[Congressional Record Volume 147, Number 47 (Tuesday, April 3, 2001)]
[Senate]
[Pages S3346-S3350]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SANTORUM (for himself, Mr. Torricelli, and Mr. Smith of 
        New Hampshire):
  S. 683. A bill to amend the Internal Revenue Code of 1986 to allow 
individuals a refundable credit against income tax for the purchase of 
private health insurance, and to establish State health insurance 
safety-net programs; to the Committee on Finance.
  Mr. SANTORUM. Mr. President, I rise to join my colleagues, Senators 
Bob Torricelli of New Jersey and Bob Smith of New Hampshire, in 
introducing the bipartisan Fair Care for the Uninsured Act of 2001, 
legislation

[[Page S3347]]

aimed at ensuring that all Americans, regardless of income, have a 
basic level of resources to purchase health insurance. I am pleased 
that House Majority Leader Dick Armey of Texas and Representative Bill 
Lipinski of Illinois have joined in introducing companion legislation 
in the House of Representatives.
  As we all know, the growing ranks of uninsured Americans, currently 
43 million, remains a major national problem that must be addressed as 
Congress considers improvements to our healthcare delivery system. The 
uninsured are three times as likely not to receive needed medical care, 
at least twice as more likely to need hospitalization for avoidable 
conditions like pneumonia and diabetes, and four times more likely to 
rely on an emergency room or have no regular source of care as compared 
to Americans who are privately insured.
  The Fair Care for the Uninsured Act represents a major step toward 
helping the uninsured obtain health insurance coverage through the 
creation of a new refundable tax credit for the purchase of private 
health insurance, a concept which enjoys bipartisan support.
  This legislation directly addresses one of the main barriers which 
now inhibits access to health insurance for millions of Americans: 
discrimination in the tax code. Most Americans obtain health insurance 
through their place of work, and for good reason: workers receive their 
employer's contribution toward health insurance completely free from 
federal taxation, including payroll taxes. This is effectively a $120 
billion per year federal subsidy for employer-provided health 
insurance. By contrast, individuals who purchase their own health 
insurance get virtually no tax relief. They must buy insurance with 
after-tax dollars, forcing many to earn twice as much income before 
taxes in order to purchase the same insurance. This hidden health tax 
penalty effectively punishes people who try to buy their insurance 
outside the workplace.
  The Fair Care for the Uninsured Act would remedy this situation by 
creating a parallel system for working families who do not have access 
to health insurance through the workplace. Specifically, this 
legislation creates a refundable tax credit of $1,000 per adult and up 
to $3,000 per family, indexed for inflation, for the purchase of 
private health insurance; would be available to individuals and 
families who don't have access to coverage through the workplace or a 
federal government program; enables individuals to use their credit to 
shop for a basic plan that best suits their needs which would be 
portable from job to job; and allows individuals to buy more generous 
coverage with after-tax dollars. And of course the states could 
supplement the credit.
  This legislation complements a bipartisan consensus which is emerging 
around this means for addressing the serious problem of uninsured 
Americans: Instead of creating new government entitlements to medical 
services, tax credits provide public financing to help uninsured 
Americans buy private health insurance. President Bush has proposed a 
similar tax credit for health insurance coverage, and Senators Jeffords 
and Breaux have introduced their own health insurance tax credit 
proposal here in the Senate. I applaud their efforts for advancing this 
important public policy initiative, and look forward to working with 
them to develop a clear mandate for helping America's uninsured.
  I would like to apprize our colleagues of a couple of improvements 
which we have added to last session's bill that I believe will help 
bring about an even more positive impact on America's uninsured 
population. First, in an effort to keep premiums affordable for older, 
sicker Americans, our Fair Care legislation calls for the creation of 
safety-net arrangements administered at the state level and funded by 
assessments on insurers. Often called high-risk pools, such 
arrangements currently exist in 28 states and would be expanded to all 
50. In addition, our Fair Care legislation this session would further 
reduce premiums by permitting the creation of Individual Membership 
Associations, through which individuals can obtain basic coverage free 
of costly state benefit mandates.
  In reducing the amount of uncompensated care that is offset through 
cost shifting to private insurance plans, and in substantially 
increasing the insurance base, a health insurance tax credit will help 
relieve some of the spiraling costs of our health care delivery system. 
It would also encourage insurance companies to write policies geared to 
the size of the credit, thus offering more options and making it 
possible for low income families to obtain coverage without paying much 
more than the available credits.
  It is time that we reduced the tax bias against families who do not 
have access to coverage through their place of work or existing 
government programs, and to encourage the creation of an effective 
market for family-selected and family-owned plans, where Americans have 
more choice and control over their health care dollars. The Fair Care 
for the Uninsured Act would create tax fairness where currently none 
exists by requiring that all Americans receive the same tax 
encouragement to purchase health insurance, regardless of employment.
  It is my hope that our colleagues will join Senators Torricelli, 
Smith and me in endorsing this bipartisan legislation to provide people 
who purchase health insurance on their own similar tax treatment as 
those who have access to insurance through their employer.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 683

       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 ``Fair Care for the Uninsured 
     Act of 2001''.

        TITLE I--REFUNDABLE CREDIT FOR HEALTH INSURANCE COVERAGE

     SEC. 101. REFUNDABLE CREDIT FOR HEALTH INSURANCE COVERAGE.

       (a) In General.--Subpart C of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     refundable credits) is amended by redesignating section 35 as 
     section 36 and by inserting after section 34 the following 
     new section:

     ``SEC. 35. HEALTH INSURANCE COSTS.

       ``(a) In General.--In the case of an individual, there 
     shall be allowed as a credit against the tax imposed by this 
     subtitle an amount equal to the amount paid during the 
     taxable year for qualified health insurance for the taxpayer, 
     his spouse, and dependents.
       ``(b) Limitations.--
       ``(1) In general.--The amount allowed as a credit under 
     subsection (a) to the taxpayer for the taxable year shall not 
     exceed the sum of the monthly limitations for coverage months 
     during such taxable year for each individual referred to in 
     subsection (a) for whom the taxpayer paid during the taxable 
     year any amount for coverage under qualified health 
     insurance.
       ``(2) Monthly limitation.--
       ``(A) In general.--The monthly limitation for an individual 
     for each coverage month of such individual during the taxable 
     year is the amount equal to 1/12 of--
       ``(i) $1,000 if such individual is the taxpayer,
       ``(ii) $1,000 if--

       ``(I) such individual is the spouse of the taxpayer,
       ``(II) the taxpayer and such spouse are married as of the 
     first day of such month, and
       ``(III) the taxpayer files a joint return for the taxable 
     year, and

       ``(iii) $500 if such individual is an individual for whom a 
     deduction under section 151(c) is allowable to the taxpayer 
     for such taxable year.
       ``(B) Limitation to 2 dependents.--Not more than 2 
     individuals may be taken into account by the taxpayer under 
     subparagraph (A)(iii).
       ``(C) Special rule for married individuals.--In the case of 
     an individual--
       ``(i) who is married (within the meaning of section 7703) 
     as of the close of the taxable year but does not file a joint 
     return for such year, and
       ``(ii) who does not live apart from such individual's 
     spouse at all times during the taxable year,
     the limitation imposed by subparagraph (B) shall be divided 
     equally between the individual and the individual's spouse 
     unless they agree on a different division.
       ``(3) Coverage month.--For purposes of this subsection--
       ``(A) In general.--The term `coverage month' means, with 
     respect to an individual, any month if--
       ``(i) as of the first day of such month such individual is 
     covered by qualified health insurance, and
       ``(ii) the premium for coverage under such insurance for 
     such month is paid by the taxpayer.
       ``(B) Employer-subsidized coverage.--
       ``(i) In general.--Such term shall not include any month 
     for which such individual is eligible to participate in any 
     subsidized health plan (within the meaning of section 
     162(l)(2)) maintained by any employer of the taxpayer or of 
     the spouse of the taxpayer.

[[Page S3348]]

       ``(ii) Premiums to nonsubsidized plans.--If an employer of 
     the taxpayer or the spouse of the taxpayer maintains a health 
     plan which is not a subsidized health plan (as so defined) 
     and which constitutes qualified health insurance, employee 
     contributions to the plan shall be treated as amounts paid 
     for qualified health insurance.
       ``(C) Cafeteria plan and flexible spending account 
     beneficiaries.--Such term shall not include any month during 
     a taxable year if any amount is not includible in the gross 
     income of the taxpayer for such year under section 106 with 
     respect to--
       ``(i) a benefit chosen under a cafeteria plan (as defined 
     in section 125(d)), or
       ``(ii) a benefit provided under a flexible spending or 
     similar arrangement.
       ``(D) Medicare and medicaid.--Such term shall not include 
     any month with respect to an individual if, as of the first 
     day of such month, such individual--
       ``(i) is entitled to any benefits under title XVIII of the 
     Social Security Act, or
       ``(ii) is a participant in the program under title XIX or 
     XXI of such Act.
       ``(E) Certain other coverage.--Such term shall not include 
     any month during a taxable year with respect to an individual 
     if, at any time during such year, any benefit is provided to 
     such individual under--
       ``(i) chapter 89 of title 5, United States Code,
       ``(ii) chapter 55 of title 10, United States Code,
       ``(iii) chapter 17 of title 38, United States Code, or
       ``(iv) any medical care program under the Indian Health 
     Care Improvement Act.
       ``(F) Prisoners.--Such term shall not include any month 
     with respect to an individual if, as of the first day of such 
     month, such individual is imprisoned under Federal, State, or 
     local authority.
       ``(G) Insufficient presence in united states.--Such term 
     shall not include any month during a taxable year with 
     respect to an individual if such individual is present in the 
     United States on fewer than 183 days during such year 
     (determined in accordance with section 7701(b)(7)).
       ``(4) Coordination with deduction for health insurance 
     costs of self-employed individuals.--In the case of a 
     taxpayer who is eligible to deduct any amount under section 
     162(l) for the taxable year, this section shall apply only if 
     the taxpayer elects not to claim any amount as a deduction 
     under such section for such year.
       ``(c) Qualified Health Insurance.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified health insurance' 
     means insurance which constitutes medical care as defined in 
     section 213(d) without regard to--
       ``(A) paragraph (1)(C) thereof, and
       ``(B) so much of paragraph (1)(D) thereof as relates to 
     qualified long-term care insurance contracts.
       ``(2) Exclusion of certain other contracts.--Such term 
     shall not include insurance if a substantial portion of its 
     benefits are excepted benefits (as defined in section 
     9832(c)).
       ``(d) Medical Savings Account Contributions.--
       ``(1) In general.--If a deduction would (but for paragraph 
     (2)) be allowed under section 220 to the taxpayer for a 
     payment for the taxable year to the medical savings account 
     of an individual, subsection (a) shall be applied by treating 
     such payment as a payment for qualified health insurance for 
     such individual.
       ``(2) Denial of double benefit.--No deduction shall be 
     allowed under section 220 for that portion of the payments 
     otherwise allowable as a deduction under section 220 for the 
     taxable year which is equal to the amount of credit allowed 
     for such taxable year by reason of this subsection.
       ``(e) Special Rules.--
       ``(1) Coordination with medical expense deduction.--The 
     amount which would (but for this paragraph) be taken into 
     account by the taxpayer under section 213 for the taxable 
     year shall be reduced by the credit (if any) allowed by this 
     section to the taxpayer for such year.
       ``(2) Denial of credit to dependents.--No credit shall be 
     allowed under this section to any individual with respect to 
     whom a deduction under section 151 is allowable to another 
     taxpayer for a taxable year beginning in the calendar year in 
     which such individual's taxable year begins.
       ``(3) Inflation adjustment.--In the case of any taxable 
     year beginning in a calendar year after 2002, each dollar 
     amount contained in subsection (b)(2)(A) shall be increased 
     by an amount equal to--
       ``(A) such dollar amount, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2001' 
     for `calendar year 1992' in subparagraph (B) thereof.
     Any increase determined under the preceding sentence shall be 
     rounded to the nearest multiple of $50 ($25 in the case of 
     the dollar amount in subsection (b)(2)(A)(iii)).''
       (b) Maintenance of Effort Requirement.--Section 162 of such 
     Code (relating to trade or business expenses) is amended by 
     redesignating subsection (p) as subsection (q) and by 
     inserting after subsection (o) the following new subsection:
       ``(p) Group Health Plan Maintenance of Effort.--No 
     deduction shall be allowed under this chapter to an employer 
     for any amount paid or incurred in connection with a group 
     health plan (as defined in subsection (n)(3)) for any taxable 
     year in which occurs the date of introduction of the Fair 
     Care for the Uninsured Act of 2001 unless such plan remains 
     in effect for at least 60 months after the date of the 
     enactment of such Act.''.
       (c) Information Reporting.--
       (1) In general.--Subpart B of part III of subchapter A of 
     chapter 61 of such Code (relating to information concerning 
     transactions with other persons) is amended by inserting 
     after section 6050S the following new section:

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

       ``(a) In General.--Any person who, in connection with a 
     trade or business conducted by such person, receives payments 
     during any calendar year from any individual for coverage of 
     such individual or any other individual under creditable 
     health insurance, shall make the return described in 
     subsection (b) (at such time as the Secretary may by 
     regulations prescribe) with respect to each individual from 
     whom such payments were received.
       ``(b) Form and Manner of Returns.--A return is described in 
     this subsection if such return--
       ``(1) is in such form as the Secretary may prescribe, and
       ``(2) contains--
       ``(A) the name, address, and TIN of the individual from 
     whom payments described in subsection (a) were received,
       ``(B) the name, address, and TIN of each individual who was 
     provided by such person with coverage under creditable health 
     insurance by reason of such payments and the period of such 
     coverage, and
       ``(C) such other information as the Secretary may 
     reasonably prescribe.
       ``(c) Creditable Health Insurance.--For purposes of this 
     section, the term `creditable health insurance' means 
     qualified health insurance (as defined in section 35(c)) 
     other than--
       ``(1) insurance under a subsidized group health plan 
     maintained by an employer, or
       ``(2) to the extent provided in regulations prescribed by 
     the Secretary, any other insurance covering an individual if 
     no credit is allowable under section 35 with respect to such 
     coverage.
       ``(d) Statements To Be Furnished to Individuals With 
     Respect to Whom Information Is Required.--Every person 
     required to make a return under subsection (a) shall furnish 
     to each individual whose name is required under subsection 
     (b)(2)(A) to be set forth in such return a written statement 
     showing--
       ``(1) the name and address of the person required to make 
     such return and the phone number of the information contact 
     for such person,
       ``(2) the aggregate amount of payments described in 
     subsection (a) received by the person required to make such 
     return from the individual to whom the statement is required 
     to be furnished, and
       ``(3) the information required under subsection (b)(2)(B) 
     with respect to such payments.
     The written statement required under the preceding sentence 
     shall be furnished on or before January 31 of the year 
     following the calendar year for which the return under 
     subsection (a) is required to be made.
       ``(e) Returns Which Would Be Required To Be Made by 2 or 
     More Persons.--Except to the extent provided in regulations 
     prescribed by the Secretary, in the case of any amount 
     received by any person on behalf of another person, only the 
     person first receiving such amount shall be required to make 
     the return under subsection (a).''.
       (2) Assessable penalties.--
       (A) Subparagraph (B) of section 6724(d)(1) of such Code 
     (relating to definitions) is amended by redesignating clauses 
     (xi) through (xvii) as clauses (xii) through (xviii), 
     respectively, and by inserting after clause (x) the following 
     new clause:
       ``(xi) section 6050T (relating to returns relating to 
     payments for qualified health insurance),''.
       (B) Paragraph (2) of section 6724(d) of such Code is 
     amended by striking ``or'' at the end of the next to last 
     subparagraph, by striking the period at the end of the last 
     subparagraph and inserting ``, or'', and by adding at the end 
     the following new subparagraph:
       ``(BB) section 6050T(d) (relating to returns relating to 
     payments for qualified health insurance).''.
       (3) Clerical amendment.--The table of sections for subpart 
     B of part III of subchapter A of chapter 61 of such Code is 
     amended by inserting after the item relating to section 6050S 
     the following new item:

``Sec. 6050T. Returns relating to payments for qualified health 
              insurance.''.
       (d) 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 35 of such Code''.
       (2) The table of sections for subpart C of part IV of 
     subchapter A of chapter 1 of such Code is amended by striking 
     the last item and inserting the following new items:

``Sec. 35. Health insurance costs.
``Sec. 36. Overpayments of tax.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

[[Page S3349]]

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

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

     ``SEC. 7527. ADVANCE PAYMENT OF HEALTH INSURANCE CREDIT FOR 
                   PURCHASERS OF QUALIFIED HEALTH INSURANCE.

       ``(a) General Rule.--In the case of an eligible individual, 
     the Secretary shall make payments to the provider of such 
     individual's qualified health insurance equal to such 
     individual's qualified health insurance credit advance amount 
     with respect to such provider.
       ``(b) Eligible Individual.--For purposes of this section, 
     the term `eligible individual' means any individual--
       ``(1) who purchases qualified health insurance (as defined 
     in section 35(c)), and
       ``(2) for whom a qualified health insurance credit 
     eligibility certificate is in effect.
       ``(c) Qualified Health Insurance Credit Eligibility 
     Certificate.--For purposes of this section, a qualified 
     health insurance credit eligibility certificate is a 
     statement furnished by an individual to the Secretary which--
       ``(1) certifies that the individual will be eligible to 
     receive the credit provided by section 35 for the taxable 
     year,
       ``(2) estimates the amount of such credit for such taxable 
     year, and
       ``(3) provides such other information as the Secretary may 
     require for purposes of this section.
       ``(d) Qualified Health Insurance Credit Advance Amount.--
     For purposes of this section, the term `qualified health 
     insurance credit advance amount' means, with respect to any 
     provider of qualified health insurance, the Secretary's 
     estimate of the amount of credit allowable under section 35 
     to the individual for the taxable year which is attributable 
     to the insurance provided to the individual by such provider.
       ``(e) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this section.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     77 of such Code is amended by adding at the end the following 
     new item:

``Sec. 7527. Advance payment of health insurance credit for purchasers 
              of qualified health insurance.''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2002.

     TITLE II--ASSURING HEALTH INSURANCE COVERAGE FOR UNINSURABLE 
                              INDIVIDUALS

     SEC. 201. ESTABLISHMENT OF HEALTH INSURANCE SAFETY NETS.

       (a) In General.--
       (1) Requirement.--For years beginning with 2002, each 
     health insurer, health maintenance organization, and health 
     service organization shall be a participant in a health 
     insurance safety net (in this title referred to as a ``safety 
     net'') established by the State in which it operates.
       (2) Functions.--Any safety net shall assure, in accordance 
     with this title, the availability of qualified health 
     insurance coverage to uninsurable individuals.
       (3) Funding.--Any safety net shall be funded by an 
     assessment against health insurers, health service 
     organizations, and health maintenance organizations on a pro 
     rata basis of premiums collected in the State in which the 
     safety net operates. The costs of the assessment may be added 
     by a health insurer, health service organization, or health 
     maintenance organization to the costs of its health insurance 
     or health coverage provided in the State.
       (4) Guaranteed renewable.--Coverage under a safety net 
     shall be guaranteed renewable except for nonpayment of 
     premiums, material misrepresentation, fraud, medicare 
     eligibility under title XVIII of the Social Security Act (42 
     U.S.C. 1395 et seq.), loss of dependent status, or 
     eligibility for other health insurance coverage.
       (5) Compliance with naic model act.--In the case of a State 
     that has not established, as of the date of the enactment of 
     this Act, a high risk pool or other comprehensive health 
     insurance program that assures the availability of qualified 
     health insurance coverage to all eligible individuals 
     residing in the State, a safety net shall be established in 
     accordance with the requirements of the ``Model Health Plan 
     For Uninsurable Individuals Act'' (or the successor model 
     Act), as adopted by the National Association of Insurance 
     Commissioners and as in effect on the date of the safety 
     net's establishment.
       (b) Deadline.--Safety nets required under subsection (a) 
     shall be established not later than January 1, 2002.
       (c) Waiver.--This title shall not apply in the case of 
     insurers and organizations operating in a State if the State 
     has established a similar comprehensive health insurance 
     program that assures the availability of qualified health 
     insurance coverage to all eligible individuals residing in 
     the State.
       (d) Recommendation for Compliance Requirement.--Not later 
     than January 1, 2003, the Secretary of Health and Human 
     Services shall submit to Congress a recommendation on 
     appropriate sanctions for States that fail to meet the 
     requirement of subsection (a).

     SEC. 202. UNINSURABLE INDIVIDUALS ELIGIBLE FOR COVERAGE.

       (a) Uninsurable and Eligible Individual Defined.--In this 
     title:
       (1) Uninsurable individual.--The term ``uninsurable 
     individual'' means, with respect to a State, an eligible 
     individual who presents proof of uninsurability by a private 
     insurer in accordance with subsection (b) or proof of a 
     condition previously recognized as uninsurable by the State.
       (2) Eligible individual.--
       (A) In general.--The term ``eligible individual'' means, 
     with respect to a State, a citizen or national of the United 
     States (or an alien lawfully admitted for permanent 
     residence) who is a resident of the State for at least 90 
     days and includes any dependent (as defined for purposes of 
     the Internal Revenue Code of 1986) of such a citizen, 
     national, or alien who also is such a resident.
       (B) Exception.--An individual is not an ``eligible 
     individual'' if the individual--
       (i) is covered by or eligible for benefits under a State 
     medicaid plan approved under title XIX of the Social Security 
     Act (42 U.S.C. 1396 et seq.),
       (ii) has voluntarily terminated safety net coverage within 
     the past 6 months,
       (iii) has received the maximum benefit payable under the 
     safety net,
       (iv) is an inmate in a public institution, or
       (v) is eligible for other public or private health care 
     programs (including programs that pay for directly, or 
     reimburse, otherwise eligible individuals with premiums 
     charged for safety net coverage).
       (b) Proof of Uninsurability.--
       (1) In general.--The proof of uninsurability for an 
     individual shall be in the form of--
       (A) a notice of rejection or refusal to issue substantially 
     similar health insurance for health reasons by one insurer; 
     or
       (B) a notice of refusal by an insurer to issue 
     substantially similar health insurance except at a rate in 
     excess of the rate applicable to the individual under the 
     safety net plan.
     For purposes of this paragraph, the term ``health insurance'' 
     does not include insurance consisting only of stoploss, 
     excess of loss, or reinsurance coverage.
       (2) Exception for individuals with uninsurable 
     conditions.--The State shall promulgate a list of medical or 
     health conditions for which an individual shall be eligible 
     for safety net plan coverage without applying for health 
     insurance or establishing proof of uninsurability under 
     paragraph (1). Individuals who can demonstrate the existence 
     or history of any medical or health conditions on such list 
     shall not be required to provide the proof described in 
     paragraph (1). The list shall be effective on the first day 
     of the operation of the safety net plan and may be amended 
     from time to time as may be appropriate.

     SEC. 203. QUALIFIED HEALTH INSURANCE COVERAGE UNDER SAFETY 
                   NET.

       In this title, the term ``qualified health insurance 
     coverage'' means, with respect to a State, health insurance 
     coverage that provides benefits typical of major medical 
     insurance available in the individual health insurance market 
     in such State.

     SEC. 204. FUNDING OF SAFETY NET.

       (a) Limitations on Premiums.--
       (1) In general.--The premium established under a safety net 
     may not exceed 125 percent of the applicable standard risk 
     rate, except as provided in paragraph (2).
       (2) Surcharge for avoidable health risks.--A safety net may 
     impose a surcharge on premiums for individuals with avoidable 
     high risks, such as smoking.
       (b) Additional Funding.--A safety net shall provide for 
     additional funding through an assessment on all health 
     insurers, health service organizations, and health 
     maintenance organizations in the State through a nonprofit 
     association consisting of all such insurers and organizations 
     doing business in the State on an equitable and pro rata 
     basis consistent with section 201.

     SEC. 205. ADMINISTRATION.

       A safety net in a State shall be administered through a 
     contract with 1 or more insurers or third party 
     administrators operating in the State.

     SEC. 206. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated such sums as may be 
     necessary to reimburse States for their costs in 
     administering this title.

             TITLE III--INDIVIDUAL MEMBERSHIP ASSOCIATIONS

     SEC. 301. EXPANSION OF ACCESS AND CHOICE THROUGH INDIVIDUAL 
                   MEMBERSHIP ASSOCIATIONS (IMAS).

       The Public Health Service Act is amended by adding at the 
     end the following new title:

           ``TITLE XXVIII--INDIVIDUAL MEMBERSHIP ASSOCIATIONS

     ``SEC. 2801. DEFINITION OF INDIVIDUAL MEMBERSHIP ASSOCIATION 
                   (IMA).

       ``(a) In General.--For purposes of this title, the terms 
     `individual membership association' and `IMA' mean a legal 
     entity that meets the following requirements:
       ``(1) Organization.--The IMA is an organization operated 
     under the direction of an association (as defined in section 
     2804(1)).
       ``(2) Offering health benefits coverage.--
       ``(A) Different groups.--The IMA, in conjunction with those 
     health insurance issuers that offer health benefits coverage 
     through the IMA, makes available health benefits coverage in 
     the manner described in subsection (b) to all members of the 
     IMA and the dependents of such members in the manner 
     described in subsection (c)(2) at rates

[[Page S3350]]

     that are established by the health insurance issuer on a 
     policy or product specific basis and that may vary only as 
     permissible under State law.
       ``(B) Nondiscrimination in coverage offered.--
       ``(i) In general.--Subject to clause (ii), the IMA may not 
     offer health benefits coverage to a member of an IMA unless 
     the same coverage is offered to all such members of the IMA.
       ``(ii) Construction.--Nothing in this title shall be 
     construed as requiring or permitting a health insurance 
     issuer to provide coverage outside the service area of the 
     issuer, as approved under State law, or preventing a health 
     insurance issuer from excluding or limiting the coverage on 
     any individual, subject to the requirement of section 2741.
       ``(C) No financial underwriting.--The IMA provides health 
     benefits coverage only through contracts with health 
     insurance issuers and does not assume insurance risk with 
     respect to such coverage.
       ``(3) Geographic areas.--Nothing in this title shall be 
     construed as preventing the establishment and operation of 
     more than one IMA in a geographic area or as limiting the 
     number of IMAs that may operate in any area.
       ``(4) Provision of administrative services to purchasers.--
       ``(A) In general.--The IMA may provide administrative 
     services for members. Such services may include accounting, 
     billing, and enrollment information.
       ``(B) Construction.--Nothing in this subsection shall be 
     construed as preventing an IMA from serving as an 
     administrative service organization to any entity.
       ``(5) Filing information.--The IMA files with the Secretary 
     information that demonstrates the IMA's compliance with the 
     applicable requirements of this title.
       ``(b) Health Benefits Coverage Requirements.--
       ``(1) Compliance with consumer protection requirements.--
     Any health benefits coverage offered through an IMA shall--
       ``(A) be underwritten by a health insurance issuer that--
       ``(i) is licensed (or otherwise regulated) under State law,
       ``(ii) meets all applicable State standards relating to 
     consumer protection, subject to section 2802(2), and
       ``(iii) offers the coverage under a contract with the IMA; 
     and
       ``(B) subject to paragraph (2) and section 2902(2), be 
     approved or otherwise permitted to be offered under State 
     law.
       ``(2) Examples of types of coverage.--The benefits coverage 
     made available through an IMA may include, but is not limited 
     to, any of the following if it meets the other applicable 
     requirements of this title:
       ``(A) Coverage through a health maintenance organization.
       ``(B) Coverage in connection with a preferred provider 
     organization.
       ``(C) Coverage in connection with a licensed provider-
     sponsored organization.
       ``(D) Indemnity coverage through an insurance company.
       ``(E) Coverage offered in connection with a contribution 
     into a medical savings account or flexible spending account.
       ``(F) Coverage that includes a point-of-service option.
       ``(G) Any combination of such types of coverage.
       ``(3) Health insurance coverage options.--An IMA shall 
     include a minimum of 2 health insurance coverage options. At 
     least 1 option shall meet all applicable State benefit 
     mandates.
       ``(4) Wellness bonuses for health promotion.--Nothing in 
     this title shall be construed as precluding a health 
     insurance issuer offering health benefits coverage through an 
     IMA from establishing premium discounts or rebates for 
     members or from modifying otherwise applicable copayments or 
     deductibles in return for adherence to programs of health 
     promotion and disease prevention so long as such programs are 
     agreed to in advance by the IMA and comply with all other 
     provisions of this title and do not discriminate among 
     similarly situated members.
       ``(c) Members; Health Insurance Issuers.--
       ``(1) Members.--
       ``(A) In general.--Under rules established to carry out 
     this title, with respect to an individual who is a member of 
     an IMA, the individual may apply for health benefits coverage 
     (including coverage for dependents of such individual) 
     offered by a health insurance issuer through the IMA.
       ``(B) Rules for enrollment.--Nothing in this paragraph 
     shall preclude an IMA from establishing rules of enrollment 
     and reenrollment of members. Such rules shall be applied 
     consistently to all members within the IMA and shall not be 
     based in any manner on health status-related factors.
       ``(2) Health insurance issuers.--The contract between an 
     IMA and a health insurance issuer shall provide, with respect 
     to a member enrolled with health benefits coverage offered by 
     the issuer through the IMA, for the payment of the premiums 
     collected by the issuer.

     ``SEC. 2802. APPLICATION OF CERTAIN LAWS AND REQUIREMENTS.

       ``State laws insofar as they relate to any of the following 
     are superseded and shall not apply to health benefits 
     coverage made available through an IMA:
       ``(1) Benefit requirements for health benefits coverage 
     offered through an IMA, including (but not limited to) 
     requirements relating to coverage of specific providers, 
     specific services or conditions, or the amount, duration, or 
     scope of benefits, but not including requirements to the 
     extent required to implement title XXVII or other Federal law 
     and to the extent the requirement prohibits an exclusion of a 
     specific disease from such coverage.
       ``(2) Any other requirements (including limitations on 
     compensation arrangements) that, directly or indirectly, 
     preclude (or have the effect of precluding) the offering of 
     such coverage through an IMA, if the IMA meets the 
     requirements of this title.
     Any State law or regulation relating to the composition or 
     organization of an IMA is preempted to the extent the law or 
     regulation is inconsistent with the provisions of this title.

     ``SEC. 2803. ADMINISTRATION.

       ``(a) In General.--The Secretary shall administer this 
     title and is authorized to issue such regulations as may be 
     required to carry out this title. Such regulations shall be 
     subject to Congressional review under the provisions of 
     chapter 8 of title 5, United States Code. The Secretary shall 
     incorporate the process of `deemed file and use' with respect 
     to the information filed under section 2801(a)(5)(A) and 
     shall determine whether information filed by an IMA 
     demonstrates compliance with the applicable requirements of 
     this title. The Secretary shall exercise authority under this 
     title in a manner that fosters and promotes the development 
     of IMAs in order to improve access to health care coverage 
     and services.
       ``(b) Periodic Reports.--The Secretary shall submit to 
     Congress a report every 30 months, during the 10-year period 
     beginning on the effective date of the rules promulgated by 
     the Secretary to carry out this title, on the effectiveness 
     of this title in promoting coverage of uninsured individuals. 
     The Secretary may provide for the production of such reports 
     through one or more contracts with appropriate private 
     entities.

     ``SEC. 2804. DEFINITIONS.

       ``For purposes of this title:
       ``(1) Association.--The term `association' means, with 
     respect to health insurance coverage offered in a State, an 
     association which--
       ``(A) has been actively in existence for at least 5 years;
       ``(B) has been formed and maintained in good faith for 
     purposes other than obtaining insurance;
       ``(C) does not condition membership in the association on 
     any health status-related factor relating to an individual 
     (including an employee of an employer or a dependent of an 
     employee); and
       ``(D) does not make health insurance coverage offered 
     through the association available other than in connection 
     with a member of the association.
       ``(2) Dependent.--The term `dependent', as applied to 
     health insurance coverage offered by a health insurance 
     issuer licensed (or otherwise regulated) in a State, shall 
     have the meaning applied to such term with respect to such 
     coverage under the laws of the State relating to such 
     coverage and such an issuer. Such term may include the spouse 
     and children of the individual involved.
       ``(3) Health benefits coverage.--The term `health benefits 
     coverage' has the meaning given the term health insurance 
     coverage in section 2791(b)(1).
       ``(4) Health insurance issuer.--The term `health insurance 
     issuer' has the meaning given such term in section 
     2791(b)(2).
       ``(5) Health status-related factor.--The term `health 
     status-related factor' has the meaning given such term in 
     section 2791(d)(9).
       ``(6) IMA; individual membership association.--The terms 
     `IMA' and `individual membership association' are defined in 
     section 2801(a).
       ``(7) Member.--The term `member' means, with respect to an 
     IMA, an individual who is a member of the association to 
     which the IMA is offering coverage.''.
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