[Congressional Record Volume 152, Number 40 (Monday, April 3, 2006)]
[Senate]
[Pages S2732-S2733]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BURNS:
  S. 2494. A bill to amend the Internal Revenue Code of 1986 to allow a 
deduction for the payment of premiums for high deductible health plans, 
to allow a credit for certain employment taxes paid with respect to 
premiums for high deductible health plans and contributions to health 
savings accounts, and for other purposes; to the Committee on Finance.
  Mr. BURNS. Mr. President, I rise today to introduce legislation to 
help provide more affordable health coverage to millions of Americans. 
This legislation makes commonsense changes that will create tax parity 
between employer-sponsored insurance and insurance purchased in the 
individual market.
  As we are well aware, the Federal tax code's treatment of medical 
care has shaped the development of the private third-party system of 
financing health care in the United States. The tax code treats the 
self-employed, unemployed, and workers at companies that do not offer 
health insurance, most of which are small businesses, less generously 
than it treats workers at companies that do offer health insurance. 
Employer-sponsored insurance receives a tax subsidy that individually-
purchased insurance does not, and as a result two-thirds of non-elderly 
Americans receive health insurance through their own or a family 
member's employer.
  Of equal concern, the percent of employer-sponsored insurance has 
dropped from 69 percent in 2000 to 60 percent in 2005 due mainly to the 
rapid rise in health insurance premiums, which have increased more than 
60 percent in real terms over the past 5 years alone. The percent of 
the non-elderly population with employer-sponsored insurance has 
correspondingly dropped, from 68 percent in 2000 to 63 percent in 2004. 
Consequently, more Americans must look to the non-group market for 
their health insurance needs.
  To help rectify this disparity, the legislation I am introducing 
today would permit premiums for high-deductible plans purchased in 
conjunction with a qualifying health savings accounts (HAS) on the 
individual market to be deductible from income taxes. In addition, an 
income tax credit would offset payroll taxes paid on these premiums. As 
such, people who purchase their health benefits in the individual 
market would receive the same tax treatment as those who receive 
employer-sponsored insurance.
  Perhaps one of the most widespread criticisms of HSA plans is that 
they are only helpful to those who are young, healthy, and wealthy. 
However, a recent survey conducted by America's Health Insurance Plans 
reveals this not to be the case. In that survey, it was shown that 50 
percent of all people covered by HSA plans in the individual market are 
40 years of age or older. Moreover, 31 percent of new enrollees in HSA 
plans were previously uninsured.
  My legislation would provide substantial savings to middle and low 
income families. For example, a family in the 15 percent income tax 
bracket, and 15.3 percent payroll tax bracket, would receive a tax 
subsidy of over $1,500 towards the purchase of a $5,000 family 
insurance HSA-qualified policy.
  Moreover, the income tax credit to offset payroll taxes is designed 
to help lower income workers. These hard-working Americans are more 
likely to work for firms that do not offer health insurance, and many 
have low enough incomes that they are paying no income taxes, but still 
must pay payroll taxes. My bill helps to give them the affordable and 
quality health benefits they deserve.
  Since being enacted in the Medicare Modernization Act, health savings 
accounts have helped to provide millions of Americans with an 
additional option in meeting their health care needs. It is simply not 
fair that the law does not provide these plans with the same tax 
treatment provided to employer-sponsored insurance. If we are to 
seriously begin addressing the rapidly rising cost of health care, it 
is imperative that we take steps now to ensure that available health 
care plans are as affordable as possible.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2494

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

     SECTION 1. DEDUCTION OF PREMIUMS FOR HIGH DEDUCTIBLE HEALTH 
                   PLANS.

       (a) In General.--Part VII of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to additional 
     itemized deductions for individuals) is amended by 
     redesignating section 224 as section 225 and by inserting 
     after section 223 the following new section:

[[Page S2733]]

     ``SEC. 224. PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS.

       ``(a) Deduction Allowed.--In the case of an individual, 
     there shall be allowed as a deduction for the taxable year 
     the aggregate amount paid by such individual as premiums 
     under a high deductible health plan with respect to months 
     during such year for which such individual is an eligible 
     individual with respect to such health plan.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Eligible individual.--The term `eligible individual' 
     has the meaning given such term by section 223(c)(1).
       ``(2) High deductible health plan.--The term `high 
     deductible health plan' has the meaning given such term by 
     section 223(c)(2).
       ``(c) Special Rules.--
       ``(1) Deduction limits.--
       ``(A) Deduction allowable for only 1 plan.--For purposes of 
     this section, in the case of an individual covered by more 
     than 1 high deductible health plan for any month, the 
     individual may only take into account amounts paid for such 
     month for the plan with the lowest premium.
       ``(B) Plans covering ineligible individuals.--If 2 or more 
     individuals are covered by a high deductible health plan for 
     any month but only 1 of such individuals is an eligible 
     individual for such month, only 50 percent of the aggregate 
     amount paid by such eligible individual as premiums under the 
     plan with respect to such month shall be taken into account 
     for purposes of this section.
       ``(2) Group health plan coverage.--
       ``(A) In general.--No deduction shall be allowed to an 
     individual under subsection (a) for any amount paid for 
     coverage under a high deductible health plan for a month if 
     that individual participates in any coverage under a group 
     health plan (within the meaning of section 5000 without 
     regard to section 5000(d)).
       ``(B) Exception for plans only providing contributions to 
     health savings accounts.--Subparagraph (A) shall not apply to 
     an individual if the individual's only coverage under a group 
     health plan for a month consists of contributions by an 
     employer to a health savings account with respect to which 
     the individual is the account beneficiary.
       ``(C) Exception for certain permitted coverage.--
     Subparagraph (A) shall not apply to an individual if the 
     individual's only coverage under a group health plan for a 
     month is coverage described in clause (i) or (ii) of section 
     223(c)(1)(B).
       ``(3) Medical and health savings accounts.--Subsection (a) 
     shall not apply with respect to any amount which is paid or 
     distributed out of an Archer MSA or a health savings account 
     which is not included in gross income under section 220(f) or 
     223(f), as the case may be.
       ``(4) Coordination with deduction for health insurance of 
     self-employed individuals.--Any amount taken into account by 
     the taxpayer in computing the deduction under section 162(l) 
     shall not be taken into account under this section.
       ``(5) Coordination with medical expense deduction.--Any 
     amount taken into account by the taxpayer in computing the 
     deduction under this section shall not be taken into account 
     under section 213.''.
       (b) Deduction Allowed Whether or Not Individual Itemizes 
     Other Deductions.--Subsection (a) of section 62 of such Code 
     is amended by inserting before the last sentence at the end 
     the following new paragraph:
       ``(21) Premiums for high deductible health plans.--The 
     deduction allowed by section 224.''.
       (c) Coordination With Section 35 Health Insurance Costs 
     Credit.--Section 35(g)(2) of such Code is amended by striking 
     ``or 213'' and inserting ``, 213, or 224''.
       (d) Clerical Amendment.--The table of sections for part VII 
     of subchapter B of chapter 1 of such Code is amended by 
     redesignating the item relating to section 224 as an item 
     relating to section 225 and by inserting before such item the 
     following new item:

``Sec. 224. Premiums for high deductible health plans.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.

     SEC. 2. CREDIT FOR CERTAIN EMPLOYMENT TAXES PAID WITH RESPECT 
                   TO PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS 
                   AND CONTRIBUTIONS TO HEALTH SAVINGS ACCOUNTS.

       (a) Allowance of Credit.--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 by inserting after 
     section 35 the following new section:

     ``SEC. 36. EMPLOYMENT TAXES PAID WITH RESPECT TO PREMIUMS FOR 
                   HIGH DEDUCTIBLE HEALTH PLANS AND CONTRIBUTIONS 
                   TO HEALTH SAVINGS ACCOUNTS.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this subtitle for the taxable year an amount equal to the 
     product of--
       ``(1) the sum of the rates of tax in effect under sections 
     3101(a), 3101(b), 3111(a), and 3111(b) for the calendar year 
     in which the taxable year begins, multiplied by
       ``(2) the sum of--
       ``(A) the aggregate amount paid by such individual as 
     premiums under a high deductible health plan which is allowed 
     as a deduction under section 224 for the taxable year, and
       ``(B) the aggregate amount paid to a health savings account 
     of such individual which is allowed as a deduction under 
     section 223 for the taxable year.
       ``(b) Credit Limited to Certain Employment Taxes.--
       ``(1) In general.--The credit allowed under subsection (a) 
     with respect to any individual for any taxable year shall not 
     exceed the specified employment taxes with respect to such 
     individual for such taxable year.
       ``(2) Specified employment taxes.--For purposes of this 
     subsection, the term `specified employment taxes' means, with 
     respect to any individual for any taxable year, the sum of--
       ``(A) the taxes imposed under sections 3101(a), 3101(b), 
     3111(a), 3111(b), 3201(a), 3211(a), and 3221(a) (taking into 
     account any adjustments or refunds under section 6413) with 
     respect to wages and compensation received by such individual 
     during the calendar year in which such taxable year begins, 
     and
       ``(B) the taxes imposed under subsections (a) and (b) of 
     section 1401 with respect to the self-employment income of 
     such individual for such taxable year.
       ``(c) Special Rule for Employment Compensation in Excess of 
     Social Security Contribution Base.--
       ``(1) In general.--If the aggregate amount of employment 
     compensation received by any individual during the calendar 
     year in which the taxable year begins exceeds the 
     contribution and benefit base (as determined under section 
     230 of the Social Security Act), the amount of the credit 
     determined under subsection (a) (determined before 
     application of subsection (b)) shall be equal to the sum of--
       ``(A) the amount determined under subsection (a) by only 
     taking into account so much of the amount determined under 
     subsection (a)(2) as does not exceed such excess and by only 
     taking into account the rates of tax in effect under section 
     3101(b) and 3111(b), and
       ``(B) the amount determined under subsection (a) by only 
     taking into account so much of the amount determined under 
     subsection (a)(2) as is not taken into account under 
     subparagraph (A) and by taking into account each of the rates 
     of tax referred to in subsection (a)(1).
       ``(2) Employment compensation.--For purposes of this 
     subsection, the term `employment compensation' means, with 
     respect to any individual for any taxable year, the sum of--
       ``(A) the wages (as defined in section 3121(a)) and 
     compensation (as defined in section 3231(e)) received by such 
     individual during the calendar year in which such taxable 
     year begins, and
       ``(B) the self-employment income (as defined in section 
     1402(b)) of such individual for such taxable year.''.
       (b) Increase in Additional Tax on Distributions Not Used 
     for Qualified Medical Expenses.--Paragraph (4) of section 
     223(f) of such Code (relating to additional tax on 
     distributions not used for qualified medical expenses) is 
     amended to read as follows:
       ``(4) Additional tax on distributions not used for 
     qualified medical expenses.--
       ``(A) In general.--The tax imposed by this chapter on the 
     account beneficiary for any taxable year in which there is a 
     payment or distribution from a health savings account of such 
     beneficiary which is includible in gross income under 
     paragraph (2) shall be increased by 30 percent of the amount 
     which is so includible.
       ``(B) Exception for disability or death.--In the case of 
     payments or distributions made after the account beneficiary 
     becomes disabled within the meaning of section 72(m)(7) or 
     dies, subparagraph (A) shall be applied by substituting `15 
     percent' for `30 percent'.
       ``(C) Exception for distributions after medicare 
     eligibility.--In the case of payments or distributions made 
     after the date on which the account beneficiary attains the 
     age specified in section 1811 of the Social Security Act, 
     subparagraph (A) shall be applied by substituting `15 
     percent' for `30 percent'.''.
       (c) Conforming Amendments.--
       (1) Paragraph (2) of section 1324(b) of title 31, United 
     States Code, is amended by inserting ``or section 36'' after 
     ``section 35''.
       (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 item relating to section 36 
     and by inserting after the item relating to section 35 the 
     following new items:

``Sec. 36. Employment taxes paid with respect to premiums for high 
              deductible health plans and contributions to health 
              savings accounts.
``Sec. 37. Overpayments of tax.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.
                                 ______