[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2893 Introduced in Senate (IS)]







108th CONGRESS
  2d Session
                                S. 2893

   To amend the Internal Revenue Code of 1986 to allow individuals a 
refundable credit against income tax for the purchase of private health 
                   insurance, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 5, 2004

 Ms. Murkowski 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 allow individuals a 
refundable credit against income tax for the purchase of private health 
                   insurance, 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 ``Save Act''.

              TITLE I--REFUNDABLE HEALTH INSURANCE CREDIT

SEC. 101. REFUNDABLE CREDIT FOR HEALTH INSURANCE COVERAGE.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 36 as section 37 and by inserting 
after section 35 the following new section:

``SEC. 36. HEALTH INSURANCE COSTS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this subtitle an amount 
equal to the amount paid during the taxable year for qualified health 
insurance for the taxpayer, his spouse, and dependents.
    ``(b) Limitations.--
            ``(1) In general.--The amount allowed as a credit under 
        subsection (a) to the taxpayer for the taxable year shall not 
        exceed the sum of the monthly limitations for coverage months 
        during such taxable year for each individual referred to in 
        subsection (a) for whom the taxpayer paid during the taxable 
        year any amount for coverage under qualified health insurance.
            ``(2) Phaseout of amount.--
                    ``(A) Reduction based on adjusted gross income.--
                The amount determined under paragraph (1) for any 
                taxable year shall be reduced (but not below zero) by 
                the amount determined under subparagraph (B).
                    ``(B) Amount of reduction.--The amount determined 
                under this subparagraph with respect to any amount 
                determined under paragraph (1) shall be the amount 
                which bears the same ratio to such amount determined 
                under paragraph (1) as--
                            ``(i) the excess of--
                                    ``(I) the taxpayer's adjusted gross 
                                income for such taxable year, over
                                    ``(II) the applicable dollar 
                                amount, bears to
                            ``(ii) $10,000.
                The rules of subparagraphs (B) and (C) of section 
                219(g)(2) shall apply to any reduction under this 
                subparagraph.
                    ``(C) Definitions.--For purposes of this 
                paragraph--
                            ``(i) adjusted gross income shall be 
                        determined in the same manner as under section 
                        408A(c)(3)(C)(i), and
                            ``(ii) the applicable dollar amount is--
                                    ``(I) in the case of a taxpayer 
                                filing a joint return, an amount equal 
                                to 350 percent of the poverty line (as 
                                defined in section 673(2) of the 
                                Community Services Block Grant Act, for 
                                a family of 4) for the taxable year,
                                    ``(II) in the case of any other 
                                taxpayer (other than a married 
                                individual filing a separate return), 
                                350 percent of the poverty line (as so 
                                defined for an individual) for the 
                                taxable year, and
                                    ``(III) in the case of a married 
                                individual filing a separate return, 
                                zero.
            ``(3) Monthly limitation.--
                    ``(A) In general.--The monthly limitation for an 
                individual for each coverage month of such individual 
                during the taxable year is the amount equal to \1/12\th 
                of--
                            ``(i) the base amount, plus
                            ``(ii) 50 percent of the amount paid in 
                        excess of the base amount.
                    ``(B) Base amount.--For purposes of this paragraph, 
                the base amount is--
                            ``(i) $1,000 if such individual is the 
                        taxpayer,
                            ``(ii) $500 if--
                                    ``(I) such individual is the spouse 
                                of the taxpayer,
                                    ``(II) the taxpayer and such spouse 
                                are married as of the first day of such 
                                month, and
                                    ``(III) the taxpayer files a joint 
                                return for the taxable year, and
                            ``(iii) $500 if such individual is an 
                        individual for whom a deduction under section 
                        151(c) is allowable to the taxpayer for such 
                        taxable year.
                    ``(C) Limitation on number of individuals other 
                than taxpayer.--Not more than 3 individuals may be 
                taken into account by the taxpayer under clauses (ii) 
                and (iii) of subparagraph (B).
                    ``(D) Special rule for married individuals.--In the 
                case of an individual--
                            ``(i) who is married (within the meaning of 
                        section 7703) as of the close of the taxable 
                        year but does not file a joint return for such 
                        year, and
                            ``(ii) who does not live apart from such 
                        individual's spouse at all times during the 
                        taxable year,
                the limitation imposed by subparagraph (C) shall be 
                divided equally between the individual and the 
individual's spouse unless they agree on a different division.
            ``(4) Coverage month.--For purposes of this subsection--
                    ``(A) In general.--The term `coverage month' means, 
                with respect to an individual, any month if--
                            ``(i) as of the first day of such month 
                        such individual is covered by qualified health 
                        insurance, and
                            ``(ii) the premium for coverage under such 
                        insurance for such month is paid by the 
                        taxpayer.
                    ``(B) Employer-subsidized coverage.--
                            ``(i) In general.--Such term shall not 
                        include any month for which such individual 
                        participates in any subsidized health plan 
                        (within the meaning of section 162(l)(2)) 
                        maintained by any employer of the taxpayer or 
                        of the spouse of the taxpayer.
                            ``(ii) Premiums to nonsubsidized plans.--If 
                        an employer of the taxpayer or the spouse of 
                        the taxpayer maintains a health plan which is 
                        not a subsidized health plan (as so defined) 
                        and which constitutes qualified health 
                        insurance, employee contributions to the plan 
                        shall be treated as amounts paid for qualified 
                        health insurance.
                    ``(C) Cafeteria plan and flexible spending account 
                beneficiaries.--Such term shall not include any month 
                during a taxable year if any amount is not includible 
                in the gross income of the taxpayer for such year under 
                section 106 with respect to--
                            ``(i) a benefit chosen under a cafeteria 
                        plan (as defined in section 125(d)), or
                            ``(ii) a benefit provided under a flexible 
                        spending or similar arrangement.
                    ``(D) Medicare and medicaid.--Such term shall not 
                include any month with respect to an individual if, as 
                of the first day of such month, such individual--
                            ``(i) is entitled to any benefits under 
                        title XVIII of the Social Security Act, or
                            ``(ii) is a participant in the program 
                        under title XIX or XXI of such Act.
                    ``(E) Certain other coverage.--Such term shall not 
                include any month during a taxable year with respect to 
                an individual if, at any time during such year, any 
                benefit is provided to such individual under--
                            ``(i) chapter 89 of title 5, United States 
                        Code,
                            ``(ii) chapter 55 of title 10, United 
                        States Code,
                            ``(iii) chapter 17 of title 38, United 
                        States Code, or
                            ``(iv) any medical care program under the 
                        Indian Health Care Improvement Act.
                    ``(F) Prisoners.--Such term shall not include any 
                month with respect to an individual if, as of the first 
day of such month, such individual is imprisoned under Federal, State, 
or local authority.
                    ``(G) Insufficient presence in united states.--Such 
                term shall not include any month during a taxable year 
                with respect to an individual if such individual is 
                present in the United States on fewer than 183 days 
                during such year (determined in accordance with section 
                7701(b)(7)).
            ``(5) Coordination with deduction for health insurance 
        costs of self-employed individuals.--In the case of a taxpayer 
        who is eligible to deduct any amount under section 162(l) for 
        the taxable year, this section shall apply only if the taxpayer 
        elects not to claim any amount as a deduction under such 
        section for such year.
    ``(c) Reduced Credit for Participants in Health Plans of 
Employers.--In the case of any individual who participates in a 
subsidized health plan (within the meaning of section 162(l)(2)) 
maintained by any employer of the taxpayer or of the spouse of the 
taxpayer (not including a cafeteria plan (as defined in section 
125(d)), there shall be allowed to the taxpayer one-half of the credit 
that would be allowed to the taxpayer under subsection (a) (determined 
without regard to the participation in the health plan) if the monthly 
limitation were determined without the addition of the amount described 
in subsection (b)(3)(A)(ii).
    ``(d) Qualified Health Insurance.--For purposes of this section--
            ``(1) In general.--The term `qualified health insurance' 
        means insurance which constitutes medical care as defined in 
        section 213(d) without regard to--
                    ``(A) paragraph (1)(C) thereof, and
                    ``(B) so much of paragraph (1)(D) thereof as 
                relates to qualified long-term care insurance 
                contracts.
            ``(2) Exclusion of certain other contracts.--Such term 
        shall not include insurance if a substantial portion of its 
        benefits are excepted benefits (as defined in section 9832(c)).
    ``(e) Medical Savings Account and Health Savings Account 
Contributions.--
            ``(1) In general.--If a deduction would (but for paragraph 
        (2)) be allowed under section 220 or 223 to the taxpayer for a 
        payment for the taxable year to the medical savings account or 
        health savings account of an individual, subsection (a) shall 
        be applied by treating such payment as a payment for qualified 
        health insurance for such individual.
            ``(2) Denial of double benefit.--No deduction shall be 
        allowed under section 220 or 223 for that portion of the 
        payments otherwise allowable as a deduction under section 220 
        or 223 for the taxable year which is equal to the amount of 
        credit allowed for such taxable year by reason of this 
        subsection.
    ``(f) Special Rules.--
            ``(1) Coordination with medical expense and high deductible 
        health plan deductions.--The amount which would (but for this 
        paragraph) be taken into account by the taxpayer under section 
        213 or 224 for the taxable year shall be reduced by the credit 
        (if any) allowed by this section to the taxpayer for such year.
            ``(2) Denial of credit to dependents.--No credit shall be 
        allowed under this section to any individual with respect to 
        whom a deduction under section 151 is allowable to another 
        taxpayer for a taxable year beginning in the calendar year in 
        which such individual's taxable year begins.
            ``(3) Denial of double benefit.--No credit shall be allowed 
        under subsection (a) if the credit under section 35 is allowed 
        and no credit shall be allowed under 35 if a credit is allowed 
        under this section 35.
            ``(4) Election not to claim credit.--This section shall not 
        apply to a taxpayer for any taxable year if such taxpayer 
        elects to have this section not apply for such taxable year.
            ``(5) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2005, each dollar 
        amount contained in subsection (b)(3)(B) shall be increased by 
        an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2004' for `calendar year 1992' in 
                subparagraph (B) thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $50 ($25 in the case of the 
        dollar amount in subsection (b)(3)(B)(iii)).''.
    (b) Information Reporting.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 of such Code (relating to information concerning 
transactions with other persons) is amended by inserting after section 
6050T the following new section:

``SEC. 6050U. RETURNS RELATING TO PAYMENTS FOR QUALIFIED HEALTH 
              INSURANCE.

    ``(a) In General.--Any person who, in connection with a trade or 
business conducted by such person, receives payments during any 
calendar year from any individual for coverage of such individual or 
any other individual under creditable health insurance, shall make the 
return described in subsection (b) (at such time as the Secretary may 
by regulations prescribe) with respect to each individual from whom 
such payments were received.
    ``(b) Form and Manner of Returns.--A return is described in this 
subsection if such return--
            ``(1) is in such form as the Secretary may prescribe, and
            ``(2) contains--
                    ``(A) the name, address, and TIN of the individual 
                from whom payments described in subsection (a) were 
                received,
                    ``(B) the name, address, and TIN of each individual 
                who was provided by such person with coverage under 
                creditable health insurance by reason of such payments 
                and the period of such coverage, and
                    ``(C) such other information as the Secretary may 
                reasonably prescribe.
    ``(c) Creditable Health Insurance.--For purposes of this section, 
the term `creditable health insurance' means qualified health insurance 
(as defined in section 36(c)) other than--
            ``(1) insurance under a subsidized group health plan 
        maintained by an employer, or
            ``(2) to the extent provided in regulations prescribed by 
        the Secretary, any other insurance covering an individual if no 
        credit is allowable under section 36 with respect to such 
        coverage.
    ``(d) Statements To Be Furnished to Individuals With Respect to 
Whom Information Is Required.--Every person required to make a return 
under subsection (a) shall furnish to each individual whose name is 
required under subsection (b)(2)(A) to be set forth in such return a 
written statement showing--
            ``(1) the name and address of the person required to make 
        such return and the phone number of the information contact for 
        such person,
            ``(2) the aggregate amount of payments described in 
        subsection (a) received by the person required to make such 
        return from the individual to whom the statement is required to 
        be furnished, and
            ``(3) the information required under subsection (b)(2)(B) 
        with respect to such payments.
The written statement required under the preceding sentence shall be 
furnished on or before January 31 of the year following the calendar 
year for which the return under subsection (a) is required to be made.
    ``(e) Returns Which Would Be Required To Be Made by 2 or More 
Persons.--Except to the extent provided in regulations prescribed by 
the Secretary, in the case of any amount received by any person on 
behalf of another person, only the person first receiving such amount 
shall be required to make the return under subsection (a).''.
            (2) Assessable penalties.--
                    (A) Subparagraph (B) of section 6724(d)(1) of such 
                Code (relating to definitions) is amended by 
                redesignating clauses (xii) through (xviii) as clauses 
                (xiii) through (xix), respectively, and by inserting 
                after clause (xi) the following new clause:
                            ``(xii) section 6050U (relating to returns 
                        relating to payments for qualified health 
                        insurance),''.
                    (B) Paragraph (2) of section 6724(d) of such Code 
                is amended by striking ``or'' at the end of the next to 
                last subparagraph, by striking the period at the end of 
                the last subparagraph and inserting ``, or'', and by 
                adding at the end the following new subparagraph:
                    ``(CC) section 6050U(d) (relating to returns 
                relating to payments for qualified health 
                insurance).''.
            (3) Clerical amendment.--The table of sections for subpart 
        B of part III of subchapter A of chapter 61 of such Code is 
        amended by inserting after the item relating to section 6050T 
        the following new item:

                              ``Sec. 6050U. Returns relating to 
                                        payments for qualified health 
                                        insurance.''.
    (c) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``, or 
        from section 36 of such Code''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by striking the last item and inserting the 
        following new items:

                              ``Sec. 36. Health insurance costs.
                              ``Sec. 37. Overpayments of tax.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 102. ADVANCE PAYMENT OF CREDIT FOR PURCHASERS OF QUALIFIED HEALTH 
              INSURANCE.

    (a) In General.--Chapter 77 of the Internal Revenue Code of 1986 
(relating to miscellaneous provisions) is amended by adding at the end 
the following new section:

``SEC. 7528. ADVANCE PAYMENT OF HEALTH INSURANCE CREDIT FOR PURCHASERS 
              OF QUALIFIED HEALTH INSURANCE.

    ``(a) General Rule.--In the case of an eligible individual, the 
Secretary shall make payments to the provider of such individual's 
qualified health insurance equal to such individual's qualified health 
insurance credit advance amount with respect to such provider.
    ``(b) Eligible Individual.--For purposes of this section, the term 
`eligible individual' means any individual--
            ``(1) who purchases qualified health insurance (as defined 
        in section 36(c)), and
            ``(2) for whom a qualified health insurance credit 
        eligibility certificate is in effect.
    ``(c) Qualified Health Insurance Credit Eligibility Certificate.--
For purposes of this section, a qualified health insurance credit 
eligibility certificate is a statement furnished by an individual to 
the Secretary which--
            ``(1) certifies that the individual will be eligible to 
        receive the credit provided by section 36 for the taxable year,
            ``(2) estimates the amount of such credit for such taxable 
        year, and
            ``(3) provides such other information as the Secretary may 
        require for purposes of this section.
    ``(d) Qualified Health Insurance Credit Advance Amount.--For 
purposes of this section, the term `qualified health insurance credit 
advance amount' means, with respect to any provider of qualified health 
insurance, the Secretary's estimate of the amount of credit allowable 
under section 36 to the individual for the taxable year which is 
attributable to the insurance provided to the individual by such 
provider.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section, 
including regulations modifying recapture rules for any overpayment of 
the qualified health insurance credit advance amount which equals at 
least 2 percent of the taxpayer's adjusted gross income for the taxable 
year by allowing periodic payments in lieu of a lump-sum payment for 
any such taxpayer whose savings and income warrant such 
modification.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 of 
such Code is amended by adding at the end the following new item:

                              ``Sec. 7528. Advance payment of health 
                                        insurance credit for purchasers 
                                        of qualified health 
                                        insurance.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable year beginning after the date of the enactment of this 
Act.

                   TITLE II--HEALTH SAVINGS ACCOUNTS

SEC. 201. DEDUCTION OF PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 224 as 
section 225 and by inserting after section 223 the following new 
section:

``SEC. 224. PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS.

    ``(a) Deduction Allowed.--In the case of an individual, there shall 
be allowed as a deduction for the taxable year the aggregate amount 
paid by such individual as premiums under a high deductible health plan 
with respect to months during such year for which such individual is an 
eligible individual with respect to such health plan.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Eligible individual.--The term `eligible individual' 
        has the meaning given such term by section 223(c)(1).
            ``(2) High deductible health plan.--The term `high 
        deductible health plan' has the meaning given such term by 
        section 223(c)(2).
    ``(c) Special Rules.--
            ``(1) Deduction allowable for only 1 plan.--For purposes of 
        this section, in the case of an individual covered by more than 
        1 high deductible health plan for any month, the individual may 
        only take into account amounts paid for 1 of such plans for 
        such month.
            ``(2) Employer provided coverage.--
                    ``(A) In general.--No deduction shall be allowed to 
                an individual under subsection (a) for any amount paid 
                for coverage under a high deductible health plan for a 
                month if that individual participates in any coverage 
                for such month that is excluded (in whole or in 
part) from the gross income of the individual or the individual's 
spouse under section 106.
                    ``(B) Cafeteria plans, etc.--Employer contributions 
                to a cafeteria plan or a flexible spending or similar 
                arrangement which are excluded from gross income under 
                section 106 shall be treated for purposes of this 
                section as paid by the employer.
            ``(3) Contributions to health savings account required.--A 
        deduction shall not be allowed under subsection (a) for a 
        taxable year with respect to such individual if such individual 
        is not allowed a deduction under section 223 for such taxable 
        year.
            ``(4) Medical and health savings accounts.--Subsection (a) 
        shall not apply with respect to any amount which is paid or 
        distributed out of an Archer MSA or a health savings account 
        which is not included in gross income under section 220(f) or 
        223(f), as the case may be.
            ``(5) Coordination with deduction for health insurance of 
        self-employed individuals.--The amount taken into account by 
        the taxpayer in computing the deduction under section 162(l) 
        shall not be taken into account under this section.
            ``(6) Coordination with medical expense deduction.--The 
        amount taken into account by the taxpayer in computing the 
        deduction under this section shall not be taken into account 
        under section 213.''.
    (b) Deduction Allowed Whether or not Individual Itemizes Other 
Deductions.--Subsection (a) of section 62 of such Code is amended by 
inserting after paragraph (19) the following new paragraph:
            ``(20) Premiums for high deductible health plans.--The 
        deduction allowed by section 224.''.
    (c) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of such Code is amended by striking the last 
item and inserting the following new items:

``Sec. 224. Premiums for high deductible health plans.
``Sec. 225. Cross reference.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 202. CREDIT FOR CONTRIBUTIONS TO HEALTH SAVINGS ACCOUNTS OF SMALL 
              BUSINESS EMPLOYEES.

    (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 new section:

``SEC. 45G. SMALL EMPLOYER CONTRIBUTIONS TO HEALTH SAVINGS ACCOUNTS.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
eligible employer, the small employer HSA contribution credit 
determined under this section for any taxable year with respect to each 
employee who is an eligible individual (as defined in section 
223(c)(1)) is an amount equal to the lesser of--
            ``(1) the amount contributed by such employer to any health 
        savings account (as defined in section 223(d) of such employee 
        during the taxable year, or
            ``(2) $200 ($500, if such employee has family coverage 
        under a high deductible health plan (as defined in section 
        223(c)(2)).
    ``(b) Eligible Employer.--For purposes of this section, the term 
`eligible employer' means, with respect to any taxable year, an 
employer which had no more than 100 employees who received at least 
$5,000 of compensation from the employer for the preceding taxable 
year.
    ``(c) Special Rules.--For purposes of this section--
            ``(1) Aggregation rules.--All persons treated as a single 
        employer under subsection (a) or (b) of section 52, or 
        subsection (n) or (o) of section 414, shall be treated as one 
        person.
            ``(2) Disallowance of deduction.--No deduction shall be 
        allowed for that portion of contributions to any health savings 
        accounts for the taxable year which is equal to the credit 
        determined under subsection (a).
            ``(3) Election not to claim credit.--This section shall not 
        apply to a taxpayer for any taxable year if such taxpayer 
        elects to have this section not apply for such taxable year.''.
    (b) Credit Allowed as Part of General Business Credit.--Section 
38(b) of such Code (defining current year business credit) is amended 
by striking ``plus'' at the end of paragraph (14), by striking the 
period at the end of paragraph (15) and inserting ``, plus'', and by 
adding at the end the following new paragraph:
            ``(16) in the case of an eligible employer (as defined in 
        section 45G(b)), the small employer HSA contribution credit 
        determined under section 45G(a).''.
    (c) Conforming Amendments.--
            (1) Section 39(d) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(11) No carryback of small employer hsa contribution 
        credit before january 1, 2005.--No portion of the unused 
        business credit for any taxable year which is attributable to 
        the small employer HSA contribution credit determined under 
        section 45G may be carried back to a taxable year beginning 
        before January 1, 2005.''.
            (2) Subsection (c) of section 196 of such Code is amended 
        by striking ``and'' at the end of paragraph (9), by striking 
        the period at the end of paragraph (10) and inserting ``, 
        and'', and by adding at the end the following new paragraph:
            ``(11) the small employer HSA contribution credit 
        determined under section 45G(a).''.
            (3) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding at 
        the end the following new item:

                              ``Sec. 45G. Small employer contributions 
                                        to health savings accounts.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to contributions made in taxable years beginning after December 
31, 2004.

                    TITLE III--STATE HIGH RISK POOLS

SEC. 301. SHORT TITLE.

    This title may be cited as the ``State High Risk Pool Funding 
Extension Act of 2004''.

SEC. 302. EXTENSION OF FUNDING FOR OPERATION OF STATE HIGH RISK HEALTH 
              INSURANCE POOLS.

    Section 2745 of the Public Health Service Act (42 U.S.C. 300gg-45) 
is amended to read as follows:

``SEC. 2745. PROMOTION OF QUALIFIED HIGH RISK POOLS.

    ``(a) Extension of Seed Grants to States.--The Secretary shall 
provide from the funds appropriated under subsection (d)(1)(A) a grant 
of up to $1,000,000 to each State that has not created a qualified high 
risk pool as of the date of the enactment of this section for the 
State's costs of creation and initial operation of such a pool.
    ``(b) Grants for Operational Losses.--
            ``(1) In general.--In the case of a State that has 
        established a qualified high risk pool that--
                    ``(A) restricts premiums charged under the pool to 
                no more than 150 percent of the premium for applicable 
                standard risk rates;
                    ``(B) offers a choice of two or more coverage 
                options through the pool; and
                    ``(C) has in effect a mechanism reasonably designed 
                to ensure continued funding of losses incurred by the 
                State after the end of fiscal year 2004 in connection 
                with operation of the pool;
        the Secretary shall provide, from the funds appropriated under 
        subsection (d)(1)(B)(i) and allotted to the State under 
        paragraph (2), a grant for the losses incurred by the State in 
        connection with the operation of the pool.
            ``(2) Allotment.--The amounts appropriated under subsection 
        (d)(1)(B)(i) for a fiscal year shall be made available to the 
        States (or the entities that operate the high risk pool under 
        applicable State law) as follows:
                    ``(A) An amount equal to 50 percent of the 
                appropriated amount for the fiscal year shall be 
                allocated in equal amounts among each eligible State 
                that applies for assistance under this subsection.
                    ``(B) An amount equal to 25 percent of the 
                appropriated amount for the fiscal year shall be 
                allocated among the States so that the amount provided 
                to a State bears the same ratio to such available 
                amount as the number of uninsured individuals in the 
                State bears to the total number of uninsured 
                individuals in all States (as determined by the 
                Secretary).
                    ``(C) An amount equal to 25 percent of the 
                appropriated amount for the fiscal year shall be 
                allocated among the States so that the amount provided 
                to a State bears the same ratio to such available 
                amount as the number of individuals enrolled in health 
                care coverage through the qualified high risk pool of 
                the State bears to the total number of individuals so 
                enrolled through qualified high risk pools in all 
                States (as determined by the Secretary).
    ``(c) Bonus Grants for Supplemental Consumer Benefits.--
            ``(1) In general.--In the case of a State that has 
        established a qualified high risk pool, the Secretary shall 
        provide, from the funds appropriated under subsection 
        (d)(1)(B)(ii), a grant to be used to provide supplemental 
        consumer benefits to enrollees or potential enrollees (or 
        defined subsets of such enrollees or potential enrollees) in 
        qualified high risk pools.
            ``(2) Benefits.--A State shall use amounts received under a 
        grant under this subsection to provide one or more of the 
        following benefits:
                    ``(A) Low-income premium subsidies.
                    ``(B) A reduction in premium trends, actual 
                premiums, or other cost-sharing requirements.
                    ``(C) An expansion or broadening of the pool of 
                individuals eligible for coverage, including 
                eliminating waiting lists, increasing enrollment caps, 
                or providing flexibility in enrollment rules.
                    ``(D) Less stringent rules, or additional waiver 
                authority, with respect to coverage of pre-existing 
                conditions.
                    ``(E) Increased benefits.
                    ``(F) The establishment of disease management 
                programs.
            ``(3) Limitation.--In allotting amounts under this 
        subsection, the Secretary shall ensure that no State receives 
        an amount that exceeds 10 percent of the amount appropriated 
        for the fiscal year involved under subsection (d)(1)(B)(ii).
            ``(4) Rule of construction.--Nothing in this subsection 
        shall be construed to prohibit States that, on the date of 
        enactment of the State High Risk Pool Funding Extension Act of 
        2004, are in the process of implementing programs to provide 
        benefits of the type described in paragraph (2), from being 
        eligible for a grant under this subsection.
    ``(d) Funding.--
            ``(1) In general.--Out of any money in the Treasury of the 
        United States not otherwise appropriated, there are authorized 
        and appropriated--
                    ``(A) $15,000,000 for the period of fiscal years 
                2004 and 2005 to carry out subsection (a); and
                    ``(B) $75,000,000 for each of fiscal years 2005 
                through 2009, of which--
                            ``(i) two-thirds of the amount appropriated 
                        for a fiscal year shall be made available for 
                        allotments under subsection (b)(2); and
                            ``(ii) one-third of the amount appropriated 
                        for a fiscal year shall be made available for 
                        allotments under subsection (c)(2).
            ``(2) Availability.--Funds appropriated under this 
        subsection for a fiscal year shall remain available for 
        obligation through the end of the following fiscal year.
            ``(3) Reallotment.--If, on June 30 of each fiscal year, the 
        Secretary determines that all amounts appropriated under 
        paragraph (1)(B)(ii) for the fiscal year will not be allotted, 
        such remaining amounts shall be allotted among States receiving 
        grants under subsection (b) for the fiscal year in amounts 
        determined pursuant to the formula under subsection (b)(2).
            ``(4) No entitlement.--Nothing in this section shall be 
        construed as providing a State with an entitlement to a grant 
        under this section.
    ``(e) Applications.--To be eligible for a grant under this section, 
a State shall submit to the Secretary an application at such time, in 
such manner, and containing such information as the Secretary may 
require.
    ``(f) Definitions.--In this section:
            ``(1) Qualified high risk pool.--
                    ``(A) In general.--The term `qualified high risk 
                pool' has the meaning given such term in section 
                2744(c)(2), except that with respect to subparagraph 
                (A) of such section a State may elect to provide for 
                the enrollment of eligible individuals through--
                            ``(i) a combination of a qualified high 
                        risk pool and an acceptable alternative 
                        mechanism; or
                            ``(ii) other health insurance coverage 
                        described in subparagraph (B).
                    ``(B) Health insurance coverage.--Health insurance 
                coverage described in this subparagraph is individual 
                health insurance coverage--
                            ``(i) that meets the requirements of 
                        section 2741;
                            ``(ii) that is subject to limits on the 
                        rates charged to individuals;
                            ``(iii) that is available to all 
                        individuals eligible for health insurance 
                        coverage under this title who are not able to 
                        participate in a qualified high risk pool; and
                            ``(iv) the defined rate limit of which does 
                        not exceed the limit allowed for a qualified 
                        risk pool that is otherwise eligible to receive 
                        assistance under a grant under this section.
                    ``(C) Other coverage.--In addition to coverage 
                described in subparagraph (B), a State may provide for 
                the offering of health insurance coverage that provides 
first dollar coverage, limits on cost-sharing, and comprehensive 
medical, hospital and surgical coverage, if the limits on rates for 
such coverage do not exceed the limit described in subparagraph (B)(iv) 
by more than 25 percentage points.
            ``(2) Standard risk rate.--The term `standard risk rate' 
        means a rate--
                    ``(A) determined under the State high risk pool by 
                considering the premium rates charged by other health 
                insurers offering health insurance coverage to 
                individuals in the insurance market served;
                    ``(B) that is established using reasonable 
                actuarial techniques; and
                    ``(C) that reflects anticipated claims experience 
                and expenses for the coverage involved.
            ``(3) State.--The term `State' means any of the 50 States 
        and the District of Columbia.''.

                TITLE IV--VOLUNTARY CHOICE COOPERATIVES

SEC. 401. GRANTS FOR THE ESTABLISHMENT AND OPERATION OF COOPERATIVES.

    Subpart 1 of part B of title XXVII of the Public Health Service Act 
(42 U.S.C. 300gg-41 et seq.) is amended by adding at the end thereof 
the following:

``SEC. 2746. GRANTS FOR THE ESTABLISHMENT AND OPERATION OF 
              COOPERATIVES.

    ``(a) In General.--The Secretary may award grants to States for the 
establishment and operation of health insurance purchasing cooperatives 
that meet the requirements of subsection (c).
    ``(b) Use of Funds.--Amounts provided under a grant under 
subsection (a) shall be used--
            ``(1) for the establishment and operation of health 
        insurance purchasing cooperatives that meet the requirements of 
        this section;
            ``(2) for the support and training of the professional 
        staff of the cooperative;
            ``(3) in the case of a State that is not operating a health 
        insurance purchasing cooperative on the date on which an 
        application for a grant under this section is submitted by the 
        State, for the conduct of a feasibility study relating to the 
        proposed activities of the cooperative; and
            ``(4) for other activities determined appropriate by the 
        Secretary; and
    ``(c) Requirements of Cooperatives.--To be eligible to receive a 
grant under subsection (a), a State shall demonstrate to the Secretary 
that the purchasing cooperative to be established or operated under the 
grant--
            ``(1) has a membership consisting solely of at least two 
        eligible employers;
            ``(2) is a nonprofit entity certified under State law;
            ``(3) is organized as an independent health insurance 
        purchasing entity with a commission that meets requirements 
        similar to the requirements imposed with respect to the 
        administration of State high risk pools that receive funds 
        under section 2745;
            ``(4) is wholly owned and administered by the members of 
        the cooperative;
            ``(5) accepts all eligible employers within the area served 
        by the cooperative as members if such employers request such 
        membership;
            ``(6) provides assistance to the members in pooling the 
        health insurance purchasing power of such members;
            ``(7) provides for the collection and distribution of data, 
        and the conduct of other activities, to improve the quality of 
        health care decisionmaking; and
            ``(8) meets such other requirements as the Secretary 
        determines appropriate.
    ``(d) Duties of Cooperatives.--Each health insurance purchasing 
cooperative that receive funds under this section shall--
            ``(1) enter into agreements with insurers offering health 
        insurance coverage that meets the guidelines developed under 
        subsection (e);
            ``(2) enter into agreements with member eligible employers 
        to provide insurance through the cooperative to the employees 
        of such employers;
            ``(3) enroll only eligible employees and their families;
            ``(4) provide enrollee information to the State; and
            ``(5) carry out other functions provided for by the 
        Secretary.
    ``(e) Qualifying Health Insurance Coverage.--For purposes of this 
section, qualifying health insurance coverage shall be coverage that 
is--
            ``(1) fully insured;
            ``(2) approved by the department of insurance for the State 
        in which the coverage is offered; and
            ``(3) creditable coverage as described in section 
        2701(c)(1).
    ``(f) Eligible Employers.--In this section, the term `eligible 
employer' means an employer--
            ``(1) that employs 100 or fewer employees (as determined in 
        accordance with section 2791(e)(6)); or
            ``(2) regardless of size, that self insures.
    ``(g) Authorization of Appropriations.--There is authorized to be 
appropriated, such sums as may be necessary to carry out this 
section.''.
                                 <all>