Federal Employees Health Care Freedom of Choice Act

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Federal Employees Health Care 
Freedom of Choice Act''.

SEC. 2. AMENDMENTS TO TITLE 5, UNITED STATES CODE.

    (a) Definitions.--Section 8901 of title 5, United States Code, is 
amended--
            (1) in paragraph (10) by striking ``and'' after the 
        semicolon;
            (2) in paragraph (11) by striking the period and inserting 
        a semicolon; and
            (3) by adding at the end the following:
            ``(12) the term `high deductible health plan' means a plan 
        described by section 8903(5) or section 8903a(d); and
            ``(13) the term `medical savings account' has the meaning 
        given such term by section 220(d) of the Internal Revenue Code 
        of 1986.''.
    (b) Authority To Contract for High Deductible Health Plans.--
Section 8902 of title 5, United States Code, is amended by adding at 
the end the following:
    ``(p)(1) The Office shall contract under this chapter for a high 
deductible health plan with any qualified carrier that--
            ``(A) offers such a plan; and
            ``(B) as of the date of enactment of the Federal Employees 
        Health Care Freedom of Choice Act, offers a health benefits 
        plan under this chapter.
    ``(2) The Office may contract under this chapter for a high 
deductible health plan with any qualified carrier that--
            ``(A) offers such a plan; but
            ``(B) does not satisfy the requirement under paragraph 
        (1)(B).''.
    (c) Description of High Deductible Health Plans and Benefits To Be 
Provided Thereunder.--
            (1) In general.--Section 8903 of title 5, United States 
        Code, is amended by adding at the end the following:
            ``(5) High deductible health plans.--(A) One or more plans 
        described by paragraph (1), (2), (3), or (4), which--
                    ``(i) are high deductible health plans (as defined 
                by section 220(c)(2) of the Internal Revenue Code of 
                1986); and
                    ``(ii) provide benefits of the types referred to by 
                section 8904(a)(5).
            ``(B) Nothing in this section shall be considered--
                    ``(i) to prevent a carrier from simultaneously 
                offering a plan described by subparagraph (A) and a 
                plan described by paragraph (1) or (2);
                    ``(ii) to require that a high deductible health 
                plan offer two levels of benefits; or
                    ``(iii) to allow, in any contract year, for--
                            ``(I) more than one plan to be offered 
                        which satisfies both subparagraph (A) and 
                        paragraph (1) (subject to clause (ii)); and
                            ``(II) more than one plan which satisfies 
                        both subparagraph (A) and paragraph (2) 
                        (subject to clause (ii)).''.
            (2) Types of benefits.--Section 8904(a) of title 5, United 
        States Code, is amended by inserting after paragraph (4) the 
        following:
            ``(5) High deductible health plans.--Benefits of the types 
        named under paragraph (1) or (2) of this subsection or both.''.
            (3) Conforming amendments.--(A) Section 8903a of title 5, 
        United States Code, is amended by redesignating subsection (d) 
        as subsection (e) and by inserting after subsection (c) the 
        following:
    ``(d) The plans under this section may include one or more plans, 
otherwise allowable under this section, that satisfy the requirements 
of clauses (i) and (ii) of section 8903(5)(A).''.
            (B) Section 8909(d) of title 5, United States Code, is 
        amended by striking ``8903a(d)'' and inserting ``8903a(e)''.
            (4) References.--Section 8903 of title 5, United States 
        Code, is amended by adding at the end (as a flush left 
        sentence) the following:
``The Office shall prescribe regulations under which the requirements 
of section 8902(c), 8902(n), 8909(e), and any other provision of this 
chapter that applies with respect to a plan described by paragraph (1), 
(2), (3), or (4) of this section shall apply with respect to the 
corresponding plan under paragraph (5) of this section. Similar 
regulations shall be prescribed with respect to any plan under section 
8903a(d).''.
    (d) Contributions Toward High Deductible Health Plans and Medical 
Savings Accounts.--
            (1) Amendments.--
                    (A) In general.--Title 5, United States Code, is 
                amended by redesignating section 8906a as section 8906b 
                and by inserting after section 8906 the following:
``Sec. 8906a. Contribution provisions relating to certain individuals 
              enrolled in high deductible health plans
    ``(a) In the case of an employee or annuitant who enrolls in a high 
deductible health plan, section 8906 shall apply in accordance with its 
terms, except as otherwise provided in this section.
    ``(b) Instead of the amount that would otherwise apply under the 
provisions of section 8906(d), the amount to be withheld under such 
provisions from the pay or annuity of an employee or annuitant 
described in subsection (a), for any biweekly or other period, shall be 
the equivalent (expressed in terms of such periods) of the amount by 
which--
            ``(1) the applicable average subscription charge, as 
        determined under section 8906(a) for the contract year 
        involved, exceeds
            ``(2) the total Government contribution allowable for such 
        contract year (as defined in subsection (h)),
but not to exceed 100 percent of the subscription charge for the plan 
in which such employee or annuitant is enrolled.
    ``(c) Instead of the amount that would otherwise apply under the 
provisions of section 8906(b), in the case of an employee or annuitant 
described in subsection (a), the biweekly or other periodic Government 
contribution under such provisions toward the subscription charge for 
the plan in which such employee or annuitant is enrolled shall be the 
amount by which such charge exceeds (if at all) the amount which under 
subsection (b) is required to be withheld from the pay or annuity of 
the employee or annuitant involved.
    ``(d)(1) Subject to paragraph (2), there shall be paid to the 
medical savings account of each employee or annuitant described in 
subsection (a), at the same time that the Government contribution under 
section 8906 is made (or would, but for this section, be made) for the 
benefit of such employee or annuitant, the amount by which--
            ``(A) the total Government contribution allowable for the 
        contract year involved (as defined in subsection (h)), exceeds
            ``(B) the amount of the Government contribution which under 
        subsection (c) is required to be made toward the subscription 
        charge for the plan in which such employee or annuitant is 
        enrolled.
No election to decline any contributions under this subsection shall be 
available to an employee or annuitant.
    ``(2) No contribution under this subsection shall be made to any 
medical savings account of an employee or annuitant for any period if, 
as of the first day of the month before the month in which such period 
commences, such employee or annuitant (or the spouse of such employee 
or annuitant, if coverage is for self and family) is entitled to 
benefits under part A of title XVIII of the Social Security Act.
    ``(3) The Office shall by regulation prescribe the time, form, and 
manner in which an employee or annuitant shall identify any medical 
savings account to which contributions for such employee or annuitant 
shall be made under this subsection.
    ``(4) Subsections (f) and (g) of section 8906 shall apply with 
respect to contributions under this subsection.
    ``(e) Any adjustment in the amount of any contribution under 
section 8906 that is required by subsection (b) or (c) of this section 
beginning in any contract year shall take effect--
            ``(1) in the case of an employee, at the point in such year 
        described in the second sentence of section 8906(b)(1); and
            ``(2) in the case of an annuitant, at the point in such 
        year described in the third sentence of section 8906(b)(1).
    ``(f)(1) This section shall not apply to any employee or annuitant 
with respect to any period for which such employee or annuitant would 
not otherwise be eligible for a Government contribution under section 
8906 (determined disregarding this section).
    ``(2) Neither subsection (b) nor (c) shall apply with respect to an 
employee or annuitant for any period for which--
            ``(A) such employee or annuitant is ineligible for any 
        contribution under subsection (d) by reason of paragraph (2) 
        thereof; or
            ``(B) the amount of the contribution under subsection (d) 
        for such employee or annuitant would otherwise be zero.
    ``(g) The Office shall by regulation provide for the application of 
section 8906(c) to the extent necessary to reflect any change in the 
ratio of individual to Government contributions resulting from the 
application of this section.
    ``(h) For purposes of this section, the term `total Government 
contribution allowable', as used with respect to a contract year, means 
the maximum Government contribution that could be made for health 
benefits for an employee or annuitant for such contract year, as 
determined under paragraph (1) of section 8906(b) (as well as paragraph 
(3) thereof, if appropriate, but disregarding paragraph (2) thereof and 
the provisions of this section).''.
                    (B) Technical and conforming amendments.--(i) The 
                table of sections at the beginning of chapter 89 of 
                title 5, United States Code, is amended by striking the 
                item relating to section 8906a and inserting the 
                following:

``8906a.   Contribution provisions relating to certain individuals 
                            enrolled in high deductible health plans.
``8906b.   Temporary employees.''.
                    (ii) Section 8913(b)(4) of title 5, United States 
                Code, is amended by striking ``8906a(a)'' and inserting 
                ``8906b(a)''.
            (2) High deductible health plans to be disregarded in 
        determining government contributions.--Section 8906 of title 5, 
        United States Code, is amended by adding at the end the 
        following:
    ``(j) Notwithstanding any other provision of this section, there 
shall not be taken into account, for purposes of computing any average 
under subsection (a), any subscription charge for any high deductible 
health plan or any individuals enrolled therein.''.
            (3) Coordination provision.--Nothing in this section or in 
        any amendment made by this section shall be considered to 
        affect any authority under section 1005(f) of title 39, United 
        States Code, to vary, add to, or substitute for any provision 
        of chapter 89 of title 5, United States Code, as amended by 
        this section.
            (4) Technical amendment.--The second sentence of section 
        8909(a) of title 5, United States Code, is amended by inserting 
        ``(not including any Government contributions under section 
        8906a to a medical savings account)'' after ``of this title''.
    (e) Information to Individuals Who May Be Eligible for Government 
Contributions to a Medical Savings Account.--Section 8907 of title 5, 
United States Code, is amended by adding at the end the following:
    ``(c) In addition to any information otherwise provided for under 
this section, the Office shall make available to all employees and 
annuitants eligible to enroll in a high deductible health plan, in a 
form acceptable to the Office after consultation with the carrier, 
information relating to--
            ``(1) the conditions under which a Government contribution 
        shall be made under this chapter to a medical savings account;
            ``(2) the amount of the Government contribution payable 
        under this chapter to a medical savings account (or how such 
        amount may be ascertained); and
            ``(3) any other matter which the Office considers 
        appropriate in connection with medical savings accounts.''.
    (f) Effective Date.--The amendments made by this section shall 
apply with respect to contract years beginning on or after January 1, 
1999. The Office of Personnel Management shall take appropriate 
measures to ensure that coverage under a high deductible health plan 
under chapter 89 of title 5, United States Code (as amended by this 
section) shall be available as of the beginning of the first contract 
year described in the preceding sentence.

SEC. 3. AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.

    (a) Inclusion of Employees Enrolled in FEHBP High Deductible Health 
Plan.--Clause (iii) of section 220(c)(1)(A) of the Internal Revenue 
Code of 1986 (defining eligible individual) is amended by striking 
``or'' at the end of subclause (I), by striking the period at the end 
of subclause (II) and inserting ``, or'', and by adding at the end the 
following new subclause:
                                    ``(III) the high deductible health 
                                plan covering such individual is 
                                provided under chapter 89 of title 5, 
                                United States Code.''.
    (b) Contributions Limited to Federal Contribution.--Subsection (b) 
section 220 of such Code (relating to limitations) is amended by adding 
at the end the following new paragraph:
            ``(8) Denial of deduction for individuals covered by high 
        deductible federal employee health benefits plan.--The 
        limitation under this subsection for any month with respect to 
        any individual shall be zero if, as of the first day of such 
        month, such individual is covered under a high deductible 
        health plan provided under chapter 89 of title 5, United States 
        Code. For purposes of applying section 106(b) for such month--
                    ``(A) the preceding sentence shall not apply, and
                    ``(B) paragraph (4) shall not apply to any 
                individual who is entitled to receive any amount for 
                such month by reason of being an annuitant (as defined 
                in section 8901(3) of such title 5).''.
    (c) Numerical Limitations, Etc., Not To Apply.--
            (1) In general.--Subsection (i) of section 220 of such Code 
        is amended by adding at the end the following new paragraph:
            ``(6) Exception for individuals covered by federal employee 
        health benefits plans.--This subsection shall not apply to any 
        individual who is an eligible individual by reason of 
        subsection (c)(1)(A)(iii)(III). Medical savings accounts 
        established by such individuals shall not be taken into account 
        in determining whether the numerical limitations under 
        subsection (j) are exceeded.''.
            (2) Exception from reporting.--Paragraph (4) of section 
        220(j) of such Code is amended by adding at the end the 
        following new subparagraph:
                    ``(E) Exception for accounts of individuals covered 
                by federal employee health benefits plans.--No report 
                shall be required under this paragraph with respect to 
                a medical savings account of an individual if such 
                account was established at the time such individual was 
                an eligible individual by reason of subsection 
                (c)(1)(A)(iii)(III).''.

Summary: Federal Employees Health Care Freedom of Choice Act - Amends provisions of Federal law relating to the Federal Employees' Health Benefits Program (FEHBP) to authorize, and in certain circumstances require, the Office of Personnel Management (OPM) to contract with qualified carriers for a high deductible health plan . Requires that such a plan provide benefits of the types provided by service benefit plans, indemnity benefit plans, or both. Sets forth special contribution requirements applicable to employees or annuitants enrolled in such plans, including mandating certain payments to the medical savings account of each individual so enrolled. Requires OPM to make information available to such individuals regarding the circumstances in which a Government contribution will be made to a medical savings account and the amount of that contribution. Amends Internal Revenue Code medical savings account provisions to modify the definition of eligible individual to add references to high deductible plans provided under the FEHBP. Regulates the medical savings account deduction for FEHBP individuals. Exempts FEHBP individuals from numerical limits on the number of taxpayers having medical savings accounts.