To make medical savings accounts available in connection with certain health plans under chapter 89 of title 5, United States Code, and for other purposes.

SECTION 1. PROVISIONS RELATING TO TITLE 5, UNITED STATES CODE.

    (a) Additional Plans.--
            (1) In general.--Section 8903 of title 5, United States 
        Code, is amended by adding at the end the following new 
        paragraph:
            ``(5) High deductible health plans.--One or more plans 
        described in paragraph (1), (2), (3), or (4), which--
                    ``(A) are high deductible health plans (as defined 
                by section 220(c)(2) of the Internal Revenue Code of 
                1986); and
                    ``(B) provide benefits of the types referred to by 
                section 8904(a)(5).''.
            (2) Types of benefits.--Section 8904(a) of such title is 
        amended by inserting after paragraph (4) the following new 
        paragraph:
            ``(5) High deductible health plans.--Benefits of the types 
        named under paragraph (1) or (2) of this subsection or both.''.
            (3) Conforming amendment.--Section 8903a(a) of such title 
        is amended by striking ``section.'' and inserting ``section 
        (including plans described by section 8903(5)).''.
    (b) Contributions.--
            (1) Allowing payment of full amount of charge for high 
        deductible health plan.--Section 8906(b)(2) of title 5, United 
        States Code, is amended by inserting ``(or 100 percent of the 
        subscription charge in the case of a high deductible health 
        plan)'' after ``75 percent of the subscription charge''.
            (2) Government contribution to medical savings accounts.--
        Section 8906 of title 5, United States Code, is amended by 
        adding at the end the following new subsection:
    ``(j)(1) In the case of an employee or annuitant who is enrolled in 
a high deductible health plan, if the maximum Government contribution 
(as computed under subsection (b)(1)) exceeds the total subscription 
charge of the plan in which the employee or annuitant is enrolled, 
then, the excess shall be paid into such medical savings account (of 
such employee or annuitant) as the employee or annuitant may designate.
    ``(2) Contributions under this subsection shall be made on the same 
biweekly (or other periodic) basis as the Government contributions 
otherwise being made on behalf of the employee or annuitant involved.
    ``(3) For purposes of carrying out this subsection in the case of 
an employee occupying a position on a part-time career employment 
basis, the maximum Government contribution shall be equal to the amount 
computed with respect to such employee under subsection (b)(3).
    ``(4) Subsections (f), (g), and (h) shall apply with respect to 
contributions under this subsection.
    ``(5) A designation under paragraph (1) shall be made in such time 
and manner as the Office by regulation requires.
    ``(6) For the purpose of this subsection--
            ``(A) the term `medical savings account' has the meaning 
        given such term by section 220(d) of the Internal Revenue Code 
        of 1986; and
            ``(B) the term `high deductible health plan' means a high 
        deductible health plan described by section 8903(5).''.
            (3) Disregarding high deductible health plans in 
        determining level of government contributions.--Section 8906(a) 
        of such title is amended--
                    (A) in paragraph (1) by striking ``plan;'' and 
                inserting ``plan described by section 8903(1);'';
                    (B) in paragraph (2) by striking ``plan;'' and 
                inserting ``plan described by section 8903(2);'';
                    (C) in paragraph (3) by inserting ``described by 
                section 8903(3)'' after ``plans''; and
                    (D) in paragraph (4) by inserting ``described by 
                section 8903(4)'' after ``plans''.
    (c) Effective Date.--The amendments made by this section shall 
apply to contract years beginning after December 31, 1997.

SEC. 2. PROVISIONS RELATING TO THE INTERNAL REVENUE CODE OF 1986.

    (a) In General.--Section 220 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(k) Federal Employees Health Benefit Plan.--For purposes of this 
section--
            ``(1) Federal government.--The Federal Government shall be 
        treated as a small employer.
            ``(2) Limitation on deduction in case of annuitant, etc.--
        Subparagraph (A) of subsection (b)(4) shall not apply in the 
        case of an individual who elects coverage under section 8905 or 
        8905a of title 5, United States Code, and who is enrolled in a 
        high deductible health plan under chapter 89 of such title.
            ``(3) Coordination with exclusion for employer 
        contributions.--The amount allowable for a taxable year as a 
        deduction under subsection (a) to an individual described in 
        paragraph (2) of this subsection shall be reduced (but not 
        below zero) by the amount which would (but for section 106(b)) 
        be includible in such individual's gross income for such 
        taxable year. The limitation of the preceding sentence shall be 
        in lieu of the limitation of subsection (b)(5).
            ``(4) Numerical limitations and sunset.--
                    ``(A) Subsection (i) shall not apply to an 
                individual described in paragraph (2).
                    ``(B) Subsection (j) shall be applied without 
                regard to a medical savings account established on 
                behalf of an individual described in paragraph (2).''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1997.

Summary: Amends Federal law relating to health insurance for Federal employees to authorize the Office of Personnel Management to contract for or approve one or more high deductible plans providing specified benefits. Allows the Government contribution for high deductible plans to be 100 percent of the subscription charge. Requires that, if 60 percent of the average subscription charge exceeds the total subscription charge of an employee's or annuitant's plan, the excess be paid into the employee's or annuitant's medical savings account. Determines that average disregarding high deductible plans. Amends Internal Revenue Code medical savings account provisions to require, for those provisions, treating the Federal Government as a small employer. Exempts individuals in high deductible plans from provisions limiting: (1) the medical savings account deduction to the compensation of the individual, and (2) the number of taxpayers having medical savings accounts.