Children Health Insurance Act of 1996

Summary: Children Health Insurance Act of 1996 - Amends the Internal Revenue Code, as amended by the Health Insurance Portability and Accountability Act of 1996, to:  (1) require group health plans and health insurers to provide access to coverage for a participant's or beneficiary's qualifying children; and (2) impose a noncompliance excise tax. 
Amends the Code to provide a tax credit for an individual who purchases child health care coverage.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Children Health Insurance Act of 
1996''.

SEC. 2. HEALTH INSURANCE AVAILABILITY FOR CHILDREN.

    (a) In General.--The Internal Revenue Code of 1986 (as amended by 
the Health Insurance Portability and Accountability Act of 1996) is 
amended by adding at the end the following:

        ``Subtitle L--Health Insurance Availability for Children

       ``CHAPTER 101--HEALTH INSURANCE AVAILABILITY FOR CHILDREN

                              ``Sec. 9901. Excise tax on failure to 
                                        meet requirement of access to 
                                        coverage.
                              ``Sec. 9902. Requirement of access to 
                                        coverage.
                              ``Sec. 9903. Definitions.

``SEC. 9901. EXCISE TAX ON FAILURE TO MEET REQUIREMENT OF ACCESS TO 
              COVERAGE.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of--
            ``(1) a group health plan to meet the coverage requirements 
        of section 9902(a); and
            ``(2) an insurer that offers health insurance coverage 
        (other than to a group health plan subject to paragraph (1)) to 
        meet the requirements of section 9902(b).
    ``(b) Amount of Tax.--
            ``(1) Group health plan.--
                    ``(A) In general.--The amount of tax imposed by 
                subsection (a)(1) on any failure with respect to a 
                participant or beneficiary of a group health plan shall 
                be 25 percent of each premium received by the group 
                health plan for the plan year in which such failure 
                occurs.
                    ``(B) Self-insured plans.--In the case that the 
                group health plan is self-insured, the cost to the plan 
                of the coverage of participants and beneficiaries shall 
                be treated as the premium received for the purposes of 
                subparagraph (A).
            ``(2) Insurer offering individual health insurance 
        coverage.--The amount of tax imposed by subsection (a)(2) on 
        any failure of an insurer with respect to an individual 
        described in paragraph (1) or (2) of section 9902(b) shall be 
        25 percent of the total amount of the premiums paid to the 
        insurer for such coverage for the plan year in which such 
        failure occurs.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply where failure not discovered 
        exercising reasonable diligence.--No tax shall be imposed by 
        subsection (a) on any failure during any period for which it is 
        established to the satisfaction of the Secretary that none of 
        the persons referred to in subsection (e) knew, or exercising 
        reasonable diligence would have known, that such failure 
        existed.
            ``(2) Tax not to apply to failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) on any failure 
        if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected during the 30-day 
                period beginning on the 1st date any of the persons 
                referred to in subsection (e) knew, or exercising 
                reasonable diligence would have known, that such 
                failure existed.
            ``(3) Waiver.--In the case of a failure which is due to 
        reasonable cause and not to willful neglect, the Secretary may 
        waive part or all of the tax imposed by subsection (a) to the 
        extent that the payment of such tax would be excessive relative 
        to the failure involved.
    ``(d) Tax Not To Apply to Certain Plans.--This section shall not 
apply to--
            ``(1) any governmental plan (within the meaning of section 
        414(d)), or
            ``(2) any church plan (within the meaning of section 
        414(e)).
    ``(e) Liability for Tax.--The following shall be responsible for 
the tax imposed by subsection (a):
            ``(1) In the case of the tax imposed by subsection (a)(1) 
        on a group health plan, the plan.
            ``(2) In the case of the tax imposed by subsection (a)(2) 
        on an insurer offering health insurance coverage, the insurer.

``SEC. 9902. REQUIREMENT OF ACCESS TO COVERAGE.

    ``(a) Group Health Plans.--
            ``(1) In general.--Each group health plan that provides 
        coverage to any participant (or beneficiary) must offer 
        qualifying coverage for each qualifying young dependent of an 
        individual who is a participant or beneficiary under the plan.
            ``(2) Timing of offer.--The offer under paragraph (1) shall 
        be made at the time a person first becomes a qualifying young 
        dependent and at least annually thereafter.
    ``(b) Health Insurance Coverage.--Each insurer that offers health 
insurance coverage in the individual market must offer qualifying 
coverage for each individual who is under 21 years of age, residing in 
the United States, and a citizen or national of the United States (or 
alien permanently residing in the United States under color of law).
    ``(c) Qualifying Coverage.--For purposes of this section--
            ``(1) In general.--The term `qualifying coverage' means 
        coverage of health care benefits that provides for at least the 
        following benefits, without any limitation based on a pre-
        existing condition with respect to such benefits and without 
        any waiting period for coverage with respect to such benefits:
                    ``(A) Medicare benefits.--Benefits provided under 
                parts A and B of title XVIII of the Social Security 
                Act, or benefits determined to be actuarially 
                equivalent to (or greater than) such benefits; except 
                that in no case shall the coinsurance attributable to 
                benefits under part B of such title exceed (with 
                respect to provision of an item or service) the lesser 
                of $10 or 10 percent of the recognized payment amount 
                with respect to such item or service (determined 
                without regard to cost-sharing).
                    ``(B) Well child care benefits.--
                            ``(i) In general.--Payment for the 
                        following items and services, without the 
                        application of deductibles, coinsurance, and 
                        copayments:
                                    ``(I) Newborn and well-baby care, 
                                including normal newborn care and 
                                pediatrician services for high-risk 
                                deliveries.
                                    ``(II) Well-child care, including 
                                routine office visits, routine 
                                immunizations (including the vaccine 
                                itself), routine laboratory tests, and 
                                preventive dental care.
                            ``(ii) Periodicity schedule.--The 
                        Secretary, in consultation with the American 
                        Academy of Pediatrics, shall establish a 
                        schedule of periodicity for services described 
                        in clause (i) which reflects the general, 
                        appropriate frequency with which such services 
                        should be provided to health children.
            ``(2) Managed care permitted.--Nothing in this section 
        shall be construed as limiting the providers through whom the 
        benefits described in paragraph (1) may be provided so long as 
        there is reasonable access to such benefits.
    ``(d) Qualifying Young Dependent.--For purposes of this section, 
the term `qualifying young dependent' means an individual who is under 
21 years of age, residing in the United States, is a citizen or 
national of the United States (or alien permanently residing in the 
United States under color of law), and a dependent (as defined in 
section 152) of the individual.

``SEC. 9903. DEFINITIONS.

    ``In this chapter--
            ``(1) Group health plan.--The term `group health plan' has 
        the meaning given such term in section 5000(b)(1), but does not 
        include such a plan that has medical benefits that only consist 
        of coverage described in paragraph (2)(B).
            ``(2) Health insurance coverage.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `health insurance coverage' 
                means benefits consisting of medical care (provided 
                directly, through insurance or reimbursement, or 
                otherwise) under any hospital or medical service policy 
                or certificate, hospital or medical service plan 
                contract, or health maintenance organization group 
                contract offered by an insurer or a health maintenance 
                organization.
                    ``(B) Exception.--Such term does not include 
                coverage under any separate policy, certificate, or 
                contract only for one or more of any of the following:
                            ``(i) Coverage for accident, credit-only, 
                        vision, disability income, long-term care, 
                        nursing home care, community-based care dental, 
                        on-site medical clinics, or employee assistance 
                        programs, or any combination thereof.
                            ``(ii) Medicare supplemental health 
                        insurance (within the meaning of section 
                        1882(g)(1) of the Social Security Act (42 
                        U.S.C. 1395ss(g)(1))) and similar supplemental 
                        coverage provided under a group health plan.
                            ``(iii) Coverage issued as a supplement to 
                        liability insurance.
                            ``(iv) Liability insurance, including 
                        general liability insurance and automobile 
                        liability insurance.
                            ``(v) Workers' compensation or similar 
                        insurance.
                            ``(vi) Automobile medical-payment 
                        insurance.
                            ``(vii) Coverage for a specified disease or 
                        illness.
                            ``(viii) Hospital or fixed indemnity 
                        insurance.
                            ``(ix) Short-term limited duration 
                        insurance.
                            ``(x) Such other coverage, comparable to 
                        that described in previous clauses, as may be 
                        specified in regulations prescribed under this 
                        title.
            ``(3) Health maintenance organization.--The term `health 
        maintenance organization' means--
                    ``(A) a federally qualified health maintenance 
                organization (as defined in section 1301(a) of the 
                Public Health Service Act (42 U.S.C. 300e(a))),
                    ``(B) an organization recognized under State law as 
                a health maintenance organization, or
                    ``(C) a similar organization regulated under State 
                law for solvency in the same manner and to the same 
                extent as such a health maintenance organization,
        if it is subject to State law which regulates insurance (within 
        the meaning of section 514(b)(2) of the Employee Retirement 
        Income Security Act of 1974).
            ``(4) Insurer.--The term `insurer' means an insurance 
        company, insurance service, or insurance organization 
        (including a health maintenance organization) which is licensed 
        to engage in the business of insurance in a State and which is 
        subject to State law which regulates insurance (within the 
        meaning of section 514(b)(2)(A) of the Employee Retirement 
        Income Security Act of 1974).
            ``(5) Individual market.--The term `individual market' 
        means the market for health insurance coverage offered to 
        individuals and not to employers or in connection with a group 
        health plan and does not include the market for such coverage 
        issued only by an insurer that makes such coverage available 
        only on the basis of affiliation with an association.
            ``(6) Incorporation of certain definitions.--The terms 
        `beneficiary' and `participant' have the meanings given such 
        terms in section 3 of the Employee Retirement Income Security 
        Act of 1974.''.
    (b) Clerical Amendment.--The table of contents for the Internal 
Revenue Code of 1986 is amended by adding after the item relating to 
subtitle K the following new item:

                              ``Subtitle L. Health Insurance 
                                        Availability for Children.''
    (c) Effective Date.--The requirement of section 9902 of the 
Internal Revenue Code of 1986 (as added by subsection (a) of this 
section) shall take effect on January 1, 1998, and shall apply to 
coverage offered on or after such date regardless of whether the plan 
year began before such date.

SEC. 3. REFUNDABLE TAX CREDIT FOR PURCHASE OF HEALTH COVERAGE FOR 
              CHILDREN.

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

``SEC. 35. PURCHASE OF HEALTH COVERAGE FOR CHILDREN.

    ``(a) General Rule.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this subtitle for the 
taxable year an amount equal to 80 percent of the qualified health 
premiums paid in the taxable year by the taxpayer.
    ``(b) Application of Credit Against Tax Liability.--
            ``(1) In general.--The credit allowable under subsection 
        (a) shall be applied against tax liability at the rate of $0.50 
        of credit for each $1 of tax liability.
            ``(2) Tax liability.--For the purposes of paragraph (1), 
        the term `tax liability' means the excess (if any) of--
                    ``(A) the sum of--
                            ``(i) the tax imposed by this chapter for 
                        the taxable year (reduced by the credits 
                        allowable against such tax other than the 
                        credits allowable under this subpart), and
                            ``(ii) the taxpayer's social security taxes 
                        for such taxable year, over
                    ``(B) the credit allowed for the taxable year under 
                section 32.
            ``(3) Social security taxes.--For purposes of paragraph 
        (2)--
                    ``(A) In general.--The term `social security taxes' 
                means, with respect to any taxpayer for any taxable 
                year--
                            ``(i) the amount of the taxes imposed by 
                        sections 3101 and 3201(a) on amounts received 
                        by the taxpayer during the calendar year in 
                        which the taxable year begins,
                            ``(ii) one-half of the amount of the taxes 
                        imposed by section 1401 on the self-employment 
                        income of the taxpayer for the taxable year, 
                        and
                            ``(iii) one-half of the amount of the taxes 
                        imposed by section 3211(a)(1) on amounts 
                        received by the taxpayer during the calendar 
                        year in which the taxable year begins.
                    ``(B) Coordination with special refund of social 
                security taxes.--The term `social security taxes' shall 
                not include any taxes to the extent the taxpayer is 
                entitled to a special refund of such taxes under 
                section 6413(c).
                    ``(C) Special rule.--Any amounts paid pursuant to 
                an agreement under section 3121(l) (relating to 
                agreements entered into by American employers with 
                respect to foreign affiliates) which are equivalent to 
                the taxes referred to in subparagraph (A)(i) shall be 
                treated as taxes referred to in such subparagraph.
    ``(c) Definitions.--For the purposes of this section--
            ``(1) Qualified health premium.--The term `qualified health 
        premium' means the amount paid for health coverage of a 
        qualifying young dependent.
            ``(2) Health coverage.--The term `health coverage' means 
        health insurance coverage (as defined by section 9902(b)) that 
        includes qualifying coverage (as defined by section 9902(c)).
            ``(3) Qualifying young dependent.--The term `qualifying 
        young dependent' has the meaning given such term by section 
        9902(d).''.
    (b) Clerical Amendment.--The table of sections for subpart C of 
part IV of subchapter A of chapter 1 is amended by striking the item 
relating to section 35 and inserting the following new items:

                              ``Sec. 35. Purchase of health coverage 
                                        for children.
                              ``Sec. 36. Overpayments of tax.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1997.