[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 637 Introduced in Senate (IS)]







109th CONGRESS
  1st Session
                                 S. 637

 To establish a national health program administered by the Office of 
Personnel Management to offer health benefits plans to individuals who 
           are not Federal employees, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 16, 2005

   Mr. Durbin (for himself, Mrs. Lincoln, Mr. Carper, Mr. Pryor, Ms. 
   Landrieu, Mr. Nelson of Florida, Mr. Corzine, Mr. Lautenberg, Ms. 
 Cantwell, and Mr. Lieberman) introduced the following bill; which was 
          read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To establish a national health program administered by the Office of 
Personnel Management to offer health benefits plans to individuals who 
           are not Federal employees, 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 ``Small Employers Health Benefits 
Program Act of 2005''.

SEC. 2. DEFINITIONS.

    (a) In General.--In this Act, the terms ``member of family'', 
``health benefits plan'', ``carrier'', ``employee organizations'', and 
``dependent'' have the meanings given such terms in section 8901 of 
title 5, United States Code.
    (b) Other Terms.--In this Act:
            (1) Employee.--The term ``employee'' has the meaning given 
        such term under section 3(6) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1002(6)). Such term shall not 
        include an employee of the Federal Government.
            (2) Employer.--The term ``employer'' has the meaning given 
        such term under section 3(5) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1002(5)), except that such term 
        shall include only employers who employed an average of at 
        least 1 but not more than 100 employees on business days during 
        the year preceding the date of application. Such term shall not 
        include the Federal Government.
            (3) Health status-related factor.--The term ``health 
        status-related factor'' has the meaning given such term in 
        section 2791(d)(9) of the Public Health Service Act (42 U.S.C. 
        300gg-91(d)(9)).
            (4) Office.--The term ``Office'' means the Office of 
        Personnel Management.
            (5) Participating employer.--The term ``participating 
        employer'' means an employer that--
                    (A) elects to provide health insurance coverage 
                under this Act to its employees; and
                    (B) is not offering other comprehensive health 
                insurance coverage to such employees.
    (c) Application of Certain Rules in Determination of Employer 
Size.--For purposes of subsection (b)(2):
            (1) Application of aggregation rule for employers.--All 
        persons treated as a single employer under subsection (b), (c), 
        (m), or (o) of section 414 of the Internal Revenue Code of 1986 
        shall be treated as 1 employer.
            (2) Employers not in existence in preceding year.--In the 
        case of an employer which was not in existence for the full 
        year prior to the date on which the employer applies to 
        participate, the determination of whether such employer meets 
        the requirements of subsection (b)(2) shall be based on the 
        average number of employees that it is reasonably expected such 
        employer will employ on business days in the employer's first 
        full year.
            (3) Predecessors.--Any reference in this subsection to an 
        employer shall include a reference to any predecessor of such 
        employer.
    (d) Waiver and Continuation of Participation.--
            (1) Waiver.--The Office may waive the limitations relating 
        to the size of an employer which may participate in the health 
        insurance program established under this Act on a case by case 
        basis if the Office determines that such employer makes a 
        compelling case for such a waiver. In making determinations 
        under this paragraph, the Office may consider the effects of 
        the employment of temporary and seasonal workers and other 
        factors.
            (2) Continuation of participation.--An employer 
        participating in the program under this Act that experiences an 
        increase in the number of employees so that such employer has 
        in excess of 100 employees, may not be excluded from 
        participation solely as a result of such increase in employees.

SEC. 3. HEALTH INSURANCE COVERAGE FOR NON-FEDERAL EMPLOYEES.

    (a) Administration.--The Office shall administer a health insurance 
program for non-Federal employees and employers in accordance with this 
Act.
    (b) Regulations.--Except as provided under this Act, the Office 
shall prescribe regulations to apply the provisions of chapter 89 of 
title 5, United States Code, to the greatest extent practicable to 
participating carriers, employers, and employees covered under this 
Act.
    (c) Limitations.--In no event shall the enactment of this Act 
result in--
            (1) any increase in the level of individual or Federal 
        Government contributions required under chapter 89 of title 5, 
        United States Code, including copayments or deductibles;
            (2) any decrease in the types of benefits offered under 
        such chapter 89; or
            (3) any other change that would adversely affect the 
        coverage afforded under such chapter 89 to employees and 
        annuitants and members of family under that chapter.
    (d) Enrollment.--The Office shall develop methods to facilitate 
enrollment under this Act, including the use of the Internet.
    (e) Contracts for Administration.--The Office may enter into 
contracts for the performance of appropriate administrative functions 
under this Act.
    (f) Separate Risk Pool.--In the administration of this Act, the 
Office shall ensure that covered employees under this Act are in a risk 
pool that is separate from the risk pool maintained for covered 
individuals under chapter 89 of title 5, United States Code.
    (g) Rule of Construction.--Nothing in this Act shall be construed 
to require a carrier that is participating in the program under chapter 
89 of title 5, United States Code, to provide health benefits plan 
coverage under this Act.

SEC. 4. CONTRACT REQUIREMENT.

    (a) In General.--The Office may enter into contracts with qualified 
carriers offering health benefits plans of the type described in 
section 8903 or 8903a of title 5, United States Code, without regard to 
section 5 of title 41, United States Code, or other statutes requiring 
competitive bidding, to provide health insurance coverage to employees 
of participating employers under this Act. Each contract shall be for a 
uniform term of at least 1 year, but may be made automatically 
renewable from term to term in the absence of notice of termination by 
either party. In entering into such contracts, the Office shall ensure 
that health benefits coverage is provided for individuals only, married 
individuals without children, and families.
    (b) Eligibility.--A carrier shall be eligible to enter into a 
contract under subsection (a) if such carrier--
            (1) is licensed to offer health benefits plan coverage in 
        each State in which the plan is offered; and
            (2) meets such other requirements as determined appropriate 
        by the Office.
    (c) Statement of Benefits.--
            (1) In general.--Each contract under this Act shall contain 
        a detailed statement of benefits offered and shall include 
        information concerning such maximums, limitations, exclusions, 
        and other definitions of benefits as the Office considers 
        necessary or desirable.
            (2) Nationwide plan.--The Office shall develop a benefit 
        package that shall be offered in the case of a contract for a 
        health benefit plan that is to be offered on a nationwide 
        basis.
    (d) Standards.--The minimum standards prescribed for health 
benefits plans under section 8902(e) of title 5, United States Code, 
and for carriers offering plans, shall apply to plans and carriers 
under this Act. Approval of a plan may be withdrawn by the Office only 
after notice and opportunity for hearing to the carrier concerned 
without regard to subchapter II of chapter 5 and chapter 7 of title 5, 
United States Code.
    (e) Conversion.--
            (1) In general.--A contract may not be made or a plan 
        approved under this section if the carrier under such contract 
        or plan does not offer to each enrollee whose enrollment in the 
        plan is ended, except by a cancellation of enrollment, a 
        temporary extension of coverage during which the individual may 
        exercise the option to convert, without evidence of good 
        health, to a nongroup contract providing health benefits. An 
        enrollee who exercises this option shall pay the full periodic 
        charges of the nongroup contract.
            (2) Noncancellable.--The benefits and coverage made 
        available under paragraph (1) may not be canceled by the 
        carrier except for fraud, over-insurance, or nonpayment of 
        periodic charges.
    (f) Rates.--Rates charged under health benefits plans under this 
Act shall reasonably and equitably reflect the cost of the benefits 
provided. Such rates shall be determined on a basis which, in the 
judgment of the Office, is consistent with the lowest schedule of basic 
rates generally charged for new group health benefits plans issued to 
large employers. The rates determined for the first contract term shall 
be continued for later contract terms, except that they may be 
readjusted for any later term, based on past experience and benefit 
adjustments under the later contract. Any readjustment in rates shall 
be made in advance of the contract term in which they will apply and on 
a basis which, in the judgment of the Office, is consistent with the 
general practice of carriers which issue group health benefits plans to 
large employers. Rates charged for coverage under this Act shall not 
vary based on health-status related factors.
    (g) Requirement of Payment for or Provision of Health Service.--
Each contract entered into under this Act shall require the carrier to 
agree to pay for or provide a health service or supply in an individual 
case if the Office finds that the employee, annuitant, family member, 
former spouse, or person having continued coverage under section 8905a 
of title 5, United States Code, is entitled thereto under the terms of 
the contract.

SEC. 5. ELIGIBILITY.

    An individual shall be eligible to enroll in a plan under this Act 
if such individual--
            (1) is an employee of an employer described in section 
        2(b)(2), or is a self employed individual as defined in section 
        401(c)(1)(B) of the Internal Revenue Code of 1986; and
            (2) is not otherwise enrolled or eligible for enrollment in 
        a plan under chapter 89 of title 5, United States Code.

SEC. 6. ALTERNATIVE CONDITIONS TO FEDERAL EMPLOYEE PLANS.

    (a) Treatment of Employee.--For purposes of enrollment in a health 
benefits plan under this Act, an individual who had coverage under a 
health insurance plan and is not a qualified beneficiary as defined 
under section 4980B(g)(1) of the Internal Revenue Code of 1986 shall be 
treated in a similar manner as an individual who begins employment as 
an employee under chapter 89 of title 5, United States Code.
    (b) Preexisting Condition Exclusions.--
            (1) In general.--Each contract under this Act may include a 
        preexisting condition exclusion as defined under section 
        9801(b)(1) of the Internal Revenue Code of 1986.
            (2) Exclusion period.--
                    (A) In general.--A preexisting condition exclusion 
                under this subsection shall provide for coverage of a 
                preexisting condition to begin not later than 6 months 
                after the date on which the coverage of the individual 
                under a health benefits plan commences, reduced by 1 
                month for each month that the individual was covered 
                under a health insurance plan immediately preceding the 
                date the individual submitted an application for 
                coverage under this Act.
                    (B) Lapse in coverage.--For purposes of this 
                paragraph, a lapse in coverage of not more than 63 days 
                immediately preceding the date of the submission of an 
                application for coverage under this Act shall not be 
                considered a lapse in continuous coverage.
    (c) Rates and Premiums.--
            (1) In general.--Rates charged and premiums paid for a 
        health benefits plan under this Act--
                    (A) shall be determined in accordance with this 
                subsection;
                    (B) may be annually adjusted and differ from such 
                rates charged and premiums paid for the same health 
                benefits plan offered under chapter 89 of title 5, 
                United States Code;
                    (C) shall be negotiated in the same manner as rates 
                and premiums are negotiated under such chapter 89; and
                    (D) shall be adjusted to cover the administrative 
                costs of the Office under this Act.
            (2) Determinations.--In determining rates and premiums 
        under this Act, the following provisions shall apply:
                    (A) In general.--A carrier that enters into a 
                contract under this Act shall determine that amount of 
                premiums to assess for coverage under a health benefits 
                plan based on an community rate that may be annually 
                adjusted--
                            (i) for the geographic area involved if the 
                        adjustment is based on geographical divisions 
                        that are not smaller than a metropolitan 
                        statistical area;
                            (ii) based on whether such coverage is for 
                        an individual, a married individual with no 
                        children, or a family; and
                            (iii) based on the age of covered 
                        individuals (subject to subparagraph (B)).
                    (B) Age adjustments.--
                            (i) In general.--With respect to 
                        subparagraph (A)(iii), in making adjustments 
                        based on age, a carrier may not use age 
                        brackets in increments that are smaller than 5 
                        years, which begin not earlier than age 30 and 
                        end not later than age 65.
                            (ii) Age 65 and older.--With respect to 
                        subparagraph (A)(iii), a carrier may develop 
                        separate rates for covered individuals who are 
                        65 years of age or older for whom medicare is 
                        the primary payor for health benefits coverage 
                        which is not covered under medicare.
                            (iii) Limitation.--In making an adjustment 
                        to premium rates under subparagraph (A)(iii), a 
                        carrier shall ensure that such adjustment does 
                        not result in an average premium rate 
                        applicable to enrollees under the plan involved 
                        that is more than 200 percent of the lowest 
                        rate for all age groups.
    (d) Termination and Reenrollment.--If an individual who is enrolled 
in a health benefits plan under this Act terminates the enrollment, the 
individual shall not be eligible for reenrollment until the first open 
enrollment period following the expiration of 6 months after the date 
of such termination.
    (e) Preemption.--
            (1) Health insurance or plans.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the terms of any contract entered into under this 
                Act that relate to the nature, provision, or extent of 
                coverage or benefits shall supersede and preempt any 
                State or local law, or any regulation issued 
                thereunder, which relates to the nature, provision, or 
                extent of coverage or benefits.
                    (B) Local plans.--With respect to a contract 
                entered into under this Act under which a carrier will 
                offer health benefits plan coverage in a limited 
                geographic area, subparagraph (A) shall not apply to 
                the extent that a mandated benefit law is in effect in 
                the State in which the plan is offered. Such mandated 
                benefit law shall continue to apply to such health 
                benefits plan.
                    (C) Rating rules.--The rating requirements under 
                subsection (c)(2) shall supercede State rating rules 
                for qualified plans under this Act.
            (2) Limitation.--Nothing in this subsection shall be 
        construed to preempt--
                    (A) any State or local law or regulation except 
                those laws and regulations described in subparagraphs 
                (A) and (C) of paragraph (1); and
                    (B) State network adequacy laws.
    (f) Rule of Construction.--Nothing in this Act shall be construed 
to limit the application of the service-charge system used by the 
Office for determining profits for participating carriers under chapter 
89 of title 5, United States Code.

SEC. 7. ENCOURAGING PARTICIPATION BY CARRIERS THROUGH ADJUSTMENTS FOR 
              RISK.

    (a) Application of Risk Corridors.--
            (1) In general.--This section shall only apply to carriers 
        with respect to health benefits plans offered under this Act 
        during any of calendar years 2006 through 2010.
            (2) Notification of costs under the plan.--In the case of a 
        carrier that offers a health benefits plan under this Act in 
        any of calendar years 2006 through 2010, the carrier shall 
        notify the Office, before such date in the succeeding year as 
        the Office specifies, of the total amount of costs incurred in 
        providing benefits under the health benefits plan for the year 
        involved and the portion of such costs that is attributable to 
        administrative expenses.
            (3) Allowable costs defined.--For purposes of this section, 
        the term ``allowable costs'' means, with respect to a health 
        benefits plan offered by a carrier under this Act, for a year, 
        the total amount of costs described in paragraph (2) for the 
        plan and year, reduced by the portion of such costs 
        attributable to administrative expenses incurred in providing 
        the benefits described in such paragraph.
    (b) Adjustment of Payment.--
            (1) No adjustment if allowable costs within 3 percent of 
        target amount.--If the allowable costs for the carrier with 
        respect to the health benefits plan involved for a calendar 
        year are at least 97 percent, but do not exceed 103 percent, of 
        the target amount for the plan and year involved, there shall 
        be no payment adjustment under this section for the plan and 
        year.
            (2) Increase in payment if allowable costs above 103 
        percent of target amount.--
                    (A) Costs between 103 and 108 percent of target 
                amount.--If the allowable costs for the carrier with 
                respect to the health benefits plan involved for the 
                year are greater than 103 percent, but not greater than 
                108 percent, of the target amount for the plan and 
                year, the Office shall reimburse the carrier for such 
                excess costs through payment to the carrier of an 
                amount equal to 75 percent of the difference between 
                such allowable costs and 103 percent of such target 
                amount.
                    (B) Costs above 108 percent of target amount.--If 
                the allowable costs for the carrier with respect to the 
                health benefits plan involved for the year are greater 
                than 108 percent of the target amount for the plan and 
                year, the Office shall reimburse the carrier for such 
                excess costs through payment to the carrier in an 
                amount equal to the sum of--
                            (i) 3.75 percent of such target amount; and
                            (ii) 90 percent of the difference between 
                        such allowable costs and 108 percent of such 
                        target amount.
            (3) Reduction in payment if allowable costs below 97 
        percent of target amount.--
                    (A) Costs between 92 and 97 percent of target 
                amount.--If the allowable costs for the carrier with 
                respect to the health benefits plan involved for the 
                year are less than 97 percent, but greater than or 
                equal to 92 percent, of the target amount for the plan 
                and year, the carrier shall be required to pay into the 
                contingency reserve fund maintained under section 
                8909(b)(2) of title 5, United States Code, an amount 
                equal to 75 percent of the difference between 97 
                percent of the target amount and such allowable costs.
                    (B) Costs below 92 percent of target amount.--If 
                the allowable costs for the carrier with respect to the 
                health benefits plan involved for the year are less 
                than 92 percent of the target amount for the plan and 
                year, the carrier shall be required to pay into the 
                stabilization fund under section 8909(b)(2) of title 5, 
                United States Code, an amount equal to the sum of--
                            (i) 3.75 percent of such target amount; and
                            (ii) 90 percent of the difference between 
                        92 percent of such target amount and such 
                        allowable costs.
            (4) Target amount described.--
                    (A) In general.--For purposes of this subsection, 
                the term ``target amount'' means, with respect to a 
                health benefits plan offered by a carrier under this 
                Act in any of calendar years 2006 through 2010, an 
                amount equal to--
                            (i) the total of the monthly premiums 
                        estimated by the carrier and approved by the 
                        Office to be paid for enrollees in the plan 
                        under this Act for the calendar year involved; 
                        reduced by
                            (ii) the amount of administrative expenses 
                        that the carrier estimates, and the Office 
                        approves, will be incurred by the carrier with 
                        respect to the plan for such calendar year.
                    (B) Submission of target amount.--Not later than 
                December 31, 2005, and each December 31 thereafter 
                through calendar year 2009, a carrier shall submit to 
                the Office a description of the target amount for such 
                carrier with respect to health benefits plans provided 
                by the carrier under this Act.
    (c) Disclosure of Information.--
            (1) In general.--Each contract under this Act shall 
        provide--
                    (A) that a carrier offering a health benefits plan 
                under this Act shall provide the Office with such 
                information as the Office determines is necessary to 
                carry out this subsection including the notification of 
                costs under subsection (a)(2) and the target amount 
                under subsection (b)(4)(B); and
                    (B) that the Office has the right to inspect and 
                audit any books and records of the organization that 
                pertain to the information regarding costs provided to 
                the Office under such subsections.
            (2) Restriction on use of information.--Information 
        disclosed or obtained pursuant to the provisions of this 
        subsection may be used by officers, employees, and contractors 
        of the Office only for the purposes of, and to the extent 
        necessary in, carrying out this section.

SEC. 8. ENCOURAGING PARTICIPATION BY CARRIERS THROUGH REINSURANCE.

    (a) Establishment.--The Office shall establish a reinsurance fund 
to provide payments to carriers that experience one or more 
catastrophic claims during a year for health benefits provided to 
individuals enrolled in a health benefits plan under this Act.
    (b) Eligibility for Payments.--To be eligible for a payment from 
the reinsurance fund for a plan year, a carrier under this Act shall 
submit to the Office an application that contains--
            (1) a certification by the carrier that the carrier paid 
        for at least one episode of care during the year for covered 
        health benefits for an individual in an amount that is in 
        excess of $50,000; and
            (2) such other information determined appropriate by the 
        Office.
    (c) Payment.--
            (1) In general.--The amount of a payment from the 
        reinsurance fund to a carrier under this section for a 
        catastrophic episode of care shall be determined by the Office 
        but shall not exceed an amount equal to 80 percent of the 
        applicable catastrophic claim amount.
            (2) Applicable catastrophic claim amount.--For purposes of 
        paragraph (1), the applicable catastrophic episode of care 
        amount shall be equal to the difference between--
                    (A) the amount of the catastrophic claim; and
                    (B) $50,000.
            (3) Limitation.--In determining the amount of a payment 
        under paragraph (1), if the amount of the catastrophic claim 
        exceeds the amount that would be paid for the healthcare items 
        or services involved under title XVIII of the Social Security 
        Act (42 U.S.C. 1395 et seq.), the Office shall use the amount 
        that would be paid under such title XVIII for purposes of 
        paragraph (2)(A).
    (d) Definition.--In this section, the term ``catastrophic claim'' 
means a claim submitted to a carrier, by or on behalf of an enrollee in 
a health benefits plan under this Act, that is in excess of $50,000.

SEC. 9. CONTINGENCY RESERVE FUND.

    Beginning on October 1, 2010, the Office may use amounts 
appropriated under section 14(a) that remain unobligated to establish a 
contingency reserve fund to provide assistance to carriers offering 
health benefits plans under this Act that experience unanticipated 
financial hardships (as determined by the Office).

SEC. 10. EMPLOYER PARTICIPATION.

    (a) Regulations.--The Office shall prescribe regulations providing 
for employer participation under this Act, including the offering of 
health benefits plans under this Act to employees.
    (b) Enrollment and Offering of Other Coverage.--
            (1) Enrollment.--A participating employer shall ensure that 
        each eligible employee has an opportunity to enroll in a plan 
        under this Act.
            (2) Prohibition on offering other comprehensive health 
        benefit coverage.--A participating employer may not offer a 
        health insurance plan providing comprehensive health benefit 
        coverage to employees other than a health benefits plan that--
                    (A) meets the requirements described in section 
                4(a); and
                    (B) is offered only through the enrollment process 
                established by the Office under section 3.
            (3) Offer of supplemental coverage options.--
                    (A) In general.--A participating employer may offer 
                supplementary coverage options to employees.
                    (B) Definition.--In subparagraph (A), the term 
                ``supplementary coverage'' means benefits described as 
                ``excepted benefits'' under section 2791(c) of the 
                Public Health Service Act (42 U.S.C. 300gg-91(c)).
    (c) Rule of Construction.--Except as provided in section 15, 
nothing in this Act shall be construed to require that an employer make 
premium contributions on behalf of employees.

SEC. 11. ADMINISTRATION THROUGH REGIONAL ADMINISTRATIVE ENTITIES.

    (a) In General.--In order to provide for the administration of the 
benefits under this Act with maximum efficiency and convenience for 
participating employers and health care providers and other individuals 
and entities providing services to such employers, the Office is 
authorized to enter into contracts with eligible entities to perform, 
on a regional basis, one or more of the following:
            (1) Collect and maintain all information relating to 
        individuals, families, and employers participating in the 
        program under this Act in the region served.
            (2) Receive, disburse, and account for payments of premiums 
        to participating employers by individuals in the region served, 
        and for payments by participating employers to carriers.
            (3) Serve as a channel of communication between carriers, 
        participating employers, and individuals relating to the 
        administration of this Act.
            (4) Otherwise carry out such activities for the 
        administration of this Act, in such manner, as may be provided 
        for in the contract entered into under this section.
            (5) The processing of grievances and appeals.
    (b) Application.--To be eligible to receive a contract under 
subsection (a), an entity shall prepare and submit to the Office an 
application at such time, in such manner, and containing such 
information as the Office may require.
    (c) Process.--
            (1) Competitive bidding.--All contracts under this section 
        shall be awarded through a competitive bidding process on a bi-
        annual basis.
            (2) Requirement.--No contract shall be entered into with 
        any entity under this section unless the Office finds that such 
        entity will perform its obligations under the contract 
        efficiently and effectively and will meet such requirements as 
        to financial responsibility, legal authority, and other matters 
        as the Office finds pertinent.
            (3) Publication of standards and criteria.--The Office 
        shall publish in the Federal Register standards and criteria 
        for the efficient and effective performance of contract 
        obligations under this section, and opportunity shall be 
        provided for public comment prior to implementation. In 
        establishing such standards and criteria, the Office shall 
        provide for a system to measure an entity's performance of 
        responsibilities.
            (4) Term.--Each contract under this section shall be for a 
        term of at least 1 year, and may be made automatically 
        renewable from term to term in the absence of notice by either 
        party of intention to terminate at the end of the current term, 
        except that the Office may terminate any such contract at any 
        time (after such reasonable notice and opportunity for hearing 
        to the entity involved as the Office may provide in 
        regulations) if the Office finds that the entity has failed 
        substantially to carry out the contract or is carrying out the 
        contract in a manner inconsistent with the efficient and 
        effective administration of the program established by this 
        Act.
    (d) Terms of Contract.--A contract entered into under this section 
shall include--
            (1) a description of the duties of the contracting entity;
            (2) an assurance that the entity will furnish to the Office 
        such timely information and reports as the Office determines 
        appropriate;
            (3) an assurance that the entity will maintain such records 
        and afford such access thereto as the Office finds necessary to 
        assure the correctness and verification of the information and 
        reports under paragraph (2) and otherwise to carry out the 
        purposes of this Act;
            (4) an assurance that the entity shall comply with such 
        confidentiality and privacy protection guidelines and 
        procedures as the Office may require; and
            (5) such other terms and conditions not inconsistent with 
        this section as the Office may find necessary or appropriate.

SEC. 12. COORDINATION WITH SOCIAL SECURITY BENEFITS.

    Benefits under this Act shall, with respect to an individual who is 
entitled to benefits under part A of title XVIII of the Social Security 
Act, be offered (for use in coordination with those medicare benefits) 
to the same extent and in the same manner as if coverage were under 
chapter 89 of title 5, United States Code.

SEC. 13. PUBLIC EDUCATION CAMPAIGN.

    (a) In General.--In carrying out this Act, the Office shall develop 
and implement an educational campaign to provide information to 
employers and the general public concerning the health insurance 
program developed under this Act.
    (b) Annual Progress Reports.--Not later than 1 year and 2 years 
after the implementation of the campaign under subsection (a), the 
Office shall submit to the appropriate committees of Congress a report 
that describes the activities of the Office under subsection (a), 
including a determination by the office of the percentage of employers 
with knowledge of the health benefits programs provided for under this 
Act.
    (c) Public Education Campaign.--There is authorized to be 
appropriated to carry out this section, such sums as may be necessary 
for each of fiscal years 2006 and 2007.

SEC. 14. APPROPRIATIONS.

    (a) Mandatory Appropriations.--There are authorized to be 
appropriated, and there are appropriated, to carry out sections 7 and 
8--
            (1) $4,000,000,000 for fiscal year 2006;
            (2) $4,000,000,000 for fiscal year 2007;
            (3) $4,000,000,000 for fiscal year 2008;
            (4) $3,000,000,000 for fiscal year 2009; and
            (5) $3,000,000,000 for fiscal year 2010.
    (b) Other Appropriations.--There are authorized to be appropriated 
to the Office, such sums as may be necessary in each fiscal year for 
the development and administration of the program under this Act.

SEC. 15. REFUNDABLE CREDIT FOR SMALL BUSINESS EMPLOYEE HEALTH INSURANCE 
              EXPENSES.

    (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 inserting 
after section 35 the following new section:

``SEC. 36. SMALL BUSINESS EMPLOYEE HEALTH INSURANCE EXPENSES.

    ``(a) Determination of Amount.--In the case of a qualified small 
employer, there shall be allowed as a credit against the tax imposed by 
this subtitle for the taxable year an amount equal to the sum of--
            ``(1) the expense amount described in subsection (b), and
            ``(2) the expense amount described in subsection (c), paid 
        by the taxpayer during the taxable year.
    ``(b) Subsection (b) Expense Amount.--For purposes of this 
section--
            ``(1) In general.--The expense amount described in this 
        subsection is the applicable percentage of the amount of 
        qualified employee health insurance expenses of each qualified 
        employee.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1)--
                    ``(A) In general.--The applicable percentage is 
                equal to--
                            ``(i) 25 percent in the case of self-only 
                        coverage,
                            ``(ii) 35 percent in the case of family 
                        coverage (as defined in section 220(c)(5)), and
                            ``(iii) 30 percent in the case of coverage 
                        for married adults with no children.
                    ``(B) Bonus for payment of greater percentage of 
                premiums.--The applicable percentage otherwise 
                specified in subparagraph (A) shall be increased by 5 
                percentage points for each additional 10 percent of the 
                qualified employee health insurance expenses of each 
                qualified employee exceeding 60 percent which are paid 
                by the qualified small employer.
    ``(c) Subsection (c) Expense Amount.--For purposes of this 
section--
            ``(1) In general.--The expense amount described in this 
        subsection is, with respect to the first credit year of a 
        qualified small employer which is an eligible employer, 10 
        percent of the qualified employee health insurance expenses of 
        each qualified employee.
            ``(2) First credit year.--For purposes of paragraph (1), 
        the term `first credit year' means the taxable year which 
        includes the date that the health insurance coverage to which 
        the qualified employee health insurance expenses relate becomes 
        effective.
            ``(3) Eligible employer.--For purposes of paragraph (1), 
        the term `eligible employer' shall not include a qualified 
        small employer if, during the 3-taxable year period immediately 
        preceding the first credit year, the employer or any member of 
        any controlled group including the employer (or any predecessor 
        of either) established or maintained health insurance coverage 
        for substantially the same employees as are the qualified 
        employees to which the qualified employee health insurance 
        expenses relate.
    ``(d) Limitation Based on Wages.--
            ``(1) In general.--The percentage which would (but for this 
        subsection) be taken into account as the percentage for 
        purposes of subsection (b)(2) or (c)(1) for the taxable year 
        shall be reduced (but not below zero) by the percentage 
        determined under paragraph (2).
            ``(2) Amount of reduction.--
                    ``(A) In general.--The percentage determined under 
                this paragraph is the percentage which bears the same 
                ratio to the percentage which would be so taken into 
                account as--
                            ``(i) the excess of--
                                    ``(I) the qualified employee's 
                                wages at an annual rate during such 
                                taxable year, over
                                    ``(II) $25,000, bears to
                            ``(ii) $5,000.
                    ``(B) Annual adjustment.--For each taxable year 
                after 2006, the dollar amounts specified for the 
                preceding taxable year (after the application of this 
                subparagraph) shall be increased by the same percentage 
                as the average percentage increase in premiums under 
                the Federal Employees Health Benefits Program under 
                chapter 89 of title 5, United States Code for the 
                calendar year in which such taxable year begins over 
                the preceding calendar year.
    ``(e) Definitions.--For purposes of this section--
            ``(1) Qualified small employer.--The term `qualified small 
        employer' means any employer (as defined in section 2(b)(2) of 
        the Small Employers Health Benefits Program Act of 2005) 
        which--
                    ``(A) is a participating employer (as defined in 
                section 2(b)(5) of such Act), and
                    ``(B) pays or incurs at least 60 percent of the 
                qualified employee health insurance expenses of each 
                qualified employee.
            ``(2) Qualified employee health insurance expenses.--
                    ``(A) In general.--The term `qualified employee 
                health insurance expenses' means any amount paid by an 
                employer for health insurance coverage under such Act 
                to the extent such amount is attributable to coverage 
                provided to any employee while such employee is a 
                qualified 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).
            ``(3) Qualified employee.--
                    ``(A) In general.--The term `qualified employee' 
                means, with respect to any period, an employee (as 
                defined in section 2(b)(1) of such Act) of an employer 
                if the total amount of wages paid or incurred by such 
                employer to such employee at an annual rate during the 
                taxable year exceeds $5,000.
                    ``(B) Wages.--The term `wages' has the meaning 
                given such term by section 3121(a) (determined without 
                regard to any dollar limitation contained in such 
                section).
    ``(f) Certain Rules Made Applicable.--For purposes of this section, 
rules similar to the rules of section 52 shall apply.
    ``(g) Credits for Nonprofit Organizations.--Any credit which would 
be allowable under subsection (a) with respect to a qualified small 
business if such qualified small business were not exempt from tax 
under this chapter shall be treated as a credit allowable under this 
subpart to such qualified small business.''.
    (b) 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. Small business employee health insurance expenses
``Sec. 37. Overpayments of tax''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2005.

SEC. 16. EFFECTIVE DATE.

    Except as provided in section 10(e), this Act shall take effect on 
the date of enactment of this Act and shall apply to contracts that 
take effect with respect to calendar year 2006 and each calendar year 
thereafter.
                                 <all>