[Congressional Record Volume 147, Number 7 (Monday, January 22, 2001)]
[Senate]
[Pages S301-S303]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BOND (for himself, Mr. Durbin, Mr. Baucus, Ms. Snowe, Mr. 
        Kerry, Mr. Jeffords, Mr. Kyl, Mr. Burns, Mr. Dorgan, Mr. 
        Harkin, Mrs. Lincoln, Mr. Leahy, Mr. Johnson, Mr. Fitzgerald, 
        Mr. Wellstone, and Mr. Bingaman):
  S. 29. A bill to amend the Internal Revenue Code of 1986 to allow a 
deduction for 100 percent of the health insurance costs of self-
employed individuals; to the Committee on Finance.


          self-employed health insurance fairness act of 2001

  Mr. BOND. Mr. President, I rise today to discuss a measure that has 
broad bipartisan support. Today, with my colleague from Illinois, 
Senator Durbin, I am introducing legislation addressing what is a top 
concern of small business owners in this country. That is the 
availability of health care.
  For the past three Congresses, we have worked to level the playing 
field for America's self-employed by ensuring that they can deduct 100 
percent of their health insurance premiums. Large corporations, 
businesses, and other organizations can deduct 100 percent of what they 
pay, but small businesses, up until recently, have been severely 
limited in what they can deduct.
  The legislation Senator Durbin and I are introducing today, the Self-
Employed Health Insurance Act of 2001, will end finally one of the most 
glaring inequities that has existed in our tax law.
  I have had the pleasure of serving for over 4 years now as chairman 
of the Senate Committee on Small Business. Throughout, one of my top 
priorities has been to ensure full deductibility of health insurance 
for the self-employed. We have made some progress. Most notably, in the 
Taxpayer Relief Act of 1997, we broke through the longstanding cap on 
the deduction to provide 100-percent deductibility. In 1998, we passed 
legislation to speed up the date that self-employed can fully deduct 
their health insurance costs to 2003 and increase the deductible 
amounts in the intervening years.
  We realize the problem with budget scoring has postponed the 
effective date of this measure, but I have talked to too many small 
business people who tell us they cannot wait until 2003 to get sick or 
to go to 2003 without having coverage for themselves and their 
employees. The self-employed still cannot afford, in many instances, 
health insurance without 100-percent deductibility. They should not 
have to wait any longer. It is time for us to unite behind this 
bipartisan issue and get this job done.
  Let me give you a fact, Mr. President. With a self-employed able to 
deduct only 60 percent of their health insurance costs today and only 
70 percent next year, it probably will come as no surprise to any of us 
that almost a quarter, 24.2 percent, of the self-employed business 
owners in Missouri do not have health insurance. In fact, 4.8 million 
Americans live in families headed by a self-employed individual and 
have no health insurance. Those families include more than 1 million 
children who lack adequate health care insurance coverage.
  The bill Senator Durbin and I are introducing today addresses this 
situation by making 100-percent deductibility begin this year. Full 
deductibility will make health insurance affordable to the self-
employed and help them get themselves and their families

[[Page S302]]

the kind of health insurance coverage they should have.
  This measure also corrects another inequity in the law affecting 
self-employed who try to provide health insurance for themselves, their 
families, and their employees. It deals with an issue I raised in the 
last Congress.
  Under the current law, the self-employed lose all the health 
insurance deduction if they are eligible to participate in another 
plan, whether or not they actually participate. This provision affects 
self-employed individuals such as Steve Hagan in my hometown of Mexico, 
MO. Steve is a financial planner who runs his own small business. 
Although he has a group medical plan for his employees, Steve cannot 
deduct the medical cost of covering himself or his family simply 
because his wife is eligible for health insurance through her employer.

  The inequity is clear. Why should he be able to deduct the cost of 
health insurance for his employees but not for himself and his family? 
What if the insurance available through his wife's employer does not 
meet the needs of their family?
  Besides being patently unfair, this is also an enormous trap for the 
unwary. Imagine the small business owner who learns that she can now 
deduct 60 percent of her health insurance costs this year, and with the 
extra deduction, she can finally afford a group medical plan for 
herself and her employees.
  Then later in the year, her husband gets a new job that offers health 
insurance. Suddenly, her self-employed health insurance deduction is 
gone. Sadly, she is left with two choices. She can bear the entire 
burden of her family's coverage, or she can terminate the insurance 
coverage for all her employees, which will likely increase due to 
coverage of fewer employees under the plan. The Tax Code should not 
force small business owners into this kind of ``no win'' situation when 
they try to provide insurance coverage for their employees and 
themselves.
  This bill eliminates this problem by clarifying that the self-
employed health insurance deduction is limited only if the self-
employed person actually participates in a subsidized health insurance 
plan offered by a spouse's employer or through a second job. It is 
simply a matter of fairness. It makes common sense. We ought to take 
this step right now.
  It is a commonsense measure that answers the urgent plea of small 
businesses for fairness in the Tax Code. It has been on the ``must do'' 
list of the national small business groups for too long. And when I 
hosted the National Women's Small Business Summit this past summer, in 
Kansas City, it was at the top of the list among the recommendations we 
received.
  We have a tremendous opportunity to work together. Let's take this 
opportunity and finish the job.
  I had initially offered a list of 21 original cosponsors. I ask 
unanimous consent that, in addition to those cosponsors, the following 
Senators be added: The Senator from Wyoming, Mr. Enzi; the Senator from 
Indiana, Mr. Lugar; the Senator from Kansas, Mr. Roberts; the Senator 
from Maine, Ms. Collins; the Senator from Pennsylvania, Mr. Specter; 
and the Senator from Wisconsin, Mr. Kohl.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BOND. Mr. President, I ask unanimous consent the bill and a 
description of its provisions be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 29

         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 ``Self-Employed Health 
     Insurance Fairness Act of 2001''.

     SEC. 2. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED 
                   INDIVIDUALS INCREASED.

       (a) In General.--Section 162(l)(1) of the Internal Revenue 
     Code of 1986 (relating to special rules for health insurance 
     costs of self-employed individuals) is amended to read as 
     follows:
       ``(1) Allowance of deduction.--In the case of an individual 
     who is an employee within the meaning of section 401(c)(1), 
     there shall be allowed as a deduction under this section an 
     amount equal to the amount paid during the taxable year for 
     insurance which constitutes medical care for the taxpayer, 
     the taxpayer's spouse, and dependents.''
       (b) Clarification of Limitations on Other Coverage.--The 
     first sentence of section 162(l)(2)(B) of the Internal 
     Revenue Code of 1986 is amended to read as follows: 
     ``Paragraph (1) shall not apply to any taxpayer for any 
     calendar month for which the taxpayer participates in any 
     subsidized health plan maintained by any employer (other than 
     an employer described in section 401(c)(4)) of the taxpayer 
     or the spouse of the taxpayer.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.
                                  ____


S. 29--Self-Employed Health Insurance Fairness Act of 2001--Description 
                             of Provisions

  The bill amends section 162(l)(1) of the Internal Revenue Code to 
increase the deduction for health-insurance costs for self-employed 
individuals to 100% beginning on January 1, 2001. Currently the self-
employed can only deduct 60% of these costs. The deduction is not 
scheduled to reach 100% until 2003, under the provisions of the Omnibus 
Consolidated and Emergency Supplemental Appropriations Act of 1998, 
which was signed into law in October 1998. The bill is designed to 
place self-employed individuals on an equal footing with large 
businesses, which can currently deduct 100% of the health-insurance 
costs for all of their employees.
  The bill also corrects a disparity under current law that bars a 
self-employed individual from deducting any of his or her health-
insurance costs if the individual is eligible to participate in another 
health-insurance plan. This provision affects self-employed individuals 
who are eligible for, but do not participate in, a health-insurance 
plan offered through a second job or through a spouse's employer. That 
insurance plan may not be adequate for the self-employed business 
owner, and this provision prevents the self-employed from deducting the 
costs of insurance policies that do meet the specific needs of their 
families. In addition, this provision provides a significant 
disincentive for self-employed business owners to provide group health 
insurance for their employees. The bill ends this disparity by 
clarifying that a self-employed person loses the deduction only if he 
or she actually participates in another health-insurance plan.
  Mr. DURBIN. Mr. President, I rise today with my colleague from 
Missouri, to introduce ``The Self-Employed Health Insurance Fairness 
Act of 2001'', as our first order of business for the new Congress. We 
have both been working on this issue for many years now and are hopeful 
that we can finally get the bill fully enacted this year. In past 
years, we have each introduced very similar bills and this year we are 
combining our efforts by introducing this bipartisan bill, which we 
intend to pursue vigorously throughout this Congress.
  This bill would allow the self-employed to take a full tax deduction 
for their health insurance premiums as of December 31, 2000. 
Corporations already can take a full deduction for these expenses and 
this bill would level the playing field by allowing the self-employed 
to take the same full deduction. This bill would mean that the farmer 
and the agribusiness would be treated the same.
  Under current law, the self-employed may only deduct 60 percent of 
their health insurance premiums this year. The deductibility will 
increase to 70 percent in 2002 and 100 percent in 2003. I am committed 
to seeing the self-employed receive equal treatment sooner rather than 
later.
  The self-employed pay over 30 percent more for their health insurance 
than those insured by group health plans. This makes it much harder for 
them to afford health insurance. More than 22 percent of the self-
employed were without health insurance in 1999, compared to 17.5 
percent of other workers. That means that 4.8 million self-employed 
Americans went without health insurance in 1999.
  In Illinois, 17 percent of the self-employed were without health 
insurance in 1999, up from 14 percent in 1996. The vast majority of 
these individuals are members of low-income working families. Fifty-
three percent of the self-employed living on less than $20,000 in 
Illinois are without health insurance. This compares with 34 percent of 
other Illinois working families with the same low income level. Almost 
50 percent of those self-employed individuals who were without health 
insurance at some

[[Page S303]]

time during 1995, went without health insurance for the entire year. In 
comparison, 62 percent of government workers saw their lack of coverage 
end within 4 months or less.
  Overall, the self-employed pay more for health insurance and are 
therefore more likely to be uninsured, and they remain uninsured longer 
than other workers. This is exacerbated by their unequal treatment by 
the tax code. Congress should move expeditiously to level the playing 
field and help more hard-working, self-employed individuals and their 
families to afford the health insurance that they need and deserve.
  Mr. BAUCUS. Mr. President, I rise today, as an original cosponsor of 
S. 29, the Self-Employed Health Insurance Fairness Act of 2001, to 
speak about the importance of making health insurance a more affordable 
option for self-employed Americans. The legislation moves forward--by 
two years--the effective date for making health insurance fully 
deductible for self-employed taxpayers. In the early 1990s, I authored 
bills to ensure that the deduction--then 25 percent--would not expire. 
We won that battle, and throughout the 1990s I consistently fought for 
increases in the deductible amount. Finally, in 1997, we enacted 
legislation to allow full, 100 percent deductibility of health 
insurance for the self-employed, phased in by 2003.
  Mr. President, in these times of surpluses, as we reap the benefits 
of our fiscal discipline, the self-employed farmers, ranchers, and 
entrepreneurs in Montana and across the country deserve this important 
tax relief today. My small business and self-employed constituents 
constantly tell me that purchasing health insurance is one of the 
things they would most like to be able to do at their business. It is 
simply unfair that large businesses are allowed to deduct 100 percent 
of their employees' health insurance costs, while the self-employed 
must wait until 2003 for this privilege. In this country, we have a 
system of health insurance that encourages Americans to purchase health 
insurance through their employer. Allowing self-employed purchasers of 
health insurance the same deduction permitted to large employers 
adheres to those concepts and adds a measure of tax equity.
  I thank Senators Durbin and Bond for so actively pursuing enactment 
of this legislation. I believe the time is right to allow full 
deductibility of health insurance for the hard-working self-employed.
                                 ______