[Congressional Record Volume 151, Number 49 (Thursday, April 21, 2005)]
[Senate]
[Pages S4114-S4118]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DURBIN (for himself and Mrs. Lincoln):
  S. 874. A bill to establish a national health program administered by 
the Office of Personnel Management to offer health benefits plans to 
individuals who are not Federal employees, and for other purposes; read 
the first time.
  Mr. DURBIN. Mr. President, 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. 874

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Small Employers Health 
     Benefits Program Act of 2005''.

     SEC. 2. DEFINITIONS.

       (a) In General.--In this Act, the terms ``member of 
     family'', ``health benefits plan'', ``carrier'', ``employee 
     organizations'', and ``dependent'' have the meanings given 
     such terms in section 8901 of title 5, United States Code.
       (b) Other Terms.--In this Act:
       (1) Employee.--The term ``employee'' has the meaning given 
     such term under section 3(6) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1002(6)). Such term 
     shall not include an employee of the Federal Government.
       (2) Employer.--The term ``employer'' has the meaning given 
     such term under section 3(5) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1002(5)), except that 
     such term shall include only employers who employed an 
     average of at least 1 but not more than 100 employees on 
     business days during the year preceding the date of 
     application. Such term shall not include the Federal 
     Government.
       (3) Health status-related factor.--The term ``health 
     status-related factor'' has the meaning given such term in 
     section 2791(d)(9) of the Public Health Service Act (42 
     U.S.C. 300gg-91(d)(9)).
       (4) Office.--The term ``Office'' means the Office of 
     Personnel Management.
       (5) Participating employer.--The term ``participating 
     employer'' means an employer that--

[[Page S4115]]

       (A) elects to provide health insurance coverage under this 
     Act to its employees; and
       (B) is not offering other comprehensive health insurance 
     coverage to such employees.
       (c) Application of Certain Rules in Determination of 
     Employer Size.--For purposes of subsection (b)(2):
       (1) Application of aggregation rule for employers.--All 
     persons treated as a single employer under subsection (b), 
     (c), (m), or (o) of section 414 of the Internal Revenue Code 
     of 1986 shall be treated as 1 employer.
       (2) Employers not in existence in preceding year.--In the 
     case of an employer which was not in existence for the full 
     year prior to the date on which the employer applies to 
     participate, the determination of whether such employer meets 
     the requirements of subsection (b)(2) shall be based on the 
     average number of employees that it is reasonably expected 
     such employer will employ on business days in the employer's 
     first full year.
       (3) Predecessors.--Any reference in this subsection to an 
     employer shall include a reference to any predecessor of such 
     employer.
       (d) Waiver and Continuation of Participation.--
       (1) Waiver.--The Office may waive the limitations relating 
     to the size of an employer which may participate in the 
     health insurance program established under this Act on a case 
     by case basis if the Office determines that such employer 
     makes a compelling case for such a waiver. In making 
     determinations under this paragraph, the Office may consider 
     the effects of the employment of temporary and seasonal 
     workers and other factors.
       (2) Continuation of participation.--An employer 
     participating in the program under this Act that experiences 
     an increase in the number of employees so that such employer 
     has in excess of 100 employees, may not be excluded from 
     participation solely as a result of such increase in 
     employees.

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

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

     SEC. 4. CONTRACT REQUIREMENT.

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

     SEC. 5. ELIGIBILITY.

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

     SEC. 6. ALTERNATIVE CONDITIONS TO FEDERAL EMPLOYEE PLANS.

       (a) Treatment of Employee.--For purposes of enrollment in a 
     health benefits plan under this Act, an individual who had 
     coverage under a health insurance plan and is not a qualified 
     beneficiary as defined under section 4980B(g)(1) of the 
     Internal Revenue Code of 1986 shall be treated in a similar 
     manner as an individual who begins employment as an employee 
     under chapter 89 of title 5, United States Code.
       (b) Preexisting Condition Exclusions.--
       (1) In general.--Each contract under this Act may include a 
     preexisting condition exclusion as defined under section 
     9801(b)(1) of the Internal Revenue Code of 1986.
       (2) Exclusion period.--
       (A) In general.--A preexisting condition exclusion under 
     this subsection shall provide for coverage of a preexisting 
     condition to begin not later than 6 months after the date on 
     which the coverage of the individual under a health benefits 
     plan commences, reduced by 1 month for each month that the 
     individual was covered under a health insurance plan 
     immediately preceding the date the individual submitted an 
     application for coverage under this Act.
       (B) Lapse in coverage.--For purposes of this paragraph, a 
     lapse in coverage of not more than 63 days immediately 
     preceding the date of the submission of an application for 
     coverage under this Act shall not be considered a lapse in 
     continuous coverage.
       (c) Rates and Premiums.--
       (1) In general.--Rates charged and premiums paid for a 
     health benefits plan under this Act--
       (A) shall be determined in accordance with this subsection;
       (B) may be annually adjusted and differ from such rates 
     charged and premiums paid for the same health benefits plan 
     offered under chapter 89 of title 5, United States Code;
       (C) shall be negotiated in the same manner as rates and 
     premiums are negotiated under such chapter 89; and
       (D) shall be adjusted to cover the administrative costs of 
     the Office under this Act.
       (2) Determinations.--In determining rates and premiums 
     under this Act, the following provisions shall apply:
       (A) In general.--A carrier that enters into a contract 
     under this Act shall determine that amount of premiums to 
     assess for coverage under a health benefits plan based on an 
     community rate that may be annually adjusted--

[[Page S4116]]

       (i) for the geographic area involved if the adjustment is 
     based on geographical divisions that are not smaller than a 
     metropolitan statistical area;
       (ii) based on whether such coverage is for an individual, a 
     married individual with no children, or a family; and
       (iii) based on the age of covered individuals (subject to 
     subparagraph (B)).
       (B) Age adjustments.--
       (i) In general.--With respect to subparagraph (A)(iii), in 
     making adjustments based on age, a carrier may not use age 
     brackets in increments that are smaller than 5 years, which 
     begin not earlier than age 30 and end not later than age 65.
       (ii) Age 65 and older.--With respect to subparagraph 
     (A)(iii), a carrier may develop separate rates for covered 
     individuals who are 65 years of age or older for whom 
     medicare is the primary payor for health benefits coverage 
     which is not covered under medicare.
       (iii) Limitation.--In making an adjustment to premium rates 
     under subparagraph (A)(iii), a carrier shall ensure that such 
     adjustment does not result in an average premium rate 
     applicable to enrollees under the plan involved that is more 
     than 200 percent of the lowest rate for all age groups.
       (d) Termination and Reenrollment.--If an individual who is 
     enrolled in a health benefits plan under this Act terminates 
     the enrollment, the individual shall not be eligible for 
     reenrollment until the first open enrollment period following 
     the expiration of 6 months after the date of such 
     termination.
       (e) Preemption.--
       (1) Health insurance or plans.--
       (A) In general.--Except as provided in subparagraph (B), 
     the terms of any contract entered into under this Act that 
     relate to the nature, provision, or extent of coverage or 
     benefits shall supersede and preempt any State or local law, 
     or any regulation issued thereunder, which relates to the 
     nature, provision, or extent of coverage or benefits.
       (B) Local plans.--With respect to a contract entered into 
     under this Act under which a carrier will offer health 
     benefits plan coverage in a limited geographic area, 
     subparagraph (A) shall not apply to the extent that a 
     mandated benefit law is in effect in the State in which the 
     plan is offered. Such mandated benefit law shall continue to 
     apply to such health benefits plan.
       (C) Rating rules.--The rating requirements under subsection 
     (c)(2) shall supercede State rating rules for qualified plans 
     under this Act.
       (2) Limitation.--Nothing in this subsection shall be 
     construed to preempt--
       (A) any State or local law or regulation except those laws 
     and regulations described in subparagraphs (A) and (C) of 
     paragraph (1); and
       (B) State network adequacy laws.
       (f) Rule of Construction.--Nothing in this Act shall be 
     construed to limit the application of the service-charge 
     system used by the Office for determining profits for 
     participating carriers under chapter 89 of title 5, United 
     States Code.

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

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

     SEC. 8. ENCOURAGING PARTICIPATION BY CARRIERS THROUGH 
                   REINSURANCE.

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

[[Page S4117]]

     SEC. 9. CONTINGENCY RESERVE FUND.

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

     SEC. 10. EMPLOYER PARTICIPATION.

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

     SEC. 11. ADMINISTRATION THROUGH REGIONAL ADMINISTRATIVE 
                   ENTITIES.

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

     SEC. 12. COORDINATION WITH SOCIAL SECURITY BENEFITS.

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

     SEC. 13. PUBLIC EDUCATION CAMPAIGN.

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

     SEC. 14. APPROPRIATIONS.

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

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

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

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

       ``(a) Determination of Amount.--In the case of a qualified 
     small employer, there shall be allowed as a credit against 
     the tax imposed by this subtitle for the taxable year an 
     amount equal to the sum of--
       ``(1) the expense amount described in subsection (b), and
       ``(2) the expense amount described in subsection (c), paid 
     by the taxpayer during the taxable year.
       ``(b) Subsection (b) Expense Amount.--For purposes of this 
     section--
       ``(1) In general.--The expense amount described in this 
     subsection is the applicable percentage of the amount of 
     qualified employee health insurance expenses of each 
     qualified employee.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1)--
       ``(A) In general.--The applicable percentage is equal to--
       ``(i) 25 percent in the case of self-only coverage,
       ``(ii) 35 percent in the case of family coverage (as 
     defined in section 220(c)(5)), and
       ``(iii) 30 percent in the case of coverage for married 
     adults with no children.
       ``(B) Bonus for payment of greater percentage of 
     premiums.--The applicable percentage otherwise specified in 
     subparagraph (A) shall be increased by 5 percentage points 
     for each additional 10 percent of the qualified employee 
     health insurance expenses of each qualified employee 
     exceeding 60 percent which are paid by the qualified small 
     employer.
       ``(c) Subsection (c) Expense Amount.--For purposes of this 
     section--
       ``(1) In general.--The expense amount described in this 
     subsection is, with respect to the first credit year of a 
     qualified small employer which is an eligible employer, 10 
     percent of the qualified employee health insurance expenses 
     of each qualified employee.
       ``(2) First credit year.--For purposes of paragraph (1), 
     the term `first credit year' means the taxable year which 
     includes the date that the health insurance coverage to which 
     the qualified employee health insurance expenses relate 
     becomes effective.
       ``(3) Eligible employer.--For purposes of paragraph (1), 
     the term `eligible employer' shall not include a qualified 
     small employer if, during the 3-taxable year period 
     immediately preceding the first credit year, the employer or 
     any member of any controlled group including the employer (or 
     any predecessor of either) established or maintained health 
     insurance coverage for substantially the same employees as 
     are the qualified employees to which the qualified employee 
     health insurance expenses relate.

[[Page S4118]]

       ``(d) Limitation Based on Wages.--
       ``(1) In general.--The percentage which would (but for this 
     subsection) be taken into account as the percentage for 
     purposes of subsection (b)(2) or (c)(1) for the taxable year 
     shall be reduced (but not below zero) by the percentage 
     determined under paragraph (2).
       ``(2) Amount of reduction.--
       ``(A) In general.--The percentage determined under this 
     paragraph is the percentage which bears the same ratio to the 
     percentage which would be so taken into account as--
       ``(i) the excess of--

       ``(I) the qualified employee's wages at an annual rate 
     during such taxable year, over
       ``(II) $25,000, bears to

       ``(ii) $5,000.
       ``(B) Annual adjustment.--For each taxable year after 2006, 
     the dollar amounts specified for the preceding taxable year 
     (after the application of this subparagraph) shall be 
     increased by the same percentage as the average percentage 
     increase in premiums under the Federal Employees Health 
     Benefits Program under chapter 89 of title 5, United States 
     Code for the calendar year in which such taxable year begins 
     over the preceding calendar year.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Qualified small employer.--The term `qualified small 
     employer' means any employer (as defined in section 2(b)(2) 
     of the Small Employers Health Benefits Program Act of 2005) 
     which--
       ``(A) is a participating employer (as defined in section 
     2(b)(5) of such Act), and
       ``(B) pays or incurs at least 60 percent of the qualified 
     employee health insurance expenses of each qualified 
     employee.
       ``(2) Qualified employee health insurance expenses.--
       ``(A) In general.--The term `qualified employee health 
     insurance expenses' means any amount paid by an employer for 
     health insurance coverage under such Act to the extent such 
     amount is attributable to coverage provided to any employee 
     while such employee is a qualified employee.
       ``(B) Exception for amounts paid under salary reduction 
     arrangements.--No amount paid or incurred for health 
     insurance coverage pursuant to a salary reduction arrangement 
     shall be taken into account under subparagraph (A).
       ``(3) Qualified employee.--
       ``(A) In general.--The term `qualified employee' means, 
     with respect to any period, an employee (as defined in 
     section 2(b)(1) of such Act) of an employer if the total 
     amount of wages paid or incurred by such employer to such 
     employee at an annual rate during the taxable year exceeds 
     $5,000.
       ``(B) Wages.--The term `wages' has the meaning given such 
     term by section 3121(a) (determined without regard to any 
     dollar limitation contained in such section).
       ``(f) Certain Rules Made Applicable.--For purposes of this 
     section, rules similar to the rules of section 52 shall 
     apply.
       ``(g) Credits for Nonprofit Organizations.--Any credit 
     which would be allowable under subsection (a) with respect to 
     a qualified small business if such qualified small business 
     were not exempt from tax under this chapter shall be treated 
     as a credit allowable under this subpart to such qualified 
     small business.''.
       (b) Conforming Amendments.--
       (1) Paragraph (2) of section 1324(b) of title 31, United 
     States Code, is amended by inserting before the period ``, or 
     from section 36 of such Code''.
       (2) The table of sections for subpart C of part IV of 
     subchapter A of chapter 1 of the Internal Revenue Code of 
     1986 is amended by striking the last item and inserting the 
     following new items:

``Sec. 36 Small business employee health insurance expenses
``Sec. 37 Overpayments of tax''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred in taxable years 
     beginning after December 31, 2005.

     SEC. 16. EFFECTIVE DATE.

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