II

106TH CONGRESS

1ST SESSION S. 1274

To amend the Internal Revenue Code of 1986 to increase the accessibility

to and affordability of health care, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 24, 1999

Mr. GRAMS (for himself, Mr. ROTH, Mr. ABRAHAM, Mr. ASHCROFT, Mr.

BURNS, Mr. DEWINE, Mr. FRIST, Mr. GORTON, Mrs. HUTCHISON, Mr.

SANTORUM, Mr. THOMAS, Mr. NICKLES, Mr. MACK, Mr. CRAIG, Mr.

COVERDELL, Mr. MCCONNELL, Mr. INHOFE, and Mr. BUNNING) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to increase

the accessibility to and affordability of health care, and

for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Health Care Access

5 and Equity Act of 1999’’.
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1 SEC. 2. DEDUCTION FOR HEALTH INSURANCE COSTS FOR

2 INDIVIDUALS NOT ELIGIBLE TO PARTICI3 PATE IN EMPLOYER-SUBSIDIZED HEALTH

4 PLANS.

5 (a) IN GENERAL.—Part VII of subchapter B of chap6 ter 1 of the Internal Revenue Code of 1986 (relating to

7 additional itemized deductions) is amended by redesig8 nating section 222 as section 223 and by inserting after

9 section 221 the following:

10 ‘‘SEC. 222. HEALTH INSURANCE COSTS.

11 ‘‘(a) IN GENERAL.—In the case of an individual,

12 there shall be allowed as a deduction an amount equal to

13 100 percent of the amount paid during the taxable year

14 for insurance which constitutes medical care for the tax15 payer, his spouse, and dependents.

16 ‘‘(b) LIMITATIONS.—

17 ‘‘(1) DEDUCTION NOT AVAILABLE TO INDIVID18 UALS ELIGIBLE FOR EMPLOYER-SUBSIDIZED COV19 ERAGE.—

20 ‘‘(A) IN GENERAL.—Except as provided in

21 subparagraphs (B) and (C), subsection (a) shall

22 not apply to any taxpayer for any calendar

23 month for which the taxpayer is eligible to par24 ticipate in any subsidized health plan main25 tained by any employer (or former employer) of

26 the taxpayer or of the spouse of the taxpayer.
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1 The preceding sentence shall be applied sepa2 rately with respect to—

3 ‘‘(i) plans which include coverage for

4 qualified long-term care services (as de5 fined in section 7702B(c)) or are qualified

6 long-term care insurance contracts (as de7 fined in section 7702B(b)), and

8 ‘‘(ii) coverage under the plans which

9 do not include such coverage and are not

10 such contracts.

11 ‘‘(B) CERTAIN COVERAGE DIS12 REGARDED.—Subparagraph (A) shall not apply

13 if the subsidized health plan is limited to—

14 ‘‘(i) coverage for accidents, disability,

15 dental care, vision care, or a specified ill16 ness, or

17 ‘‘(ii) making payments of a fixed

18 amount per day (or other period) of hos19 pitalization.

20 ‘‘(C) CONTINUATION COVERAGE.—Cov21 erage shall not be treated as subsidized for pur22 poses of this paragraph if—

23 ‘‘(i) such coverage is continuation cov24 erage (within the meaning of section
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1 4980B(f)) required to be provided by the

2 employer, and

3 ‘‘(ii) the taxpayer or the taxpayer’s

4 spouse is required to pay a premium for

5 such coverage in an amount not less than

6 100 percent of the applicable premium

7 (within the meaning of section

8 4980B(f)(4)) for the period of such cov9 erage.

10 ‘‘(2) LIMITATION ON LONG-TERM CARE PRE11 MIUMS.—In the case of a qualified long-term care

12 insurance contract (as defined in section 7702B(b)),

13 only eligible long-term care premiums (as defined in

14 section 213(d)(10)) shall be taken into account

15 under subsection (a).

16 ‘‘(3) DEDUCTION NOT AVAILABLE FOR PAY17 MENT OF CERTAIN PREMIUMS.—The following

18 amounts shall not be taken into account under sub19 section (a):

20 ‘‘(A) MEDICARE PREMIUMS.—Any amount

21 paid as a premium—

22 ‘‘(i) under part A, B, or C of title

23 XVIII of the Social Security Act, and
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1 ‘‘(ii) for any medicare supplemental

2 policy described in section 1882 of such

3 Act.

4 ‘‘(B) ANCILLARY COVERAGE PREMIUMS.—

5 Any amount paid as a premium for insurance

6 which provides for—

7 ‘‘(i) coverage for accidents, disability,

8 dental care, vision care, or a specified ill9 ness, or

10 ‘‘(ii) making payments of a fixed

11 amount per day (or other period) of hos12 pitalization.

13 ‘‘(C) TANGENTIAL COVERAGE PRE14 MIUMS.—Any amount paid as a premium for

15 insurance if substantially all of the coverage

16 provided under such insurance relates to—

17 ‘‘(i) liabilities incurred under workers’

18 compensation laws,

19 ‘‘(ii) tort liabilities,

20 ‘‘(iii) liabilities relating to ownership

21 or use of property, or

22 ‘‘(iv) such other similar liabilities as

23 the Secretary may specify by regulations.

24 ‘‘(c) SPECIAL RULES.—For purposes of this

25 section—
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1 ‘‘(1) COORDINATION WITH MEDICAL DEDUC2 TION, ETC.—Any amount paid by a taxpayer for in3 surance to which subsection (a) applies shall not be

4 taken into account in computing the amount allow5 able to the taxpayer as a deduction under section

6 213(a).

7 ‘‘(2) DEDUCTION NOT ALLOWED FOR SELF-EM8 PLOYMENT TAX PURPOSES.—The deduction allow9 able by reason of this section shall not be taken into

10 account in determining an individual’s net earnings

11 from self-employment (within the meaning of section

12 1402(a)) for purposes of chapter 2.’’

13 (b) CONFORMING AMENDMENTS.—

14 (1) Subsection (l) of section 162 of the Internal

15 Revenue Code of 1986 is repealed.

16 (2) Subsection (a) of section 62 of such Code

17 is amended by inserting after paragraph (17) the

18 following:

19 ‘‘(18) HEALTH INSURANCE COSTS OF CERTAIN

20 INDIVIDUALS.—The deduction allowed by section

21 222.’’

22 (3) The table of sections for part VII of sub23 chapter B of chapter 1 of such Code is amended by

24 striking the last item and inserting the following:

‘‘Sec. 222. Health insurance costs.

‘‘Sec. 223. Cross reference.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1999.

4 SEC. 3. FULL AVAILABILITY OF MEDICAL SAVINGS AC5 COUNTS.

6 (a) AVAILABILITY NOT LIMITED TO ACCOUNTS FOR

7 EMPLOYEES OF SMALL EMPLOYERS AND SELF-EM8 PLOYED INDIVIDUALS.—

9 (1) IN GENERAL.—Section 220(c)(1)(A) of the

10 Internal Revenue Code of 1986 (relating to eligible

11 individual) is amended to read as follows:

12 ‘‘(A) IN GENERAL.—The term ‘eligible in13 dividual’ means, with respect to any month, any

14 individual if—

15 ‘‘(i) such individual is covered under a

16 high deductible health plan as of the 1st

17 day of such month, and

18 ‘‘(ii) such individual is not, while cov19 ered under a high deductible health plan,

20 covered under any health plan—

21 ‘‘(I) which is not a high deduct22 ible health plan, and

23 ‘‘(II) which provides coverage for

24 any benefit which is covered under the

25 high deductible health plan.’’
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1 (2) CONFORMING AMENDMENTS.—

2 (A) Section 220(c)(1) of such Code is

3 amended by striking subparagraphs (C) and

4 (D).

5 (B) Section 220(c) of such Code is amend6 ed by striking paragraph (4) (defining small

7 employer) and by redesignating paragraph (5)

8 as paragraph (4).

9 (C) Section 220(b) of such Code is amend10 ed by striking paragraph (4) (relating to deduc11 tion limited by compensation) and by redesig12 nating paragraphs (5), (6), and (7) as para13 graphs (4), (5), and (6), respectively.

14 (b) REMOVAL OF LIMITATION ON NUMBER OF TAX15 PAYERS HAVING MEDICAL SAVINGS ACCOUNTS.—

16 (1) IN GENERAL.—Section 220 of the Internal

17 Revenue Code of 1986 (relating to medical savings

18 accounts) is amended by striking subsections (i) and

19 (j).

20 (2) MEDICARE+CHOICE.—Section 138 of such

21 Code (relating to Medicare+Choice MSA) is amend22 ed by striking subsection (f).

23 (c) REDUCTION IN HIGH DEDUCTIBLE PLAN MIN24 IMUM ANNUAL DEDUCTIBLE.—
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1 (1) IN GENERAL.—Section 220(c)(2)(A) of the

2 Internal Revenue Code of 1986 (relating to high de3 ductible health plan) is amended—

4 (A) by striking ‘‘$1,500’’ in clause (i) and

5 inserting ‘‘$1,000’’, and

6 (B) by striking ‘‘$3,000’’ in clause (ii) and

7 inserting ‘‘$2,000’’.

8 (2) CONFORMING AMENDMENT.—Subsection (g)

9 of section 220 of such Code is amended—

10 (A) by striking ‘‘1998’’ and inserting

11 ‘‘1999’’; and

12 (B) by striking ‘‘1997’’ and inserting

13 ‘‘1998’’.

14 (d) INCREASE IN CONTRIBUTION LIMIT TO 100 PER15 CENT OF ANNUAL DEDUCTIBLE.—

16 (1) IN GENERAL.—Section 220(b)(2) of the In17 ternal Revenue Code of 1986 (relating to monthly

18 limitation) is amended to read as follows:

19 ‘‘(2) MONTHLY LIMITATION.—The monthly limitation for any month is the amount equal to 1 20 ⁄12 of

21 the annual deductible of the high deductible health

22 plan of the individual.’’

23 (2) CONFORMING AMENDMENT.—Section

24 220(d)(1)(A) of such Code is amended by striking

25 ‘‘75 percent of’’.
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1 (e) LIMITATION ON ADDITIONAL TAX ON DISTRIBU2 TIONS NOT USED FOR QUALIFIED MEDICAL EX3 PENSES.—Section 220(f)(4) of the Internal Revenue Code

4 of 1986 (relating to additional tax on distributions not

5 used for qualified medical expenses) is amended by adding

6 at the end the following:

7 ‘‘(D) EXCEPTION IN CASE OF SUFFICIENT

8 ACCOUNT BALANCE.—Subparagraph (A) shall

9 only apply to any payment or distribution in

10 any taxable year to the extent that the fair

11 market value of the assets of the medical sav12 ings account after such payment or distribution

13 is less than the annual deductible for the high

14 deductible health plan of the account holder

15 (determined as of January 1 of the calendar

16 year in which the taxable year begins).’’

17 (f) EFFECTIVE DATE.—The amendments made by

18 this section shall apply to taxable years beginning after

19 December 31, 1999.

20 SEC. 4. CARRYOVER OF UNUSED BENEFITS FROM CAFE21 TERIA PLANS, FLEXIBLE SPENDING AR22 RANGEMENTS, AND HEALTH FLEXIBLE

23 SPENDING ACCOUNTS.

24 (a) IN GENERAL.—Section 125 of the Internal Rev25 enue Code of 1986 (relating to cafeteria plans) is amended
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1 by redesignating subsections (h) and (i) as subsections (i)

2 and (j) and by inserting after subsection (g) the following:

3 ‘‘(h) ALLOWANCE OF CARRYOVERS OF UNUSED BEN4 EFITS TO LATER TAXABLE YEARS.—

5 ‘‘(1) IN GENERAL.—For purposes of this title—

6 ‘‘(A) notwithstanding subsection (d)(2), a

7 plan or other arrangement shall not fail to be

8 treated as a cafeteria plan or flexible spending

9 or similar arrangement, and

10 ‘‘(B) no amount shall be required to be in11 cluded in gross income by reason of this section

12 or any other provision of this chapter,

13 solely because under such plan or other arrangement

14 any nontaxable benefit which is unused as of the

15 close of a taxable year may be carried forward to 1

16 or more succeeding taxable years.

17 ‘‘(2) LIMITATION.—Paragraph (1) shall not

18 apply to amounts carried from a plan to the extent

19 such amounts exceed $500 (applied on an annual

20 basis). For purposes of this paragraph, all plans and

21 arrangements maintained by an employer or any re22 lated person shall be treated as 1 plan.

23 ‘‘(3) ALLOWANCE OF ROLLOVER.—

24 ‘‘(A) IN GENERAL.—In the case of any un25 used benefit described in paragraph (1) which
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1 consists of amounts in a health flexible spend2 ing account or dependent care flexible spending

3 account, the plan or arrangement shall provide

4 that a participant may elect, in lieu of such car5 ryover, to have such amounts distributed to the

6 participant.

7 ‘‘(B) AMOUNTS NOT INCLUDED IN IN8 COME.—Any distribution under subparagraph

9 (A) shall not be included in gross income to the

10 extent that such amount is transferred in a

11 trustee-to-trustee transfer, or is contributed

12 within 60 days of the date of the distribution,

13 to—

14 ‘‘(i) a qualified cash or deferred ar15 rangement described in section 401(k),

16 ‘‘(ii) a plan under which amounts are

17 contributed by an individual’s employer for

18 an annuity contract described in section

19 403(b),

20 ‘‘(iii) an eligible deferred compensa21 tion plan described in section 457, or

22 ‘‘(iv) a medical savings account (with23 in the meaning of section 220).

24 Any amount rolled over under this subpara25 graph shall be treated as a rollover contribution
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1 for the taxable year from which the unused

2 amount would otherwise be carried.

3 ‘‘(C) TREATMENT OF ROLLOVER.—Any

4 amount rolled over under subparagraph (B)

5 shall be treated as an eligible rollover under

6 section 220, 401(k), 403(b), or 457, whichever

7 is applicable, and shall be taken into account in

8 applying any limitation (or participation re9 quirement) on employer or employee contribu10 tions under such section or any other provision

11 of this chapter for the taxable year of the roll12 over.

13 ‘‘(4) COST-OF-LIVING ADJUSTMENT.—In the

14 case of any taxable year beginning in a calendar

15 year after 1999, the $500 amount under paragraph

16 (2) shall be adjusted at the same time and in the

17 same manner as under section 415(d)(2), except

18 that the base period taken into account shall be the

19 calendar quarter beginning October 1, 1998, and

20 any increase which is not a multiple of $50 shall be

21 rounded to the next lowest multiple of $50.’’

22 (b) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to taxable years beginning after

24 December 31, 1999.
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1 SEC. 5. PERMITTING CONTRIBUTION TOWARDS MEDICAL

2 SAVINGS ACCOUNT THROUGH FEDERAL EM3 PLOYEES HEALTH BENEFITS PROGRAM

4 (FEHBP).

5 (a) GOVERNMENT CONTRIBUTION TO MEDICAL SAV6 INGS ACCOUNT.—

7 (1) IN GENERAL.—Section 8906 of title 5,

8 United States Code, is amended by adding at the

9 end the following:

10 ‘‘(j)(1) In the case of an employee or annuitant who

11 is enrolled in a catastrophic plan described by section

12 8903(5), there shall be a Government contribution under

13 this subsection to a medical savings account established

14 or maintained for the benefit of the individual. The con15 tribution under this subsection shall be in addition to the

16 Government contribution under subsection (b).

17 ‘‘(2) The amount of the Government contribution

18 under this subsection with respect to an individual is equal

19 to the amount by which—

20 ‘‘(A) the maximum contribution allowed under

21 subsection (b)(1) with respect to any employee or

22 annuitant, exceeds

23 ‘‘(B) the amount of the Government contribu24 tion actually made with respect to the individual

25 under subsection (b) for coverage under the cata26 strophic plan.
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1 ‘‘(3) The Government contributions under this sub2 section shall be paid into a medical savings account (des3 ignated by the individual involved) in a manner that is

4 specified by the Office and consistent with the timing of

5 contributions under subsection (b).

6 ‘‘(4) Subsections (f) and (g) shall apply to contribu7 tions under this section in the same manner as they apply

8 to contributions under subsection (b).

9 ‘‘(5) For the purpose of this subsection, the term

10 ‘medical savings account’ has the meaning given such term

11 by section 220(d) of the Internal Revenue Code of 1986.’’

12 (2) ALLOWING PAYMENT OF FULL AMOUNT OF

13 CHARGE FOR CATASTROPHIC PLAN.—Section

14 8906(b)(2) of such title is amended by inserting ‘‘(or

15 100 percent of the subscription charge in the case

16 of a catastrophic plan)’’ after ‘‘75 percent of the

17 subscription charge’’.

18 (b) OFFERING OF CATASTROPHIC PLANS.—

19 (1) IN GENERAL.—Section 8903 of title 5,

20 United States Code, is amended by adding at the

21 end the following:

22 ‘‘(5) CATASTROPHIC PLANS.—One or more

23 plans described in paragraph (1), (2), or (3), but

24 which provide benefits of the types referred to by

25 paragraph (5) of section 8904(a), instead of the
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1 types referred to in paragraphs (1), (2), and (3) of

2 such section.’’

3 (2) TYPES OF BENEFITS.—Section 8904(a) of

4 such title is amended by inserting after paragraph

5 (4) the following:

6 ‘‘(5) CATASTROPHIC PLANS.—Benefits of the

7 types named under paragraph (1) or (2) of this sub8 section or both, to the extent expenses covered by

9 the plan exceed $500.’’

10 (3) DETERMINING LEVEL OF GOVERNMENT

11 CONTRIBUTIONS.—Section 8906(b) of such title is

12 amended by adding at the end the following: ‘‘Sub13 scription charges for medical savings accounts shall

14 be deemed to be the amount of Government con15 tributions made under subsection (j)(2).’’

16 (c) EFFECTIVE DATE.—The amendments made by

17 this section shall apply to contract terms beginning on or

18 after January 1, 2000.

19 SEC. 6. INCLUSION OF QUALIFIED LONG-TERM CARE IN20 SURANCE CONTRACTS IN CAFETERIA PLANS,

21 FLEXIBLE SPENDING ARRANGEMENTS, AND

22 HEALTH FLEXIBLE SPENDING ACCOUNTS.

23 (a) IN GENERAL.—Section 125(f) of the Internal

24 Revenue Code of 1986 (defining qualified benefits) is

25 amended by striking the last sentence and inserting the
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1 following: ‘‘Such term includes any qualified long-term

2 care insurance contract.’’

3 (b) EFFECTIVE DATE.—The amendment made by

4 this section shall apply to taxable years beginning after

5 December 31, 1999.

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