[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 1875 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                S. 1875

To amend the Internal Revenue Code of 1986 to provide a refundable and 
 advanceable credit for health insurance, to amend the Social Security 
    Act to provide for improved private health insurance access and 
affordability, to amend the Internal Revenue Code of 1986 to repeal the 
            alternative minimum tax, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 25, 2007

  Mr. DeMint 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 a refundable and 
 advanceable credit for health insurance, to amend the Social Security 
    Act to provide for improved private health insurance access and 
affordability, to amend the Internal Revenue Code of 1986 to repeal the 
            alternative minimum tax, 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; REFERENCE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Healthy Tax Reform 
Act''.
    (b) Reference.--Except as otherwise expressly provided, whenever in 
this Act an amendment or repeal is expressed in terms of an amendment 
to, or repeal of, a section or other provision, the reference shall be 
considered to be made to a section or other provision of the Internal 
Revenue Code of 1986.
    (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; reference; table of contents.
TITLE I--REFUNDABLE AND ADVANCEABLE CREDIT FOR CERTAIN HEALTH INSURANCE 
                                COVERAGE

Sec. 101. Refundable and advanceable credit for certain health 
                            insurance coverage.
Sec. 102. Changes to existing tax preferences for medical coverage, 
                            etc., for individuals eligible for 
                            qualified health insurance credit or 
                            standard deduction.
 TITLE II--IMPROVING PRIVATE HEALTH INSURANCE ACCESS AND AFFORDABILITY

Sec. 201. Improving private health insurance access and affordability.
Sec. 202. Expansion of Medicaid health opportunity accounts to all 
                            States.
               TITLE III--ALTERNATIVE MINIMUM TAX REPEAL

Sec. 301. Permanent repeal of alternative minimum tax.

TITLE I--REFUNDABLE AND ADVANCEABLE CREDIT FOR CERTAIN HEALTH INSURANCE 
                                COVERAGE

SEC. 101. REFUNDABLE AND ADVANCEABLE CREDIT FOR CERTAIN HEALTH 
              INSURANCE COVERAGE.

    (a) Advanceable Credit.--Subpart A of part IV of subchapter A of 
chapter 1 (relating to nonrefundable personal credits) is amended by 
adding at the end the following new section:

``SEC. 25E. QUALIFIED HEALTH INSURANCE CREDIT.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year the sum of the monthly limitations determined 
under subsection (b) for the taxpayer and the taxpayer's spouse and 
dependents.
    ``(b) Monthly Limitation.--
            ``(1) In general.--The monthly limitation for each month 
        during the taxable year for an eligible individual is \1/12\th 
        of--
                    ``(A) the applicable adult amount, in the case that 
                the eligible individual is the taxpayer or the 
                taxpayer's spouse,
                    ``(B) the applicable adult amount, in the case that 
                the eligible individual is an adult dependent, and
                    ``(C) the applicable child amount, in the case that 
                the eligible individual is a child dependent.
            ``(2) Limitation on aggregate amount.--Notwithstanding 
        paragraph (1), the aggregate monthly limitations for the 
        taxpayer and the taxpayer's spouse and dependents for any month 
        shall not exceed \1/12\th of the applicable aggregate amount.
            ``(3) Applicable amount.--For purposes of this section--


 
 
                    Applicable adult  Applicable child     Applicable
 ``Calendar year         amount            amount       aggregate amount
 
          2009             $2,160             $1,620            $5,400
          2010             $2,220             $1,670            $5,550
          2011             $2,290             $1,710            $5,710
          2012             $2,350             $1,760            $5,880
          2013             $2,420             $1,810            $6,050
          2014             $2,490             $1,870            $6,220
          2015             $2,560             $1,920            $6,400
          2016             $2,640             $1,980            $6,590
          2017             $2,710             $2,030            $6,780
 

            ``(4) No credit for ineligible months.--With respect to any 
        individual, the monthly limitation shall be zero for any month 
        for which such individual is not an eligible individual.
    ``(c) Limitation Based on Amount of Tax.--In the case of a taxable 
year to which section 26(a)(2) does not apply, the credit allowed under 
subsection (a) for the taxable year shall not exceed the excess of--
            ``(1) the sum of the regular tax liability (as defined in 
        section 26(b)) plus the tax imposed by section 55, over
            ``(2) the sum of the credits allowable under this subpart 
        (other than this section) and section 27 for the taxable year.
    ``(d) Excess Credit Refundable to Certain Tax-Favored Accounts.--
If--
            ``(1) the credit which would be allowable under subsection 
        (a) if only qualified refund eligible health insurance were 
        taken into account under this section, exceeds
            ``(2) the limitation imposed by section 26 or subsection 
        (c) for the taxable year,
such excess shall be paid by the Secretary into the designated account 
of the taxpayer.
    ``(e) Eligible Individual.--For purposes of this section--
            ``(1) In general.--The term `eligible individual' means, 
        with respect to any month, an individual who--
                    ``(A) is the taxpayer, the taxpayer's spouse, or 
                the taxpayer's dependent, and
                    ``(B) is covered under qualified health insurance 
                as of the 1st day of such month.
            ``(2) Coverage under medicare, medicaid, schip, military 
        coverage.--The term `eligible individual' shall not include any 
        individual who for any month is--
                    ``(A) entitled to benefits under part A of title 
                XVIII of the Social Security Act or enrolled under part 
                B of such title, and the individual is not a 
                participant or beneficiary in a group health plan or 
                large group health plan that is a primary plan (as 
                defined in section 1862(b)(2)(A) of such Act),
                    ``(B) enrolled in the program under title XIX or 
                XXI of such Act (other than under section 1928 of such 
                Act), or
                    ``(C) entitled to benefits under chapter 55 of 
                title 10, United States Code, including under the 
                TRICARE program (as defined in section 1072(7) of such 
                title).
            ``(3) Identification requirements.--The term `eligible 
        individual' shall not include any individual for any month 
        unless the policy number associated with the qualified health 
        insurance and the TIN of each eligible individual covered under 
        such health insurance for such month are included on the return 
        of tax for the taxable year in which such month occurs.
            ``(4) Prisoners.--The term `eligible individual' shall not 
        include any individual for a month if, as of the first day of 
        such month, such individual is imprisoned under Federal, State, 
        or local authority.
            ``(5) Aliens.--The term `eligible individual' shall not 
        include any alien individual who is not a lawful permanent 
        resident of the United States.
    ``(f) Health Insurance.--For purposes of this section--
            ``(1) Qualified health insurance.--The term `qualified 
        health insurance' means any insurance constituting medical care 
        which (as determined under regulations prescribed by the 
        Secretary)--
                    ``(A) has a reasonable annual and lifetime benefit 
                maximum, and
                    ``(B) provides coverage for inpatient and 
                outpatient care, emergency benefits, and physician 
                care.
        Such term does not include any insurance substantially all of 
        the coverage of which is coverage described in section 
        223(c)(1)(B).
            ``(2) Qualified refund eligible health insurance.--The term 
        `qualified refund eligible health insurance' means any 
        qualified health insurance which is--
                    ``(A) coverage under a group health plan (as 
                defined in section 5000(b)(1)), or
                    ``(B) coverage offered in a State which has been 
                deemed by the Secretary of Health and Human Services to 
                meet the refundability requirements of section 2201 of 
                the Social Security Act.
    ``(g) Designated Accounts.--
            ``(1) Designated account.--For purposes of this section, 
        the term `designated account' means any specified account 
        established and maintained by the provider of the taxpayer's 
        qualified refund eligible health insurance--
                    ``(A) which is designated by the taxpayer (in such 
                form and manner as the Secretary may provide) on the 
                return of tax for the taxable year, and
                    ``(B) which, under the terms of the account, 
                accepts the payment described in subparagraph (A) on 
                behalf of the taxpayer.
            ``(2) Specified account.--For purposes of this paragraph, 
        the term `specified account' means--
                    ``(A) any health savings account under section 223 
                or Archer MSA under section 220, or
                    ``(B) any health insurance reserve account.
            ``(3) Health insurance reserve account.--For purposes of 
        this subsection, the term `health insurance reserve account' 
        means a trust created or organized in the United States as a 
        health insurance reserve account exclusively for the purpose of 
        paying the qualified medical expenses (within the meaning of 
        section 223(d)(2)) of the account beneficiary (as defined in 
        section 223(d)(3)), but only if the written governing 
        instrument creating the trust meets the requirements described 
        in subparagraphs (B), (C), (D), and (E) of section 223(d)(1). 
        Rules similar to the rules under subsections (g) and (h) of 
        section 408 shall apply for purposes of this subparagraph.
            ``(4) Treatment of payment.--Any payment under subsection 
        (d) to a designated account shall--
                    ``(A) not be taken into account with respect to any 
                dollar limitation which applies with respect to 
                contributions to such account (or to tax benefits with 
                respect to such contributions),
                    ``(B) be includible in the gross income of the 
                taxpayer for the taxable year in which the payment is 
                made (except as provided in subparagraph (C)), and
                    ``(C) be taken into account in determining any 
                deduction or exclusion from gross income in the same 
                manner as if such contribution were made by the 
                taxpayer.
    ``(h) Other Definitions.--For purposes of this section--
            ``(1) Dependent.--The term `dependent' has the meaning 
        given such term by section 152 (determined without regard to 
        subsections (b)(1), (b)(2), and (d)(1)(B) thereof). An 
        individual who is a child to whom section 152(e) applies shall 
        be treated as a dependent of the custodial parent for a 
        coverage month unless the custodial and noncustodial parent 
        provide otherwise.
            ``(2) Adult.--The term `adult' means an individual who is 
        not a child.
            ``(3) Child.--The term `child' means a qualifying child (as 
        defined in section 152(c).
    ``(i) Special Rules.--
            ``(1) Coordination with medical deduction, etc.--Any amount 
        paid by a taxpayer for insurance to which subsection (a) 
        applies shall not be taken into account in computing the amount 
        allowable to the taxpayer as a credit under section 35 or as a 
        deduction under section 213(a).
            ``(2) Medical and health savings accounts.--The credit 
        allowed under subsection (a) for any taxable year shall be 
        reduced by the aggregate amount distributed from Archer MSAs 
        (as defined in section 220(d)) and health savings accounts (as 
        defined in section 223(d)) which are excludable from gross 
        income for such taxable years by reason of being used to pay 
        premiums for coverage of an eligible individual under qualified 
        health insurance for any month.
            ``(3) 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.
            ``(4) Married couples must file joint return.--
                    ``(A) In general.--If the taxpayer is married at 
                the close of the taxable year, the credit shall be 
                allowed under subsection (a) only if the taxpayer and 
                his spouse file a joint return for the taxable year.
                    ``(B) Marital status; certain married individuals 
                living apart.--Rules similar to the rules of paragraphs 
                (3) and (4) of section 21(e) shall apply for purposes 
                of this paragraph.
            ``(5) Verification of coverage, etc.--No credit shall be 
        allowed under this section with respect to any individual 
        unless such individual's coverage (and such related information 
        as the Secretary may require) is verified in such manner as the 
        Secretary may prescribe.
            ``(6) Insurance which covers other individuals; treatment 
        of payments.--Rules similar to the rules of paragraphs (7) and 
        (8) of section 35(g) shall apply for purposes of this section.
    ``(j) Coordination With Advance Payments.--
            ``(1) Reduction in credit for advance payments.--With 
        respect to any taxable year, the amount which would (but for 
        this subsection) be allowed as a credit to the taxpayer under 
        subsection (a) shall be reduced (but not below zero) by the 
        aggregate amount paid on behalf of such taxpayer under section 
        7527A for months beginning in such taxable year.
            ``(2) Recapture of excess advance payments.--If the 
        aggregate amount paid on behalf of the taxpayer under section 
        7527A for months beginning in the taxable year exceeds the sum 
        of the monthly limitations determined under subsection (b) for 
        the taxpayer and the taxpayer's spouse and dependents for such 
        months, then the tax imposed by this chapter for such taxable 
        year shall be increased by the sum of--
                    ``(A) such excess, plus
                    ``(B) interest on such excess determined at the 
                underpayment rate established under section 6621 for 
                the period from the date of the payment under section 
                7527A to the date such excess is paid.
        For purposes of subparagraph (B), an equal part of the 
        aggregate amount of the excess shall be deemed to be 
        attributable to payments made under section 7527A on the first 
        day of each month beginning in such taxable year, unless the 
        taxpayer establishes the date on which each such payment giving 
        rise to such excess occurred, in which case subparagraph (B) 
        shall be applied with respect to each date so established.
    ``(k) Cost-of-Living Adjustments.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 2017, each of the dollar 
        amounts contained in the last row of the table under subsection 
        (b)(3) shall be increased by an amount equal to such dollar 
        amount multiplied by the blended cost-of-living adjustment.
            ``(2) Blended cost-of-living adjustment.--For purposes of 
        paragraph (1), the blended cost-of-living adjustment means one-
        half of the sum of--
                    ``(A) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins by substituting `calendar year 
                2016' for `calendar year 1992' in subparagraph (B) 
                thereof, plus
                    ``(B) the cost-of-living adjustment determined 
                under section 213(d)(10)(B)(ii) for the calendar year 
                in which the taxable year begins by substituting `2016' 
                for `1996' in subclause (II) thereof.
            ``(3) Rounding.--Any increase determined under paragraph 
        (2) shall be rounded to the nearest multiple of $10.''.
    (b) Advance Payment of Credit.--Chapter 77 (relating to 
miscellaneous provisions) is amended by inserting after section 7527 
the following new section:

``SEC. 7527A. ADVANCE PAYMENT OF CREDIT FOR QUALIFIED REFUND ELIGIBLE 
              HEALTH INSURANCE.

    ``(a) In General.--The Secretary shall establish a program for 
making payments on behalf of individuals to providers of qualified 
refund eligible health insurance (as defined in section 25E(f)(2)) for 
such individuals.
    ``(b) Limitation.--The Secretary may make payments under subsection 
(a) only to the extent that the Secretary determines that the amount of 
such payments made on behalf of any taxpayer for any month does not 
exceed the sum of the monthly limitations determined under section 
25E(b) for the taxpayer and taxpayer's spouse and dependents for such 
month.''.
    (c) Information Reporting.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 (relating to information concerning transactions 
        with other persons) is amended by inserting after section 6050V 
        the following new section:

``SEC. 6050W. RETURNS RELATING TO CREDIT FOR QUALIFIED REFUND ELIGIBLE 
              HEALTH INSURANCE.

    ``(a) Requirement of Reporting.--Every person who is entitled to 
receive payments for any month of any calendar year under section 7527A 
(relating to advance payment of credit for qualified refund eligible 
health insurance) with respect to any individual shall, at such time as 
the Secretary may prescribe, make the return described in subsection 
(b) with respect to each such individual.
    ``(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, with respect to each individual referred to 
        in subsection (a)--
                    ``(A) the name, address, and TIN of each such 
                individual,
                    ``(B) the months for which amounts payments under 
                section 7527A were received,
                    ``(C) the amount of each such payment,
                    ``(D) the type of insurance coverage provide by 
                such person with respect to such individual and the 
                policy number associated with such coverage,
                    ``(E) the name, address, and TIN of the spouse and 
                each dependent covered under such coverage, and
                    ``(F) such other information as the Secretary may 
                prescribe.
    ``(c) 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 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, and
            ``(2) the information required to be shown on the return 
        with respect to such individual.
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.
    ``(d) 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) 
                (relating to definitions) is amended by redesignating 
                clauses (xv) through (xxi) as clauses (xvi) through 
                (xxii), respectively, and by inserting after clause 
                (xiv) the following new clause:
                            ``(xv) section 6050W (relating to returns 
                        relating to credit for qualified refund 
                        eligible health insurance),''.
                    (B) Paragraph (2) of section 6724(d) is amended by 
                striking the period at the end of subparagraph (CC) and 
                inserting ``, or'' and by inserting after subparagraph 
                (CC) the following new subparagraph:
                    ``(DD) section 6050W (relating to returns relating 
                to credit for qualified refund eligible health 
                insurance).''.
    (d) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting ``or 25E'' after ``section 
        35''.
            (2)(A) Section 23(b)(4)(B) is amended by inserting ``and 
        section 25D'' after ``this section''.
            (B) Section 24(b)(3)(B) is amended by striking ``and 25B'' 
        and inserting ``, 25B, and 25D''.
            (C) Section 25B(g)(2) is amended by striking ``section 23'' 
        and inserting ``sections 23 and 25D''.
            (D) Section 26(a)(1) is amended by striking ``and 25B'' and 
        inserting ``25B, and 25D''.
            (3) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 is amended by inserting after the 
        item relating to section 25D the following new item:

``Sec. 25E. Qualified health insurance credit.''.
            (4) The table of sections for chapter 77 is amended by 
        inserting after the item relating to section 7527 the following 
        new item:

``Sec. 7527A. Advance payment of credit for qualified refund eligible 
                            health insurance.''.
            (5) The table of sections for subpart B of part III of 
        subchapter A of chapter 61 is amended by adding at the end the 
        following new item:

``Sec. 6050W. Returns relating to credit for qualified refund eligible 
                            health insurance.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 102. CHANGES TO EXISTING TAX PREFERENCES FOR MEDICAL COVERAGE, 
              ETC., FOR INDIVIDUALS ELIGIBLE FOR QUALIFIED HEALTH 
              INSURANCE CREDIT OR STANDARD DEDUCTION.

    (a) Exclusion for Contributions by Employer to Accident and Health 
Plans.--
            (1) In general.--Section 106 (relating to contributions by 
        employer to accident and health plans) is amended by adding at 
        the end the following new subsection:
    ``(f) No Exclusion for Individuals Eligible for Qualified Health 
Insurance Credit.--Subsection (a) shall not apply with respect to any 
employer-provided coverage under an accident or health plan for any 
individual for any month unless such individual is described in 
paragraph (2) or (5) of section 25E(e) for such month. The amount 
includible in gross income by reason of this subsection shall be 
determined under rules similar to the rules of section 4980B(f)(4).''.
            (2) Conforming amendments.--
                    (A) Section 106(b)(1) is amended--
                            (i) by inserting ``gross income does not 
                        include'' before ``amounts contributed'', and
                            (ii) by striking ``shall be treated as 
                        employer-provided coverage for medical expenses 
                        under an accident or health plan''.
                    (B) Section 106(d)(1) is amended--
                            (i) by inserting ``gross income does not 
                        include'' before ``amounts contributed'', and
                            (ii) by striking ``shall be treated as 
                        employer-provided coverage for medical expenses 
                        under an accident or health plan''.
    (b) Amounts Received Under Accident and Health Plans.--Section 105 
(relating to amounts received under accident and health plans) is 
amended by adding at the end the following new subsection:
    ``(f) No Exclusion for Individuals Eligible for Qualified Health 
Insurance Credit.--Subsection (b) shall not apply with respect to any 
employer-provided coverage under an accident or health plan for any 
individual for any month unless such individual is described in 
paragraph (2) or (5) of section 25E(e) for such month.''.
    (c) Special Rules for Health Insurance Costs of Self-Employed 
Individuals.--Subsection (l) of section 162 (relating to special rules 
for health insurance costs of self-employed individuals) is amended by 
adding at the end the following new paragraph:
            ``(6) No deduction to individuals eligible for qualified 
        health insurance.--Paragraph (1) shall not apply for any 
        individual for any month unless such individual is described in 
        paragraph (2) or (5) of section 25E(e) for such month.''.
    (d) Earned Income Credit Unaffected by Repealed Exclusions.--
Subparagraph (B) of section 32(c)(2) is amended by redesignating 
clauses (v) and (vi) as clauses (vi) and (vii), respectively, and by 
inserting after clause (iv) the following new clause:
                            ``(v) the earned income of an individual 
                        shall be computed without regard to sections 
                        105(f) and 106(f),''.
    (e) Modification of Deduction for Medical Expenses.--Subsection (d) 
of section 213 is amended by adding at the end the following new 
paragraph:
            ``(12) Premiums for qualified health insurance.--The term 
        `medical care' does not include any amount paid as a premium 
        for coverage of an eligible individual (as defined in section 
        25E(e)) under qualified health insurance (as defined in section 
        25E(f)) for any month.''.
    (f)  Definition of Wages for Employment Tax Purposes.--
            (1) Federal insurance contributions act.--Subsection (a) of 
        section 3121 is amended--
                    (A) by striking ``sickness or'' each place it 
                appears in paragraph (2), and
                    (B) by inserting after paragraph (2) the following 
                new paragraph:
            ``(3) any payment made to or for the benefit of an employee 
        if at the time of such payment it is reasonable to believe that 
        the employee will be able to exclude such payment from income 
        under section 104, 105, or 106;''.
            (2) Railroad retirement tax.--Subsection (e) of section 
        3231 is amended--
                    (A) by striking ``sickness or'' each place it 
                appears in paragraph (1), and
                    (B) by adding at the end the following new 
                paragraph:
            ``(13) The term `compensation' shall not include any 
        payment made to or for the benefit of an employee if at the 
        time of such payment it is reasonable to believe that the 
        employee will be able to exclude such payment from income under 
        section 104, 105, or 106.''.
            (3) Unemployment tax.--Subsection (b) of section 3306 is 
        amended--
                    (A) by striking ``sickness or'' each place it 
                appears in paragraph (2), and
                    (B) by inserting after paragraph (2) the following 
                new paragraph:
            ``(3) any payment made to or for the benefit of an employee 
        if at the time of such payment it is reasonable to believe that 
        the employee will be able to exclude such payment from income 
        under section 104, 105, or 106;''.
    (g) Reporting Requirement.--Subsection (a) of section 6051 is 
amended by striking ``and'' at the end of paragraph (12), by striking 
the period at the end of paragraph (13) and inserting ``and'', and by 
inserting after paragraph (13) the following new paragraph:
            ``(14) the total amount of employer-provided coverage under 
        an accident or health plan which is includible in gross income 
        by reason of sections 105(f) and 106(f).''.
    (h) Retired Public Safety Officers.--Section 402(l)(4)(D) is 
amended by adding at the end the following: ``Such term shall not 
include any premium for coverage by an accident or health insurance 
plan for any month unless such individual is described in paragraph (2) 
or (5) of section 25E(e) for such month.''.
    (i) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

 TITLE II--IMPROVING PRIVATE HEALTH INSURANCE ACCESS AND AFFORDABILITY

SEC. 201. IMPROVING PRIVATE HEALTH INSURANCE ACCESS AND AFFORDABILITY.

    The Social Security Act is amended by adding at the end the 
following new title:

 ``TITLE XXII--REFUNDABILITY DEEMING; STATE HEALTH INSURANCE EXCHANGES

                  ``Subtitle A--Refundability Deeming

``SEC. 2201. REFUNDABILITY DEEMING.

    ``(a) In General.--For purposes of section 25E of the Internal 
Revenue Code of 1986, the Secretary shall deem whether a State (as 
defined for purposes of title XIX) has taken efforts to provide its 
citizens with greater access to affordable private health insurance. 
Those efforts may include, but are not limited to, the following 
initiatives:
            ``(1) The establishment of a State health insurance 
        exchange.
            ``(2) The establishment of a high risk solution, such as a 
        high risk pool, reinsurance mechanism, or other State-designed 
        high risk solution.
            ``(3) The availability of affordable coverage (as defined 
        in section 2212(b)(2), determined without regard to whether 
        such coverage is qualified exchange-based health insurance 
        coverage (as defined in section 2214).
    ``(b) More Individuals Covered.--A State shall demonstrate to the 
Secretary that an initiative under subsection (a) is reasonably 
designed to operate in a manner so as to result, in combination with 
the qualified health insurance tax credit, in a reduction in the number 
of eligible individuals (as defined in section 2213) in the State who 
do not have health insurance coverage, as measured by the Secretary 
based upon information obtained in the Current Population Survey.
    ``(c) Reference to Refundability Requirement for Application of 
Refundability of Qualified Health Insurance Tax Credit.--For rules 
relating to limitations on the refundability of the qualified health 
insurance credit under section 25E of the Internal Revenue Code of 1986 
in relation to initiatives described in subsection (a), see section 
25E(d). In this title, the term `qualified health insurance tax credit' 
means the tax credit provided under such section.

             ``Subtitle B--State Health Insurance Exchanges

``SEC. 2211. STATE HEALTH INSURANCE EXCHANGES.

    ``(a) In General.--The Secretary shall provide a process for the 
review and certification of applications of each State of a State-based 
program as a certified health insurance exchange for the State (each in 
this subtitle referred to as a `certified State health insurance 
exchange' or an `exchange'). A program shall not be treated as a 
certified State health insurance exchange unless the Secretary, in 
consultation with the Secretary of the Treasury, determines that the 
program meets the requirements for an exchange under this subtitle.
    ``(b) Continued Certification.--Upon certification of a program 
under subsection (a), the program shall remain so certified unless the 
Secretary determines that the program has failed to meet any of the 
requirements for an exchange under this subtitle.

``SEC. 2212. REQUIREMENTS FOR EXCHANGE CERTIFICATION.

    ``(a) General Requirements.--
            ``(1) In general.--The exchange shall be a means to pool 
        individual consumers purchasing private health insurance, to 
        provide them with greater negotiating leverage, and to provide 
        a market where private health insurance plans can compete to 
        offer coverage for these individuals.
            ``(2) Administration.--Nothing in this subtitle shall 
        prohibit a State from either directly contracting with the 
        health insurance plans participating in the exchange or a third 
        party administrator to operate the exchange.
            ``(3) Plan participation.--No State may restrict or 
        otherwise limit the ability of health insurance plans to 
        participate in and offer health insurance products through an 
        exchange, so long as the providers of these plans are duly 
        licensed under State insurance laws applicable to all health 
        insurance providers in the State and comply with the 
        requirements under this subtitle.
            ``(4) Benefits.--A State shall not impose requirements that 
        health insurance plans participating in the exchange provide 
        any benefits, beyond those requirements that the State imposes 
        upon all licensed health insurance providers operating in the 
        State.
            ``(5) Pricing.--A State shall not set prices for any 
        products offered through the exchange.
            ``(6) Premiums collection method.--A State shall ensure the 
        existence of an effective and efficient method for the 
        collection of premiums owed for qualified exchange-based health 
        insurance coverage.
            ``(7) Multi-state pooling arrangements.--Nothing in this 
        subtitle shall prohibit State health insurance exchanges from 
        organizing into a multi-state pooling arrangement.
    ``(b) Offering of Affordable Qualified Exchange-Based Health 
Insurance Coverage to Eligible Individuals.--
            ``(1) Affordable and benchmark coverage.--The exchange must 
        have one or more health insurance plans participating in the 
        offering to each eligible individual (as defined in section 
        2213(a)) of qualified exchange-based health insurance coverage 
        (as defined in section 2214)--
                    ``(A) at least one of which is affordable as 
                determined under paragraph (2); and
                    ``(B) at least one of which provides benchmark 
                benefits coverage described in section 2113(b).
        Private health insurance providers, duly licensed in the State, 
        may enter into agreements with the exchange to provide 
        qualified exchange-based health insurance coverage and increase 
        the choices available to eligible individuals.
            ``(2) Affordable coverage.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                State through an exchange shall meet the requirement 
                under paragraph (1)(A) in a year by using its funds to 
                supplement the premiums of the lowest cost plan 
                participating in the exchange (as determined by a 
                methodology to be specified by the Secretary), so that 
                the average premium for individuals enrolling in the 
                plan will not exceed 6 percent of the State's median 
                income.
                    ``(B) Exception.--A State is not required under 
                subparagraph (A) to provide any supplemental payments 
                if there is at least one plan available in all areas of 
                the State with average premiums that are below 6 
                percent of the State's median income.
                    ``(C) No use of price fixing.--The implementation 
                of this paragraph shall comply with subsection (a)(5).
                    ``(D) Application.--
                            ``(i) Disregarding late enrollment 
                        penalties and related premium disincentives.--
                        The amount of premium under subparagraph (A) 
                        shall not take into account any increase in 
                        premium resulting from the State's application 
                        of methods permitted under subsection (a)(6).
                            ``(ii) Application to sub-state areas.--A 
                        State may apply subparagraph (A) separately for 
                        different areas within the State.
    ``(c) Enrollment of Eligible Individuals.--
            ``(1) Enrollment mechanisms.--Health insurance plans 
        participating in the exchange in State shall have uniform 
        mechanisms designed to encourage and facilitate the enrollment 
        of all eligible individuals in qualified exchange-based health 
        insurance coverage.
            ``(2) Enrollment opportunities.--
                    ``(A) In general.--Health insurance plans 
                participating in the exchange in a State shall permit 
                the enrollment and changes of enrollment of individuals 
                at the time they become eligible individuals in the 
                State, such as through loss of group-based qualifying 
                health insurance coverage, changes in residency or 
                family composition, and other circumstances specified 
                by the Secretary.
                    ``(B) Annual open enrollment periods.--Health 
                insurance plans participating in the exchange in a 
                State shall permit eligible individuals to change 
                enrollment among such plans in an annual manner, 
                subject to subparagraph (A).
            ``(3) Limitation on preexisting condition exclusions.--
        Qualified exchange-based health insurance coverage shall meet 
        the requirements of section 9801 of the Internal Revenue Code 
        of 1986 in the same manner as if it were a group health plan.
    ``(d) Pathway for Enrollment by Medicaid and SCHIP Beneficiaries.--
A State through an exchange shall include a pathway for eligible 
individuals who are enrolled (or eligible to enroll) under title XIX or 
XXI in such State to enroll in qualified exchange-based health 
insurance coverage. A State may use the program under section 1938 in 
developing such a pathway.
    ``(e) Methods To Reduce Adverse Selection.--Health insurance plans 
participating in the exchange in a State shall have a mechanism to 
reduce adverse selection in the enrollment of eligible individuals. 
This mechanism shall be uniform for all such plans and may include 
waiting periods and premium surcharges for late enrollees (or 
individuals who otherwise do not have periods of creditable coverage 
before enrolling through the exchange) and other devices reasonably 
designed to reduce adverse selection in the enrollment of eligible 
individuals consistent with the requirements of subpart 1 of part B of 
title XXVII of the Public Health Service Act (relating to portability, 
access, and renewability requirements for health insurance coverage in 
the individual market).
    ``(f) Reinsurance or Other Risk Redistribution Mechanism.--Health 
insurance plans participating in the exchange in a State may have a 
uniform mechanism that protects entities offering qualified exchange-
based health insurance coverage to manage risk. Such a mechanism may 
include reinsurance, a high risk pool, or other mechanism approved by 
the Secretary.
    ``(g) Dissemination of Coverage Information.--Health insurance 
plans participating in the exchange in a State shall ensure that there 
is wide dissemination of information about health insurance coverage 
options, including the plans offered and premiums and benefits for such 
plans, to eligible individuals and to employers that provide financial 
assistance in purchasing such coverage.
    ``(h) Information Coordination.--Health insurance plans 
participating in the exchange in a State shall report to the Secretary 
of the Treasury such information as is required under the Internal 
Revenue Code of 1986 to carry out the qualified health insurance tax 
credit.

``SEC. 2213. ELIGIBLE INDIVIDUAL.

    ``(a) Eligible Individual.--In this subtitle--
            ``(1) In general.--The term `eligible individual' means, 
        with respect to a State and a month, an individual who, as of 
        the first day of the month--
                    ``(A) is a resident of the State (as determined in 
                accordance with guidelines specified by the Secretary);
                    ``(B) is citizen or national of the United States, 
                an alien lawfully admitted to the United States for 
                permanent residence or otherwise residing in the United 
                States under color of law, or an alien otherwise 
                lawfully residing in the United States under color of 
                law for such period as the Secretary shall specify; and
                    ``(C) is not covered under group-based qualifying 
                health insurance coverage.
            ``(2) Group-based qualifying health insurance coverage.--
        The term `group-based qualifying health insurance coverage' 
        means any of the following::
                    ``(A) Group health plan coverage.--
                            ``(i) In general.--Subject to clause (ii), 
                        coverage under a group health plan (as defined 
                        in section 9832(a) of the Internal Revenue Code 
                        of 1986).
                            ``(ii) Exception.--Clause (i) shall not 
                        include--
                                    ``(I) a health plan if 
                                substantially all of its coverage is 
                                coverage described in section 
                                223(c)(1)(B) of the Internal Revenue 
                                Code of 1986; or
                                    ``(II) coverage under a group 
                                health plan insofar as the plan 
                                benefits consist (other than coverage 
                                described in subclause (I)) of 
                                contribution towards a qualified 
                                exchange-based health insurance 
                                coverage.
                    ``(B) Medicare.--
                            ``(i) In general.--Subject to clause (ii), 
                        coverage under any part of the Medicare program 
                        under title XVIII.
                            ``(ii) Exception.--Clause (i) shall not 
                        apply if all the coverage under Medicare is, 
                        through the direct or indirect application of 
                        section 1862(b), secondary to coverage under a 
                        group health plan.
                    ``(C) Military health care.--Coverage under the 
                military health program under chapter 55 of title 10, 
                United States Code, including under the TRICARE program 
                (as defined in section 1072(7) of such title).
                    ``(D) FEHBP.--Coverage under the Federal employees 
                health benefit program under chapter 89 of title 5, 
                United States Code.
                    ``(E) Full veterans coverage.--Coverage through the 
                Department of Veterans Affairs if such coverage is 
                based on enrollment of an individual who is described 
                in paragraph (1) of section 1705(a) of title 38, United 
                States Code (relating to veterans with service-
                connected disabilities rated 50 percent or greater).
    ``(b) Relation to Medicaid/SCHIP.--Except as a State may otherwise 
provide, an individual is not disqualified from being an eligible 
individual merely because the individual is enrolled under title XIX or 
XXI.

``SEC. 2214. QUALIFIED EXCHANGE-BASED HEALTH INSURANCE COVERAGE.

    ``In this subtitle, the term `qualified exchange-based health 
insurance coverage' means qualified health insurance (as defined in 
section 25E(f)(1) of the Internal Revenue Code of 1986) offered by a 
private entity through an exchange.

``SEC. 2215. FLEXIBILITY IN APPLICATION TO LOWER-INCOME INDIVIDUALS.

    ``(a) State Supplementation.--Nothing in this subtitle shall be 
construed as preventing a State from providing, under a certified State 
health insurance exchange and at the State's own expense, additional 
assistance to eligible individuals with respect to subsidizing premium 
and cost-sharing costs for qualified exchange-based health insurance 
coverage.
    ``(b) Treatment of Certain Medicaid and SCHIP Beneficiaries.--
Nothing in this subtitle shall be construed as preventing a State 
Medicaid or children's health insurance program under title XIX or XXI 
from permitting individuals eligible for medical assistance or child 
health assistance under the respective titles from obtaining such 
assistance through enrollment in qualified exchange-based health 
insurance coverage.''.

SEC. 202. EXPANSION OF MEDICAID HEALTH OPPORTUNITY ACCOUNTS TO ALL 
              STATES.

    Section 1938 of the Social Security Act (42 U.S.C. 1396u-8) is 
amended--
            (1) in subsection (a)--
                    (A) by striking paragraph (1) and inserting the 
                following:
            ``(1) In general.--Notwithstanding any other provision of 
        this title, the Secretary shall establish a program under which 
        States may provide under their State plans under this title 
        (including such a plan operating under a statewide waiver under 
        section 1115) in accordance with this section for the provision 
        of alternative benefits consistent with subsection (c) for 
        eligible population groups in one or more geographic areas of 
        the State specified by the State. An amendment under the 
        previous sentence is referred to in this section as a `State 
        health opportunity accounts program'.''; and
                    (B) in paragraph (2)--
                            (i) by striking the paragraph heading and 
                        inserting ``Implementation.--'';
                            (ii) by striking subparagraph (A) and 
                        inserting the following:
                    ``(A) In general.--The program established under 
                this section shall begin on January 1, 2008.''; and
                            (iii) in subparagraph (B)--
                                    (I) by striking clause (i) and 
                                inserting the following:
                            ``(i) In general.--Not later than March 31, 
                        2013, the Comptroller General of the United 
                        States shall submit a report to Congress 
                        evaluating the programs conducted under this 
                        section .''; and
                                    (II) in clause (ii), by striking 
                                ``2010'' and inserting ``2013''; and
                    (C) in paragraph (3)(E), by inserting ``that 
                include plan comparison information in language that is 
                easily understood'' before the period;
            (2) in subsection (b)--
                    (A) in paragraph (1), by striking ``consistent with 
                paragraphs (2) and (3)'';
                    (B) by striking paragraphs (2) through (4) and 
                inserting the following:
            ``(2) Limitation on enrollees in medicaid managed care 
        organizations.--Insofar as the State provides for eligibility 
        of individuals who are enrolled in Medicaid managed care 
        organizations, such individuals may participate in the State 
        health opportunity account program only if the State provides 
        assurances satisfactory to the Secretary that the following 
        conditions are met with respect to any such organization:
                    ``(A) In no case may the number of such individuals 
                enrolled in the organization who participate in the 
                program exceed 5 percent of the total number of 
                individuals enrolled in such organization.
                    ``(B) The proportion of enrollees in the 
                organization who so participate is not significantly 
                disproportionate to the proportion of such enrollees in 
                other such organizations who participate.
                    ``(C) The State has provided for an appropriate 
                adjustment in the per capita payments to the 
                organization to account for such participation, taking 
                into account differences in the likely use of health 
                services between enrollees who so participate and 
                enrollees who do not so participate.''; and
                    (C) by redesignating paragraphs (5) and (6) as 
                paragraphs (3) and (4), respectively;
            (3) in subsection (d)--
                    (A) in paragraph (2)(C)(i)--
                            (i) in subclause (II), by striking ``and'' 
                        at the end;
                            (ii) in subclause (III), by striking the 
                        period at the end and inserting ``; and''; and
                            (iii) by adding at the end the following:
                                    ``(IV) shall provide contributions 
                                into such an account on a sliding-scale 
                                based on income.''; and
                    (B) in paragraph (3)(B)(ii)--
                            (i) in subclause (I), by striking ``and'' 
                        at the end;
                            (ii) by redesignating subclause (II) as 
                        subclause (III); and
                            (iii) by inserting after subclause (I), the 
                        following:
                                    ``(II) may be transferred into a 
                                health savings account established 
                                under section 223 of the Internal 
                                Revenue Code of 1986 and such transfer 
                                shall be treated as a rollover 
                                contribution described in section 
                                223(f) of the Internal Revenue Code of 
                                1986; and''; and
            (4) by striking ``State demonstration program'' each place 
        it appears and inserting ``State health opportunity accounts 
        program''.

               TITLE III--ALTERNATIVE MINIMUM TAX REPEAL

SEC. 301. PERMANENT REPEAL OF ALTERNATIVE MINIMUM TAX.

    (a) In General.--Section 55(a) (relating to alternative minimum tax 
imposed) is amended by adding at the end the following new flush 
sentence:
``For purposes of this title, the tentative minimum tax on any taxpayer 
for any taxable year beginning after December 31, 2006, shall be 
zero.''.
    (b) Modification of Limitation on Use of Credit for Prior Year 
Minimum Tax Liability.--Subsection (c) of section 53 (relating to 
credit for prior year minimum tax liability) is amended to read as 
follows:
    ``(c) Limitation.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        credit allowable under subsection (a) for any taxable year 
        shall not exceed the excess (if any) of--
                    ``(A) the regular tax liability of the taxpayer for 
                such taxable year reduced by the sum of the credits 
                allowable under subparts A, B, D, E, and F of this 
                part, over
                    ``(B) the tentative minimum tax for the taxable 
                year.
            ``(2) Taxable years beginning after 2006.--In the case of 
        any taxable year beginning after December 31, 2006, the credit 
        allowable under subsection (a) to a taxpayer other than a 
        corporation for any taxable year shall not exceed 90 percent of 
        the regular tax liability of the taxpayer for such taxable year 
        reduced by the sum of the credits allowable under subparts A, 
        B, D, E, and F of this part.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2006.
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