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QUALITY CARE FOR THE UNINSURED ACT OF 1999
(House of Representatives - October 06, 1999)

Text of this article available as: TXT PDF [Pages H9431-H9474] QUALITY CARE FOR THE UNINSURED ACT OF 1999 Mr. BLILEY. Mr. Speaker, pursuant to House Resolution 323, I call up the bill (H.R. 2990) to amend the Internal Revenue Code of 1986 to allow individuals greater access to health insurance through a health care tax deduction, a long-term care deduction, and other health- related tax incentives, to amend the Employee Retirement Income Security Act of 1974 to provide access to and choice in health care through association health plans, to amend the Public Health Service Act to create new pooling opportunities for small employers to obtain greater access to health coverage through HealthMarts, and for other purposes, and ask for its immediate consideration in the House. The Clerk read the title of the bill. The text of H.R. 2990 is as follows: H.R. 2990 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE; TABLE OF CONTENTS. (a) Short Title.--This Act may be cited as the ``Quality Care for the Uninsured Act of 1999''. (b) Table of Contents.--The table of contents of this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Purposes. Sec. 3. Findings relating to health care choice. TITLE I--TAX-RELATED HEALTH CARE PROVISIONS Sec. 101. Deduction for health and long-term care insurance costs of individuals not participating in employer-subsidized health plans. Sec. 102. Deduction for 100 percent of health insurance costs of self- employed individuals. Sec. 103. Expansion of availability of medical savings accounts. Sec. 104. Long-term care insurance permitted to be offered under cafeteria plans and flexible spending arrangements. Sec. 105. Additional personal exemption for taxpayer caring for elderly family member in taxpayer's home. Sec. 106. Expanded human clinical trials qualifying for orphan drug credit. Sec. 107. Inclusion of certain vaccines against streptococcus pneumoniae to list of taxable vaccines; reduction in per dose tax rate. Sec. 108. Credit for clinical testing research expenses attributable to certain qualified academic institutions including teaching hospitals. TITLE II--GREATER ACCESS AND CHOICE THROUGH ASSOCIATION HEALTH PLANS Sec. 201. Rules. ``Part 8--Rules Governing Association Health Plans ``Sec. 801. Association health plans. ``Sec. 802. Certification of association health plans. ``Sec. 803. Requirements relating to sponsors and boards of trustees. ``Sec. 804. Participation and coverage requirements. ``Sec. 805. Other requirements relating to plan documents, contribution rates, and benefit options. ``Sec. 806. Maintenance of reserves and provisions for solvency for plans providing health benefits in addition to health insurance coverage. ``Sec. 807. Requirements for application and related requirements. ``Sec. 808. Notice requirements for voluntary termination. ``Sec. 809. Corrective actions and mandatory termination. ``Sec. 810. Trusteeship by the Secretary of insolvent association health plans providing health benefits in addition to health insurance coverage. ``Sec. 811. State assessment authority. ``Sec. 812. Special rules for church plans. ``Sec. 813. Definitions and rules of construction. Sec. 202. Clarification of treatment of single employer arrangements. Sec. 203. Clarification of treatment of certain collectively bargained arrangements. Sec. 204. Enforcement provisions. Sec. 205. Cooperation between Federal and State authorities. Sec. 206. Effective date and transitional and other rules. TITLE III--GREATER ACCESS AND CHOICE THROUGH HEALTHMARTS Sec. 301. Expansion of consumer choice through HealthMarts. [[Page H9432]] ``TITLE XXVIII--HEALTHMARTS ``Sec. 2801. Definition of HealthMart. ``Sec. 2802. Application of certain laws and requirements. ``Sec. 2803. Administration. ``Sec. 2804. Definitions. TITLE IV--COMMUNITY HEALTH ORGANIZATIONS Sec. 401. Promotion of provision of insurance by community health organizations. (c) Constitutional Authority To Enact This Legislation.-- The constitutional authority upon which this Act rests is the power of Congress to regulate commerce with foreign nations and among the several States, set forth in article I, section 8 of the United States Constitution. SEC. 2. PURPOSES. The purposes of this Act are-- (1) to make it possible for individuals, employees, and the self-employed to purchase and own their own health insurance without suffering any negative tax consequences; (2) to assist individuals in obtaining and in paying for basic health care services; (3) to render patients and deliverers sensitive to the cost of health care, giving them both the incentive and the ability to restrain undesired increases in health care costs; (4) to foster the development of numerous, varied, and innovative systems of providing health care which will compete against each other in terms of price, service, and quality, and thus allow the American people to benefit from competitive forces which will reward efficient and effective deliverers and eliminate those which provide unsatisfactory quality of care or are inefficient; and (5) to encourage the development of systems of delivering health care which are capable of supplying a broad range of health care services in a comprehensive and systematic manner. SEC. 3. FINDINGS RELATING TO HEALTH CARE CHOICE. (a) Congress finds that the majority of Americans are receiving health care of a quality unmatched elsewhere in the world but that 43 million Americans remain without private health insurance. Congress further finds that small business faces significant challenges in the purchase of health insurance, including higher costs and lack of choice of coverage. Congress further finds that such challenges lead to fewer Americans who are able to take advantage of private health insurance, leading to higher cost and lower quality care. (b) Congress finds that reduction of the number of uninsured Americans is an important public policy goal. Congress further finds that the use of alternative pooling mechanisms such as Association Health Plans, HealthMarts and other innovative means could provide significant opportunities for small business and individuals to purchase health insurance. Congress further finds that the use of such mechanisms could provide significant opportunities to expand private health coverage for individuals who are employees of small business, self-employed, or do not work for employers who provide health insurance. (c) Congress finds that the current Tax Code provides significant incentives for employers to provide health insurance coverage for their employees by providing a deduction for the employer for the cost of health insurance coverage and an exclusion from income for the employee for employer-provided health care. Congress further finds that some individuals may prefer to decline coverage under their employer's group health plan and obtain individual health insurance coverage, and some employers may wish to give employees the opportunity to do so. Congress further finds that the Internal Revenue Service has ruled that this tax treatment for the employer and employee for employer-provided health care applies even if the employer pays for individual health insurance polices for its employees. Therefore, the Tax Code makes it possible for employers to provide employees choice among health insurance coverage while retaining favorable tax treatment. Congress further finds that the present-law exclusion for employer-provided health care, together with the tax provisions in the bill, will provide more equitable tax treatment for health insurance expenses, encourage uninsured individuals to purchase insurance, expand health care options, and encourage individuals to better manage their health care needs and expenses. (d) Congress finds that continually increasing and complex government regulation of the health care delivery system has proven ineffective in restraining costs and is itself expensive and counterproductive in fulfilling its purposes and detrimental to the care of patients. TITLE I--TAX-RELATED HEALTH CARE PROVISIONS SEC. 101. DEDUCTION FOR HEALTH AND LONG-TERM CARE INSURANCE COSTS OF INDIVIDUALS NOT PARTICIPATING IN EMPLOYER-SUBSIDIZED HEALTH PLANS. (a) In General.--Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by redesignating section 222 as section 223 and by inserting after section 221 the following new section: ``SEC. 222. HEALTH AND LONG-TERM CARE INSURANCE COSTS. ``(a) In General.--In the case of an individual, there shall be allowed as a deduction an amount equal to the applicable percentage of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer and the taxpayer's spouse and dependents. ``(b) Applicable Percentage.--For purposes of subsection (a), the applicable percentage shall be determined in accordance with the following table: ``For taxable years beginning The applicable in calendar year-- percentage is-- 2002, 2003, and 2004.............................................25 2005.............................................................35 2006.............................................................65 2007 and thereafter............................................100. ``(c) Limitation Based on Other Coverage.-- ``(1) Coverage under certain subsidized employer plans.-- ``(A) In general.--Subsection (a) shall not apply to any taxpayer for any calendar month for which the taxpayer participates in any health plan maintained by any employer of the taxpayer or of the spouse of the taxpayer if 50 percent or more of the cost of coverage under such plan (determined under section 4980B and without regard to payments made with respect to any coverage described in subsection (e)) is paid or incurred by the employer. ``(B) Employer contributions to cafeteria plans, flexible spending arrangements, and medical savings accounts.-- Employer contributions to a cafeteria plan, a flexible spending or similar arrangement, or a medical savings account which are excluded from gross income under section 106 shall be treated for purposes of subparagraph (A) as paid by the employer. ``(C) Aggregation of plans of employer.--A health plan which is not otherwise described in subparagraph (A) shall be treated as described in such subparagraph if such plan would be so described if all health plans of persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 were treated as one health plan. ``(D) Separate application to health insurance and long- term care insurance.--Subparagraphs (A) and (C) shall be applied separately with respect to-- ``(i) plans which include primarily coverage for qualified long-term care services or are qualified long-term care insurance contracts, and ``(ii) plans which do not include such coverage and are not such contracts. ``(2) Coverage under certain federal programs.-- ``(A) In general.--Subsection (a) shall not apply to any amount paid for any coverage for an individual for any calendar month if, as of the first day of such month, the individual is covered under any medical care program described in-- ``(i) title XVIII, XIX, or XXI of the Social Security Act, ``(ii) chapter 55 of title 10, United States Code, ``(iii) chapter 17 of title 38, United States Code, ``(iv) chapter 89 of title 5, United States Code, or ``(v) the Indian Health Care Improvement Act. ``(B) Exceptions.-- ``(i) Qualified long-term care.--Subparagraph (A) shall not apply to amounts paid for coverage under a qualified long- term care insurance contract. ``(ii) Continuation coverage of fehbp.--Subparagraph (A)(iv) shall not apply to coverage which is comparable to continuation coverage under section 4980B. ``(d) Long-Term Care Deduction Limited to Qualified Long- Term Care Insurance Contracts.--In the case of a qualified long-term care insurance contract, only eligible long-term care premiums (as defined in section 213(d)(10)) may be taken into account under subsection (a). ``(e) Deduction Not Available for Payment of Ancillary Coverage Premiums.--Any amount paid as a premium for insurance which provides for-- ``(1) coverage for accidents, disability, dental care, vision care, or a specified illness, or ``(2) making payments of a fixed amount per day (or other period) by reason of being hospitalized, shall not be taken into account under subsection (a). ``(f) Special Rules.-- ``(1) Coordination with deduction for health insurance costs of self-employed individuals.--The amount taken into account by the taxpayer in computing the deduction under section 162(l) shall not be taken into account under this section. ``(2) Coordination with medical expense deduction.--The amount taken into account by the taxpayer in computing the deduction under this section shall not be taken into account under section 213. ``(g) Regulations.--The Secretary shall prescribe such regulations as may be appropriate to carry out this section, including regulations requiring employers to report to their employees and the Secretary such information as the Secretary determines to be appropriate.''. (b) Deduction Allowed Whether or Not Taxpayer Itemizes Other Deductions.--Subsection (a) of section 62 of such Code is amended by inserting after paragraph (17) the following new item: ``(18) Health and long-term care insurance costs.--The deduction allowed by section 222.''. (c) Clerical Amendment.--The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the last item and inserting the following new items: [[Page H9433]] ``Sec. 222. Health and long-term care insurance costs. ``Sec. 223. Cross reference.''. (d) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2001. SEC. 102. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS. (a) In General.--Paragraph (1) of section 162(l) of the Internal Revenue Code of 1986 is amended to read as follows: ``(1) Allowance of deduction.--In the case of an individual who is an employee within the meaning of section 401(c)(1), there shall be allowed as a deduction under this section an amount equal to 100 percent of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer and the taxpayer's spouse and dependents.''. (b) Clarification of Limitations on Other Coverage.--The first sentence of section 162(l)(2)(B) of such Code is amended to read as follows: ``Paragraph (1) shall not apply to any taxpayer for any calendar month for which the taxpayer participates in any subsidized health plan maintained by any employer (other than an employer described in section 401(c)(4)) of the taxpayer or the spouse of the taxpayer.''. (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. SEC. 103. EXPANSION OF AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS. (a) Repeal of Limitations on Number of Medical Savings Accounts.-- (1) In general.--Subsections (i) and (j) of section 220 of the Internal Revenue Code of 1986 are hereby repealed. (2) Conforming amendments.-- (A) Paragraph (1) of section 220(c) of such Code is amended by striking subparagraph (D). (B) Section 138 of such Code is amended by striking subsection (f). (b) Availability Not Limited to Accounts For Employees of Small Employers and Self-employed Individuals.-- (1) In general.--Section 220(c)(1)(A) of such Code (relating to eligible individual) is amended to read as follows: ``(A) In general.--The term `eligible individual' means, with respect to any month, any individual if-- ``(i) such individual is covered under a high deductible health plan as of the 1st day of such month, and ``(ii) such individual is not, while covered under a high deductible health plan, covered under any health plan-- ``(I) which is not a high deductible health plan, and ``(II) which provides coverage for any benefit which is covered under the high deductible health plan.''. (2) Conforming amendments.-- (A) Section 220(c)(1) of such Code is amended by striking subparagraph (C). (B) Section 220(c) of such Code is amended by striking paragraph (4) (defining small employer) and by redesignating paragraph (5) as paragraph (4). (C) Section 220(b) of such Code is amended by striking paragraph (4) (relating to deduction limited by compensation) and by redesignating paragraphs (5), (6), and (7) as paragraphs (4), (5), and (6), respectively. (c) Increase in Amount of Deduction Allowed for Contributions to Medical Savings Accounts.-- (1) In general.--Paragraph (2) of section 220(b) of such Code is amended to read as follows: ``(2) Monthly limitation.--The monthly limitation for any month is the amount equal to \1/12\ of the annual deductible (as of the first day of such month) of the individual's coverage under the high deductible health plan.''. (2) Conforming amendment.--Clause (ii) of section 220(d)(1)(A) of such Code is amended by striking ``75 percent of''. (d) Both Employers and Employees May Contribute to Medical Savings Accounts.--Paragraph (5) of section 220(b) of such Code is amended to read as follows: ``(5) Coordination with exclusion for employer contributions.--The limitation which would (but for this paragraph) apply under this subsection to the taxpayer for any taxable year shall be reduced (but not below zero) by the amount which would (but for section 106(b)) be includible in the taxpayer's gross income for such taxable year.''. (e) Reduction of Permitted Deductibles Under High Deductible Health Plans.-- (1) In general.--Subparagraph (A) of section 220(c)(2) of such Code (defining high deductible health plan) is amended-- (A) by striking ``$1,500'' in clause (i) and inserting ``$1,000'', and (B) by striking ``$3,000'' in clause (ii) and inserting ``$2,000''. (2) Conforming amendment.--Subsection (g) of section 220 of such Code is amended to read as follows: ``(g) Cost-of-Living Adjustment.-- ``(1) In general.--In the case of any taxable year beginning in a calendar year after 1998, each dollar amount in subsection (c)(2) 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 such taxable year begins by substituting `calendar year 1997' for `calendar year 1992' in subparagraph (B) thereof. ``(2) Special rules.--In the case of the $1,000 amount in subsection (c)(2)(A)(i) and the $2,000 amount in subsection (c)(2)(A)(ii), paragraph (1)(B) shall be applied by substituting `calendar year 1999' for `calendar year 1997'. ``(3) Rounding.--If any increase under paragraph (1) or (2) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50. (f) Medical Savings Accounts May Be Offered Under Cafeteria Plans.--Subsection (f) of section 125 of such Code is amended by striking ``106(b),''. (g) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. SEC. 104. LONG-TERM CARE INSURANCE PERMITTED TO BE OFFERED UNDER CAFETERIA PLANS AND FLEXIBLE SPENDING ARRANGEMENTS. (a) Cafeteria Plans.-- (1) In general.--Subsection (f ) of section 125 of the Internal Revenue Code of 1986 (defining qualified benefits) is amended by inserting before the period at the end ``; except that such term shall include the payment of premiums for any qualified long-term care insurance contract (as defined in section 7702B) to the extent the amount of such payment does not exceed the eligible long-term care premiums (as defined in section 213(d)(10)) for such contract''. (b) Flexible Spending Arrangements.--Section 106 of such Code (relating to contributions by employer to accident and health plans) is amended by striking subsection (c). (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2001. SEC. 105. ADDITIONAL PERSONAL EXEMPTION FOR TAXPAYER CARING FOR ELDERLY FAMILY MEMBER IN TAXPAYER'S HOME. (a) In General.--Section 151 of the Internal Revenue Code of 1986 (relating to allowance of deductions for personal exemptions) is amended by redesignating subsection (e) as subsection (f ) and by inserting after subsection (d) the following new subsection: ``(e) Additional Exemption for Certain Elderly Family Members Residing With Taxpayer.-- ``(1) In general.--An exemption of the exemption amount for each qualified family member of the taxpayer. ``(2) Qualified family member.--For purposes of this subsection, the term `qualified family member' means, with respect to any taxable year, any individual-- ``(A) who is an ancestor of the taxpayer or of the taxpayer's spouse or who is the spouse of any such ancestor, ``(B) who is a member for the entire taxable year of a household maintained by the taxpayer, and ``(C) who has been certified, before the due date for filing the return of tax for the taxable year (without extensions), by a physician (as defined in section 1861(r)(1) of the Social Security Act) as being an individual with long- term care needs described in paragraph (3) for a period-- ``(i) which is at least 180 consecutive days, and ``(ii) a portion of which occurs within the taxable year. Such term shall not include any individual otherwise meeting the requirements of the preceding sentence unless within the 39\1/2\ month period ending on such due date (or such other period as the Secretary prescribes) a physician (as so defined) has certified that such individual meets such requirements. ``(3) Individuals with long-term care needs.--An individual is described in this paragraph if the individual-- ``(A) is unable to perform (without substantial assistance from another individual) at least two activities of daily living (as defined in section 7702B(c)(2)(B)) due to a loss of functional capacity, or ``(B) requires substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment and is unable to perform, without reminding or cuing assistance, at least one activity of daily living (as so defined) or to the extent provided in regulations prescribed by the Secretary (in consultation with the Secretary of Health and Human Services), is unable to engage in age appropriate activities. ``(4) Special rules.--Rules similar to the rules of paragraphs (1), (2), (3), (4), and (5) of section 21(e) shall apply for purposes of this subsection.''. (b) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. SEC. 106. EXPANDED HUMAN CLINICAL TRIALS QUALIFYING FOR ORPHAN DRUG CREDIT. (a) In General.--Subclause (I) of section 45C(b)(2)(A)(ii) of the Internal Revenue Code of 1986 is amended to read as follows: ``(I) after the date that the application is filed for designation under such section 526, and''. (b) Conforming Amendment.--Clause (i) of section 45C(b)(2)(A) of such Code is amended by inserting ``which is'' before ``being'' and by inserting before the comma at the end ``and which is designated under section 526 of such Act''. (c) Effective Date.--The amendments made by this section shall apply to amounts paid or incurred after December 31, 2000. SEC. 107. INCLUSION OF CERTAIN VACCINES AGAINST STREPTOCOCCUS PNEUMONIAE TO LIST OF TAXABLE VACCINES; REDUCTION IN PER DOSE TAX RATE. (a) Inclusion of Vaccines.-- [[Page H9434]] (1) In general.--Section 4132(a)(1) of the Internal Revenue Code of 1986 (defining taxable vaccine) is amended by adding at the end the following new subparagraph: ``(L) Any conjugate vaccine against streptococcus pneumoniae.''. (2) Effective date.-- (A) Sales.--The amendment made by this subsection shall apply to vaccine sales beginning on the day after the date on which the Centers for Disease Control makes a final recommendation for routine administration to children of any conjugate vaccine against streptococcus pneumoniae, but shall not take effect if subsection (c) does not take effect. (B) Deliveries.--For purposes of subparagraph (A), in the case of sales on or before the date described in such subparagraph for which delivery is made after such date, the delivery date shall be considered the sale date. (b) Reduction in Per Dose Tax Rate.-- (1) In general.--Section 4131(b)(1) of such Code (relating to amount of tax) is amended by striking ``75 cents'' and inserting ``50 cents''. (2) Effective date.-- (A) Sales.--The amendment made by this subsection shall apply to vaccine sales after December 31, 2004, but shall not take effect if subsection (c) does not take effect. (B) Deliveries.--For purposes of subparagraph (A), in the case of sales on or before the date described in such subparagraph for which delivery is made after such date, the delivery date shall be considered the sale date. (3) Limitation on certain credits or refunds.--For purposes of applying section 4132(b) of the Internal Revenue Code of 1986 with respect to any claim for credit or refund filed after August 31, 2004, the amount of tax taken into account shall not exceed the tax computed under the rate in effect on January 1, 2005. (c) Vaccine Tax and Trust Fund Amendments.-- (1) Sections 1503 and 1504 of the Vaccine Injury Compensation Program Modification Act (and the amendments made by such sections) are hereby repealed. (2) Subparagraph (A) of section 9510(c)(1) of such Code is amended by striking ``August 5, 1997'' and inserting ``October 21, 1998''. (3) The amendments made by this subsection shall take effect as if included in the provisions of the Tax and Trade Relief Extension Act of 1998 to which they relate. (d) Report.--Not later than December 31, 1999, the Comptroller General of the United States shall prepare and submit a report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on the operation of the Vaccine Injury Compensation Trust Fund and on the adequacy of such Fund to meet future claims made under the Vaccine Injury Compensation Program. SEC. 108. CREDIT FOR CLINICAL TESTING RESEARCH EXPENSES ATTRIBUTABLE TO CERTAIN QUALIFIED ACADEMIC INSTITUTIONS INCLUDING TEACHING HOSPITALS. (a) In General.--Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by inserting after section 41 the following: ``SEC. 41A. CREDIT FOR MEDICAL INNOVATION EXPENSES. ``(a) General Rule.--For purposes of section 38, the medical innovation credit determined under this section for the taxable year shall be an amount equal to 40 percent of the excess (if any) of-- ``(1) the qualified medical innovation expenses for the taxable year, over ``(2) the medical innovation base period amount. ``(b) Qualified Medical Innovation Expenses.--For purposes of this section-- ``(1) In general.--The term `qualified medical innovation expenses' means the amounts which are paid or incurred by the taxpayer during the taxable year directly or indirectly to any qualified academic institution for clinical testing research activities. ``(2) Clinical testing research activities.-- ``(A) In general.--The term `clinical testing research activities' means human clinical testing conducted at any qualified academic institution in the development of any product, which occurs before-- ``(i) the date on which an application with respect to such product is approved under section 505(b), 506, or 507 of the Federal Food, Drug, and Cosmetic Act (as in effect on the date of the enactment of this section), ``(ii) the date on which a license for such product is issued under section 351 of the Public Health Service Act (as so in effect), or ``(iii) the date classification or approval of such product which is a device intended for human use is given under section 513, 514, or 515 of the Federal Food, Drug, and Cosmetic Act (as so in effect). ``(B) Product.--The term `product' means any drug, biologic, or medical device. ``(3) Qualified academic institution.--The term `qualified academic institution' means any of the following institutions: ``(A) Educational institution.--A qualified organization described in section 170(b)(1)(A)(iii) which is owned by, or affiliated with, an institution of higher education (as defined in section 3304(f )). ``(B) Teaching hospital.--A teaching hospital which-- ``(i) is publicly supported or owned by an organization described in section 501(c)(3), and ``(ii) is affiliated with an organization meeting the requirements of subparagraph (A). ``(C) Foundation.--A medical research organization described in section 501(c)(3) (other than a private foundation) which is affiliated with, or owned by-- ``(i) an organization meeting the requirements of subparagraph (A), or ``(ii) a teaching hospital meeting the requirements of subparagraph (B). ``(D) Charitable research hospital.--A hospital that is designated as a cancer center by the National Cancer Institute. ``(4) Exclusion for amounts funded by grants, etc.--The term `qualified medical innovation expenses' shall not include any amount to the extent such amount is funded by any grant, contract, or otherwise by another person (or any governmental entity). ``(c) Medical Innovation Base Period Amount.--For purposes of this section, the term `medical innovation base period amount' means the average annual qualified medical innovation expenses paid by the taxpayer during the 3-taxable year period ending with the taxable year immediately preceding the first taxable year of the taxpayer beginning after December 31, 2000. ``(d) Special Rules.-- ``(1) Limitation on foreign testing.--No credit shall be allowed under this section with respect to any clinical testing research activities conducted outside the United States. ``(2) Certain rules made applicable.--Rules similar to the rules of subsections (f ) and (g) of section 41 shall apply for purposes of this section. ``(3) Election.--This section shall apply to any taxpayer for any taxable year only if such taxpayer elects to have this section apply for such taxable year. ``(4) Coordination with credit for increasing research expenditures and with credit for clinical testing expenses for certain drugs for rare diseases.--Any qualified medical innovation expense for a taxable year to which an election under this section applies shall not be taken into account for purposes of determining the credit allowable under section 41 or 45C for such taxable year.''. (b) Credit To Be Part of General Business Credit.-- (1) In general.--Section 38(b) of such Code (relating to current year business credits) is amended by striking ``plus'' at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting ``, plus'', and by adding at the end the following: ``(13) the medical innovation expenses credit determined under section 41A(a).''. (2) Transition rule.--Section 39(d) of such Code is amended by adding at the end the following new paragraph: ``(9) No carryback of section 41a credit before enactment.--No portion of the unused business credit for any taxable year which is attributable to the medical innovation credit determined under section 41A may be carried back to a taxable year beginning before January 1, 2001.''. (c) Denial of Double Benefit.--Section 280C of such Code is amended by adding at the end the following new subsection: ``(d) Credit for Increasing Medical Innovation Expenses.-- ``(1) In general.--No deduction shall be allowed for that portion of the qualified medical innovation expenses (as defined in section 41A(b)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 41A(a). ``(2) Certain rules to apply.--Rules similar to the rules of paragraphs (2), (3), and (4) of subsection (c) shall apply for purposes of this subsection.''. (d) Deduction for Unused Portion of Credit.--Section 196(c) of such Code (defining qualified business credits) is amended by redesignating paragraphs (5) through (8) as paragraphs (6) through (9), respectively, and by inserting after paragraph (4) the following new paragraph: ``(5) the medical innovation expenses credit determined under section 41A(a) (other than such credit determined under the rules of section 280C(d)(2)),''. (e) Clerical Amendment.--The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding after the item relating to section 41 the following: ``Sec. 41A. Credit for medical innovation expenses.''. (f) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. TITLE II--GREATER ACCESS AND CHOICE THROUGH ASSOCIATION HEALTH PLANS SEC. 201. RULES. (a) In General.--Subtitle B of title I of the Employee Retirement Income Security Act of 1974 is amended by adding after part 7 the following new part: ``Part 8--Rules Governing Association Health Plans ``SEC. 801. ASSOCIATION HEALTH PLANS. ``(a) In General.--For purposes of this part, the term `association health plan' means a group health plan-- ``(1) whose sponsor is (or is deemed under this part to be) described in subsection (b); and ``(2) under which at least one option of health insurance coverage offered by a health insurance issuer (which may include, [[Page H9435]] among other options, managed care options, point of service options, and preferred provider options) is provided to participants and beneficiaries, unless, for any plan year, such coverage remains unavailable to the plan despite good faith efforts exercised by the plan to secure such coverage. ``(b) Sponsorship.--The sponsor of a group health plan is described in this subsection if such sponsor-- ``(1) is organized and maintained in good faith, with a constitution and bylaws specifically stating its purpose and providing for periodic meetings on at least an annual basis, as a bona fide trade association, a bona fide industry association (including a rural electric cooperative association or a rural telephone cooperative association), a bona fide professional association, or a bona fide chamber of commerce (or similar bona fide business association, including a corporation or similar organization that operates on a cooperative basis (within the meaning of section 1381 of the Internal Revenue Code of 1986)), for substantial purposes other than that of obtaining or providing medical care; ``(2) is established as a permanent entity which receives the active support of its members and collects from its members on a periodic basis dues or payments necessary to maintain eligibility for membership in the sponsor; and ``(3) does not condition membership, such dues or payments, or coverage under the plan on the basis of health status- related factors with respect to the employees of its members (or affiliated members), or the dependents of such employees, and does not condition such dues or payments on the basis of group health plan participation. Any sponsor consisting of an association of entities which meet the requirements of paragraphs (1), (2), and (3) shall be deemed to be a sponsor described in this subsection. ``SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS. ``(a) In General.--The applicable authority shall prescribe by regulation, through negotiated rulemaking, a procedure under which, subject to subsection (b), the applicable authority shall certify association health plans which apply for certification as meeting the requirements of this part. ``(b) Standards.--Under the procedure prescribed pursuant to subsection (a), in the case of an association health plan that provides at least one benefit option which does not consist of health insurance coverage, the applicable authority shall certify such plan as meeting the requirements of this part only if the applicable authority is satisfied that-- ``(1) such certification-- ``(A) is administratively feasible; ``(B) is not adverse to the interests of the individuals covered under the plan; and ``(C) is protective of the rights and benefits of the individuals covered under the plan; and ``(2) the applicable requirements of this part are met (or, upon the date on which the plan is to commence operations, will be met) with respect to the plan. ``(c) Requirements Applicable to Certified Plans.--An association health plan with respect to which certification under this part is in effect shall meet the applicable requirements of this part, effective on the date of certification (or, if later, on the date on which the plan is to commence operations). ``(d) Requirements for Continued Certification.--The applicable authority may provide by regulation, through negotiated rulemaking, for continued certification of association health plans under this part. ``(e) Class Certification for Fully Insured Plans.--The applicable authority shall establish a class certification procedure for association health plans under which all benefits consist of health insurance coverage. Under such procedure, the applicable authority shall provide for the granting of certification under this part to the plans in each class of such association health plans upon appropriate filing under such procedure in connection with plans in such class and payment of the prescribed fee under section 807(a). ``(f) Certification of Self-Insured Association Health Plans.--An association health plan which offers one or more benefit options which do not consist of health insurance coverage may be certified under this part only if such plan consists of any of the following: ``(1) a plan which offered such coverage on the date of the enactment of the Quality Care for the Uninsured Act of 1999, ``(2) a plan under which the sponsor does not restrict membership to one or more trades and businesses or industries and whose eligible participating employers represent a broad cross-section of trades and businesses or industries, or ``(3) a plan whose eligible participating employers represent one or more trades or businesses, or one or more industries, which have been indicated as having average or above-average health insurance risk or health claims experience by reason of State rate filings, denials of coverage, proposed premium rate levels, and other means demonstrated by such plan in accordance with regulations which the Secretary shall prescribe through negotiated rulemaking, including (but not limited to) the following: agriculture; automobile dealerships; barbering and cosmetology; child care; construction; dance, theatrical, and orchestra productions; disinfecting and pest control; eating and drinking establishments; fishing; hospitals; labor organizations; logging; manufacturing (metals); mining; medical and dental practices; medical laboratories; sanitary services; transportation (local and freight); and warehousing. ``SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF TRUSTEES. ``(a) Sponsor.--The requirements of this subsection are met with respect to an association health plan if the sponsor has met (or is deemed under this part to have met) the requirements of section 801(b) for a continuous period of not less than 3 years ending with the date of the application for certification under this part. ``(b) Board of Trustees.--The requirements of this subsection are met with respect to an association health plan if the following requirements are met: ``(1) Fiscal control.--The plan is operated, pursuant to a trust agreement, by a board of trustees which has complete fiscal control over the plan and which is responsible for all operations of the plan. ``(2) Rules of operation and financial controls.--The board of trustees has in effect rules of operation and financial controls, based on a 3-year plan of operation, adequate to carry out the terms of the plan and to meet all requirements of this title applicable to the plan. ``(3) Rules governing relationship to participating employers and to contractors.-- ``(A) In general.--Except as provided in subparagraphs (B) and (C), the members of the board of trustees are individuals selected from individuals who are the owners, officers, directors, or employees of the participating employers or who are partners in the participating employers and actively participate in the business. ``(B) Limitation.-- ``(i) General rule.--Except as provided in clauses (ii) and (iii), no such member is an owner, officer, director, or employee of, or partner in, a contract administrator or other service provider to the plan. ``(ii) Limited exception for providers of services solely on behalf of the sponsor.--Officers or employees of a sponsor which is a service provider (other than a contract administrator) to the plan may be members of the board if they constitute not more than 25 percent of the membership of the board and they do not provide services to the plan other than on behalf of the sponsor. ``(iii) Treatment of providers of medical care.--In the case of a sponsor which is an association whose membership consists primarily of providers of medical care, clause (i) shall not apply in the case of any service provider described in subparagraph (A) who is a provider of medical care under the plan. ``(C) Certain plans excluded.--Subparagraph (A) shall not apply to an association health plan which is in existence on the date of the enactment of the Quality Care for the Uninsured Act of 1999. ``(D) Sole authority.--The board has sole authority under the plan to approve applications for participation in the plan and to contract with a service provider to administer the day-to-day affairs of the plan. ``(c) Treatment of Franchise Networks.--In the case of a group health plan which is established and maintained by a franchiser for a franchise network consisting of its franchisees-- ``(1) the requirements of subsection (a) and section 801(a)(1) shall be deemed met if such requirements would otherwise be met if the franchiser were deemed to be the sponsor referred to in section 801(b), such network were deemed to be an association described in section 801(b), and each franchisee were deemed to be a member (of the association and the sponsor) referred to in section 801(b); and ``(2) the requirements of section 804(a)(1) shall be deemed met. The Secretary may by regulation, through negotiated rulemaking, define for purposes of this subsection the terms `franchiser', `franchise network', and `franchisee'. ``(d) Certain Collectively Bargained Plans.-- ``(1) In general.--In the case of a group health plan described in paragraph (2)-- ``(A) the requirements of subsection (a) and section 801(a)(1) shall be deemed met; ``(B) the joint board of trustees shall be deemed a board of trustees with respect to which the requirements of subsection (b) are met; and ``(C) the requirements of section 804 shall be deemed met. ``(2) Requirements.--A group health plan is described in this paragraph if-- ``(A) the plan is a multiemployer plan; or ``(B) the plan is in existence on April 1, 1997, and would be described in section 3(40)(A)(i) but solely for the failure to meet the requirements of section 3(40)(C)(ii). ``SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS. ``(a) Covered Employers and Individuals.--The requirements of this subsection are met with respect to an association health plan if, under the terms of the plan-- ``(1) each participating employer must be-- ``(A) a member of the sponsor, ``(B) the sponsor, or ``(C) an affiliated member of the sponsor with respect to which the requirements of subsection (b) are met, except that, in the case of a sponsor which is a professional association or other individual-based association, if at least one of the officers, directors, or employees of an [[Page H9436]] employer, or at least one of the individuals who are partners in an employer and who actively participates in the business, is a member or such an affiliated member of the sponsor, participating employers may also include such employer; and ``(2) all individuals commencing coverage under the plan after certification under this part must be-- ``(A) active or retired owners (including self-employed individuals), officers, directors, or employees of, or partners in, participating employers; or ``(B) the beneficiaries of individuals described in subparagraph (A). ``(b) Coverage of Previously Uninsured Employees.--In the case of an association health plan in existence on the date of the enactment of the Quality Care for the Uninsured Act of 1999, an affiliated member of the sponsor of the plan may be offered coverage under the plan as a participating employer only if-- ``(1) the affiliated member was an affiliated member on the date of certification under this part; or ``(2) during the 12-month period preceding the date of the offering of such coverage, the affiliated member has not maintained or contributed to a group health plan with respect to any of its employees who would otherwise be eligible to participate in such association health plan. ``(c) Individual Market Unaffected.--The requirements of this subsection are met with respect to an association health plan if, under the terms of the plan, no participating employer may provide health insurance coverage in the individual market for any employee not covered under the plan which is similar to the coverage contemporaneously provided to employees of the employer under the plan, if such exclusion of the employee from coverage under the plan is based on a health status-related factor with respect to the employee and such employee would, but for such exclusion on such basis, be eligible for coverage under the plan. ``(d) Prohibition of Discrimination Against Employers and Employees Eligible To Participate.--The requirements of this subsection are met with respect to an association health plan if-- ``(1) under the terms of the plan, all employers meeting the preceding requirements of this section are eligible to qualify as participating employers for all geographically available coverage options, unless, in the case of any such employer, participation or contribution requirements of the type referred to in section 2711 of the Public Health Service Act are not met; ``(2) upon request, any employer eligible to participate is furnished information regarding all coverage options available under the plan; and ``(3) the applicable requirements of sections 701, 702, and 703 are met with respect to the plan. ``SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOCUMENTS, CONTRIBUTION RATES, AND BENEFIT OPTIONS. ``(a) In General.--The requirements of this section are met with respect to an association health plan if the following requirements are met: ``(1) Contents of governing instruments.--The instruments governing the plan include a written instrument, meeting the requirements of an instrument required under section 402(a)(1), which-- ``(A) provides that the board of trustees serves as the named fiduciary required for plans under section 402(a)(1) and serves in the capacity of a plan administrator (referred to in section 3(16)(A)); ``(B) provides that the sponsor of the plan is to serve as plan sponsor (referred to in section 3(16)(B)); and ``(C) incorporates the requirements of section 806. ``(2) Contribution rates must be nondiscriminatory.-- ``(A) The contribution rates for any participating small employer do not vary on the basis of the claims experience of such employer and do not vary on the basis of the type of business or industry in which such employer is engaged. ``(B) Nothing in this title or any other provision of law shall be construed to preclude an association health plan, or a health insurance issuer offering health insurance coverage in connection with an association health plan, from-- ``(i) setting contribution rates based on the claims experience of the plan; or ``(ii) varying contribution rates for small employers in a State to the extent that such rates could vary using the same methodology employed in such State for regulating premium rates in the small group market with respect to health insurance coverage offered in connection with bona fide associations (within the meaning of section 2791(d)(3) of the Public Health Service Act), subject to the requirements of section 702(b) relating to contribution rates. ``(3) Floor for number of covered individuals with respect to certain plans.--If any benefit option under the plan does not consist of health insurance coverage, the plan has as of the beginning of the plan year not fewer than 1,000 participants and beneficiaries. ``(4) Marketing requirements.-- ``(A) In general.--If a benefit option which consists of health insurance coverage is offered under the plan, State- licensed insurance agents shall be used to distribute to small employers coverage which does not consist of health insurance coverage in a manner comparable to the manner in which such agents are used to distribute health insurance coverage. ``(B) State-licensed insurance agents.--For purposes of subparagraph (A), the term `State-licensed insurance agents' means one or more agents who are licensed in a State and are subject to the laws of such State relating to licensure, qualification, testing, examination, and continuing education of persons authorized to offer, sell, or solicit health insurance coverage in such State. ``(5) Regulatory requirements.--Such other requirements as the applicable authority determines are necessary to carry out the purposes of this part, which shall be prescribed by the applicable authority by regulation through negotiated rulemaking. ``(b) Ability of Association Health Plans To Design Benefit Options.--Subject to section 514(d), nothing in this part or any provision of State law (as defined in section 514(c)(1)) shall be construed to preclude an association health plan, or a health insurance issuer offering health insurance coverage in connection with an association health plan, from exercising its sole discretion in selecting the specific items and services consisting of medical care to be included as benefits under such plan or coverage, except (subject to section 514) in the case of any law to the extent that it (1) prohibits an exclusion of a specific disease from such coverage, or (2) is not preempted under section 731(a)(1) with respect to matters governed by section 711 or 712. ``SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS FOR SOLVENCY FOR PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO HEALTH INSURANCE COVERAGE. ``(a) In General.--The requirements of this section are met with respect to an association health plan if-- ``(1) the benefits under the plan consist solely of health insurance coverage; or ``(2) if the plan provides any additional benefit options which do not consist of health insurance coverage, the plan-- ``(A) establishes and maintains reserves with respect to such additional benefit options, in amounts recommended by the qualified actuary, consisting of-- ``(i) a reserve sufficient for unearned contributions; ``(ii) a reserve sufficient for benefit liabilities which have been incurred, which have not been satisfied, and for which risk of loss has not yet been transferred, and for expected administrative costs with respect to such benefit liabilities; ``(iii) a reserve sufficient for any other obligations of the plan; and ``(iv) a reserve sufficient for a margin of error and other fluctuations, taking into account the specific circumstances of the plan; and ``(B) establishes and maintains aggregate and specific excess /stop loss insurance and solvency indemnification, with respect to such additional benefit options for which risk of loss has not yet been transferred, as follows: ``(i) The plan shall secure aggregate excess /stop loss insurance for the plan with an attachment point which is not greater than 125 percent of expected gross annual claims. The applicable authority may by regulation, through negotiated rulemaking, provide for upward adjustments in the amount of such percentage in specified circumstances in which the plan specifically provides for and maintains reserves in excess of the amounts required under subparagraph (A). ``(ii) The plan shall secure specific excess /stop loss insurance for the plan with an attachment point which is at least equal to an amount recommended by the plan's qualified actuary (but not more than $175,000). The applicable authority may by regulation, through negotiated rulemaking, provide for adjustments in the amount of such insurance in specified circumstances in which the plan specifically provides for and maintains reserves in excess of the amounts required under subparagraph (A). ``(iii) The plan shall secure indemnification insurance for any claims which the plan is unable to satisfy by reason of a plan termination. Any regulations prescribed by the applicable authority pursuant to clause (i) or (ii) of subparagraph (B) may allow for such adjustments in the required levels of excess /stop loss insurance as the qualified actuary may recommend, taking into account the specific circumstances of the plan. ``(b) Minimum Surplus in Addition to Claims Reserves.--In the case of any association health plan described in subsection (a)(2), the requirements of this subsection are met if the plan establishes and maintains surplus in an amount at least equal to-- ``(1) $500,000, or ``(2) such greater amount (but not greater than $2,000,000) as may be set forth in regulations prescribed by the applicable authority through negotiated rulemaking, based on the level of aggregate and specific excess /stop loss insurance provided with respect to such plan. ``(c) Additional Requirements.--In the case of any association health plan described in subsection (a)(2), the applicable authority may provide such additional requirements relating to reserves and excess /stop loss insurance as the applicable authority considers appropriate. Such requirements may be provided by regulation, through negotiated rulemaking, with respect to any such plan or any class of such plans. [[Page H9437]] ``(d) Adjustments for Excess /Stop Loss Insurance.--The applicable authority may provide for adjustments to the levels of reserves otherwise required under subsections (a) and (b) with respect to any plan or class of plans to take into account excess /stop loss insurance provided with respect to such plan or plans. ``(e) Alternative Means of Compliance.--The applicable authority may permit an association health plan described in subsection (a)(2) to substitute, for all or part of the requirements of this section (except subsection (a)(2)(B)(iii)), such security, guarantee, hold-harmless arrangement, or other financial arrangement as the applicable authority determines to be adequate to enable the plan to fully meet all its financial obligations on a timely basis and is otherwise no less protective of the interests of participants and beneficiaries than the requirements for which it is substituted. The applicable authority may take into account, for purposes of this subsection, evidence provided by the plan or sponsor which demonstrates an assumption of liability with respect to the plan. Such evidence may be in the form of a contract of indemnification, lien, bonding, insurance, letter of credit, recourse under applicable terms of the plan in the form of assessments of participating employers, security, or other financial arrangement. ``(f) Measures To Ensure Continued Payment of Benefits by Certain Plans in Distress.-- ``(1) Payments by certain plans to association health plan fund.-- ``(A) In general.--In the case of an association health plan described in subsection (a)(2), the requirements of this subsection are met if the plan makes payments into the Association Health Plan Fund under this subparagraph when they are due. Such payments shall consist of annual payments in the amount of $5,000, except that the Secretary shall reduce part or all of such annual payments, or shall provide a rebate of part or all of such a payment, to the extent that the Secretary determines that the balance in such Fund is sufficient (taking into account such a reduction or rebate) to meet all reasonable actuarial requirements. Such determination shall occur not less than once annually. In addition to any such annual payments, such payments may include such supplemental payments as the Secretary may determine to be necessary to meet reasonable actuarial requirements to carry out paragraph (2). Payments under this par

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QUALITY CARE FOR THE UNINSURED ACT OF 1999
(House of Representatives - October 06, 1999)

Text of this article available as: TXT PDF [Pages H9431-H9474] QUALITY CARE FOR THE UNINSURED ACT OF 1999 Mr. BLILEY. Mr. Speaker, pursuant to House Resolution 323, I call up the bill (H.R. 2990) to amend the Internal Revenue Code of 1986 to allow individuals greater access to health insurance through a health care tax deduction, a long-term care deduction, and other health- related tax incentives, to amend the Employee Retirement Income Security Act of 1974 to provide access to and choice in health care through association health plans, to amend the Public Health Service Act to create new pooling opportunities for small employers to obtain greater access to health coverage through HealthMarts, and for other purposes, and ask for its immediate consideration in the House. The Clerk read the title of the bill. The text of H.R. 2990 is as follows: H.R. 2990 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE; TABLE OF CONTENTS. (a) Short Title.--This Act may be cited as the ``Quality Care for the Uninsured Act of 1999''. (b) Table of Contents.--The table of contents of this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Purposes. Sec. 3. Findings relating to health care choice. TITLE I--TAX-RELATED HEALTH CARE PROVISIONS Sec. 101. Deduction for health and long-term care insurance costs of individuals not participating in employer-subsidized health plans. Sec. 102. Deduction for 100 percent of health insurance costs of self- employed individuals. Sec. 103. Expansion of availability of medical savings accounts. Sec. 104. Long-term care insurance permitted to be offered under cafeteria plans and flexible spending arrangements. Sec. 105. Additional personal exemption for taxpayer caring for elderly family member in taxpayer's home. Sec. 106. Expanded human clinical trials qualifying for orphan drug credit. Sec. 107. Inclusion of certain vaccines against streptococcus pneumoniae to list of taxable vaccines; reduction in per dose tax rate. Sec. 108. Credit for clinical testing research expenses attributable to certain qualified academic institutions including teaching hospitals. TITLE II--GREATER ACCESS AND CHOICE THROUGH ASSOCIATION HEALTH PLANS Sec. 201. Rules. ``Part 8--Rules Governing Association Health Plans ``Sec. 801. Association health plans. ``Sec. 802. Certification of association health plans. ``Sec. 803. Requirements relating to sponsors and boards of trustees. ``Sec. 804. Participation and coverage requirements. ``Sec. 805. Other requirements relating to plan documents, contribution rates, and benefit options. ``Sec. 806. Maintenance of reserves and provisions for solvency for plans providing health benefits in addition to health insurance coverage. ``Sec. 807. Requirements for application and related requirements. ``Sec. 808. Notice requirements for voluntary termination. ``Sec. 809. Corrective actions and mandatory termination. ``Sec. 810. Trusteeship by the Secretary of insolvent association health plans providing health benefits in addition to health insurance coverage. ``Sec. 811. State assessment authority. ``Sec. 812. Special rules for church plans. ``Sec. 813. Definitions and rules of construction. Sec. 202. Clarification of treatment of single employer arrangements. Sec. 203. Clarification of treatment of certain collectively bargained arrangements. Sec. 204. Enforcement provisions. Sec. 205. Cooperation between Federal and State authorities. Sec. 206. Effective date and transitional and other rules. TITLE III--GREATER ACCESS AND CHOICE THROUGH HEALTHMARTS Sec. 301. Expansion of consumer choice through HealthMarts. [[Page H9432]] ``TITLE XXVIII--HEALTHMARTS ``Sec. 2801. Definition of HealthMart. ``Sec. 2802. Application of certain laws and requirements. ``Sec. 2803. Administration. ``Sec. 2804. Definitions. TITLE IV--COMMUNITY HEALTH ORGANIZATIONS Sec. 401. Promotion of provision of insurance by community health organizations. (c) Constitutional Authority To Enact This Legislation.-- The constitutional authority upon which this Act rests is the power of Congress to regulate commerce with foreign nations and among the several States, set forth in article I, section 8 of the United States Constitution. SEC. 2. PURPOSES. The purposes of this Act are-- (1) to make it possible for individuals, employees, and the self-employed to purchase and own their own health insurance without suffering any negative tax consequences; (2) to assist individuals in obtaining and in paying for basic health care services; (3) to render patients and deliverers sensitive to the cost of health care, giving them both the incentive and the ability to restrain undesired increases in health care costs; (4) to foster the development of numerous, varied, and innovative systems of providing health care which will compete against each other in terms of price, service, and quality, and thus allow the American people to benefit from competitive forces which will reward efficient and effective deliverers and eliminate those which provide unsatisfactory quality of care or are inefficient; and (5) to encourage the development of systems of delivering health care which are capable of supplying a broad range of health care services in a comprehensive and systematic manner. SEC. 3. FINDINGS RELATING TO HEALTH CARE CHOICE. (a) Congress finds that the majority of Americans are receiving health care of a quality unmatched elsewhere in the world but that 43 million Americans remain without private health insurance. Congress further finds that small business faces significant challenges in the purchase of health insurance, including higher costs and lack of choice of coverage. Congress further finds that such challenges lead to fewer Americans who are able to take advantage of private health insurance, leading to higher cost and lower quality care. (b) Congress finds that reduction of the number of uninsured Americans is an important public policy goal. Congress further finds that the use of alternative pooling mechanisms such as Association Health Plans, HealthMarts and other innovative means could provide significant opportunities for small business and individuals to purchase health insurance. Congress further finds that the use of such mechanisms could provide significant opportunities to expand private health coverage for individuals who are employees of small business, self-employed, or do not work for employers who provide health insurance. (c) Congress finds that the current Tax Code provides significant incentives for employers to provide health insurance coverage for their employees by providing a deduction for the employer for the cost of health insurance coverage and an exclusion from income for the employee for employer-provided health care. Congress further finds that some individuals may prefer to decline coverage under their employer's group health plan and obtain individual health insurance coverage, and some employers may wish to give employees the opportunity to do so. Congress further finds that the Internal Revenue Service has ruled that this tax treatment for the employer and employee for employer-provided health care applies even if the employer pays for individual health insurance polices for its employees. Therefore, the Tax Code makes it possible for employers to provide employees choice among health insurance coverage while retaining favorable tax treatment. Congress further finds that the present-law exclusion for employer-provided health care, together with the tax provisions in the bill, will provide more equitable tax treatment for health insurance expenses, encourage uninsured individuals to purchase insurance, expand health care options, and encourage individuals to better manage their health care needs and expenses. (d) Congress finds that continually increasing and complex government regulation of the health care delivery system has proven ineffective in restraining costs and is itself expensive and counterproductive in fulfilling its purposes and detrimental to the care of patients. TITLE I--TAX-RELATED HEALTH CARE PROVISIONS SEC. 101. DEDUCTION FOR HEALTH AND LONG-TERM CARE INSURANCE COSTS OF INDIVIDUALS NOT PARTICIPATING IN EMPLOYER-SUBSIDIZED HEALTH PLANS. (a) In General.--Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by redesignating section 222 as section 223 and by inserting after section 221 the following new section: ``SEC. 222. HEALTH AND LONG-TERM CARE INSURANCE COSTS. ``(a) In General.--In the case of an individual, there shall be allowed as a deduction an amount equal to the applicable percentage of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer and the taxpayer's spouse and dependents. ``(b) Applicable Percentage.--For purposes of subsection (a), the applicable percentage shall be determined in accordance with the following table: ``For taxable years beginning The applicable in calendar year-- percentage is-- 2002, 2003, and 2004.............................................25 2005.............................................................35 2006.............................................................65 2007 and thereafter............................................100. ``(c) Limitation Based on Other Coverage.-- ``(1) Coverage under certain subsidized employer plans.-- ``(A) In general.--Subsection (a) shall not apply to any taxpayer for any calendar month for which the taxpayer participates in any health plan maintained by any employer of the taxpayer or of the spouse of the taxpayer if 50 percent or more of the cost of coverage under such plan (determined under section 4980B and without regard to payments made with respect to any coverage described in subsection (e)) is paid or incurred by the employer. ``(B) Employer contributions to cafeteria plans, flexible spending arrangements, and medical savings accounts.-- Employer contributions to a cafeteria plan, a flexible spending or similar arrangement, or a medical savings account which are excluded from gross income under section 106 shall be treated for purposes of subparagraph (A) as paid by the employer. ``(C) Aggregation of plans of employer.--A health plan which is not otherwise described in subparagraph (A) shall be treated as described in such subparagraph if such plan would be so described if all health plans of persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 were treated as one health plan. ``(D) Separate application to health insurance and long- term care insurance.--Subparagraphs (A) and (C) shall be applied separately with respect to-- ``(i) plans which include primarily coverage for qualified long-term care services or are qualified long-term care insurance contracts, and ``(ii) plans which do not include such coverage and are not such contracts. ``(2) Coverage under certain federal programs.-- ``(A) In general.--Subsection (a) shall not apply to any amount paid for any coverage for an individual for any calendar month if, as of the first day of such month, the individual is covered under any medical care program described in-- ``(i) title XVIII, XIX, or XXI of the Social Security Act, ``(ii) chapter 55 of title 10, United States Code, ``(iii) chapter 17 of title 38, United States Code, ``(iv) chapter 89 of title 5, United States Code, or ``(v) the Indian Health Care Improvement Act. ``(B) Exceptions.-- ``(i) Qualified long-term care.--Subparagraph (A) shall not apply to amounts paid for coverage under a qualified long- term care insurance contract. ``(ii) Continuation coverage of fehbp.--Subparagraph (A)(iv) shall not apply to coverage which is comparable to continuation coverage under section 4980B. ``(d) Long-Term Care Deduction Limited to Qualified Long- Term Care Insurance Contracts.--In the case of a qualified long-term care insurance contract, only eligible long-term care premiums (as defined in section 213(d)(10)) may be taken into account under subsection (a). ``(e) Deduction Not Available for Payment of Ancillary Coverage Premiums.--Any amount paid as a premium for insurance which provides for-- ``(1) coverage for accidents, disability, dental care, vision care, or a specified illness, or ``(2) making payments of a fixed amount per day (or other period) by reason of being hospitalized, shall not be taken into account under subsection (a). ``(f) Special Rules.-- ``(1) Coordination with deduction for health insurance costs of self-employed individuals.--The amount taken into account by the taxpayer in computing the deduction under section 162(l) shall not be taken into account under this section. ``(2) Coordination with medical expense deduction.--The amount taken into account by the taxpayer in computing the deduction under this section shall not be taken into account under section 213. ``(g) Regulations.--The Secretary shall prescribe such regulations as may be appropriate to carry out this section, including regulations requiring employers to report to their employees and the Secretary such information as the Secretary determines to be appropriate.''. (b) Deduction Allowed Whether or Not Taxpayer Itemizes Other Deductions.--Subsection (a) of section 62 of such Code is amended by inserting after paragraph (17) the following new item: ``(18) Health and long-term care insurance costs.--The deduction allowed by section 222.''. (c) Clerical Amendment.--The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the last item and inserting the following new items: [[Page H9433]] ``Sec. 222. Health and long-term care insurance costs. ``Sec. 223. Cross reference.''. (d) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2001. SEC. 102. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS. (a) In General.--Paragraph (1) of section 162(l) of the Internal Revenue Code of 1986 is amended to read as follows: ``(1) Allowance of deduction.--In the case of an individual who is an employee within the meaning of section 401(c)(1), there shall be allowed as a deduction under this section an amount equal to 100 percent of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer and the taxpayer's spouse and dependents.''. (b) Clarification of Limitations on Other Coverage.--The first sentence of section 162(l)(2)(B) of such Code is amended to read as follows: ``Paragraph (1) shall not apply to any taxpayer for any calendar month for which the taxpayer participates in any subsidized health plan maintained by any employer (other than an employer described in section 401(c)(4)) of the taxpayer or the spouse of the taxpayer.''. (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. SEC. 103. EXPANSION OF AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS. (a) Repeal of Limitations on Number of Medical Savings Accounts.-- (1) In general.--Subsections (i) and (j) of section 220 of the Internal Revenue Code of 1986 are hereby repealed. (2) Conforming amendments.-- (A) Paragraph (1) of section 220(c) of such Code is amended by striking subparagraph (D). (B) Section 138 of such Code is amended by striking subsection (f). (b) Availability Not Limited to Accounts For Employees of Small Employers and Self-employed Individuals.-- (1) In general.--Section 220(c)(1)(A) of such Code (relating to eligible individual) is amended to read as follows: ``(A) In general.--The term `eligible individual' means, with respect to any month, any individual if-- ``(i) such individual is covered under a high deductible health plan as of the 1st day of such month, and ``(ii) such individual is not, while covered under a high deductible health plan, covered under any health plan-- ``(I) which is not a high deductible health plan, and ``(II) which provides coverage for any benefit which is covered under the high deductible health plan.''. (2) Conforming amendments.-- (A) Section 220(c)(1) of such Code is amended by striking subparagraph (C). (B) Section 220(c) of such Code is amended by striking paragraph (4) (defining small employer) and by redesignating paragraph (5) as paragraph (4). (C) Section 220(b) of such Code is amended by striking paragraph (4) (relating to deduction limited by compensation) and by redesignating paragraphs (5), (6), and (7) as paragraphs (4), (5), and (6), respectively. (c) Increase in Amount of Deduction Allowed for Contributions to Medical Savings Accounts.-- (1) In general.--Paragraph (2) of section 220(b) of such Code is amended to read as follows: ``(2) Monthly limitation.--The monthly limitation for any month is the amount equal to \1/12\ of the annual deductible (as of the first day of such month) of the individual's coverage under the high deductible health plan.''. (2) Conforming amendment.--Clause (ii) of section 220(d)(1)(A) of such Code is amended by striking ``75 percent of''. (d) Both Employers and Employees May Contribute to Medical Savings Accounts.--Paragraph (5) of section 220(b) of such Code is amended to read as follows: ``(5) Coordination with exclusion for employer contributions.--The limitation which would (but for this paragraph) apply under this subsection to the taxpayer for any taxable year shall be reduced (but not below zero) by the amount which would (but for section 106(b)) be includible in the taxpayer's gross income for such taxable year.''. (e) Reduction of Permitted Deductibles Under High Deductible Health Plans.-- (1) In general.--Subparagraph (A) of section 220(c)(2) of such Code (defining high deductible health plan) is amended-- (A) by striking ``$1,500'' in clause (i) and inserting ``$1,000'', and (B) by striking ``$3,000'' in clause (ii) and inserting ``$2,000''. (2) Conforming amendment.--Subsection (g) of section 220 of such Code is amended to read as follows: ``(g) Cost-of-Living Adjustment.-- ``(1) In general.--In the case of any taxable year beginning in a calendar year after 1998, each dollar amount in subsection (c)(2) 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 such taxable year begins by substituting `calendar year 1997' for `calendar year 1992' in subparagraph (B) thereof. ``(2) Special rules.--In the case of the $1,000 amount in subsection (c)(2)(A)(i) and the $2,000 amount in subsection (c)(2)(A)(ii), paragraph (1)(B) shall be applied by substituting `calendar year 1999' for `calendar year 1997'. ``(3) Rounding.--If any increase under paragraph (1) or (2) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50. (f) Medical Savings Accounts May Be Offered Under Cafeteria Plans.--Subsection (f) of section 125 of such Code is amended by striking ``106(b),''. (g) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. SEC. 104. LONG-TERM CARE INSURANCE PERMITTED TO BE OFFERED UNDER CAFETERIA PLANS AND FLEXIBLE SPENDING ARRANGEMENTS. (a) Cafeteria Plans.-- (1) In general.--Subsection (f ) of section 125 of the Internal Revenue Code of 1986 (defining qualified benefits) is amended by inserting before the period at the end ``; except that such term shall include the payment of premiums for any qualified long-term care insurance contract (as defined in section 7702B) to the extent the amount of such payment does not exceed the eligible long-term care premiums (as defined in section 213(d)(10)) for such contract''. (b) Flexible Spending Arrangements.--Section 106 of such Code (relating to contributions by employer to accident and health plans) is amended by striking subsection (c). (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2001. SEC. 105. ADDITIONAL PERSONAL EXEMPTION FOR TAXPAYER CARING FOR ELDERLY FAMILY MEMBER IN TAXPAYER'S HOME. (a) In General.--Section 151 of the Internal Revenue Code of 1986 (relating to allowance of deductions for personal exemptions) is amended by redesignating subsection (e) as subsection (f ) and by inserting after subsection (d) the following new subsection: ``(e) Additional Exemption for Certain Elderly Family Members Residing With Taxpayer.-- ``(1) In general.--An exemption of the exemption amount for each qualified family member of the taxpayer. ``(2) Qualified family member.--For purposes of this subsection, the term `qualified family member' means, with respect to any taxable year, any individual-- ``(A) who is an ancestor of the taxpayer or of the taxpayer's spouse or who is the spouse of any such ancestor, ``(B) who is a member for the entire taxable year of a household maintained by the taxpayer, and ``(C) who has been certified, before the due date for filing the return of tax for the taxable year (without extensions), by a physician (as defined in section 1861(r)(1) of the Social Security Act) as being an individual with long- term care needs described in paragraph (3) for a period-- ``(i) which is at least 180 consecutive days, and ``(ii) a portion of which occurs within the taxable year. Such term shall not include any individual otherwise meeting the requirements of the preceding sentence unless within the 39\1/2\ month period ending on such due date (or such other period as the Secretary prescribes) a physician (as so defined) has certified that such individual meets such requirements. ``(3) Individuals with long-term care needs.--An individual is described in this paragraph if the individual-- ``(A) is unable to perform (without substantial assistance from another individual) at least two activities of daily living (as defined in section 7702B(c)(2)(B)) due to a loss of functional capacity, or ``(B) requires substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment and is unable to perform, without reminding or cuing assistance, at least one activity of daily living (as so defined) or to the extent provided in regulations prescribed by the Secretary (in consultation with the Secretary of Health and Human Services), is unable to engage in age appropriate activities. ``(4) Special rules.--Rules similar to the rules of paragraphs (1), (2), (3), (4), and (5) of section 21(e) shall apply for purposes of this subsection.''. (b) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. SEC. 106. EXPANDED HUMAN CLINICAL TRIALS QUALIFYING FOR ORPHAN DRUG CREDIT. (a) In General.--Subclause (I) of section 45C(b)(2)(A)(ii) of the Internal Revenue Code of 1986 is amended to read as follows: ``(I) after the date that the application is filed for designation under such section 526, and''. (b) Conforming Amendment.--Clause (i) of section 45C(b)(2)(A) of such Code is amended by inserting ``which is'' before ``being'' and by inserting before the comma at the end ``and which is designated under section 526 of such Act''. (c) Effective Date.--The amendments made by this section shall apply to amounts paid or incurred after December 31, 2000. SEC. 107. INCLUSION OF CERTAIN VACCINES AGAINST STREPTOCOCCUS PNEUMONIAE TO LIST OF TAXABLE VACCINES; REDUCTION IN PER DOSE TAX RATE. (a) Inclusion of Vaccines.-- [[Page H9434]] (1) In general.--Section 4132(a)(1) of the Internal Revenue Code of 1986 (defining taxable vaccine) is amended by adding at the end the following new subparagraph: ``(L) Any conjugate vaccine against streptococcus pneumoniae.''. (2) Effective date.-- (A) Sales.--The amendment made by this subsection shall apply to vaccine sales beginning on the day after the date on which the Centers for Disease Control makes a final recommendation for routine administration to children of any conjugate vaccine against streptococcus pneumoniae, but shall not take effect if subsection (c) does not take effect. (B) Deliveries.--For purposes of subparagraph (A), in the case of sales on or before the date described in such subparagraph for which delivery is made after such date, the delivery date shall be considered the sale date. (b) Reduction in Per Dose Tax Rate.-- (1) In general.--Section 4131(b)(1) of such Code (relating to amount of tax) is amended by striking ``75 cents'' and inserting ``50 cents''. (2) Effective date.-- (A) Sales.--The amendment made by this subsection shall apply to vaccine sales after December 31, 2004, but shall not take effect if subsection (c) does not take effect. (B) Deliveries.--For purposes of subparagraph (A), in the case of sales on or before the date described in such subparagraph for which delivery is made after such date, the delivery date shall be considered the sale date. (3) Limitation on certain credits or refunds.--For purposes of applying section 4132(b) of the Internal Revenue Code of 1986 with respect to any claim for credit or refund filed after August 31, 2004, the amount of tax taken into account shall not exceed the tax computed under the rate in effect on January 1, 2005. (c) Vaccine Tax and Trust Fund Amendments.-- (1) Sections 1503 and 1504 of the Vaccine Injury Compensation Program Modification Act (and the amendments made by such sections) are hereby repealed. (2) Subparagraph (A) of section 9510(c)(1) of such Code is amended by striking ``August 5, 1997'' and inserting ``October 21, 1998''. (3) The amendments made by this subsection shall take effect as if included in the provisions of the Tax and Trade Relief Extension Act of 1998 to which they relate. (d) Report.--Not later than December 31, 1999, the Comptroller General of the United States shall prepare and submit a report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on the operation of the Vaccine Injury Compensation Trust Fund and on the adequacy of such Fund to meet future claims made under the Vaccine Injury Compensation Program. SEC. 108. CREDIT FOR CLINICAL TESTING RESEARCH EXPENSES ATTRIBUTABLE TO CERTAIN QUALIFIED ACADEMIC INSTITUTIONS INCLUDING TEACHING HOSPITALS. (a) In General.--Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by inserting after section 41 the following: ``SEC. 41A. CREDIT FOR MEDICAL INNOVATION EXPENSES. ``(a) General Rule.--For purposes of section 38, the medical innovation credit determined under this section for the taxable year shall be an amount equal to 40 percent of the excess (if any) of-- ``(1) the qualified medical innovation expenses for the taxable year, over ``(2) the medical innovation base period amount. ``(b) Qualified Medical Innovation Expenses.--For purposes of this section-- ``(1) In general.--The term `qualified medical innovation expenses' means the amounts which are paid or incurred by the taxpayer during the taxable year directly or indirectly to any qualified academic institution for clinical testing research activities. ``(2) Clinical testing research activities.-- ``(A) In general.--The term `clinical testing research activities' means human clinical testing conducted at any qualified academic institution in the development of any product, which occurs before-- ``(i) the date on which an application with respect to such product is approved under section 505(b), 506, or 507 of the Federal Food, Drug, and Cosmetic Act (as in effect on the date of the enactment of this section), ``(ii) the date on which a license for such product is issued under section 351 of the Public Health Service Act (as so in effect), or ``(iii) the date classification or approval of such product which is a device intended for human use is given under section 513, 514, or 515 of the Federal Food, Drug, and Cosmetic Act (as so in effect). ``(B) Product.--The term `product' means any drug, biologic, or medical device. ``(3) Qualified academic institution.--The term `qualified academic institution' means any of the following institutions: ``(A) Educational institution.--A qualified organization described in section 170(b)(1)(A)(iii) which is owned by, or affiliated with, an institution of higher education (as defined in section 3304(f )). ``(B) Teaching hospital.--A teaching hospital which-- ``(i) is publicly supported or owned by an organization described in section 501(c)(3), and ``(ii) is affiliated with an organization meeting the requirements of subparagraph (A). ``(C) Foundation.--A medical research organization described in section 501(c)(3) (other than a private foundation) which is affiliated with, or owned by-- ``(i) an organization meeting the requirements of subparagraph (A), or ``(ii) a teaching hospital meeting the requirements of subparagraph (B). ``(D) Charitable research hospital.--A hospital that is designated as a cancer center by the National Cancer Institute. ``(4) Exclusion for amounts funded by grants, etc.--The term `qualified medical innovation expenses' shall not include any amount to the extent such amount is funded by any grant, contract, or otherwise by another person (or any governmental entity). ``(c) Medical Innovation Base Period Amount.--For purposes of this section, the term `medical innovation base period amount' means the average annual qualified medical innovation expenses paid by the taxpayer during the 3-taxable year period ending with the taxable year immediately preceding the first taxable year of the taxpayer beginning after December 31, 2000. ``(d) Special Rules.-- ``(1) Limitation on foreign testing.--No credit shall be allowed under this section with respect to any clinical testing research activities conducted outside the United States. ``(2) Certain rules made applicable.--Rules similar to the rules of subsections (f ) and (g) of section 41 shall apply for purposes of this section. ``(3) Election.--This section shall apply to any taxpayer for any taxable year only if such taxpayer elects to have this section apply for such taxable year. ``(4) Coordination with credit for increasing research expenditures and with credit for clinical testing expenses for certain drugs for rare diseases.--Any qualified medical innovation expense for a taxable year to which an election under this section applies shall not be taken into account for purposes of determining the credit allowable under section 41 or 45C for such taxable year.''. (b) Credit To Be Part of General Business Credit.-- (1) In general.--Section 38(b) of such Code (relating to current year business credits) is amended by striking ``plus'' at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting ``, plus'', and by adding at the end the following: ``(13) the medical innovation expenses credit determined under section 41A(a).''. (2) Transition rule.--Section 39(d) of such Code is amended by adding at the end the following new paragraph: ``(9) No carryback of section 41a credit before enactment.--No portion of the unused business credit for any taxable year which is attributable to the medical innovation credit determined under section 41A may be carried back to a taxable year beginning before January 1, 2001.''. (c) Denial of Double Benefit.--Section 280C of such Code is amended by adding at the end the following new subsection: ``(d) Credit for Increasing Medical Innovation Expenses.-- ``(1) In general.--No deduction shall be allowed for that portion of the qualified medical innovation expenses (as defined in section 41A(b)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 41A(a). ``(2) Certain rules to apply.--Rules similar to the rules of paragraphs (2), (3), and (4) of subsection (c) shall apply for purposes of this subsection.''. (d) Deduction for Unused Portion of Credit.--Section 196(c) of such Code (defining qualified business credits) is amended by redesignating paragraphs (5) through (8) as paragraphs (6) through (9), respectively, and by inserting after paragraph (4) the following new paragraph: ``(5) the medical innovation expenses credit determined under section 41A(a) (other than such credit determined under the rules of section 280C(d)(2)),''. (e) Clerical Amendment.--The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding after the item relating to section 41 the following: ``Sec. 41A. Credit for medical innovation expenses.''. (f) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. TITLE II--GREATER ACCESS AND CHOICE THROUGH ASSOCIATION HEALTH PLANS SEC. 201. RULES. (a) In General.--Subtitle B of title I of the Employee Retirement Income Security Act of 1974 is amended by adding after part 7 the following new part: ``Part 8--Rules Governing Association Health Plans ``SEC. 801. ASSOCIATION HEALTH PLANS. ``(a) In General.--For purposes of this part, the term `association health plan' means a group health plan-- ``(1) whose sponsor is (or is deemed under this part to be) described in subsection (b); and ``(2) under which at least one option of health insurance coverage offered by a health insurance issuer (which may include, [[Page H9435]] among other options, managed care options, point of service options, and preferred provider options) is provided to participants and beneficiaries, unless, for any plan year, such coverage remains unavailable to the plan despite good faith efforts exercised by the plan to secure such coverage. ``(b) Sponsorship.--The sponsor of a group health plan is described in this subsection if such sponsor-- ``(1) is organized and maintained in good faith, with a constitution and bylaws specifically stating its purpose and providing for periodic meetings on at least an annual basis, as a bona fide trade association, a bona fide industry association (including a rural electric cooperative association or a rural telephone cooperative association), a bona fide professional association, or a bona fide chamber of commerce (or similar bona fide business association, including a corporation or similar organization that operates on a cooperative basis (within the meaning of section 1381 of the Internal Revenue Code of 1986)), for substantial purposes other than that of obtaining or providing medical care; ``(2) is established as a permanent entity which receives the active support of its members and collects from its members on a periodic basis dues or payments necessary to maintain eligibility for membership in the sponsor; and ``(3) does not condition membership, such dues or payments, or coverage under the plan on the basis of health status- related factors with respect to the employees of its members (or affiliated members), or the dependents of such employees, and does not condition such dues or payments on the basis of group health plan participation. Any sponsor consisting of an association of entities which meet the requirements of paragraphs (1), (2), and (3) shall be deemed to be a sponsor described in this subsection. ``SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS. ``(a) In General.--The applicable authority shall prescribe by regulation, through negotiated rulemaking, a procedure under which, subject to subsection (b), the applicable authority shall certify association health plans which apply for certification as meeting the requirements of this part. ``(b) Standards.--Under the procedure prescribed pursuant to subsection (a), in the case of an association health plan that provides at least one benefit option which does not consist of health insurance coverage, the applicable authority shall certify such plan as meeting the requirements of this part only if the applicable authority is satisfied that-- ``(1) such certification-- ``(A) is administratively feasible; ``(B) is not adverse to the interests of the individuals covered under the plan; and ``(C) is protective of the rights and benefits of the individuals covered under the plan; and ``(2) the applicable requirements of this part are met (or, upon the date on which the plan is to commence operations, will be met) with respect to the plan. ``(c) Requirements Applicable to Certified Plans.--An association health plan with respect to which certification under this part is in effect shall meet the applicable requirements of this part, effective on the date of certification (or, if later, on the date on which the plan is to commence operations). ``(d) Requirements for Continued Certification.--The applicable authority may provide by regulation, through negotiated rulemaking, for continued certification of association health plans under this part. ``(e) Class Certification for Fully Insured Plans.--The applicable authority shall establish a class certification procedure for association health plans under which all benefits consist of health insurance coverage. Under such procedure, the applicable authority shall provide for the granting of certification under this part to the plans in each class of such association health plans upon appropriate filing under such procedure in connection with plans in such class and payment of the prescribed fee under section 807(a). ``(f) Certification of Self-Insured Association Health Plans.--An association health plan which offers one or more benefit options which do not consist of health insurance coverage may be certified under this part only if such plan consists of any of the following: ``(1) a plan which offered such coverage on the date of the enactment of the Quality Care for the Uninsured Act of 1999, ``(2) a plan under which the sponsor does not restrict membership to one or more trades and businesses or industries and whose eligible participating employers represent a broad cross-section of trades and businesses or industries, or ``(3) a plan whose eligible participating employers represent one or more trades or businesses, or one or more industries, which have been indicated as having average or above-average health insurance risk or health claims experience by reason of State rate filings, denials of coverage, proposed premium rate levels, and other means demonstrated by such plan in accordance with regulations which the Secretary shall prescribe through negotiated rulemaking, including (but not limited to) the following: agriculture; automobile dealerships; barbering and cosmetology; child care; construction; dance, theatrical, and orchestra productions; disinfecting and pest control; eating and drinking establishments; fishing; hospitals; labor organizations; logging; manufacturing (metals); mining; medical and dental practices; medical laboratories; sanitary services; transportation (local and freight); and warehousing. ``SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF TRUSTEES. ``(a) Sponsor.--The requirements of this subsection are met with respect to an association health plan if the sponsor has met (or is deemed under this part to have met) the requirements of section 801(b) for a continuous period of not less than 3 years ending with the date of the application for certification under this part. ``(b) Board of Trustees.--The requirements of this subsection are met with respect to an association health plan if the following requirements are met: ``(1) Fiscal control.--The plan is operated, pursuant to a trust agreement, by a board of trustees which has complete fiscal control over the plan and which is responsible for all operations of the plan. ``(2) Rules of operation and financial controls.--The board of trustees has in effect rules of operation and financial controls, based on a 3-year plan of operation, adequate to carry out the terms of the plan and to meet all requirements of this title applicable to the plan. ``(3) Rules governing relationship to participating employers and to contractors.-- ``(A) In general.--Except as provided in subparagraphs (B) and (C), the members of the board of trustees are individuals selected from individuals who are the owners, officers, directors, or employees of the participating employers or who are partners in the participating employers and actively participate in the business. ``(B) Limitation.-- ``(i) General rule.--Except as provided in clauses (ii) and (iii), no such member is an owner, officer, director, or employee of, or partner in, a contract administrator or other service provider to the plan. ``(ii) Limited exception for providers of services solely on behalf of the sponsor.--Officers or employees of a sponsor which is a service provider (other than a contract administrator) to the plan may be members of the board if they constitute not more than 25 percent of the membership of the board and they do not provide services to the plan other than on behalf of the sponsor. ``(iii) Treatment of providers of medical care.--In the case of a sponsor which is an association whose membership consists primarily of providers of medical care, clause (i) shall not apply in the case of any service provider described in subparagraph (A) who is a provider of medical care under the plan. ``(C) Certain plans excluded.--Subparagraph (A) shall not apply to an association health plan which is in existence on the date of the enactment of the Quality Care for the Uninsured Act of 1999. ``(D) Sole authority.--The board has sole authority under the plan to approve applications for participation in the plan and to contract with a service provider to administer the day-to-day affairs of the plan. ``(c) Treatment of Franchise Networks.--In the case of a group health plan which is established and maintained by a franchiser for a franchise network consisting of its franchisees-- ``(1) the requirements of subsection (a) and section 801(a)(1) shall be deemed met if such requirements would otherwise be met if the franchiser were deemed to be the sponsor referred to in section 801(b), such network were deemed to be an association described in section 801(b), and each franchisee were deemed to be a member (of the association and the sponsor) referred to in section 801(b); and ``(2) the requirements of section 804(a)(1) shall be deemed met. The Secretary may by regulation, through negotiated rulemaking, define for purposes of this subsection the terms `franchiser', `franchise network', and `franchisee'. ``(d) Certain Collectively Bargained Plans.-- ``(1) In general.--In the case of a group health plan described in paragraph (2)-- ``(A) the requirements of subsection (a) and section 801(a)(1) shall be deemed met; ``(B) the joint board of trustees shall be deemed a board of trustees with respect to which the requirements of subsection (b) are met; and ``(C) the requirements of section 804 shall be deemed met. ``(2) Requirements.--A group health plan is described in this paragraph if-- ``(A) the plan is a multiemployer plan; or ``(B) the plan is in existence on April 1, 1997, and would be described in section 3(40)(A)(i) but solely for the failure to meet the requirements of section 3(40)(C)(ii). ``SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS. ``(a) Covered Employers and Individuals.--The requirements of this subsection are met with respect to an association health plan if, under the terms of the plan-- ``(1) each participating employer must be-- ``(A) a member of the sponsor, ``(B) the sponsor, or ``(C) an affiliated member of the sponsor with respect to which the requirements of subsection (b) are met, except that, in the case of a sponsor which is a professional association or other individual-based association, if at least one of the officers, directors, or employees of an [[Page H9436]] employer, or at least one of the individuals who are partners in an employer and who actively participates in the business, is a member or such an affiliated member of the sponsor, participating employers may also include such employer; and ``(2) all individuals commencing coverage under the plan after certification under this part must be-- ``(A) active or retired owners (including self-employed individuals), officers, directors, or employees of, or partners in, participating employers; or ``(B) the beneficiaries of individuals described in subparagraph (A). ``(b) Coverage of Previously Uninsured Employees.--In the case of an association health plan in existence on the date of the enactment of the Quality Care for the Uninsured Act of 1999, an affiliated member of the sponsor of the plan may be offered coverage under the plan as a participating employer only if-- ``(1) the affiliated member was an affiliated member on the date of certification under this part; or ``(2) during the 12-month period preceding the date of the offering of such coverage, the affiliated member has not maintained or contributed to a group health plan with respect to any of its employees who would otherwise be eligible to participate in such association health plan. ``(c) Individual Market Unaffected.--The requirements of this subsection are met with respect to an association health plan if, under the terms of the plan, no participating employer may provide health insurance coverage in the individual market for any employee not covered under the plan which is similar to the coverage contemporaneously provided to employees of the employer under the plan, if such exclusion of the employee from coverage under the plan is based on a health status-related factor with respect to the employee and such employee would, but for such exclusion on such basis, be eligible for coverage under the plan. ``(d) Prohibition of Discrimination Against Employers and Employees Eligible To Participate.--The requirements of this subsection are met with respect to an association health plan if-- ``(1) under the terms of the plan, all employers meeting the preceding requirements of this section are eligible to qualify as participating employers for all geographically available coverage options, unless, in the case of any such employer, participation or contribution requirements of the type referred to in section 2711 of the Public Health Service Act are not met; ``(2) upon request, any employer eligible to participate is furnished information regarding all coverage options available under the plan; and ``(3) the applicable requirements of sections 701, 702, and 703 are met with respect to the plan. ``SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOCUMENTS, CONTRIBUTION RATES, AND BENEFIT OPTIONS. ``(a) In General.--The requirements of this section are met with respect to an association health plan if the following requirements are met: ``(1) Contents of governing instruments.--The instruments governing the plan include a written instrument, meeting the requirements of an instrument required under section 402(a)(1), which-- ``(A) provides that the board of trustees serves as the named fiduciary required for plans under section 402(a)(1) and serves in the capacity of a plan administrator (referred to in section 3(16)(A)); ``(B) provides that the sponsor of the plan is to serve as plan sponsor (referred to in section 3(16)(B)); and ``(C) incorporates the requirements of section 806. ``(2) Contribution rates must be nondiscriminatory.-- ``(A) The contribution rates for any participating small employer do not vary on the basis of the claims experience of such employer and do not vary on the basis of the type of business or industry in which such employer is engaged. ``(B) Nothing in this title or any other provision of law shall be construed to preclude an association health plan, or a health insurance issuer offering health insurance coverage in connection with an association health plan, from-- ``(i) setting contribution rates based on the claims experience of the plan; or ``(ii) varying contribution rates for small employers in a State to the extent that such rates could vary using the same methodology employed in such State for regulating premium rates in the small group market with respect to health insurance coverage offered in connection with bona fide associations (within the meaning of section 2791(d)(3) of the Public Health Service Act), subject to the requirements of section 702(b) relating to contribution rates. ``(3) Floor for number of covered individuals with respect to certain plans.--If any benefit option under the plan does not consist of health insurance coverage, the plan has as of the beginning of the plan year not fewer than 1,000 participants and beneficiaries. ``(4) Marketing requirements.-- ``(A) In general.--If a benefit option which consists of health insurance coverage is offered under the plan, State- licensed insurance agents shall be used to distribute to small employers coverage which does not consist of health insurance coverage in a manner comparable to the manner in which such agents are used to distribute health insurance coverage. ``(B) State-licensed insurance agents.--For purposes of subparagraph (A), the term `State-licensed insurance agents' means one or more agents who are licensed in a State and are subject to the laws of such State relating to licensure, qualification, testing, examination, and continuing education of persons authorized to offer, sell, or solicit health insurance coverage in such State. ``(5) Regulatory requirements.--Such other requirements as the applicable authority determines are necessary to carry out the purposes of this part, which shall be prescribed by the applicable authority by regulation through negotiated rulemaking. ``(b) Ability of Association Health Plans To Design Benefit Options.--Subject to section 514(d), nothing in this part or any provision of State law (as defined in section 514(c)(1)) shall be construed to preclude an association health plan, or a health insurance issuer offering health insurance coverage in connection with an association health plan, from exercising its sole discretion in selecting the specific items and services consisting of medical care to be included as benefits under such plan or coverage, except (subject to section 514) in the case of any law to the extent that it (1) prohibits an exclusion of a specific disease from such coverage, or (2) is not preempted under section 731(a)(1) with respect to matters governed by section 711 or 712. ``SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS FOR SOLVENCY FOR PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO HEALTH INSURANCE COVERAGE. ``(a) In General.--The requirements of this section are met with respect to an association health plan if-- ``(1) the benefits under the plan consist solely of health insurance coverage; or ``(2) if the plan provides any additional benefit options which do not consist of health insurance coverage, the plan-- ``(A) establishes and maintains reserves with respect to such additional benefit options, in amounts recommended by the qualified actuary, consisting of-- ``(i) a reserve sufficient for unearned contributions; ``(ii) a reserve sufficient for benefit liabilities which have been incurred, which have not been satisfied, and for which risk of loss has not yet been transferred, and for expected administrative costs with respect to such benefit liabilities; ``(iii) a reserve sufficient for any other obligations of the plan; and ``(iv) a reserve sufficient for a margin of error and other fluctuations, taking into account the specific circumstances of the plan; and ``(B) establishes and maintains aggregate and specific excess /stop loss insurance and solvency indemnification, with respect to such additional benefit options for which risk of loss has not yet been transferred, as follows: ``(i) The plan shall secure aggregate excess /stop loss insurance for the plan with an attachment point which is not greater than 125 percent of expected gross annual claims. The applicable authority may by regulation, through negotiated rulemaking, provide for upward adjustments in the amount of such percentage in specified circumstances in which the plan specifically provides for and maintains reserves in excess of the amounts required under subparagraph (A). ``(ii) The plan shall secure specific excess /stop loss insurance for the plan with an attachment point which is at least equal to an amount recommended by the plan's qualified actuary (but not more than $175,000). The applicable authority may by regulation, through negotiated rulemaking, provide for adjustments in the amount of such insurance in specified circumstances in which the plan specifically provides for and maintains reserves in excess of the amounts required under subparagraph (A). ``(iii) The plan shall secure indemnification insurance for any claims which the plan is unable to satisfy by reason of a plan termination. Any regulations prescribed by the applicable authority pursuant to clause (i) or (ii) of subparagraph (B) may allow for such adjustments in the required levels of excess /stop loss insurance as the qualified actuary may recommend, taking into account the specific circumstances of the plan. ``(b) Minimum Surplus in Addition to Claims Reserves.--In the case of any association health plan described in subsection (a)(2), the requirements of this subsection are met if the plan establishes and maintains surplus in an amount at least equal to-- ``(1) $500,000, or ``(2) such greater amount (but not greater than $2,000,000) as may be set forth in regulations prescribed by the applicable authority through negotiated rulemaking, based on the level of aggregate and specific excess /stop loss insurance provided with respect to such plan. ``(c) Additional Requirements.--In the case of any association health plan described in subsection (a)(2), the applicable authority may provide such additional requirements relating to reserves and excess /stop loss insurance as the applicable authority considers appropriate. Such requirements may be provided by regulation, through negotiated rulemaking, with respect to any such plan or any class of such plans. [[Page H9437]] ``(d) Adjustments for Excess /Stop Loss Insurance.--The applicable authority may provide for adjustments to the levels of reserves otherwise required under subsections (a) and (b) with respect to any plan or class of plans to take into account excess /stop loss insurance provided with respect to such plan or plans. ``(e) Alternative Means of Compliance.--The applicable authority may permit an association health plan described in subsection (a)(2) to substitute, for all or part of the requirements of this section (except subsection (a)(2)(B)(iii)), such security, guarantee, hold-harmless arrangement, or other financial arrangement as the applicable authority determines to be adequate to enable the plan to fully meet all its financial obligations on a timely basis and is otherwise no less protective of the interests of participants and beneficiaries than the requirements for which it is substituted. The applicable authority may take into account, for purposes of this subsection, evidence provided by the plan or sponsor which demonstrates an assumption of liability with respect to the plan. Such evidence may be in the form of a contract of indemnification, lien, bonding, insurance, letter of credit, recourse under applicable terms of the plan in the form of assessments of participating employers, security, or other financial arrangement. ``(f) Measures To Ensure Continued Payment of Benefits by Certain Plans in Distress.-- ``(1) Payments by certain plans to association health plan fund.-- ``(A) In general.--In the case of an association health plan described in subsection (a)(2), the requirements of this subsection are met if the plan makes payments into the Association Health Plan Fund under this subparagraph when they are due. Such payments shall consist of annual payments in the amount of $5,000, except that the Secretary shall reduce part or all of such annual payments, or shall provide a rebate of part or all of such a payment, to the extent that the Secretary determines that the balance in such Fund is sufficient (taking into account such a reduction or rebate) to meet all reasonable actuarial requirements. Such determination shall occur not less than once annually. In addition to any such annual payments, such payments may include such supplemental payments as the Secretary may determine to be necessary to meet reasonable actuarial requirements to carry out paragraph (2). Payments unde

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All articles in House section

QUALITY CARE FOR THE UNINSURED ACT OF 1999
(House of Representatives - October 06, 1999)

Text of this article available as: TXT PDF [Pages H9431-H9474] QUALITY CARE FOR THE UNINSURED ACT OF 1999 Mr. BLILEY. Mr. Speaker, pursuant to House Resolution 323, I call up the bill (H.R. 2990) to amend the Internal Revenue Code of 1986 to allow individuals greater access to health insurance through a health care tax deduction, a long-term care deduction, and other health- related tax incentives, to amend the Employee Retirement Income Security Act of 1974 to provide access to and choice in health care through association health plans, to amend the Public Health Service Act to create new pooling opportunities for small employers to obtain greater access to health coverage through HealthMarts, and for other purposes, and ask for its immediate consideration in the House. The Clerk read the title of the bill. The text of H.R. 2990 is as follows: H.R. 2990 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE; TABLE OF CONTENTS. (a) Short Title.--This Act may be cited as the ``Quality Care for the Uninsured Act of 1999''. (b) Table of Contents.--The table of contents of this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Purposes. Sec. 3. Findings relating to health care choice. TITLE I--TAX-RELATED HEALTH CARE PROVISIONS Sec. 101. Deduction for health and long-term care insurance costs of individuals not participating in employer-subsidized health plans. Sec. 102. Deduction for 100 percent of health insurance costs of self- employed individuals. Sec. 103. Expansion of availability of medical savings accounts. Sec. 104. Long-term care insurance permitted to be offered under cafeteria plans and flexible spending arrangements. Sec. 105. Additional personal exemption for taxpayer caring for elderly family member in taxpayer's home. Sec. 106. Expanded human clinical trials qualifying for orphan drug credit. Sec. 107. Inclusion of certain vaccines against streptococcus pneumoniae to list of taxable vaccines; reduction in per dose tax rate. Sec. 108. Credit for clinical testing research expenses attributable to certain qualified academic institutions including teaching hospitals. TITLE II--GREATER ACCESS AND CHOICE THROUGH ASSOCIATION HEALTH PLANS Sec. 201. Rules. ``Part 8--Rules Governing Association Health Plans ``Sec. 801. Association health plans. ``Sec. 802. Certification of association health plans. ``Sec. 803. Requirements relating to sponsors and boards of trustees. ``Sec. 804. Participation and coverage requirements. ``Sec. 805. Other requirements relating to plan documents, contribution rates, and benefit options. ``Sec. 806. Maintenance of reserves and provisions for solvency for plans providing health benefits in addition to health insurance coverage. ``Sec. 807. Requirements for application and related requirements. ``Sec. 808. Notice requirements for voluntary termination. ``Sec. 809. Corrective actions and mandatory termination. ``Sec. 810. Trusteeship by the Secretary of insolvent association health plans providing health benefits in addition to health insurance coverage. ``Sec. 811. State assessment authority. ``Sec. 812. Special rules for church plans. ``Sec. 813. Definitions and rules of construction. Sec. 202. Clarification of treatment of single employer arrangements. Sec. 203. Clarification of treatment of certain collectively bargained arrangements. Sec. 204. Enforcement provisions. Sec. 205. Cooperation between Federal and State authorities. Sec. 206. Effective date and transitional and other rules. TITLE III--GREATER ACCESS AND CHOICE THROUGH HEALTHMARTS Sec. 301. Expansion of consumer choice through HealthMarts. [[Page H9432]] ``TITLE XXVIII--HEALTHMARTS ``Sec. 2801. Definition of HealthMart. ``Sec. 2802. Application of certain laws and requirements. ``Sec. 2803. Administration. ``Sec. 2804. Definitions. TITLE IV--COMMUNITY HEALTH ORGANIZATIONS Sec. 401. Promotion of provision of insurance by community health organizations. (c) Constitutional Authority To Enact This Legislation.-- The constitutional authority upon which this Act rests is the power of Congress to regulate commerce with foreign nations and among the several States, set forth in article I, section 8 of the United States Constitution. SEC. 2. PURPOSES. The purposes of this Act are-- (1) to make it possible for individuals, employees, and the self-employed to purchase and own their own health insurance without suffering any negative tax consequences; (2) to assist individuals in obtaining and in paying for basic health care services; (3) to render patients and deliverers sensitive to the cost of health care, giving them both the incentive and the ability to restrain undesired increases in health care costs; (4) to foster the development of numerous, varied, and innovative systems of providing health care which will compete against each other in terms of price, service, and quality, and thus allow the American people to benefit from competitive forces which will reward efficient and effective deliverers and eliminate those which provide unsatisfactory quality of care or are inefficient; and (5) to encourage the development of systems of delivering health care which are capable of supplying a broad range of health care services in a comprehensive and systematic manner. SEC. 3. FINDINGS RELATING TO HEALTH CARE CHOICE. (a) Congress finds that the majority of Americans are receiving health care of a quality unmatched elsewhere in the world but that 43 million Americans remain without private health insurance. Congress further finds that small business faces significant challenges in the purchase of health insurance, including higher costs and lack of choice of coverage. Congress further finds that such challenges lead to fewer Americans who are able to take advantage of private health insurance, leading to higher cost and lower quality care. (b) Congress finds that reduction of the number of uninsured Americans is an important public policy goal. Congress further finds that the use of alternative pooling mechanisms such as Association Health Plans, HealthMarts and other innovative means could provide significant opportunities for small business and individuals to purchase health insurance. Congress further finds that the use of such mechanisms could provide significant opportunities to expand private health coverage for individuals who are employees of small business, self-employed, or do not work for employers who provide health insurance. (c) Congress finds that the current Tax Code provides significant incentives for employers to provide health insurance coverage for their employees by providing a deduction for the employer for the cost of health insurance coverage and an exclusion from income for the employee for employer-provided health care. Congress further finds that some individuals may prefer to decline coverage under their employer's group health plan and obtain individual health insurance coverage, and some employers may wish to give employees the opportunity to do so. Congress further finds that the Internal Revenue Service has ruled that this tax treatment for the employer and employee for employer-provided health care applies even if the employer pays for individual health insurance polices for its employees. Therefore, the Tax Code makes it possible for employers to provide employees choice among health insurance coverage while retaining favorable tax treatment. Congress further finds that the present-law exclusion for employer-provided health care, together with the tax provisions in the bill, will provide more equitable tax treatment for health insurance expenses, encourage uninsured individuals to purchase insurance, expand health care options, and encourage individuals to better manage their health care needs and expenses. (d) Congress finds that continually increasing and complex government regulation of the health care delivery system has proven ineffective in restraining costs and is itself expensive and counterproductive in fulfilling its purposes and detrimental to the care of patients. TITLE I--TAX-RELATED HEALTH CARE PROVISIONS SEC. 101. DEDUCTION FOR HEALTH AND LONG-TERM CARE INSURANCE COSTS OF INDIVIDUALS NOT PARTICIPATING IN EMPLOYER-SUBSIDIZED HEALTH PLANS. (a) In General.--Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by redesignating section 222 as section 223 and by inserting after section 221 the following new section: ``SEC. 222. HEALTH AND LONG-TERM CARE INSURANCE COSTS. ``(a) In General.--In the case of an individual, there shall be allowed as a deduction an amount equal to the applicable percentage of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer and the taxpayer's spouse and dependents. ``(b) Applicable Percentage.--For purposes of subsection (a), the applicable percentage shall be determined in accordance with the following table: ``For taxable years beginning The applicable in calendar year-- percentage is-- 2002, 2003, and 2004.............................................25 2005.............................................................35 2006.............................................................65 2007 and thereafter............................................100. ``(c) Limitation Based on Other Coverage.-- ``(1) Coverage under certain subsidized employer plans.-- ``(A) In general.--Subsection (a) shall not apply to any taxpayer for any calendar month for which the taxpayer participates in any health plan maintained by any employer of the taxpayer or of the spouse of the taxpayer if 50 percent or more of the cost of coverage under such plan (determined under section 4980B and without regard to payments made with respect to any coverage described in subsection (e)) is paid or incurred by the employer. ``(B) Employer contributions to cafeteria plans, flexible spending arrangements, and medical savings accounts.-- Employer contributions to a cafeteria plan, a flexible spending or similar arrangement, or a medical savings account which are excluded from gross income under section 106 shall be treated for purposes of subparagraph (A) as paid by the employer. ``(C) Aggregation of plans of employer.--A health plan which is not otherwise described in subparagraph (A) shall be treated as described in such subparagraph if such plan would be so described if all health plans of persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 were treated as one health plan. ``(D) Separate application to health insurance and long- term care insurance.--Subparagraphs (A) and (C) shall be applied separately with respect to-- ``(i) plans which include primarily coverage for qualified long-term care services or are qualified long-term care insurance contracts, and ``(ii) plans which do not include such coverage and are not such contracts. ``(2) Coverage under certain federal programs.-- ``(A) In general.--Subsection (a) shall not apply to any amount paid for any coverage for an individual for any calendar month if, as of the first day of such month, the individual is covered under any medical care program described in-- ``(i) title XVIII, XIX, or XXI of the Social Security Act, ``(ii) chapter 55 of title 10, United States Code, ``(iii) chapter 17 of title 38, United States Code, ``(iv) chapter 89 of title 5, United States Code, or ``(v) the Indian Health Care Improvement Act. ``(B) Exceptions.-- ``(i) Qualified long-term care.--Subparagraph (A) shall not apply to amounts paid for coverage under a qualified long- term care insurance contract. ``(ii) Continuation coverage of fehbp.--Subparagraph (A)(iv) shall not apply to coverage which is comparable to continuation coverage under section 4980B. ``(d) Long-Term Care Deduction Limited to Qualified Long- Term Care Insurance Contracts.--In the case of a qualified long-term care insurance contract, only eligible long-term care premiums (as defined in section 213(d)(10)) may be taken into account under subsection (a). ``(e) Deduction Not Available for Payment of Ancillary Coverage Premiums.--Any amount paid as a premium for insurance which provides for-- ``(1) coverage for accidents, disability, dental care, vision care, or a specified illness, or ``(2) making payments of a fixed amount per day (or other period) by reason of being hospitalized, shall not be taken into account under subsection (a). ``(f) Special Rules.-- ``(1) Coordination with deduction for health insurance costs of self-employed individuals.--The amount taken into account by the taxpayer in computing the deduction under section 162(l) shall not be taken into account under this section. ``(2) Coordination with medical expense deduction.--The amount taken into account by the taxpayer in computing the deduction under this section shall not be taken into account under section 213. ``(g) Regulations.--The Secretary shall prescribe such regulations as may be appropriate to carry out this section, including regulations requiring employers to report to their employees and the Secretary such information as the Secretary determines to be appropriate.''. (b) Deduction Allowed Whether or Not Taxpayer Itemizes Other Deductions.--Subsection (a) of section 62 of such Code is amended by inserting after paragraph (17) the following new item: ``(18) Health and long-term care insurance costs.--The deduction allowed by section 222.''. (c) Clerical Amendment.--The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the last item and inserting the following new items: [[Page H9433]] ``Sec. 222. Health and long-term care insurance costs. ``Sec. 223. Cross reference.''. (d) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2001. SEC. 102. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS. (a) In General.--Paragraph (1) of section 162(l) of the Internal Revenue Code of 1986 is amended to read as follows: ``(1) Allowance of deduction.--In the case of an individual who is an employee within the meaning of section 401(c)(1), there shall be allowed as a deduction under this section an amount equal to 100 percent of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer and the taxpayer's spouse and dependents.''. (b) Clarification of Limitations on Other Coverage.--The first sentence of section 162(l)(2)(B) of such Code is amended to read as follows: ``Paragraph (1) shall not apply to any taxpayer for any calendar month for which the taxpayer participates in any subsidized health plan maintained by any employer (other than an employer described in section 401(c)(4)) of the taxpayer or the spouse of the taxpayer.''. (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. SEC. 103. EXPANSION OF AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS. (a) Repeal of Limitations on Number of Medical Savings Accounts.-- (1) In general.--Subsections (i) and (j) of section 220 of the Internal Revenue Code of 1986 are hereby repealed. (2) Conforming amendments.-- (A) Paragraph (1) of section 220(c) of such Code is amended by striking subparagraph (D). (B) Section 138 of such Code is amended by striking subsection (f). (b) Availability Not Limited to Accounts For Employees of Small Employers and Self-employed Individuals.-- (1) In general.--Section 220(c)(1)(A) of such Code (relating to eligible individual) is amended to read as follows: ``(A) In general.--The term `eligible individual' means, with respect to any month, any individual if-- ``(i) such individual is covered under a high deductible health plan as of the 1st day of such month, and ``(ii) such individual is not, while covered under a high deductible health plan, covered under any health plan-- ``(I) which is not a high deductible health plan, and ``(II) which provides coverage for any benefit which is covered under the high deductible health plan.''. (2) Conforming amendments.-- (A) Section 220(c)(1) of such Code is amended by striking subparagraph (C). (B) Section 220(c) of such Code is amended by striking paragraph (4) (defining small employer) and by redesignating paragraph (5) as paragraph (4). (C) Section 220(b) of such Code is amended by striking paragraph (4) (relating to deduction limited by compensation) and by redesignating paragraphs (5), (6), and (7) as paragraphs (4), (5), and (6), respectively. (c) Increase in Amount of Deduction Allowed for Contributions to Medical Savings Accounts.-- (1) In general.--Paragraph (2) of section 220(b) of such Code is amended to read as follows: ``(2) Monthly limitation.--The monthly limitation for any month is the amount equal to \1/12\ of the annual deductible (as of the first day of such month) of the individual's coverage under the high deductible health plan.''. (2) Conforming amendment.--Clause (ii) of section 220(d)(1)(A) of such Code is amended by striking ``75 percent of''. (d) Both Employers and Employees May Contribute to Medical Savings Accounts.--Paragraph (5) of section 220(b) of such Code is amended to read as follows: ``(5) Coordination with exclusion for employer contributions.--The limitation which would (but for this paragraph) apply under this subsection to the taxpayer for any taxable year shall be reduced (but not below zero) by the amount which would (but for section 106(b)) be includible in the taxpayer's gross income for such taxable year.''. (e) Reduction of Permitted Deductibles Under High Deductible Health Plans.-- (1) In general.--Subparagraph (A) of section 220(c)(2) of such Code (defining high deductible health plan) is amended-- (A) by striking ``$1,500'' in clause (i) and inserting ``$1,000'', and (B) by striking ``$3,000'' in clause (ii) and inserting ``$2,000''. (2) Conforming amendment.--Subsection (g) of section 220 of such Code is amended to read as follows: ``(g) Cost-of-Living Adjustment.-- ``(1) In general.--In the case of any taxable year beginning in a calendar year after 1998, each dollar amount in subsection (c)(2) 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 such taxable year begins by substituting `calendar year 1997' for `calendar year 1992' in subparagraph (B) thereof. ``(2) Special rules.--In the case of the $1,000 amount in subsection (c)(2)(A)(i) and the $2,000 amount in subsection (c)(2)(A)(ii), paragraph (1)(B) shall be applied by substituting `calendar year 1999' for `calendar year 1997'. ``(3) Rounding.--If any increase under paragraph (1) or (2) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50. (f) Medical Savings Accounts May Be Offered Under Cafeteria Plans.--Subsection (f) of section 125 of such Code is amended by striking ``106(b),''. (g) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. SEC. 104. LONG-TERM CARE INSURANCE PERMITTED TO BE OFFERED UNDER CAFETERIA PLANS AND FLEXIBLE SPENDING ARRANGEMENTS. (a) Cafeteria Plans.-- (1) In general.--Subsection (f ) of section 125 of the Internal Revenue Code of 1986 (defining qualified benefits) is amended by inserting before the period at the end ``; except that such term shall include the payment of premiums for any qualified long-term care insurance contract (as defined in section 7702B) to the extent the amount of such payment does not exceed the eligible long-term care premiums (as defined in section 213(d)(10)) for such contract''. (b) Flexible Spending Arrangements.--Section 106 of such Code (relating to contributions by employer to accident and health plans) is amended by striking subsection (c). (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2001. SEC. 105. ADDITIONAL PERSONAL EXEMPTION FOR TAXPAYER CARING FOR ELDERLY FAMILY MEMBER IN TAXPAYER'S HOME. (a) In General.--Section 151 of the Internal Revenue Code of 1986 (relating to allowance of deductions for personal exemptions) is amended by redesignating subsection (e) as subsection (f ) and by inserting after subsection (d) the following new subsection: ``(e) Additional Exemption for Certain Elderly Family Members Residing With Taxpayer.-- ``(1) In general.--An exemption of the exemption amount for each qualified family member of the taxpayer. ``(2) Qualified family member.--For purposes of this subsection, the term `qualified family member' means, with respect to any taxable year, any individual-- ``(A) who is an ancestor of the taxpayer or of the taxpayer's spouse or who is the spouse of any such ancestor, ``(B) who is a member for the entire taxable year of a household maintained by the taxpayer, and ``(C) who has been certified, before the due date for filing the return of tax for the taxable year (without extensions), by a physician (as defined in section 1861(r)(1) of the Social Security Act) as being an individual with long- term care needs described in paragraph (3) for a period-- ``(i) which is at least 180 consecutive days, and ``(ii) a portion of which occurs within the taxable year. Such term shall not include any individual otherwise meeting the requirements of the preceding sentence unless within the 39\1/2\ month period ending on such due date (or such other period as the Secretary prescribes) a physician (as so defined) has certified that such individual meets such requirements. ``(3) Individuals with long-term care needs.--An individual is described in this paragraph if the individual-- ``(A) is unable to perform (without substantial assistance from another individual) at least two activities of daily living (as defined in section 7702B(c)(2)(B)) due to a loss of functional capacity, or ``(B) requires substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment and is unable to perform, without reminding or cuing assistance, at least one activity of daily living (as so defined) or to the extent provided in regulations prescribed by the Secretary (in consultation with the Secretary of Health and Human Services), is unable to engage in age appropriate activities. ``(4) Special rules.--Rules similar to the rules of paragraphs (1), (2), (3), (4), and (5) of section 21(e) shall apply for purposes of this subsection.''. (b) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. SEC. 106. EXPANDED HUMAN CLINICAL TRIALS QUALIFYING FOR ORPHAN DRUG CREDIT. (a) In General.--Subclause (I) of section 45C(b)(2)(A)(ii) of the Internal Revenue Code of 1986 is amended to read as follows: ``(I) after the date that the application is filed for designation under such section 526, and''. (b) Conforming Amendment.--Clause (i) of section 45C(b)(2)(A) of such Code is amended by inserting ``which is'' before ``being'' and by inserting before the comma at the end ``and which is designated under section 526 of such Act''. (c) Effective Date.--The amendments made by this section shall apply to amounts paid or incurred after December 31, 2000. SEC. 107. INCLUSION OF CERTAIN VACCINES AGAINST STREPTOCOCCUS PNEUMONIAE TO LIST OF TAXABLE VACCINES; REDUCTION IN PER DOSE TAX RATE. (a) Inclusion of Vaccines.-- [[Page H9434]] (1) In general.--Section 4132(a)(1) of the Internal Revenue Code of 1986 (defining taxable vaccine) is amended by adding at the end the following new subparagraph: ``(L) Any conjugate vaccine against streptococcus pneumoniae.''. (2) Effective date.-- (A) Sales.--The amendment made by this subsection shall apply to vaccine sales beginning on the day after the date on which the Centers for Disease Control makes a final recommendation for routine administration to children of any conjugate vaccine against streptococcus pneumoniae, but shall not take effect if subsection (c) does not take effect. (B) Deliveries.--For purposes of subparagraph (A), in the case of sales on or before the date described in such subparagraph for which delivery is made after such date, the delivery date shall be considered the sale date. (b) Reduction in Per Dose Tax Rate.-- (1) In general.--Section 4131(b)(1) of such Code (relating to amount of tax) is amended by striking ``75 cents'' and inserting ``50 cents''. (2) Effective date.-- (A) Sales.--The amendment made by this subsection shall apply to vaccine sales after December 31, 2004, but shall not take effect if subsection (c) does not take effect. (B) Deliveries.--For purposes of subparagraph (A), in the case of sales on or before the date described in such subparagraph for which delivery is made after such date, the delivery date shall be considered the sale date. (3) Limitation on certain credits or refunds.--For purposes of applying section 4132(b) of the Internal Revenue Code of 1986 with respect to any claim for credit or refund filed after August 31, 2004, the amount of tax taken into account shall not exceed the tax computed under the rate in effect on January 1, 2005. (c) Vaccine Tax and Trust Fund Amendments.-- (1) Sections 1503 and 1504 of the Vaccine Injury Compensation Program Modification Act (and the amendments made by such sections) are hereby repealed. (2) Subparagraph (A) of section 9510(c)(1) of such Code is amended by striking ``August 5, 1997'' and inserting ``October 21, 1998''. (3) The amendments made by this subsection shall take effect as if included in the provisions of the Tax and Trade Relief Extension Act of 1998 to which they relate. (d) Report.--Not later than December 31, 1999, the Comptroller General of the United States shall prepare and submit a report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on the operation of the Vaccine Injury Compensation Trust Fund and on the adequacy of such Fund to meet future claims made under the Vaccine Injury Compensation Program. SEC. 108. CREDIT FOR CLINICAL TESTING RESEARCH EXPENSES ATTRIBUTABLE TO CERTAIN QUALIFIED ACADEMIC INSTITUTIONS INCLUDING TEACHING HOSPITALS. (a) In General.--Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by inserting after section 41 the following: ``SEC. 41A. CREDIT FOR MEDICAL INNOVATION EXPENSES. ``(a) General Rule.--For purposes of section 38, the medical innovation credit determined under this section for the taxable year shall be an amount equal to 40 percent of the excess (if any) of-- ``(1) the qualified medical innovation expenses for the taxable year, over ``(2) the medical innovation base period amount. ``(b) Qualified Medical Innovation Expenses.--For purposes of this section-- ``(1) In general.--The term `qualified medical innovation expenses' means the amounts which are paid or incurred by the taxpayer during the taxable year directly or indirectly to any qualified academic institution for clinical testing research activities. ``(2) Clinical testing research activities.-- ``(A) In general.--The term `clinical testing research activities' means human clinical testing conducted at any qualified academic institution in the development of any product, which occurs before-- ``(i) the date on which an application with respect to such product is approved under section 505(b), 506, or 507 of the Federal Food, Drug, and Cosmetic Act (as in effect on the date of the enactment of this section), ``(ii) the date on which a license for such product is issued under section 351 of the Public Health Service Act (as so in effect), or ``(iii) the date classification or approval of such product which is a device intended for human use is given under section 513, 514, or 515 of the Federal Food, Drug, and Cosmetic Act (as so in effect). ``(B) Product.--The term `product' means any drug, biologic, or medical device. ``(3) Qualified academic institution.--The term `qualified academic institution' means any of the following institutions: ``(A) Educational institution.--A qualified organization described in section 170(b)(1)(A)(iii) which is owned by, or affiliated with, an institution of higher education (as defined in section 3304(f )). ``(B) Teaching hospital.--A teaching hospital which-- ``(i) is publicly supported or owned by an organization described in section 501(c)(3), and ``(ii) is affiliated with an organization meeting the requirements of subparagraph (A). ``(C) Foundation.--A medical research organization described in section 501(c)(3) (other than a private foundation) which is affiliated with, or owned by-- ``(i) an organization meeting the requirements of subparagraph (A), or ``(ii) a teaching hospital meeting the requirements of subparagraph (B). ``(D) Charitable research hospital.--A hospital that is designated as a cancer center by the National Cancer Institute. ``(4) Exclusion for amounts funded by grants, etc.--The term `qualified medical innovation expenses' shall not include any amount to the extent such amount is funded by any grant, contract, or otherwise by another person (or any governmental entity). ``(c) Medical Innovation Base Period Amount.--For purposes of this section, the term `medical innovation base period amount' means the average annual qualified medical innovation expenses paid by the taxpayer during the 3-taxable year period ending with the taxable year immediately preceding the first taxable year of the taxpayer beginning after December 31, 2000. ``(d) Special Rules.-- ``(1) Limitation on foreign testing.--No credit shall be allowed under this section with respect to any clinical testing research activities conducted outside the United States. ``(2) Certain rules made applicable.--Rules similar to the rules of subsections (f ) and (g) of section 41 shall apply for purposes of this section. ``(3) Election.--This section shall apply to any taxpayer for any taxable year only if such taxpayer elects to have this section apply for such taxable year. ``(4) Coordination with credit for increasing research expenditures and with credit for clinical testing expenses for certain drugs for rare diseases.--Any qualified medical innovation expense for a taxable year to which an election under this section applies shall not be taken into account for purposes of determining the credit allowable under section 41 or 45C for such taxable year.''. (b) Credit To Be Part of General Business Credit.-- (1) In general.--Section 38(b) of such Code (relating to current year business credits) is amended by striking ``plus'' at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting ``, plus'', and by adding at the end the following: ``(13) the medical innovation expenses credit determined under section 41A(a).''. (2) Transition rule.--Section 39(d) of such Code is amended by adding at the end the following new paragraph: ``(9) No carryback of section 41a credit before enactment.--No portion of the unused business credit for any taxable year which is attributable to the medical innovation credit determined under section 41A may be carried back to a taxable year beginning before January 1, 2001.''. (c) Denial of Double Benefit.--Section 280C of such Code is amended by adding at the end the following new subsection: ``(d) Credit for Increasing Medical Innovation Expenses.-- ``(1) In general.--No deduction shall be allowed for that portion of the qualified medical innovation expenses (as defined in section 41A(b)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 41A(a). ``(2) Certain rules to apply.--Rules similar to the rules of paragraphs (2), (3), and (4) of subsection (c) shall apply for purposes of this subsection.''. (d) Deduction for Unused Portion of Credit.--Section 196(c) of such Code (defining qualified business credits) is amended by redesignating paragraphs (5) through (8) as paragraphs (6) through (9), respectively, and by inserting after paragraph (4) the following new paragraph: ``(5) the medical innovation expenses credit determined under section 41A(a) (other than such credit determined under the rules of section 280C(d)(2)),''. (e) Clerical Amendment.--The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding after the item relating to section 41 the following: ``Sec. 41A. Credit for medical innovation expenses.''. (f) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. TITLE II--GREATER ACCESS AND CHOICE THROUGH ASSOCIATION HEALTH PLANS SEC. 201. RULES. (a) In General.--Subtitle B of title I of the Employee Retirement Income Security Act of 1974 is amended by adding after part 7 the following new part: ``Part 8--Rules Governing Association Health Plans ``SEC. 801. ASSOCIATION HEALTH PLANS. ``(a) In General.--For purposes of this part, the term `association health plan' means a group health plan-- ``(1) whose sponsor is (or is deemed under this part to be) described in subsection (b); and ``(2) under which at least one option of health insurance coverage offered by a health insurance issuer (which may include, [[Page H9435]] among other options, managed care options, point of service options, and preferred provider options) is provided to participants and beneficiaries, unless, for any plan year, such coverage remains unavailable to the plan despite good faith efforts exercised by the plan to secure such coverage. ``(b) Sponsorship.--The sponsor of a group health plan is described in this subsection if such sponsor-- ``(1) is organized and maintained in good faith, with a constitution and bylaws specifically stating its purpose and providing for periodic meetings on at least an annual basis, as a bona fide trade association, a bona fide industry association (including a rural electric cooperative association or a rural telephone cooperative association), a bona fide professional association, or a bona fide chamber of commerce (or similar bona fide business association, including a corporation or similar organization that operates on a cooperative basis (within the meaning of section 1381 of the Internal Revenue Code of 1986)), for substantial purposes other than that of obtaining or providing medical care; ``(2) is established as a permanent entity which receives the active support of its members and collects from its members on a periodic basis dues or payments necessary to maintain eligibility for membership in the sponsor; and ``(3) does not condition membership, such dues or payments, or coverage under the plan on the basis of health status- related factors with respect to the employees of its members (or affiliated members), or the dependents of such employees, and does not condition such dues or payments on the basis of group health plan participation. Any sponsor consisting of an association of entities which meet the requirements of paragraphs (1), (2), and (3) shall be deemed to be a sponsor described in this subsection. ``SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS. ``(a) In General.--The applicable authority shall prescribe by regulation, through negotiated rulemaking, a procedure under which, subject to subsection (b), the applicable authority shall certify association health plans which apply for certification as meeting the requirements of this part. ``(b) Standards.--Under the procedure prescribed pursuant to subsection (a), in the case of an association health plan that provides at least one benefit option which does not consist of health insurance coverage, the applicable authority shall certify such plan as meeting the requirements of this part only if the applicable authority is satisfied that-- ``(1) such certification-- ``(A) is administratively feasible; ``(B) is not adverse to the interests of the individuals covered under the plan; and ``(C) is protective of the rights and benefits of the individuals covered under the plan; and ``(2) the applicable requirements of this part are met (or, upon the date on which the plan is to commence operations, will be met) with respect to the plan. ``(c) Requirements Applicable to Certified Plans.--An association health plan with respect to which certification under this part is in effect shall meet the applicable requirements of this part, effective on the date of certification (or, if later, on the date on which the plan is to commence operations). ``(d) Requirements for Continued Certification.--The applicable authority may provide by regulation, through negotiated rulemaking, for continued certification of association health plans under this part. ``(e) Class Certification for Fully Insured Plans.--The applicable authority shall establish a class certification procedure for association health plans under which all benefits consist of health insurance coverage. Under such procedure, the applicable authority shall provide for the granting of certification under this part to the plans in each class of such association health plans upon appropriate filing under such procedure in connection with plans in such class and payment of the prescribed fee under section 807(a). ``(f) Certification of Self-Insured Association Health Plans.--An association health plan which offers one or more benefit options which do not consist of health insurance coverage may be certified under this part only if such plan consists of any of the following: ``(1) a plan which offered such coverage on the date of the enactment of the Quality Care for the Uninsured Act of 1999, ``(2) a plan under which the sponsor does not restrict membership to one or more trades and businesses or industries and whose eligible participating employers represent a broad cross-section of trades and businesses or industries, or ``(3) a plan whose eligible participating employers represent one or more trades or businesses, or one or more industries, which have been indicated as having average or above-average health insurance risk or health claims experience by reason of State rate filings, denials of coverage, proposed premium rate levels, and other means demonstrated by such plan in accordance with regulations which the Secretary shall prescribe through negotiated rulemaking, including (but not limited to) the following: agriculture; automobile dealerships; barbering and cosmetology; child care; construction; dance, theatrical, and orchestra productions; disinfecting and pest control; eating and drinking establishments; fishing; hospitals; labor organizations; logging; manufacturing (metals); mining; medical and dental practices; medical laboratories; sanitary services; transportation (local and freight); and warehousing. ``SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF TRUSTEES. ``(a) Sponsor.--The requirements of this subsection are met with respect to an association health plan if the sponsor has met (or is deemed under this part to have met) the requirements of section 801(b) for a continuous period of not less than 3 years ending with the date of the application for certification under this part. ``(b) Board of Trustees.--The requirements of this subsection are met with respect to an association health plan if the following requirements are met: ``(1) Fiscal control.--The plan is operated, pursuant to a trust agreement, by a board of trustees which has complete fiscal control over the plan and which is responsible for all operations of the plan. ``(2) Rules of operation and financial controls.--The board of trustees has in effect rules of operation and financial controls, based on a 3-year plan of operation, adequate to carry out the terms of the plan and to meet all requirements of this title applicable to the plan. ``(3) Rules governing relationship to participating employers and to contractors.-- ``(A) In general.--Except as provided in subparagraphs (B) and (C), the members of the board of trustees are individuals selected from individuals who are the owners, officers, directors, or employees of the participating employers or who are partners in the participating employers and actively participate in the business. ``(B) Limitation.-- ``(i) General rule.--Except as provided in clauses (ii) and (iii), no such member is an owner, officer, director, or employee of, or partner in, a contract administrator or other service provider to the plan. ``(ii) Limited exception for providers of services solely on behalf of the sponsor.--Officers or employees of a sponsor which is a service provider (other than a contract administrator) to the plan may be members of the board if they constitute not more than 25 percent of the membership of the board and they do not provide services to the plan other than on behalf of the sponsor. ``(iii) Treatment of providers of medical care.--In the case of a sponsor which is an association whose membership consists primarily of providers of medical care, clause (i) shall not apply in the case of any service provider described in subparagraph (A) who is a provider of medical care under the plan. ``(C) Certain plans excluded.--Subparagraph (A) shall not apply to an association health plan which is in existence on the date of the enactment of the Quality Care for the Uninsured Act of 1999. ``(D) Sole authority.--The board has sole authority under the plan to approve applications for participation in the plan and to contract with a service provider to administer the day-to-day affairs of the plan. ``(c) Treatment of Franchise Networks.--In the case of a group health plan which is established and maintained by a franchiser for a franchise network consisting of its franchisees-- ``(1) the requirements of subsection (a) and section 801(a)(1) shall be deemed met if such requirements would otherwise be met if the franchiser were deemed to be the sponsor referred to in section 801(b), such network were deemed to be an association described in section 801(b), and each franchisee were deemed to be a member (of the association and the sponsor) referred to in section 801(b); and ``(2) the requirements of section 804(a)(1) shall be deemed met. The Secretary may by regulation, through negotiated rulemaking, define for purposes of this subsection the terms `franchiser', `franchise network', and `franchisee'. ``(d) Certain Collectively Bargained Plans.-- ``(1) In general.--In the case of a group health plan described in paragraph (2)-- ``(A) the requirements of subsection (a) and section 801(a)(1) shall be deemed met; ``(B) the joint board of trustees shall be deemed a board of trustees with respect to which the requirements of subsection (b) are met; and ``(C) the requirements of section 804 shall be deemed met. ``(2) Requirements.--A group health plan is described in this paragraph if-- ``(A) the plan is a multiemployer plan; or ``(B) the plan is in existence on April 1, 1997, and would be described in section 3(40)(A)(i) but solely for the failure to meet the requirements of section 3(40)(C)(ii). ``SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS. ``(a) Covered Employers and Individuals.--The requirements of this subsection are met with respect to an association health plan if, under the terms of the plan-- ``(1) each participating employer must be-- ``(A) a member of the sponsor, ``(B) the sponsor, or ``(C) an affiliated member of the sponsor with respect to which the requirements of subsection (b) are met, except that, in the case of a sponsor which is a professional association or other individual-based association, if at least one of the officers, directors, or employees of an [[Page H9436]] employer, or at least one of the individuals who are partners in an employer and who actively participates in the business, is a member or such an affiliated member of the sponsor, participating employers may also include such employer; and ``(2) all individuals commencing coverage under the plan after certification under this part must be-- ``(A) active or retired owners (including self-employed individuals), officers, directors, or employees of, or partners in, participating employers; or ``(B) the beneficiaries of individuals described in subparagraph (A). ``(b) Coverage of Previously Uninsured Employees.--In the case of an association health plan in existence on the date of the enactment of the Quality Care for the Uninsured Act of 1999, an affiliated member of the sponsor of the plan may be offered coverage under the plan as a participating employer only if-- ``(1) the affiliated member was an affiliated member on the date of certification under this part; or ``(2) during the 12-month period preceding the date of the offering of such coverage, the affiliated member has not maintained or contributed to a group health plan with respect to any of its employees who would otherwise be eligible to participate in such association health plan. ``(c) Individual Market Unaffected.--The requirements of this subsection are met with respect to an association health plan if, under the terms of the plan, no participating employer may provide health insurance coverage in the individual market for any employee not covered under the plan which is similar to the coverage contemporaneously provided to employees of the employer under the plan, if such exclusion of the employee from coverage under the plan is based on a health status-related factor with respect to the employee and such employee would, but for such exclusion on such basis, be eligible for coverage under the plan. ``(d) Prohibition of Discrimination Against Employers and Employees Eligible To Participate.--The requirements of this subsection are met with respect to an association health plan if-- ``(1) under the terms of the plan, all employers meeting the preceding requirements of this section are eligible to qualify as participating employers for all geographically available coverage options, unless, in the case of any such employer, participation or contribution requirements of the type referred to in section 2711 of the Public Health Service Act are not met; ``(2) upon request, any employer eligible to participate is furnished information regarding all coverage options available under the plan; and ``(3) the applicable requirements of sections 701, 702, and 703 are met with respect to the plan. ``SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOCUMENTS, CONTRIBUTION RATES, AND BENEFIT OPTIONS. ``(a) In General.--The requirements of this section are met with respect to an association health plan if the following requirements are met: ``(1) Contents of governing instruments.--The instruments governing the plan include a written instrument, meeting the requirements of an instrument required under section 402(a)(1), which-- ``(A) provides that the board of trustees serves as the named fiduciary required for plans under section 402(a)(1) and serves in the capacity of a plan administrator (referred to in section 3(16)(A)); ``(B) provides that the sponsor of the plan is to serve as plan sponsor (referred to in section 3(16)(B)); and ``(C) incorporates the requirements of section 806. ``(2) Contribution rates must be nondiscriminatory.-- ``(A) The contribution rates for any participating small employer do not vary on the basis of the claims experience of such employer and do not vary on the basis of the type of business or industry in which such employer is engaged. ``(B) Nothing in this title or any other provision of law shall be construed to preclude an association health plan, or a health insurance issuer offering health insurance coverage in connection with an association health plan, from-- ``(i) setting contribution rates based on the claims experience of the plan; or ``(ii) varying contribution rates for small employers in a State to the extent that such rates could vary using the same methodology employed in such State for regulating premium rates in the small group market with respect to health insurance coverage offered in connection with bona fide associations (within the meaning of section 2791(d)(3) of the Public Health Service Act), subject to the requirements of section 702(b) relating to contribution rates. ``(3) Floor for number of covered individuals with respect to certain plans.--If any benefit option under the plan does not consist of health insurance coverage, the plan has as of the beginning of the plan year not fewer than 1,000 participants and beneficiaries. ``(4) Marketing requirements.-- ``(A) In general.--If a benefit option which consists of health insurance coverage is offered under the plan, State- licensed insurance agents shall be used to distribute to small employers coverage which does not consist of health insurance coverage in a manner comparable to the manner in which such agents are used to distribute health insurance coverage. ``(B) State-licensed insurance agents.--For purposes of subparagraph (A), the term `State-licensed insurance agents' means one or more agents who are licensed in a State and are subject to the laws of such State relating to licensure, qualification, testing, examination, and continuing education of persons authorized to offer, sell, or solicit health insurance coverage in such State. ``(5) Regulatory requirements.--Such other requirements as the applicable authority determines are necessary to carry out the purposes of this part, which shall be prescribed by the applicable authority by regulation through negotiated rulemaking. ``(b) Ability of Association Health Plans To Design Benefit Options.--Subject to section 514(d), nothing in this part or any provision of State law (as defined in section 514(c)(1)) shall be construed to preclude an association health plan, or a health insurance issuer offering health insurance coverage in connection with an association health plan, from exercising its sole discretion in selecting the specific items and services consisting of medical care to be included as benefits under such plan or coverage, except (subject to section 514) in the case of any law to the extent that it (1) prohibits an exclusion of a specific disease from such coverage, or (2) is not preempted under section 731(a)(1) with respect to matters governed by section 711 or 712. ``SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS FOR SOLVENCY FOR PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO HEALTH INSURANCE COVERAGE. ``(a) In General.--The requirements of this section are met with respect to an association health plan if-- ``(1) the benefits under the plan consist solely of health insurance coverage; or ``(2) if the plan provides any additional benefit options which do not consist of health insurance coverage, the plan-- ``(A) establishes and maintains reserves with respect to such additional benefit options, in amounts recommended by the qualified actuary, consisting of-- ``(i) a reserve sufficient for unearned contributions; ``(ii) a reserve sufficient for benefit liabilities which have been incurred, which have not been satisfied, and for which risk of loss has not yet been transferred, and for expected administrative costs with respect to such benefit liabilities; ``(iii) a reserve sufficient for any other obligations of the plan; and ``(iv) a reserve sufficient for a margin of error and other fluctuations, taking into account the specific circumstances of the plan; and ``(B) establishes and maintains aggregate and specific excess /stop loss insurance and solvency indemnification, with respect to such additional benefit options for which risk of loss has not yet been transferred, as follows: ``(i) The plan shall secure aggregate excess /stop loss insurance for the plan with an attachment point which is not greater than 125 percent of expected gross annual claims. The applicable authority may by regulation, through negotiated rulemaking, provide for upward adjustments in the amount of such percentage in specified circumstances in which the plan specifically provides for and maintains reserves in excess of the amounts required under subparagraph (A). ``(ii) The plan shall secure specific excess /stop loss insurance for the plan with an attachment point which is at least equal to an amount recommended by the plan's qualified actuary (but not more than $175,000). The applicable authority may by regulation, through negotiated rulemaking, provide for adjustments in the amount of such insurance in specified circumstances in which the plan specifically provides for and maintains reserves in excess of the amounts required under subparagraph (A). ``(iii) The plan shall secure indemnification insurance for any claims which the plan is unable to satisfy by reason of a plan termination. Any regulations prescribed by the applicable authority pursuant to clause (i) or (ii) of subparagraph (B) may allow for such adjustments in the required levels of excess /stop loss insurance as the qualified actuary may recommend, taking into account the specific circumstances of the plan. ``(b) Minimum Surplus in Addition to Claims Reserves.--In the case of any association health plan described in subsection (a)(2), the requirements of this subsection are met if the plan establishes and maintains surplus in an amount at least equal to-- ``(1) $500,000, or ``(2) such greater amount (but not greater than $2,000,000) as may be set forth in regulations prescribed by the applicable authority through negotiated rulemaking, based on the level of aggregate and specific excess /stop loss insurance provided with respect to such plan. ``(c) Additional Requirements.--In the case of any association health plan described in subsection (a)(2), the applicable authority may provide such additional requirements relating to reserves and excess /stop loss insurance as the applicable authority considers appropriate. Such requirements may be provided by regulation, through negotiated rulemaking, with respect to any such plan or any class of such plans. [[Page H9437]] ``(d) Adjustments for Excess /Stop Loss Insurance.--The applicable authority may provide for adjustments to the levels of reserves otherwise required under subsections (a) and (b) with respect to any plan or class of plans to take into account excess /stop loss insurance provided with respect to such plan or plans. ``(e) Alternative Means of Compliance.--The applicable authority may permit an association health plan described in subsection (a)(2) to substitute, for all or part of the requirements of this section (except subsection (a)(2)(B)(iii)), such security, guarantee, hold-harmless arrangement, or other financial arrangement as the applicable authority determines to be adequate to enable the plan to fully meet all its financial obligations on a timely basis and is otherwise no less protective of the interests of participants and beneficiaries than the requirements for which it is substituted. The applicable authority may take into account, for purposes of this subsection, evidence provided by the plan or sponsor which demonstrates an assumption of liability with respect to the plan. Such evidence may be in the form of a contract of indemnification, lien, bonding, insurance, letter of credit, recourse under applicable terms of the plan in the form of assessments of participating employers, security, or other financial arrangement. ``(f) Measures To Ensure Continued Payment of Benefits by Certain Plans in Distress.-- ``(1) Payments by certain plans to association health plan fund.-- ``(A) In general.--In the case of an association health plan described in subsection (a)(2), the requirements of this subsection are met if the plan makes payments into the Association Health Plan Fund under this subparagraph when they are due. Such payments shall consist of annual payments in the amount of $5,000, except that the Secretary shall reduce part or all of such annual payments, or shall provide a rebate of part or all of such a payment, to the extent that the Secretary determines that the balance in such Fund is sufficient (taking into account such a reduction or rebate) to meet all reasonable actuarial requirements. Such determination shall occur not less than once annually. In addition to any such annual payments, such payments may include such supplemental payments as the Secretary may determine to be necessary to meet reasonable actuarial requirements to carry out paragraph (2). Payments under this par

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QUALITY CARE FOR THE UNINSURED ACT OF 1999
(House of Representatives - October 06, 1999)

Text of this article available as: TXT PDF [Pages H9431-H9474] QUALITY CARE FOR THE UNINSURED ACT OF 1999 Mr. BLILEY. Mr. Speaker, pursuant to House Resolution 323, I call up the bill (H.R. 2990) to amend the Internal Revenue Code of 1986 to allow individuals greater access to health insurance through a health care tax deduction, a long-term care deduction, and other health- related tax incentives, to amend the Employee Retirement Income Security Act of 1974 to provide access to and choice in health care through association health plans, to amend the Public Health Service Act to create new pooling opportunities for small employers to obtain greater access to health coverage through HealthMarts, and for other purposes, and ask for its immediate consideration in the House. The Clerk read the title of the bill. The text of H.R. 2990 is as follows: H.R. 2990 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE; TABLE OF CONTENTS. (a) Short Title.--This Act may be cited as the ``Quality Care for the Uninsured Act of 1999''. (b) Table of Contents.--The table of contents of this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Purposes. Sec. 3. Findings relating to health care choice. TITLE I--TAX-RELATED HEALTH CARE PROVISIONS Sec. 101. Deduction for health and long-term care insurance costs of individuals not participating in employer-subsidized health plans. Sec. 102. Deduction for 100 percent of health insurance costs of self- employed individuals. Sec. 103. Expansion of availability of medical savings accounts. Sec. 104. Long-term care insurance permitted to be offered under cafeteria plans and flexible spending arrangements. Sec. 105. Additional personal exemption for taxpayer caring for elderly family member in taxpayer's home. Sec. 106. Expanded human clinical trials qualifying for orphan drug credit. Sec. 107. Inclusion of certain vaccines against streptococcus pneumoniae to list of taxable vaccines; reduction in per dose tax rate. Sec. 108. Credit for clinical testing research expenses attributable to certain qualified academic institutions including teaching hospitals. TITLE II--GREATER ACCESS AND CHOICE THROUGH ASSOCIATION HEALTH PLANS Sec. 201. Rules. ``Part 8--Rules Governing Association Health Plans ``Sec. 801. Association health plans. ``Sec. 802. Certification of association health plans. ``Sec. 803. Requirements relating to sponsors and boards of trustees. ``Sec. 804. Participation and coverage requirements. ``Sec. 805. Other requirements relating to plan documents, contribution rates, and benefit options. ``Sec. 806. Maintenance of reserves and provisions for solvency for plans providing health benefits in addition to health insurance coverage. ``Sec. 807. Requirements for application and related requirements. ``Sec. 808. Notice requirements for voluntary termination. ``Sec. 809. Corrective actions and mandatory termination. ``Sec. 810. Trusteeship by the Secretary of insolvent association health plans providing health benefits in addition to health insurance coverage. ``Sec. 811. State assessment authority. ``Sec. 812. Special rules for church plans. ``Sec. 813. Definitions and rules of construction. Sec. 202. Clarification of treatment of single employer arrangements. Sec. 203. Clarification of treatment of certain collectively bargained arrangements. Sec. 204. Enforcement provisions. Sec. 205. Cooperation between Federal and State authorities. Sec. 206. Effective date and transitional and other rules. TITLE III--GREATER ACCESS AND CHOICE THROUGH HEALTHMARTS Sec. 301. Expansion of consumer choice through HealthMarts. [[Page H9432]] ``TITLE XXVIII--HEALTHMARTS ``Sec. 2801. Definition of HealthMart. ``Sec. 2802. Application of certain laws and requirements. ``Sec. 2803. Administration. ``Sec. 2804. Definitions. TITLE IV--COMMUNITY HEALTH ORGANIZATIONS Sec. 401. Promotion of provision of insurance by community health organizations. (c) Constitutional Authority To Enact This Legislation.-- The constitutional authority upon which this Act rests is the power of Congress to regulate commerce with foreign nations and among the several States, set forth in article I, section 8 of the United States Constitution. SEC. 2. PURPOSES. The purposes of this Act are-- (1) to make it possible for individuals, employees, and the self-employed to purchase and own their own health insurance without suffering any negative tax consequences; (2) to assist individuals in obtaining and in paying for basic health care services; (3) to render patients and deliverers sensitive to the cost of health care, giving them both the incentive and the ability to restrain undesired increases in health care costs; (4) to foster the development of numerous, varied, and innovative systems of providing health care which will compete against each other in terms of price, service, and quality, and thus allow the American people to benefit from competitive forces which will reward efficient and effective deliverers and eliminate those which provide unsatisfactory quality of care or are inefficient; and (5) to encourage the development of systems of delivering health care which are capable of supplying a broad range of health care services in a comprehensive and systematic manner. SEC. 3. FINDINGS RELATING TO HEALTH CARE CHOICE. (a) Congress finds that the majority of Americans are receiving health care of a quality unmatched elsewhere in the world but that 43 million Americans remain without private health insurance. Congress further finds that small business faces significant challenges in the purchase of health insurance, including higher costs and lack of choice of coverage. Congress further finds that such challenges lead to fewer Americans who are able to take advantage of private health insurance, leading to higher cost and lower quality care. (b) Congress finds that reduction of the number of uninsured Americans is an important public policy goal. Congress further finds that the use of alternative pooling mechanisms such as Association Health Plans, HealthMarts and other innovative means could provide significant opportunities for small business and individuals to purchase health insurance. Congress further finds that the use of such mechanisms could provide significant opportunities to expand private health coverage for individuals who are employees of small business, self-employed, or do not work for employers who provide health insurance. (c) Congress finds that the current Tax Code provides significant incentives for employers to provide health insurance coverage for their employees by providing a deduction for the employer for the cost of health insurance coverage and an exclusion from income for the employee for employer-provided health care. Congress further finds that some individuals may prefer to decline coverage under their employer's group health plan and obtain individual health insurance coverage, and some employers may wish to give employees the opportunity to do so. Congress further finds that the Internal Revenue Service has ruled that this tax treatment for the employer and employee for employer-provided health care applies even if the employer pays for individual health insurance polices for its employees. Therefore, the Tax Code makes it possible for employers to provide employees choice among health insurance coverage while retaining favorable tax treatment. Congress further finds that the present-law exclusion for employer-provided health care, together with the tax provisions in the bill, will provide more equitable tax treatment for health insurance expenses, encourage uninsured individuals to purchase insurance, expand health care options, and encourage individuals to better manage their health care needs and expenses. (d) Congress finds that continually increasing and complex government regulation of the health care delivery system has proven ineffective in restraining costs and is itself expensive and counterproductive in fulfilling its purposes and detrimental to the care of patients. TITLE I--TAX-RELATED HEALTH CARE PROVISIONS SEC. 101. DEDUCTION FOR HEALTH AND LONG-TERM CARE INSURANCE COSTS OF INDIVIDUALS NOT PARTICIPATING IN EMPLOYER-SUBSIDIZED HEALTH PLANS. (a) In General.--Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by redesignating section 222 as section 223 and by inserting after section 221 the following new section: ``SEC. 222. HEALTH AND LONG-TERM CARE INSURANCE COSTS. ``(a) In General.--In the case of an individual, there shall be allowed as a deduction an amount equal to the applicable percentage of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer and the taxpayer's spouse and dependents. ``(b) Applicable Percentage.--For purposes of subsection (a), the applicable percentage shall be determined in accordance with the following table: ``For taxable years beginning The applicable in calendar year-- percentage is-- 2002, 2003, and 2004.............................................25 2005.............................................................35 2006.............................................................65 2007 and thereafter............................................100. ``(c) Limitation Based on Other Coverage.-- ``(1) Coverage under certain subsidized employer plans.-- ``(A) In general.--Subsection (a) shall not apply to any taxpayer for any calendar month for which the taxpayer participates in any health plan maintained by any employer of the taxpayer or of the spouse of the taxpayer if 50 percent or more of the cost of coverage under such plan (determined under section 4980B and without regard to payments made with respect to any coverage described in subsection (e)) is paid or incurred by the employer. ``(B) Employer contributions to cafeteria plans, flexible spending arrangements, and medical savings accounts.-- Employer contributions to a cafeteria plan, a flexible spending or similar arrangement, or a medical savings account which are excluded from gross income under section 106 shall be treated for purposes of subparagraph (A) as paid by the employer. ``(C) Aggregation of plans of employer.--A health plan which is not otherwise described in subparagraph (A) shall be treated as described in such subparagraph if such plan would be so described if all health plans of persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 were treated as one health plan. ``(D) Separate application to health insurance and long- term care insurance.--Subparagraphs (A) and (C) shall be applied separately with respect to-- ``(i) plans which include primarily coverage for qualified long-term care services or are qualified long-term care insurance contracts, and ``(ii) plans which do not include such coverage and are not such contracts. ``(2) Coverage under certain federal programs.-- ``(A) In general.--Subsection (a) shall not apply to any amount paid for any coverage for an individual for any calendar month if, as of the first day of such month, the individual is covered under any medical care program described in-- ``(i) title XVIII, XIX, or XXI of the Social Security Act, ``(ii) chapter 55 of title 10, United States Code, ``(iii) chapter 17 of title 38, United States Code, ``(iv) chapter 89 of title 5, United States Code, or ``(v) the Indian Health Care Improvement Act. ``(B) Exceptions.-- ``(i) Qualified long-term care.--Subparagraph (A) shall not apply to amounts paid for coverage under a qualified long- term care insurance contract. ``(ii) Continuation coverage of fehbp.--Subparagraph (A)(iv) shall not apply to coverage which is comparable to continuation coverage under section 4980B. ``(d) Long-Term Care Deduction Limited to Qualified Long- Term Care Insurance Contracts.--In the case of a qualified long-term care insurance contract, only eligible long-term care premiums (as defined in section 213(d)(10)) may be taken into account under subsection (a). ``(e) Deduction Not Available for Payment of Ancillary Coverage Premiums.--Any amount paid as a premium for insurance which provides for-- ``(1) coverage for accidents, disability, dental care, vision care, or a specified illness, or ``(2) making payments of a fixed amount per day (or other period) by reason of being hospitalized, shall not be taken into account under subsection (a). ``(f) Special Rules.-- ``(1) Coordination with deduction for health insurance costs of self-employed individuals.--The amount taken into account by the taxpayer in computing the deduction under section 162(l) shall not be taken into account under this section. ``(2) Coordination with medical expense deduction.--The amount taken into account by the taxpayer in computing the deduction under this section shall not be taken into account under section 213. ``(g) Regulations.--The Secretary shall prescribe such regulations as may be appropriate to carry out this section, including regulations requiring employers to report to their employees and the Secretary such information as the Secretary determines to be appropriate.''. (b) Deduction Allowed Whether or Not Taxpayer Itemizes Other Deductions.--Subsection (a) of section 62 of such Code is amended by inserting after paragraph (17) the following new item: ``(18) Health and long-term care insurance costs.--The deduction allowed by section 222.''. (c) Clerical Amendment.--The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the last item and inserting the following new items: [[Page H9433]] ``Sec. 222. Health and long-term care insurance costs. ``Sec. 223. Cross reference.''. (d) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2001. SEC. 102. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS. (a) In General.--Paragraph (1) of section 162(l) of the Internal Revenue Code of 1986 is amended to read as follows: ``(1) Allowance of deduction.--In the case of an individual who is an employee within the meaning of section 401(c)(1), there shall be allowed as a deduction under this section an amount equal to 100 percent of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer and the taxpayer's spouse and dependents.''. (b) Clarification of Limitations on Other Coverage.--The first sentence of section 162(l)(2)(B) of such Code is amended to read as follows: ``Paragraph (1) shall not apply to any taxpayer for any calendar month for which the taxpayer participates in any subsidized health plan maintained by any employer (other than an employer described in section 401(c)(4)) of the taxpayer or the spouse of the taxpayer.''. (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. SEC. 103. EXPANSION OF AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS. (a) Repeal of Limitations on Number of Medical Savings Accounts.-- (1) In general.--Subsections (i) and (j) of section 220 of the Internal Revenue Code of 1986 are hereby repealed. (2) Conforming amendments.-- (A) Paragraph (1) of section 220(c) of such Code is amended by striking subparagraph (D). (B) Section 138 of such Code is amended by striking subsection (f). (b) Availability Not Limited to Accounts For Employees of Small Employers and Self-employed Individuals.-- (1) In general.--Section 220(c)(1)(A) of such Code (relating to eligible individual) is amended to read as follows: ``(A) In general.--The term `eligible individual' means, with respect to any month, any individual if-- ``(i) such individual is covered under a high deductible health plan as of the 1st day of such month, and ``(ii) such individual is not, while covered under a high deductible health plan, covered under any health plan-- ``(I) which is not a high deductible health plan, and ``(II) which provides coverage for any benefit which is covered under the high deductible health plan.''. (2) Conforming amendments.-- (A) Section 220(c)(1) of such Code is amended by striking subparagraph (C). (B) Section 220(c) of such Code is amended by striking paragraph (4) (defining small employer) and by redesignating paragraph (5) as paragraph (4). (C) Section 220(b) of such Code is amended by striking paragraph (4) (relating to deduction limited by compensation) and by redesignating paragraphs (5), (6), and (7) as paragraphs (4), (5), and (6), respectively. (c) Increase in Amount of Deduction Allowed for Contributions to Medical Savings Accounts.-- (1) In general.--Paragraph (2) of section 220(b) of such Code is amended to read as follows: ``(2) Monthly limitation.--The monthly limitation for any month is the amount equal to \1/12\ of the annual deductible (as of the first day of such month) of the individual's coverage under the high deductible health plan.''. (2) Conforming amendment.--Clause (ii) of section 220(d)(1)(A) of such Code is amended by striking ``75 percent of''. (d) Both Employers and Employees May Contribute to Medical Savings Accounts.--Paragraph (5) of section 220(b) of such Code is amended to read as follows: ``(5) Coordination with exclusion for employer contributions.--The limitation which would (but for this paragraph) apply under this subsection to the taxpayer for any taxable year shall be reduced (but not below zero) by the amount which would (but for section 106(b)) be includible in the taxpayer's gross income for such taxable year.''. (e) Reduction of Permitted Deductibles Under High Deductible Health Plans.-- (1) In general.--Subparagraph (A) of section 220(c)(2) of such Code (defining high deductible health plan) is amended-- (A) by striking ``$1,500'' in clause (i) and inserting ``$1,000'', and (B) by striking ``$3,000'' in clause (ii) and inserting ``$2,000''. (2) Conforming amendment.--Subsection (g) of section 220 of such Code is amended to read as follows: ``(g) Cost-of-Living Adjustment.-- ``(1) In general.--In the case of any taxable year beginning in a calendar year after 1998, each dollar amount in subsection (c)(2) 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 such taxable year begins by substituting `calendar year 1997' for `calendar year 1992' in subparagraph (B) thereof. ``(2) Special rules.--In the case of the $1,000 amount in subsection (c)(2)(A)(i) and the $2,000 amount in subsection (c)(2)(A)(ii), paragraph (1)(B) shall be applied by substituting `calendar year 1999' for `calendar year 1997'. ``(3) Rounding.--If any increase under paragraph (1) or (2) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50. (f) Medical Savings Accounts May Be Offered Under Cafeteria Plans.--Subsection (f) of section 125 of such Code is amended by striking ``106(b),''. (g) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. SEC. 104. LONG-TERM CARE INSURANCE PERMITTED TO BE OFFERED UNDER CAFETERIA PLANS AND FLEXIBLE SPENDING ARRANGEMENTS. (a) Cafeteria Plans.-- (1) In general.--Subsection (f ) of section 125 of the Internal Revenue Code of 1986 (defining qualified benefits) is amended by inserting before the period at the end ``; except that such term shall include the payment of premiums for any qualified long-term care insurance contract (as defined in section 7702B) to the extent the amount of such payment does not exceed the eligible long-term care premiums (as defined in section 213(d)(10)) for such contract''. (b) Flexible Spending Arrangements.--Section 106 of such Code (relating to contributions by employer to accident and health plans) is amended by striking subsection (c). (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2001. SEC. 105. ADDITIONAL PERSONAL EXEMPTION FOR TAXPAYER CARING FOR ELDERLY FAMILY MEMBER IN TAXPAYER'S HOME. (a) In General.--Section 151 of the Internal Revenue Code of 1986 (relating to allowance of deductions for personal exemptions) is amended by redesignating subsection (e) as subsection (f ) and by inserting after subsection (d) the following new subsection: ``(e) Additional Exemption for Certain Elderly Family Members Residing With Taxpayer.-- ``(1) In general.--An exemption of the exemption amount for each qualified family member of the taxpayer. ``(2) Qualified family member.--For purposes of this subsection, the term `qualified family member' means, with respect to any taxable year, any individual-- ``(A) who is an ancestor of the taxpayer or of the taxpayer's spouse or who is the spouse of any such ancestor, ``(B) who is a member for the entire taxable year of a household maintained by the taxpayer, and ``(C) who has been certified, before the due date for filing the return of tax for the taxable year (without extensions), by a physician (as defined in section 1861(r)(1) of the Social Security Act) as being an individual with long- term care needs described in paragraph (3) for a period-- ``(i) which is at least 180 consecutive days, and ``(ii) a portion of which occurs within the taxable year. Such term shall not include any individual otherwise meeting the requirements of the preceding sentence unless within the 39\1/2\ month period ending on such due date (or such other period as the Secretary prescribes) a physician (as so defined) has certified that such individual meets such requirements. ``(3) Individuals with long-term care needs.--An individual is described in this paragraph if the individual-- ``(A) is unable to perform (without substantial assistance from another individual) at least two activities of daily living (as defined in section 7702B(c)(2)(B)) due to a loss of functional capacity, or ``(B) requires substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment and is unable to perform, without reminding or cuing assistance, at least one activity of daily living (as so defined) or to the extent provided in regulations prescribed by the Secretary (in consultation with the Secretary of Health and Human Services), is unable to engage in age appropriate activities. ``(4) Special rules.--Rules similar to the rules of paragraphs (1), (2), (3), (4), and (5) of section 21(e) shall apply for purposes of this subsection.''. (b) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. SEC. 106. EXPANDED HUMAN CLINICAL TRIALS QUALIFYING FOR ORPHAN DRUG CREDIT. (a) In General.--Subclause (I) of section 45C(b)(2)(A)(ii) of the Internal Revenue Code of 1986 is amended to read as follows: ``(I) after the date that the application is filed for designation under such section 526, and''. (b) Conforming Amendment.--Clause (i) of section 45C(b)(2)(A) of such Code is amended by inserting ``which is'' before ``being'' and by inserting before the comma at the end ``and which is designated under section 526 of such Act''. (c) Effective Date.--The amendments made by this section shall apply to amounts paid or incurred after December 31, 2000. SEC. 107. INCLUSION OF CERTAIN VACCINES AGAINST STREPTOCOCCUS PNEUMONIAE TO LIST OF TAXABLE VACCINES; REDUCTION IN PER DOSE TAX RATE. (a) Inclusion of Vaccines.-- [[Page H9434]] (1) In general.--Section 4132(a)(1) of the Internal Revenue Code of 1986 (defining taxable vaccine) is amended by adding at the end the following new subparagraph: ``(L) Any conjugate vaccine against streptococcus pneumoniae.''. (2) Effective date.-- (A) Sales.--The amendment made by this subsection shall apply to vaccine sales beginning on the day after the date on which the Centers for Disease Control makes a final recommendation for routine administration to children of any conjugate vaccine against streptococcus pneumoniae, but shall not take effect if subsection (c) does not take effect. (B) Deliveries.--For purposes of subparagraph (A), in the case of sales on or before the date described in such subparagraph for which delivery is made after such date, the delivery date shall be considered the sale date. (b) Reduction in Per Dose Tax Rate.-- (1) In general.--Section 4131(b)(1) of such Code (relating to amount of tax) is amended by striking ``75 cents'' and inserting ``50 cents''. (2) Effective date.-- (A) Sales.--The amendment made by this subsection shall apply to vaccine sales after December 31, 2004, but shall not take effect if subsection (c) does not take effect. (B) Deliveries.--For purposes of subparagraph (A), in the case of sales on or before the date described in such subparagraph for which delivery is made after such date, the delivery date shall be considered the sale date. (3) Limitation on certain credits or refunds.--For purposes of applying section 4132(b) of the Internal Revenue Code of 1986 with respect to any claim for credit or refund filed after August 31, 2004, the amount of tax taken into account shall not exceed the tax computed under the rate in effect on January 1, 2005. (c) Vaccine Tax and Trust Fund Amendments.-- (1) Sections 1503 and 1504 of the Vaccine Injury Compensation Program Modification Act (and the amendments made by such sections) are hereby repealed. (2) Subparagraph (A) of section 9510(c)(1) of such Code is amended by striking ``August 5, 1997'' and inserting ``October 21, 1998''. (3) The amendments made by this subsection shall take effect as if included in the provisions of the Tax and Trade Relief Extension Act of 1998 to which they relate. (d) Report.--Not later than December 31, 1999, the Comptroller General of the United States shall prepare and submit a report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on the operation of the Vaccine Injury Compensation Trust Fund and on the adequacy of such Fund to meet future claims made under the Vaccine Injury Compensation Program. SEC. 108. CREDIT FOR CLINICAL TESTING RESEARCH EXPENSES ATTRIBUTABLE TO CERTAIN QUALIFIED ACADEMIC INSTITUTIONS INCLUDING TEACHING HOSPITALS. (a) In General.--Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by inserting after section 41 the following: ``SEC. 41A. CREDIT FOR MEDICAL INNOVATION EXPENSES. ``(a) General Rule.--For purposes of section 38, the medical innovation credit determined under this section for the taxable year shall be an amount equal to 40 percent of the excess (if any) of-- ``(1) the qualified medical innovation expenses for the taxable year, over ``(2) the medical innovation base period amount. ``(b) Qualified Medical Innovation Expenses.--For purposes of this section-- ``(1) In general.--The term `qualified medical innovation expenses' means the amounts which are paid or incurred by the taxpayer during the taxable year directly or indirectly to any qualified academic institution for clinical testing research activities. ``(2) Clinical testing research activities.-- ``(A) In general.--The term `clinical testing research activities' means human clinical testing conducted at any qualified academic institution in the development of any product, which occurs before-- ``(i) the date on which an application with respect to such product is approved under section 505(b), 506, or 507 of the Federal Food, Drug, and Cosmetic Act (as in effect on the date of the enactment of this section), ``(ii) the date on which a license for such product is issued under section 351 of the Public Health Service Act (as so in effect), or ``(iii) the date classification or approval of such product which is a device intended for human use is given under section 513, 514, or 515 of the Federal Food, Drug, and Cosmetic Act (as so in effect). ``(B) Product.--The term `product' means any drug, biologic, or medical device. ``(3) Qualified academic institution.--The term `qualified academic institution' means any of the following institutions: ``(A) Educational institution.--A qualified organization described in section 170(b)(1)(A)(iii) which is owned by, or affiliated with, an institution of higher education (as defined in section 3304(f )). ``(B) Teaching hospital.--A teaching hospital which-- ``(i) is publicly supported or owned by an organization described in section 501(c)(3), and ``(ii) is affiliated with an organization meeting the requirements of subparagraph (A). ``(C) Foundation.--A medical research organization described in section 501(c)(3) (other than a private foundation) which is affiliated with, or owned by-- ``(i) an organization meeting the requirements of subparagraph (A), or ``(ii) a teaching hospital meeting the requirements of subparagraph (B). ``(D) Charitable research hospital.--A hospital that is designated as a cancer center by the National Cancer Institute. ``(4) Exclusion for amounts funded by grants, etc.--The term `qualified medical innovation expenses' shall not include any amount to the extent such amount is funded by any grant, contract, or otherwise by another person (or any governmental entity). ``(c) Medical Innovation Base Period Amount.--For purposes of this section, the term `medical innovation base period amount' means the average annual qualified medical innovation expenses paid by the taxpayer during the 3-taxable year period ending with the taxable year immediately preceding the first taxable year of the taxpayer beginning after December 31, 2000. ``(d) Special Rules.-- ``(1) Limitation on foreign testing.--No credit shall be allowed under this section with respect to any clinical testing research activities conducted outside the United States. ``(2) Certain rules made applicable.--Rules similar to the rules of subsections (f ) and (g) of section 41 shall apply for purposes of this section. ``(3) Election.--This section shall apply to any taxpayer for any taxable year only if such taxpayer elects to have this section apply for such taxable year. ``(4) Coordination with credit for increasing research expenditures and with credit for clinical testing expenses for certain drugs for rare diseases.--Any qualified medical innovation expense for a taxable year to which an election under this section applies shall not be taken into account for purposes of determining the credit allowable under section 41 or 45C for such taxable year.''. (b) Credit To Be Part of General Business Credit.-- (1) In general.--Section 38(b) of such Code (relating to current year business credits) is amended by striking ``plus'' at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting ``, plus'', and by adding at the end the following: ``(13) the medical innovation expenses credit determined under section 41A(a).''. (2) Transition rule.--Section 39(d) of such Code is amended by adding at the end the following new paragraph: ``(9) No carryback of section 41a credit before enactment.--No portion of the unused business credit for any taxable year which is attributable to the medical innovation credit determined under section 41A may be carried back to a taxable year beginning before January 1, 2001.''. (c) Denial of Double Benefit.--Section 280C of such Code is amended by adding at the end the following new subsection: ``(d) Credit for Increasing Medical Innovation Expenses.-- ``(1) In general.--No deduction shall be allowed for that portion of the qualified medical innovation expenses (as defined in section 41A(b)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 41A(a). ``(2) Certain rules to apply.--Rules similar to the rules of paragraphs (2), (3), and (4) of subsection (c) shall apply for purposes of this subsection.''. (d) Deduction for Unused Portion of Credit.--Section 196(c) of such Code (defining qualified business credits) is amended by redesignating paragraphs (5) through (8) as paragraphs (6) through (9), respectively, and by inserting after paragraph (4) the following new paragraph: ``(5) the medical innovation expenses credit determined under section 41A(a) (other than such credit determined under the rules of section 280C(d)(2)),''. (e) Clerical Amendment.--The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding after the item relating to section 41 the following: ``Sec. 41A. Credit for medical innovation expenses.''. (f) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. TITLE II--GREATER ACCESS AND CHOICE THROUGH ASSOCIATION HEALTH PLANS SEC. 201. RULES. (a) In General.--Subtitle B of title I of the Employee Retirement Income Security Act of 1974 is amended by adding after part 7 the following new part: ``Part 8--Rules Governing Association Health Plans ``SEC. 801. ASSOCIATION HEALTH PLANS. ``(a) In General.--For purposes of this part, the term `association health plan' means a group health plan-- ``(1) whose sponsor is (or is deemed under this part to be) described in subsection (b); and ``(2) under which at least one option of health insurance coverage offered by a health insurance issuer (which may include, [[Page H9435]] among other options, managed care options, point of service options, and preferred provider options) is provided to participants and beneficiaries, unless, for any plan year, such coverage remains unavailable to the plan despite good faith efforts exercised by the plan to secure such coverage. ``(b) Sponsorship.--The sponsor of a group health plan is described in this subsection if such sponsor-- ``(1) is organized and maintained in good faith, with a constitution and bylaws specifically stating its purpose and providing for periodic meetings on at least an annual basis, as a bona fide trade association, a bona fide industry association (including a rural electric cooperative association or a rural telephone cooperative association), a bona fide professional association, or a bona fide chamber of commerce (or similar bona fide business association, including a corporation or similar organization that operates on a cooperative basis (within the meaning of section 1381 of the Internal Revenue Code of 1986)), for substantial purposes other than that of obtaining or providing medical care; ``(2) is established as a permanent entity which receives the active support of its members and collects from its members on a periodic basis dues or payments necessary to maintain eligibility for membership in the sponsor; and ``(3) does not condition membership, such dues or payments, or coverage under the plan on the basis of health status- related factors with respect to the employees of its members (or affiliated members), or the dependents of such employees, and does not condition such dues or payments on the basis of group health plan participation. Any sponsor consisting of an association of entities which meet the requirements of paragraphs (1), (2), and (3) shall be deemed to be a sponsor described in this subsection. ``SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS. ``(a) In General.--The applicable authority shall prescribe by regulation, through negotiated rulemaking, a procedure under which, subject to subsection (b), the applicable authority shall certify association health plans which apply for certification as meeting the requirements of this part. ``(b) Standards.--Under the procedure prescribed pursuant to subsection (a), in the case of an association health plan that provides at least one benefit option which does not consist of health insurance coverage, the applicable authority shall certify such plan as meeting the requirements of this part only if the applicable authority is satisfied that-- ``(1) such certification-- ``(A) is administratively feasible; ``(B) is not adverse to the interests of the individuals covered under the plan; and ``(C) is protective of the rights and benefits of the individuals covered under the plan; and ``(2) the applicable requirements of this part are met (or, upon the date on which the plan is to commence operations, will be met) with respect to the plan. ``(c) Requirements Applicable to Certified Plans.--An association health plan with respect to which certification under this part is in effect shall meet the applicable requirements of this part, effective on the date of certification (or, if later, on the date on which the plan is to commence operations). ``(d) Requirements for Continued Certification.--The applicable authority may provide by regulation, through negotiated rulemaking, for continued certification of association health plans under this part. ``(e) Class Certification for Fully Insured Plans.--The applicable authority shall establish a class certification procedure for association health plans under which all benefits consist of health insurance coverage. Under such procedure, the applicable authority shall provide for the granting of certification under this part to the plans in each class of such association health plans upon appropriate filing under such procedure in connection with plans in such class and payment of the prescribed fee under section 807(a). ``(f) Certification of Self-Insured Association Health Plans.--An association health plan which offers one or more benefit options which do not consist of health insurance coverage may be certified under this part only if such plan consists of any of the following: ``(1) a plan which offered such coverage on the date of the enactment of the Quality Care for the Uninsured Act of 1999, ``(2) a plan under which the sponsor does not restrict membership to one or more trades and businesses or industries and whose eligible participating employers represent a broad cross-section of trades and businesses or industries, or ``(3) a plan whose eligible participating employers represent one or more trades or businesses, or one or more industries, which have been indicated as having average or above-average health insurance risk or health claims experience by reason of State rate filings, denials of coverage, proposed premium rate levels, and other means demonstrated by such plan in accordance with regulations which the Secretary shall prescribe through negotiated rulemaking, including (but not limited to) the following: agriculture; automobile dealerships; barbering and cosmetology; child care; construction; dance, theatrical, and orchestra productions; disinfecting and pest control; eating and drinking establishments; fishing; hospitals; labor organizations; logging; manufacturing (metals); mining; medical and dental practices; medical laboratories; sanitary services; transportation (local and freight); and warehousing. ``SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF TRUSTEES. ``(a) Sponsor.--The requirements of this subsection are met with respect to an association health plan if the sponsor has met (or is deemed under this part to have met) the requirements of section 801(b) for a continuous period of not less than 3 years ending with the date of the application for certification under this part. ``(b) Board of Trustees.--The requirements of this subsection are met with respect to an association health plan if the following requirements are met: ``(1) Fiscal control.--The plan is operated, pursuant to a trust agreement, by a board of trustees which has complete fiscal control over the plan and which is responsible for all operations of the plan. ``(2) Rules of operation and financial controls.--The board of trustees has in effect rules of operation and financial controls, based on a 3-year plan of operation, adequate to carry out the terms of the plan and to meet all requirements of this title applicable to the plan. ``(3) Rules governing relationship to participating employers and to contractors.-- ``(A) In general.--Except as provided in subparagraphs (B) and (C), the members of the board of trustees are individuals selected from individuals who are the owners, officers, directors, or employees of the participating employers or who are partners in the participating employers and actively participate in the business. ``(B) Limitation.-- ``(i) General rule.--Except as provided in clauses (ii) and (iii), no such member is an owner, officer, director, or employee of, or partner in, a contract administrator or other service provider to the plan. ``(ii) Limited exception for providers of services solely on behalf of the sponsor.--Officers or employees of a sponsor which is a service provider (other than a contract administrator) to the plan may be members of the board if they constitute not more than 25 percent of the membership of the board and they do not provide services to the plan other than on behalf of the sponsor. ``(iii) Treatment of providers of medical care.--In the case of a sponsor which is an association whose membership consists primarily of providers of medical care, clause (i) shall not apply in the case of any service provider described in subparagraph (A) who is a provider of medical care under the plan. ``(C) Certain plans excluded.--Subparagraph (A) shall not apply to an association health plan which is in existence on the date of the enactment of the Quality Care for the Uninsured Act of 1999. ``(D) Sole authority.--The board has sole authority under the plan to approve applications for participation in the plan and to contract with a service provider to administer the day-to-day affairs of the plan. ``(c) Treatment of Franchise Networks.--In the case of a group health plan which is established and maintained by a franchiser for a franchise network consisting of its franchisees-- ``(1) the requirements of subsection (a) and section 801(a)(1) shall be deemed met if such requirements would otherwise be met if the franchiser were deemed to be the sponsor referred to in section 801(b), such network were deemed to be an association described in section 801(b), and each franchisee were deemed to be a member (of the association and the sponsor) referred to in section 801(b); and ``(2) the requirements of section 804(a)(1) shall be deemed met. The Secretary may by regulation, through negotiated rulemaking, define for purposes of this subsection the terms `franchiser', `franchise network', and `franchisee'. ``(d) Certain Collectively Bargained Plans.-- ``(1) In general.--In the case of a group health plan described in paragraph (2)-- ``(A) the requirements of subsection (a) and section 801(a)(1) shall be deemed met; ``(B) the joint board of trustees shall be deemed a board of trustees with respect to which the requirements of subsection (b) are met; and ``(C) the requirements of section 804 shall be deemed met. ``(2) Requirements.--A group health plan is described in this paragraph if-- ``(A) the plan is a multiemployer plan; or ``(B) the plan is in existence on April 1, 1997, and would be described in section 3(40)(A)(i) but solely for the failure to meet the requirements of section 3(40)(C)(ii). ``SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS. ``(a) Covered Employers and Individuals.--The requirements of this subsection are met with respect to an association health plan if, under the terms of the plan-- ``(1) each participating employer must be-- ``(A) a member of the sponsor, ``(B) the sponsor, or ``(C) an affiliated member of the sponsor with respect to which the requirements of subsection (b) are met, except that, in the case of a sponsor which is a professional association or other individual-based association, if at least one of the officers, directors, or employees of an [[Page H9436]] employer, or at least one of the individuals who are partners in an employer and who actively participates in the business, is a member or such an affiliated member of the sponsor, participating employers may also include such employer; and ``(2) all individuals commencing coverage under the plan after certification under this part must be-- ``(A) active or retired owners (including self-employed individuals), officers, directors, or employees of, or partners in, participating employers; or ``(B) the beneficiaries of individuals described in subparagraph (A). ``(b) Coverage of Previously Uninsured Employees.--In the case of an association health plan in existence on the date of the enactment of the Quality Care for the Uninsured Act of 1999, an affiliated member of the sponsor of the plan may be offered coverage under the plan as a participating employer only if-- ``(1) the affiliated member was an affiliated member on the date of certification under this part; or ``(2) during the 12-month period preceding the date of the offering of such coverage, the affiliated member has not maintained or contributed to a group health plan with respect to any of its employees who would otherwise be eligible to participate in such association health plan. ``(c) Individual Market Unaffected.--The requirements of this subsection are met with respect to an association health plan if, under the terms of the plan, no participating employer may provide health insurance coverage in the individual market for any employee not covered under the plan which is similar to the coverage contemporaneously provided to employees of the employer under the plan, if such exclusion of the employee from coverage under the plan is based on a health status-related factor with respect to the employee and such employee would, but for such exclusion on such basis, be eligible for coverage under the plan. ``(d) Prohibition of Discrimination Against Employers and Employees Eligible To Participate.--The requirements of this subsection are met with respect to an association health plan if-- ``(1) under the terms of the plan, all employers meeting the preceding requirements of this section are eligible to qualify as participating employers for all geographically available coverage options, unless, in the case of any such employer, participation or contribution requirements of the type referred to in section 2711 of the Public Health Service Act are not met; ``(2) upon request, any employer eligible to participate is furnished information regarding all coverage options available under the plan; and ``(3) the applicable requirements of sections 701, 702, and 703 are met with respect to the plan. ``SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOCUMENTS, CONTRIBUTION RATES, AND BENEFIT OPTIONS. ``(a) In General.--The requirements of this section are met with respect to an association health plan if the following requirements are met: ``(1) Contents of governing instruments.--The instruments governing the plan include a written instrument, meeting the requirements of an instrument required under section 402(a)(1), which-- ``(A) provides that the board of trustees serves as the named fiduciary required for plans under section 402(a)(1) and serves in the capacity of a plan administrator (referred to in section 3(16)(A)); ``(B) provides that the sponsor of the plan is to serve as plan sponsor (referred to in section 3(16)(B)); and ``(C) incorporates the requirements of section 806. ``(2) Contribution rates must be nondiscriminatory.-- ``(A) The contribution rates for any participating small employer do not vary on the basis of the claims experience of such employer and do not vary on the basis of the type of business or industry in which such employer is engaged. ``(B) Nothing in this title or any other provision of law shall be construed to preclude an association health plan, or a health insurance issuer offering health insurance coverage in connection with an association health plan, from-- ``(i) setting contribution rates based on the claims experience of the plan; or ``(ii) varying contribution rates for small employers in a State to the extent that such rates could vary using the same methodology employed in such State for regulating premium rates in the small group market with respect to health insurance coverage offered in connection with bona fide associations (within the meaning of section 2791(d)(3) of the Public Health Service Act), subject to the requirements of section 702(b) relating to contribution rates. ``(3) Floor for number of covered individuals with respect to certain plans.--If any benefit option under the plan does not consist of health insurance coverage, the plan has as of the beginning of the plan year not fewer than 1,000 participants and beneficiaries. ``(4) Marketing requirements.-- ``(A) In general.--If a benefit option which consists of health insurance coverage is offered under the plan, State- licensed insurance agents shall be used to distribute to small employers coverage which does not consist of health insurance coverage in a manner comparable to the manner in which such agents are used to distribute health insurance coverage. ``(B) State-licensed insurance agents.--For purposes of subparagraph (A), the term `State-licensed insurance agents' means one or more agents who are licensed in a State and are subject to the laws of such State relating to licensure, qualification, testing, examination, and continuing education of persons authorized to offer, sell, or solicit health insurance coverage in such State. ``(5) Regulatory requirements.--Such other requirements as the applicable authority determines are necessary to carry out the purposes of this part, which shall be prescribed by the applicable authority by regulation through negotiated rulemaking. ``(b) Ability of Association Health Plans To Design Benefit Options.--Subject to section 514(d), nothing in this part or any provision of State law (as defined in section 514(c)(1)) shall be construed to preclude an association health plan, or a health insurance issuer offering health insurance coverage in connection with an association health plan, from exercising its sole discretion in selecting the specific items and services consisting of medical care to be included as benefits under such plan or coverage, except (subject to section 514) in the case of any law to the extent that it (1) prohibits an exclusion of a specific disease from such coverage, or (2) is not preempted under section 731(a)(1) with respect to matters governed by section 711 or 712. ``SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS FOR SOLVENCY FOR PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO HEALTH INSURANCE COVERAGE. ``(a) In General.--The requirements of this section are met with respect to an association health plan if-- ``(1) the benefits under the plan consist solely of health insurance coverage; or ``(2) if the plan provides any additional benefit options which do not consist of health insurance coverage, the plan-- ``(A) establishes and maintains reserves with respect to such additional benefit options, in amounts recommended by the qualified actuary, consisting of-- ``(i) a reserve sufficient for unearned contributions; ``(ii) a reserve sufficient for benefit liabilities which have been incurred, which have not been satisfied, and for which risk of loss has not yet been transferred, and for expected administrative costs with respect to such benefit liabilities; ``(iii) a reserve sufficient for any other obligations of the plan; and ``(iv) a reserve sufficient for a margin of error and other fluctuations, taking into account the specific circumstances of the plan; and ``(B) establishes and maintains aggregate and specific excess /stop loss insurance and solvency indemnification, with respect to such additional benefit options for which risk of loss has not yet been transferred, as follows: ``(i) The plan shall secure aggregate excess /stop loss insurance for the plan with an attachment point which is not greater than 125 percent of expected gross annual claims. The applicable authority may by regulation, through negotiated rulemaking, provide for upward adjustments in the amount of such percentage in specified circumstances in which the plan specifically provides for and maintains reserves in excess of the amounts required under subparagraph (A). ``(ii) The plan shall secure specific excess /stop loss insurance for the plan with an attachment point which is at least equal to an amount recommended by the plan's qualified actuary (but not more than $175,000). The applicable authority may by regulation, through negotiated rulemaking, provide for adjustments in the amount of such insurance in specified circumstances in which the plan specifically provides for and maintains reserves in excess of the amounts required under subparagraph (A). ``(iii) The plan shall secure indemnification insurance for any claims which the plan is unable to satisfy by reason of a plan termination. Any regulations prescribed by the applicable authority pursuant to clause (i) or (ii) of subparagraph (B) may allow for such adjustments in the required levels of excess /stop loss insurance as the qualified actuary may recommend, taking into account the specific circumstances of the plan. ``(b) Minimum Surplus in Addition to Claims Reserves.--In the case of any association health plan described in subsection (a)(2), the requirements of this subsection are met if the plan establishes and maintains surplus in an amount at least equal to-- ``(1) $500,000, or ``(2) such greater amount (but not greater than $2,000,000) as may be set forth in regulations prescribed by the applicable authority through negotiated rulemaking, based on the level of aggregate and specific excess /stop loss insurance provided with respect to such plan. ``(c) Additional Requirements.--In the case of any association health plan described in subsection (a)(2), the applicable authority may provide such additional requirements relating to reserves and excess /stop loss insurance as the applicable authority considers appropriate. Such requirements may be provided by regulation, through negotiated rulemaking, with respect to any such plan or any class of such plans. [[Page H9437]] ``(d) Adjustments for Excess /Stop Loss Insurance.--The applicable authority may provide for adjustments to the levels of reserves otherwise required under subsections (a) and (b) with respect to any plan or class of plans to take into account excess /stop loss insurance provided with respect to such plan or plans. ``(e) Alternative Means of Compliance.--The applicable authority may permit an association health plan described in subsection (a)(2) to substitute, for all or part of the requirements of this section (except subsection (a)(2)(B)(iii)), such security, guarantee, hold-harmless arrangement, or other financial arrangement as the applicable authority determines to be adequate to enable the plan to fully meet all its financial obligations on a timely basis and is otherwise no less protective of the interests of participants and beneficiaries than the requirements for which it is substituted. The applicable authority may take into account, for purposes of this subsection, evidence provided by the plan or sponsor which demonstrates an assumption of liability with respect to the plan. Such evidence may be in the form of a contract of indemnification, lien, bonding, insurance, letter of credit, recourse under applicable terms of the plan in the form of assessments of participating employers, security, or other financial arrangement. ``(f) Measures To Ensure Continued Payment of Benefits by Certain Plans in Distress.-- ``(1) Payments by certain plans to association health plan fund.-- ``(A) In general.--In the case of an association health plan described in subsection (a)(2), the requirements of this subsection are met if the plan makes payments into the Association Health Plan Fund under this subparagraph when they are due. Such payments shall consist of annual payments in the amount of $5,000, except that the Secretary shall reduce part or all of such annual payments, or shall provide a rebate of part or all of such a payment, to the extent that the Secretary determines that the balance in such Fund is sufficient (taking into account such a reduction or rebate) to meet all reasonable actuarial requirements. Such determination shall occur not less than once annually. In addition to any such annual payments, such payments may include such supplemental payments as the Secretary may determine to be necessary to meet reasonable actuarial requirements to carry out paragraph (2). Payments unde