[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 2994 Introduced in Senate (IS)]







106th CONGRESS
  2d Session
                                S. 2994

To amend the Internal Revenue Code of 1986 to provide tax incentives to 
     encourage small business health plans, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 27, 2000

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

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide tax incentives to 
     encourage small business health plans, 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.

    This Act may be cited as the ``Health Insurance Equity Act of 
2000''.

SEC. 2. CERTAIN GRANTS BY PRIVATE FOUNDATIONS TO QUALIFIED HEALTH 
              BENEFIT PURCHASING COALITIONS.

    (a) In General.--Section 4942 of the Internal Revenue Code of 1986 
(relating to taxes on failure to distribute income) is amended by 
adding at the end the following:
    ``(k) Certain Qualified Health Benefit Purchasing Coalition 
Distributions.--
            ``(1) In general.--For purposes of subsection (g) and 
        section 4945(d)(5), a qualified health benefit purchasing 
        coalition distribution by a private foundation shall be 
        considered to be a distribution for a charitable purpose.
            ``(2) Qualified health benefit purchasing coalition 
        distribution.--For purposes of paragraph (1)--
                    ``(A) In general.--The term `qualified health 
                benefit purchasing coalition distribution' means any 
                amount paid by a private foundation to or on behalf of 
                a qualified health benefit purchasing coalition (as 
                defined in section 9841) for purposes of payment or 
                reimbursement of start-up costs paid or incurred in 
                connection with the establishment and maintenance of 
                such coalition.
                    ``(B) Exclusions.--Such term shall not include any 
                amount used by a qualified health benefit purchasing 
                coalition (as so defined)--
                            ``(i) for the purchase of real property,
                            ``(ii) as payment to, or for the benefit 
                        of, members (or employees or affiliates of such 
                        members) of such coalition, or
                            ``(iii) for start-up costs paid or incurred 
                        more than 24 months after the date of 
                        establishment of such coalition.
            ``(3) Termination.--This subsection shall not apply--
                    ``(A) to qualified health benefit purchasing 
                coalition distributions paid or incurred after December 
                31, 2008, and
                    ``(B) with respect to start-up costs of a coalition 
                which are paid or incurred after December 31, 2010.''.
    (b) Effective Date.--The amendment made by this subsection shall 
apply to qualified health benefit purchasing coalition distributions, 
as defined in section 4942(k)(2) of the Internal Revenue Code of 1986, 
as added by subsection (a), paid in taxable years beginning after 
December 31, 2000.

SEC. 3. SMALL BUSINESS HEALTH PLAN TAX CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business-related 
credits) is amended by adding at the end the following:

``SEC. 45D. EMPLOYEE HEALTH INSURANCE EXPENSES.

    ``(a) General Rule.--For purposes of section 38, in the case of a 
small employer (as defined in section 4980D(d)(2)), the employee health 
insurance expenses credit determined under this section for the taxable 
year is an amount equal to the applicable percentage of the amount paid 
by the taxpayer during the taxable year for qualified employee health 
insurance expenses.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage is--
            ``(1) in the case of insurance purchased as a member of a 
        qualified health benefit purchasing coalition (as defined in 
        section 9841), 25 percent, and
            ``(2) in the case of insurance not described in paragraph 
        (1), 20 percent.
    ``(c) Per Employee Dollar Limitation.--
            ``(1) In general.--The amount of qualified employee health 
        insurance expenses taken into account under subsection (a) with 
        respect to any qualified employee for any taxable year shall 
        not exceed the sum of the monthly limitations for coverage 
        months of such employee during such taxable year.
            ``(2) Monthly limitation.--The monthly limitation for each 
        coverage month during the taxable year is equal to \1/12\ of--
                    ``(A) $2,000 in the case of self-only coverage, and
                    ``(B) $5,000 in the case of family coverage.
            ``(3) Coverage month.--For purposes of this subsection, the 
        term `coverage month' means, with respect to an individual, any 
        month if--
                    ``(A) as of the first day of such month such 
                individual is covered by the taxpayer's new health 
                plan, and
                    ``(B) the premium for coverage under such plan for 
                such month is paid by the taxpayer.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified employee.--
                    ``(A) In general.--The term `qualified employee' 
                means, with respect to any period, an employee of an 
                employer if--
                            ``(i) the total amount of wages paid or 
                        incurred by such employer with respect to such 
                        employee for the taxable year exceeds $10,000, 
                        and
                            ``(ii) the employee is not a highly 
                        compensated employee.
                    ``(B) Treatment of certain employees.--For purposes 
                of subparagraph (A), the term `employee' shall 
                include--
                            ``(i) an employee within the meaning of 
                        section 401(c)(1), and
                            ``(ii) a leased employee within the meaning 
                        of section 414(n).
                    ``(C) Exclusion of certain employees.--
                            ``(i) In general.--If a plan--
                                    ``(I) prescribes minimum age and 
                                service requirements as a condition of 
                                coverage, and
                                    ``(II) excludes all employees not 
                                meeting such requirements from 
                                coverage,
                        then such employees shall be excluded from 
                        consideration for purposes of this paragraph.
                            ``(ii) Collective bargaining agreement.--
                        For purposes of this paragraph, there shall be 
                        excluded from consideration employees who are 
                        included in a unit of employees covered by an 
                        agreement between employee representatives and 
                        one or more employers, if there is evidence 
                        that health insurance benefits were the subject 
                        of good faith bargaining between such employee 
                        representatives and such employer.
                            ``(iii) Limits on minimum requirements.--
                        Rules similar to the rules of section 410(a) 
                        shall apply with respect to minimum age and 
                        service requirements under clause (i).
                    ``(D) Wages.--The term `wages'--
                            ``(i) has the meaning given such term by 
                        section 3121(a) (determined without regard to 
any dollar limitation contained in such section), and
                            ``(ii) in the case of an employee described 
                        in subparagraph (B)(i), includes the net 
                        earnings from self-employment (as defined in 
                        section 1402(a) and as so determined).
            ``(2) Qualified employee health insurance expenses.--
                    ``(A) In general.--The term `qualified employee 
                health insurance expenses' means any amount paid or 
                incurred by an employer during the applicable period 
                for health insurance coverage provided under a new 
                health plan to the extent such amount is attributable 
                to coverage provided to any employee who is not a 
                highly compensated employee.
                    ``(B) Exception for amounts paid under salary 
                reduction arrangements.--No amount paid or incurred for 
                health insurance coverage pursuant to a salary 
                reduction arrangement shall be taken into account under 
                subparagraph (A).
                    ``(C) Health insurance coverage.--The term `health 
                insurance coverage' has the meaning given such term by 
                section 9832(b)(1).
                    ``(D) New health plan.--For purposes of this 
                paragraph, the term `new health plan' means any 
                arrangement of the employer which provides health 
                insurance coverage to employees if--
                            ``(i) such employer (or predecessor 
                        employer) did not establish or maintain such 
                        arrangement (or any similar arrangement) at any 
                        time during the 2 taxable years ending prior to 
                        the taxable year in which the credit under this 
                        section is first allowed, and
                            ``(ii) such arrangement covers at least 70 
                        percent of the qualified employees of such 
                        employer who are not otherwise covered by 
                        health insurance.
                    ``(E) Applicable period.--For purposes of 
                subparagraph (A), the applicable period with respect to 
                an employer shall be the 4-year period beginning on the 
                date such employer establishes a new health plan.
            ``(3) Highly compensated employee.--The term `highly 
        compensated employee' means an employee who for the preceding 
        year had compensation from the employer in excess of $75,000.
    ``(e) Certain rules made applicable.--For purposes of this section, 
rules similar to the rules of section 52 shall apply.
    ``(f) Disallowance of Deduction.--No deduction shall be allowed for 
that portion of the qualified employee health insurance expenses for 
the taxable year which is equal to the amount of the credit determined 
under subsection (a).
    ``(g) Termination.--This section shall not apply to expenses paid 
or incurred by an employer with respect to any arrangement established 
on or after January 1, 2009.''.
    (b) Credit To Be Part of General Business Credit.--Section 38(b) of 
the Internal Revenue Code of 1986 (relating to current year business 
credit) is amended by striking ``plus'' at the end of paragraph (11), 
by striking the period at the end of paragraph (12) and inserting ``, 
plus'', and by adding at the end the following:
            ``(13) the employee health insurance expenses credit 
        determined under section 45D.''
    (c) No Carrybacks.--Subsection (d) of section 39 of the Internal 
Revenue Code of 1986 (relating to carryback and carryforward of unused 
credits) is amended by adding at the end the following:
            ``(9) No carryback of section 45d credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the employee health insurance 
        expenses credit determined under section 45D may be carried 
        back to a taxable year ending before the date of the enactment 
        of section 45D.''
    (d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following:

                              ``Sec. 45D. Employee health insurance 
                                        expenses.''
    (e) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2000, for arrangements established after the date of the 
enactment of this Act.

SEC. 4. QUALIFIED HEALTH BENEFIT PURCHASING COALITION.

    (a) In General.--Chapter 100 of the Internal Revenue Code of 1986 
(relating to group health plan requirements) is amended by adding at 
the end the following new subchapter:

     ``Subchapter D--Qualified Health Benefit Purchasing Coalition

                              ``Sec.  9841.  Qualified health benefit 
                                        purchasing coalition.

``SEC. 9841. QUALIFIED HEALTH BENEFIT PURCHASING COALITION.

    ``(a) In General.--A qualified health benefit purchasing coalition 
is a private not-for-profit corporation which--
            ``(1) is licensed to provide health insurance in the State 
        in which the employers to which such coalition is providing 
        insurance is located, and
            ``(2) establishes to the Secretary, under State 
        certification procedures or other procedures as the Secretary 
        may provide by regulation, that such coalition meets the 
        requirements of this section.
    ``(b) Board of Directors.--
            ``(1) In general.--Each purchasing coalition under this 
        section shall be governed by a Board of Directors.
            ``(2) Election.--The Secretary shall establish procedures 
        governing election of such Board.
            ``(3) Membership.--The Board of Directors shall--
                    ``(A) be composed of small employers and employee 
                representatives of such employers, but
                    ``(B) not include other interested parties, such as 
                service providers, health insurers, or insurance agents 
                or brokers which may have a conflict of interest with 
                the purposes of the coalition.
    ``(c) Membership of Coalition.--
            ``(1) In general.--A purchasing coalition--
                    ``(A) shall accept all small employers residing 
                within the area served by the coalition as members if 
                such employers request such membership, and
                    ``(B) may accept any other employers residing with 
                such area.
            ``(2) Voting.--Members of a purchasing coalition shall have 
        voting rights consistent with the rules established by the 
        State.
    ``(d) Duties of Purchasing Coalitions.--Each purchasing coalition 
shall--
            ``(1) enter into agreements with employers to provide 
        health insurance benefits to employees of such employers,
            ``(2) enter into agreements with 3 or more unaffiliated, 
        qualified licensed health plans, to offer benefits to members,
            ``(3) offer to members at least 1 open enrollment period 
        per calendar year,
            ``(4) serve a significant geographical area, and
            ``(5) carry out other functions provided for under this 
        section.
    ``(e) Limitation on Activities.--A purchasing coalition shall not--
            ``(1) perform any activity (including certification or 
        enforcement) relating to compliance or licensing of health 
        plans,
            ``(2) assume insurance or financial risk in relation to any 
        health plan, or
            ``(3) perform other activities identified by the State as 
        being inconsistent with the performance of its duties under 
        this section.
    ``(f) Additional Requirements For Purchasing Coalitions.--As 
provided by the Secretary in regulations, a purchasing coalition shall 
be subject to requirements similar to the requirements of a group 
health plan under this chapter.
    ``(g) Definition of Small Employer.--The term `small employer' has 
the meaning given such term by section 4980D(d)(2).''.
    (b) Conforming Amendment.--The table of subchapters for chapter 100 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following item:
                              ``Subchapter D.  Qualified health benefit 
                                        purchasing coalition.''.
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