described in this paragraph include the following:
                    ``(A) An eligibility error rate for premium 
                assistance to the extent the applicable error rate 
                exceeds the maximum permissible error rate specified by 
                the Secretary.
                    ``(B) Misappropriations or other expenditures that 
                the Secretary finds are attributable to malfeasance or 
                misfeasance.
    ``(c) Audits.--The Secretary shall conduct regular audits of the 
activities conducted under this part.
    ``(d) Budgetary Treatment.--Subject to section 2825, this section 
constitutes budget authority in advance of appropriations Acts, and 
represents the obligation of the Federal Government to provide payments 
to the States in accordance with this section.
    ``(e) Nonentitlement.--Nothing in this title shall be construed as 
providing an individual with an entitlement to assistance under this 
title.

``SEC. 2825. AUTHORIZATION OF APPROPRIATIONS AND DEFICIT REDUCTION.

    ``(a) Authorization of Appropriations.--There is authorized to be 
appropriated to make Federal payments under this title--
            ``(1) for fiscal year 1998, $3,000,000,000;
            ``(2) for fiscal year 1999, $3,000,000,000;
            ``(3) for fiscal year 2000, $4,000,000,000;
            ``(4) for fiscal year 2001, $5,000,000,000; and
            ``(5) for fiscal year 2002, $5,000,000,000.
    ``(b) Deficit Reduction Targets.--For purposes of this section, the 
deficit reduction target shall be--
            ``(1) for fiscal year 1998, $3,000,000,000;
            ``(2) for fiscal year 1999, $3,000,000,000;
            ``(3) for fiscal year 2000, $2,000,000,000;
            ``(4) for fiscal year 2001, $1,000,000,000; and
            ``(5) for fiscal year 2002, $1,000,000,000.
Any amount of revenue available under this subsection shall be 
deposited into the Treasury and used for deficit reduction.
    ``(c) Reduction in Authorized Amount.--
            ``(1) In general.--If, with respect to a fiscal year, the 
        total estimated amount of revenue derived for the financing of 
        the program under this title is less than the total target 
        amount determined under paragraph (2), then the amount referred 
        to for the following fiscal year under subsection (a) shall be 
        reduced by the amount by which the amount of such estimated 
        revenue is less than the total target amount determined under 
        paragraph (2) for such fiscal year multiplied by \2/3\.
            ``(2) Total target amount.--For purposes of paragraph (1), 
        the total target amount for a fiscal year shall be equal to the 
        sum of--
                    ``(A) the amount authorized to be appropriated for 
                such year under subsection (a); and
                    ``(B) the deficit reduction target for such fiscal 
                year under subsection (b).
            ``(3) Revenue in excess of estimates.--If the estimated 
        amount of revenue described in paragraph (1) for a fiscal year 
        is greater than the total target amount under paragraph (2) for 
        such fiscal year, then the amount authorized for the following 
        fiscal year under subsection (a) shall be increased in the same 
        manner as the reduction described in paragraph (1).

   ``Subpart 2--Services for Pregnant Women, New Mothers, and Infants

``SEC. 2831. PROGRAM FOR PREGNANT WOMEN AND INFANTS.

    ``(a) Establishment of Program.--A participating State may use up 
to 5 percent of the amount of the allotment to the State for a fiscal 
year under section 2825 to establish a program to meet the needs 
identified by the State in the statewide needs assessments prepared by 
the States under section 505(a)(1)(A) of the Social Security Act (42 
U.S.C. 705(a)(1)(A)).
    ``(b) Coordination.--A State shall take actions to ensure that the 
program established under this section is coordinated with the programs 
operated by the State under title V of the Social Security Act (42 
U.S.C. 705).
    ``(c) Maintenance of Effort.--With respect to a State that carries 
out a program under this section, funds made available under this title 
for such program shall be used to supplement and not supplant current 
State spending for the needs described in subsection (a).

           ``Part C--Definitions and Miscellaneous Provisions

                        ``Subpart 1--Definitions

``SEC. 2841. DEFINITIONS.

    ``(a) In General.--In this title:
            ``(1) Eligible child.--The term ``eligible child'' means an 
        individual who is 18 years of age or younger.
            ``(2) Participating state.--The term `participating State' 
        means any State that elects to establish a program under part 
        A.
            ``(3) Poverty line.--The term `poverty line' means the 
        income official poverty line (as defined by the Office of 
        Management and Budget, and revised annually in accordance with 
        section 673(2) of the Omnibus Budget Reconciliation Act of 
        1981) that is applicable to a family of the size involved.
            ``(4) Qualifying children's policy.--The term `qualifying 
        children's policy' means a policy that meets the standards 
        described in section 2802.
            ``(5) Qualifying children's direct service benefit 
        option.--The term `qualifying children's direct service benefit 
        option' means the provision of direct medical assistance under 
        the standards described in section 2803.
            ``(6) State.--The term `State' means each of the several 
        States, the District of Columbia, Puerto Rico, the Virgin 
        Islands, Guam, American Samoa, and the Northern Mariana 
        Islands.
            ``(7) Subsidy eligible child.--The term `subsidy eligible 
        child' means a child who--
                    ``(A) meets reasonable eligibility criteria 
                established by the State, and has a family income that 
                falls within the applicable income criteria (as defined 
                in section 2822), for purposes of providing subsidies 
                under the State program;
                    ``(B) is an eligible child;
                    ``(C) is a citizen or qualified alien (as defined 
                in section 431(b) of the Personal Responsibility and 
                Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
                1641(b));
                    ``(D) is not eligible for medical assistance under 
                the State plan under title XIX of the Social Security 
                Act, except that nothing in this title shall be 
                construed to require that an individual be denied 
                medical assistance under a State plan under title XIX 
                of the Social Security Act (42 U.S.C. 1396 et seq.) in 
                order for that child to be eligible to receive 
                assistance under the State program under this title; 
                and
                    ``(E) has not been covered under a group health 
                plan (unless such coverage was terminated as a result 
                of a change in employment status) during the 6-month 
                period ending on the date on which the individual 
                applies for subsidy-eligible health coverage under this 
                title.
        For purposes of subparagraph (E), enrollment in a health plan 
        under a COBRA continuation provision (as defined in section 
        2791(d)(4)) shall not constitute enrollment in a group health 
        plan.
    ``(b) Definitions Relating to Income.--In this title:
            ``(1) Family income.--The term `family income' means, with 
        respect to an individual who--
                    ``(A) is not a dependent of another individual, the 
                sum of the modified adjusted gross incomes for the 
                individual, the individual's spouse, and children who 
                are dependents of the individual; or
                    ``(B) is a dependent of another individual, the sum 
                of the modified adjusted gross incomes for the other 
                individual, the other individual's spouse, and children 
                who are dependents of the other individual.
        The Secretary may promulgate rules under which spousal income 
        may be disregarded in instances where a spouse is not part of a 
        family unit.
            ``(2) Dependent.--The term `dependent' has the meaning 
        given such term under section 152 of the Internal Revenue Code 
        of 1986. For purposes of this paragraph, a child who is placed 
        in foster care by a State agency shall not be considered a 
        dependent of another individual.
            ``(3) Modified adjusted gross income.--The term `modified 
        adjusted gross income' means adjusted gross income (as defined 
        in section 62(a) of the Internal Revenue Code of 1986)--
                    ``(A) determined without regard to sections 135, 
                162(l), 911, 931, and 933 of such Code, and
                    ``(B) increased by--
                            ``(i) the amount of interest received or 
                        accrued by the individual during the taxable 
                        year which is exempt from tax, and
                            ``(ii) the amount of the social security 
                        benefits (as defined in section 86(d) of such 
                        Code) received during the taxable year to the 
                        extent not included in gross income under 
                        section 86 of such Code.
        The determination under the preceding sentence shall be made 
        without regard to any carryover or carryback.
    ``(c) Other Definitions.--The term--
            ``(1) `group health plan' has the meaning given the term in 
        section 2791(a);
            ``(2) `health insurance coverage' has the meaning given the 
        term in section 2791(b)(1);
            ``(3) `health insurance issuer' has the meaning given the 
        term in section 2791(b)(2);
            ``(4) `health maintenance organization' has the meaning 
        given the term in section 2791(b)(3); and
            ``(5) `network plan' has the meaning given the term in 
        section 2791(B)(10).
    ``(d) References to Individual.--For purposes of this title, any 
reference to an individual shall include a reference to the parent or 
guardian of such individual.

                 ``Subpart 2--Miscellaneous Provisions

``SEC. 2851. OTHER CONTRIBUTIONS TO PREMIUMS.

    ``(a) General Rule.--Any employer which elects to make employer 
contributions on behalf of an individual who is an employee of such 
employer, or who is a dependent of such employee, for health insurance 
coverage shall not condition, or vary, such contributions with respect 
to any such individual by reason of such individual's status as an 
individual eligible for assistance under part B.
    ``(b) Elimination of Contributions.--An employer shall not be 
treated as failing to meet the requirements of subsection (a) if the 
employer ceases to make employer contributions for health insurance 
coverage for all its employees.
    ``(c) Enforcement.--The enforcement provisions applicable to group 
health insurance coverage under the amendments made by section 
101(e)(2) of the Health Insurance Portability and Accountability Act of 
1996 shall apply with respect to an employer that violates the 
provisions of this section in the same manner as such provisions apply 
to employers under such amendments.

``SEC. 2852. MAINTENANCE OF EFFORT.

    ``(a) Medicaid.--A State that elects to participate under this 
title may not modify the eligibility requirements for children under 
the State program under title XIX of the Social Security Act, as in 
effect on January 1, 1997 (except that such requirements may be 
modified pursuant to an application for a waiver under section 1115 of 
the Social Security Act (42 U.S.C. 1315) submitted prior to January 1, 
1997), in any manner that would have the effect of reducing the 
eligibility of children for coverage under such program.
    ``(b) Maintenance of Effort.--Funds appropriated pursuant to the 
authority of this Act shall be used to supplement and not supplant 
other Federal and State funds expended to provide services for disabled 
individuals.

``SEC. 2853. APPLICATION OF OTHER REQUIREMENTS AND STATE FLEXIBILITY.--

    ``(a) Application of Insurance Requirements Under Title XXVII.--For 
purposes of applying sections 2701 (a) through (e) and (g) (relating to 
limitations on preexisting conditions and increased portability) except 
those provisions relating to late enrollees, waiting periods, and 
election of alternative methods under section 2701(c)(3)(B), 2702(a)(1) 
and (b) (relating to eligibility to enroll), 2711(a)(1)(A) (relating to 
guaranteed availability for eligible individuals), and 2711(c) and 
(d)(1) (relating to special rules for network plans and financial 
capacity) to health insurance issuers offering a qualifying children's 
policy and health insurance issuers offering wrap-around insurance 
under this title, a qualifying children's policy shall be deemed to be 
health insurance coverage offered by a health insurance issuer in the 
small group market, in connection with a group health plan, and an 
eligible individual shall be considered a small employer for the 
purposes of section 2711(a)(1)(A), (c) and (d)(1), except that section 
2701(b) shall apply to a qualifying children's policy offered to a 
subsidy eligible child.
    ``(b) State Flexibility.--Nothing in this section shall be 
construed to prevent a State from establishing or implementing 
standards or requirements--
            ``(1) not prescribed in this title; or
            ``(2) related to the issuance, renewal or portability of 
        health insurance under a qualifying children's policy or a 
        qualifying children's direct service benefit option that 
        provide greater protection or benefit to an eligible child.

``SEC. 2854. REGULATIONS.

    The Secretary may issue regulations to implement the program 
established under this title.''.

SEC. 4. CONFORMING AMENDMENTS.

    (a) ERISA.--Section 701(c)(1) of the Employee Retirement Income 
Security Act of 1974 (as added by section 101(a) of the Health 
Insurance Portability and Accountability Act of 1996) is amended by 
adding at the end the following:
                    ``(K) A qualifying children's policy under the 
                Child Health Insurance and Lower Deficit Act.''.
    (b) Public Health Service Act.--
            (1) Section 2701(c)(1) of the Public Health Service Act (as 
        added by section 102(a) of the Health Insurance Portability and 
        Accountability Act of 1996) is amended by adding at the end the 
        following:
                    ``(K) A qualifying children's policy under the 
                Child Health Insurance and Lower Deficit Act.''.
            (2) Section 2761(b)(1)(A) of the Public Health Service Act 
        (as added by section 102(a) of the Health Insurance Portability 
        and Accountability Act of 1996) is amended--
                    (A) by striking ``or church plan'' and inserting 
                ``church plan''; and
                    (B) by inserting before the semicolon the 
                following: ``, qualifying children's policy, or 
                qualifying children's direct service benefit option''.

SEC. 5. EFFECTIVE DATE.

    This Act shall become effective on the date of enactment of this 
Act, except that funds to carry out programs under the amendments made 
by this Act shall not be available prior to January 1, 1998.
                                 <all>