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[House Report 109-192]
[From the U.S. Government Publishing Office]

109th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    109-192

======================================================================

 
           STATE HIGH RISK POOL FUNDING EXTENSION ACT OF 2005

                                _______
                                

 July 27, 2005.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Barton of Texas, from the Committee on Energy and Commerce, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 3204]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 3204) to amend title XXVII of the Public Health 
Service Act to extend Federal funding for the establishment and 
operation of State high risk health insurance pools, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     1
Purpose and Summary..............................................     3
Background and Need for Legislation..............................     4
Hearings.........................................................     4
Committee Consideration..........................................     4
Committee Votes..................................................     5
Committee Oversight Findings.....................................     5
Statement of General Performance Goals and Objectives............     5
New Budget Authority, Entitlement Authority, and Tax Expenditures     5
Committee Cost Estimate..........................................     5
Congressional Budget Office Estimate.............................     5
Federal Mandates Statement.......................................     7
Advisory Committee Statement.....................................     7
Constitutional Authority Statement...............................     7
Applicability to Legislative Branch..............................     8
Section-by-Section Analysis of the Legislation...................     8
Changes in Existing Law Made by the Bill, as Reported............     9

                               Amendment

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``State High Risk Pool Funding Extension 
Act of 2005''.

SEC. 2. EXTENSION OF FUNDING FOR ESTABLISHMENT AND OPERATION OF STATE 
                    HIGH RISK HEALTH INSURANCE POOLS.

  (a) Authorization of Appropriations.--Subsection (c) of section 2745 
of the Public Health Service Act (42 U.S.C. 300gg-45) is amended to 
read as follows:
  ``(c) Authorization of Appropriations.--
          ``(1) Seed grants.--For the purpose of carrying out 
        subsection (a), there is authorized to be appropriated 
        $15,000,000 for fiscal year 2005.
          ``(2) Operation of pools.--For the purpose of carrying out 
        subsection (b), there is authorized to be appropriated 
        $50,000,000 for each of the fiscal years 2005 through 2009.
          ``(3) Availability; rule of construction.--Funds appropriated 
        under this subsection for a fiscal year shall remain available 
        for obligation through the end of the following fiscal year. 
        Nothing in this section shall be construed as providing a State 
        with an entitlement to a grant under this section.''.
  (b) Change in Requirements for Qualified High Risk Pools.--
          (1) Change in requirement for operational grants.--Subsection 
        (b) of such section is amended--
                  (A) in paragraph (1)(A), by inserting ``(or 200 
                percent in the case of a State that meets the 
                requirements of paragraph (3))'' after ``150 percent'';
                  (B) in paragraph (1)(C), by striking ``after the end 
                of fiscal year 2004'' and inserting ``after the end of 
                the last fiscal year for which a grant is provided 
                under this paragraph''; and
                  (C) by adding at the end the following new paragraph:
          ``(3) Special rule for pools charging higher premiums.--In 
        the case of a qualified high risk pool of a State which charges 
        premiums that exceed 150 percent of the premium for applicable 
        standard risks, the State shall use at least 50 percent of the 
        amount of the grant provided to carry out this subsection to 
        reduce premiums for enrollees. ''.
          (2) Change in definition of qualified high risk pool.--
        Subsection (d) of such section is amended to read as follows:
  ``(d) Definitions.--In this section:
          ``(1) Qualified high risk pool.--The term `qualified high 
        risk pool' has the meaning given such term in section 
        2744(c)(2), except that a State may elect to meet the 
        requirement of subparagraph (A) of such section (insofar as it 
        requires the provision of coverage to all eligible individuals) 
        through providing for the enrollment of eligible individuals 
        through an acceptable alternative mechanism (as defined for 
        purposes of section 2744) that includes a high risk pool as a 
        component.
          ``(2) Standard risk rate.--The term `standard risk rate' 
        means a rate that--
                  ``(A) is determined under the State high risk pool by 
                considering the premium rates charged by other health 
                insurers offering health insurance coverage to 
                individuals in the insurance market served;
                  ``(B) is established using reasonable actuarial 
                techniques; and
                  ``(C) reflects anticipated claims experience and 
                expenses for the coverage involved.
          ``(3) State.--The term `State' means any of the 50 States and 
        the District of Columbia.''.
          (3) Effective date.--The amendments made by this subsection 
        shall apply to grants for fiscal years beginning with fiscal 
        year 2005.
  (c) Change in Allotment Formula for Operational Grants.--Subsection 
(b)(2) of such section is amended--
          (1) by inserting ``(before fiscal year 2005)'' after ``for a 
        fiscal year''; and
          (2) by adding at the end the following:
 ``The amount appropriated under subsection (c)(2) for a fiscal year 
beginning with fiscal year 2005 (less the portion of such amount made 
available to carry out subsection (f)) shall be made available to the 
States (including entities that operate the high risk pool under 
applicable State law in a State) that qualify for a grant under 
subsection (b) as follows:
                  ``(A) An amount equal to \1/3\ of such amount shall 
                be allocated in equal amounts among such qualifying 
                States.
                  ``(B) An amount equal to \1/3\ of such amount shall 
                be allocated among such States so that the amount 
                provided to a State bears the same ratio to such 
                available amount as the number of uninsured individuals 
                in the State bears to the total number of uninsured 
                individuals in all such States (as determined by the 
                Secretary).
                  ``(C) An amount equal to \1/3\ of such amount shall 
                be allocated among such States so that the amount 
                provided to a State bears the same ratio to such 
                available amount as the number of individuals enrolled 
                in health care coverage through the qualified high risk 
                pool of the State bears to the total number of 
                individuals so enrolled through qualified high risk 
                pools in all such States (as determined by the 
                Secretary).''.
  (d) Administrative Provisions; Annual Report.--Such section is 
amended by adding at the end the following new subsection:
  ``(e) Administrative Provisions; Annual Report.--
          ``(1) Applications.--To be eligible for a grant under this 
        section, a State shall submit to the Secretary an application 
        at such time, in such manner, and containing such information 
        as the Secretary may require.
          ``(2) No entitlement.--Nothing in this section shall be 
        construed as providing a State with an entitlement to a grant 
        under this section.
          ``(3) Annual report.--The Secretary shall submit to Congress 
        an annual report on grants provided under this section. Each 
        such report shall include information on the distribution of 
        such grants among the States and the use of grant funds by 
        States.''.
  (e) Bonus Grants for Supplemental Consumer Benefits.--Such section is 
further amended--
          (1) in subsection (c)(2), as added by subsection (a), by 
        adding at the end the following: ``Of the amount appropriated 
        under the preceding sentence for fiscal year 2005, up to 50 
        percent shall be available for the purpose of carrying out 
        subsection (f).''; and
          (2) by adding at the end the following new subsection:
  ``(f) Bonus Grants for Supplemental Consumer Benefits.--
          ``(1) In general.--In the case of each State that has 
        established a qualified high risk pool, the Secretary shall 
        provide, from the funds made available under subsection (c)(2) 
        to carry out this subsection, a grant to be used to provide 
        supplemental consumer benefits to enrollees or potential 
        enrollees (or defined subsets of such enrollees or potential 
        enrollees) in qualified high risk pools.
          ``(2) Benefits.--Funds provided to a State under paragraph 
        (1) may be used only to provide one or more of the following 
        benefits:
                  ``(A) Low-income premium subsidies.
                  ``(B) A reduction in premium trends, actual premiums, 
                or other cost-sharing requirements.
                  ``(C) An expansion or broadening of the pool of 
                individuals eligible for coverage, such as through 
                eliminating waiting lists, increasing enrollment caps, 
                or providing flexibility in enrollment rules.
          ``(3) Limitation.--In no case shall the amount of a grant 
        under this subsection to a State, from the amount made 
        available under subsection (c)(2) for a fiscal year to carry 
        out this subsection, exceed 10 percent of the amount so made 
        available.
          ``(4) Rule of construction.--Nothing in this subsection shall 
        be construed to prohibit a State that, on the date of enactment 
        of this subsection, is in the process of implementing programs 
        to provide benefits of the type described in paragraph (2), 
        from being eligible for a grant under this subsection.
          ``(5) Funding.--
                  ``(A) Availability.--Funds appropriated under this 
                subsection for a fiscal year shall remain available for 
                obligation through the end of the following fiscal 
                year.
                  ``(B) Reallotment.--If, on June 30 of a fiscal year 
                for which funds are made available under this 
                subsection, the Secretary determines that the full 
                amounts will not be made available for grants under 
                this subsection, such remaining amounts shall be made 
                available and allotted among qualifying States under 
                subsection (b) for the fiscal year in accordance with 
                the formula under subsection (b)(2).''.

                          Purpose and Summary

    The purpose of H.R. 3204 is to extend Federal funding for 
the establishment and operation of State high risk health 
insurance pools.

                  Background and Need for Legislation

    The State High Risk Pool Funding Extension Act of 2005 
extends Federal funding that was made available under the Trade 
Act of 2002 for the establishment and operation of State high-
risk health insurance pools.
    High-risk pools provide health insurance for individuals 
who have been unable to purchase coverage due to pre-existing 
conditions, chronic illnesses, or conditions that make them too 
expensive to insure. Risk pools allow eligible individuals to 
purchase health insurance, pay premiums, and receive health 
coverage through private insurers. In states that operate 
pools, total premiums are capped at a fixed percentage of 
market-based premiums, which helps to guarantee that the 
product remains affordable. Because high-risk pools cover many 
individuals who have major health problems, the costs of 
operating the pools exceed the funds received through 
beneficiary premiums. States operating pools have historically 
made up for this shortfall through taxes upon health insurers 
and also in some instances general fund revenues.
    The Trade Act of 2002 provided new federal funding for 
state high-risk pools. The Act provided $40 million for fiscal 
years 2003 and 2004 for states to cover a portion of the losses 
of qualified state high-risk pools. These funds were 
distributed to states according to a formula that was based on 
the number of uninsured persons living in the state. The Act 
also provided $20 million for fiscal year 2003 for seed grants 
to states seeking to establish high-risk pools.
    H.R. 3204 would extend seed grant funding to $15 million 
for fiscal year 2005, and would provide $50 million for each of 
fiscal years 2005 through 2009 for the operation of a qualified 
high-risk pool. H.R. 3204 also makes several changes to the 
definition of a ``qualified high risk'' pool that would be 
eligible for Federal grant money. In addition, H.R. 3204 would 
alter the allotment formula for distributing grant money. This 
formula would stipulate that \1/3\ of the allotted grant money 
would be allocated in equal amounts among qualifying states, 
\1/3\ of such amount will be allocated based on the number of 
uninsured individuals in a state, and \1/3\ of such amount will 
be allocated based on the number of individuals enrolled in the 
state's high risk pool. Finally, this legislation provides 
bonus grants to ensure that a significant portion of the 
Federal funding is used to provide supplemental consumer 
benefits for current and potential pool enrollees.

                                Hearings

    The Committee on Energy and Commerce has not held hearings 
on the legislation.

                        Committee Consideration

    On Tuesday, June 14, 2005, the Subcommittee on Health met 
in open markup session and approved H.R. 3204, the State High 
Risk Pool Funding Extension Act of 2005, for full Committee 
consideration, by a voice vote, a quorum being present. On 
Wednesday, July 20, 2005, the full Committee met in open markup 
session and ordered H.R. 3204 favorably reported to the House, 
amended, by a voice vote, a quorum being present.

                            Committee Votes

    There were no record votes taken in connection with 
ordering H.R. 3204 reported. A motion by Mr. Barton to order 
H.R. 3204 reported to the House, amended, was agreed to by a 
voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has not held oversight 
or legislative hearings on this legislation.

         Statement of General Performance Goals and Objectives

    The goals of H.R. 3204 are to extend Federal funding for 
the establishment and operation of State high risk health 
insurance pools, and also to expand the definition of a 
``qualified high risk pool'' that would qualify for Federal 
funding.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
3204, the State High Risk Pool Funding Extension Act of 2005, 
would result in no new or increased budget authority, 
entitlement authority, or tax expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:
                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 25, 2005.
Hon. Joe Barton,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3204, the State 
High Risk Pool Funding Extension Act of 2005.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Shinobu 
Suzuki.
            Sincerely,
                                      Elizabeth M. Robinson
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

H.R. 3204--State High Risk Pool Funding Extension Act of 2005

    Summary: H.R. 3204 would amend the Public Health Service 
Act to extend the funding for the creation and operation of a 
state high-risk health insurance pool. The high-risk pools 
offer health insurance to individuals who cannot obtain 
coverage in the marketplace. Under an authorization that 
expired in 2004, the Department of Health and Human Services 
(HHS) provided seed grants to states to create a high-risk 
health insurance pool and operational grants for the losses 
incurred in connection with the operation of a pool. H.R. 3204 
would extend the funding for the seed grants through 2006 and 
would increase and extend the funding for the operational 
grants through 2009. In addition would alter how grants are 
allotted to states. This estimate assumes that H.R. 3204 will 
be enacted near the end of fiscal year 2005. CBO estimates that 
enactment of H.R. 3204 would have no effect on direct spending 
in 2005 but would increase direct spending by $30 million in 
2006 and $230 million over the 2006-2010 period. Enacting H.R. 
3204 would not affect revenues.
    H.R. 3204 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would extend and expand appropriation for grants to states 
that operate high-risk insurance pools.
    Estimated cost to the federal government: The estimate 
budgetary impact of H.R. 3204 is shown in the following table. 
The costs of this legislation fall within budget function 550 
(health).

----------------------------------------------------------------------------------------------------------------
                                                               By fiscal year, in millions of dollars--
                                                     -----------------------------------------------------------
                                                        2005      2006      2007      2008      2009      2010
----------------------------------------------------------------------------------------------------------------
                                           CHANGES IN DIRECT SPENDING

Budget Authority....................................        65        50        50        50        50         0
Estimated Outlays...................................         0        30        50        50        50        50
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: H.R. 3204 would amend the Public Health 
Service Act to reauthorize a program that provided grants to 
states that establish a qualifying health insurance pool for 
high-risk individuals. The bill would appropriate $15 million 
in 2005 for seed grants to states to establish qualified high-
risk health insurance pools, and would appropriate $50 million 
a year for fiscal years 2005 through 2009 for grants to states 
to defray the cost of operating high-risk pools. The original 
program appropriated funds for seed grants during 2003 and for 
grants to defray operating costs during 2003 and 2004. CBO 
estimates that enacting H.R. 3204 would have no effect on 
direct spending in 2005 but would increase direct spending by 
$230 million over the 2006-2010 period.
    The seed grant program would provide grants of up to $1 
million to each state that establishes a qualified high-risk 
insurance program. Based on the experience of the original seed 
grant program, and on information from HHS regarding the number 
of states likely to qualify for seed grants in 2005 and 2006, 
CBO estimates that direct spending for seed grants would total 
$5 million over the 2005-2010 period.
    H.R. 3204 would eliminate both the original requirement 
that each state match the amount of the federal grant to defray 
the cost of operating a high-risk pool and the corresponding 
limit on the federal contribution to no more than half of the 
operating loss of the pool. The bill would require that a 
portion of the fiscal year 2005 funds for operational grants be 
used for grants to provide supplemental benefits, such as 
premium subsidies for low-income individuals, a reduction in 
premiums or other cost-sharing requirements, an expansion or 
broadening of the pool of individuals eligible for coverage, or 
increased benefits to enrollees or potential enrollees in a 
qualified high-risk pool. However, on June 30 of the following 
fiscal year, unspent funds allocated to grants for supplemental 
benefits would be distributed to the states receiving 
operational grants that cover incurred losses.
    The bill also would modify the formula for allocating funds 
to states to give one third of the funds to eligible states 
equally and apportion remaining two-thirds based on the number 
of uninsured individuals in each state and the number of 
enrollees in the state's qualified high-risk pool. Previously, 
all funds were allotted based solely on the number of uninsured 
individuals in the state. Based on the operating losses of the 
existing pools (in 31 states), CBO expects that of the 
appropriated funds would be spent, with direct spending of $230 
million over the 2006-2010 period.
    Intergovernmental and private-sector impact: H.R. 3204 
contains no intergovernmental or private-sector mandates as 
defined in the UMRA and would benefit states by providing 
funding to establish and continue operations of high-risk pools 
for health insurance.
    Previous CBO etimate: On February 10, 2005, CBO transmitted 
an estimate of S. 288, the State High Risk Pool Funding 
Extension Act of 2005, as reported by the Senate Committee on 
Health, Education, Labor, and Pensions on February 10, 2005. 
CBO's estimates of two bills reflect differences in the level 
of appropriations: S. 288 would appropriate more than H.R. 3204 
($90 million in fiscal year 2005 and $75 million a year for 
fiscal years 2006 through 2009).
    Estimate prepared by: Federal costs: Shinobu Suzuki; Impact 
on state, local, and tribal governments: Leo Lex; Impact on the 
private sector: Chapin White.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation

Section 1. Short title

    This section designates the bill as the ``State High Risk 
Pool Funding Extension Act of 2005''.

Section 2. Extension of Funding for Establishment and Operation of 
        State High Risk Health Insurance Pool

    Section 2 amends section 2745(c) of the Public Health 
Service Act to extend the authorization of appropriations for 
seed grants, operation of state high risk pools.
    Section 2 also changes the requirements for qualified high 
risk pools. A state that charges 200 percent of the premium for 
standard risk rates may now qualify for Federal grant funding 
provided that the state uses 50 percent of the amount of the 
grant to carry out this subsection to reduce premiums for 
enrollees. Section 2 also states that a ``qualified high risk 
pool'' has the meaning given such term in section 2744(c)(2) of 
the Public Health Service Act, except that a state may elect to 
meet the requirement of subparagraph (A) of such section 
(insofar as it requires the provision of coverage to all 
eligible individuals) through providing for the enrollment of 
eligible individuals through an acceptable alternative 
mechanism (as defined in section 2744) that includes a high 
risk pool as a component. This modification was intended to 
ensure that Washington and Oregon, which operate high risk 
pools in this fashion, could qualify for Federal grant funding.
    Section 2 also changes the distribution formula so that \1/
3\ of the grant money is allocated in equal amounts among 
qualifying states, \1/3\ of such amount is allocated based on 
the number of uninsured individuals in a state, and \1/3\ of 
such amount is allocated based on the number of individuals 
enrolled in the state's high risk pool.
    Section 2 requires the Secretary of Health and Human 
Services to submit to Congress an annual report on grants 
provided under this section. Each such report shall include 
information on the distribution of such grants among the States 
and the use of grant funds by States.
    In addition, section 2 provides for bonus grants for 
supplemental consumer benefits. Up to 50 percent of the 
appropriated amount will be available for states only to 
provide for low-income premium subsidies; a reduction in 
premium trends, actual premiums, or other cost-sharing 
requirements, or an expansion or broadening of the pool of 
individuals eligible for coverage, such as through eliminating 
waiting lists, increasing enrollment caps, or providing 
flexibility in enrollment rules.
    Funds appropriated under this subsection for a fiscal year 
shall remain available for obligation through the end of the 
following fiscal year. If on June 30th of a fiscal year the 
Secretary determines that the full amount of funding will not 
be made available, such remaining amounts shall be made 
available and allotted among qualifying States for the fiscal 
year in accordance with the formula.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

SECTION 2745 OF THE PUBLIC HEALTH SERVICE ACT

           *       *       *       *       *       *       *

SEC. 2745. PROMOTION OF QUALIFIED HIGH RISK POOLS.

  (a) * * *
  (b) Matching Funds for Operation of Pools.--
          (1) In general.--In the case of a State that has 
        established a qualified high risk pool that--
                  (A) restricts premiums charged under the pool 
                to no more than 150 percent (or 200 percent in 
                the case of a State that meets the requirements 
                of paragraph (3)) of the premium for applicable 
                standard risk rates;
                  (B) offers a choice of two or more coverage 
                options through the pool; and
                  (C) has in effect a mechanism reasonably 
                designed to ensure continued funding of losses 
                incurred by the State [after the end of fiscal 
                year 2004] after the end of the last fiscal 
                year for which a grant is provided under this 
                paragraph in connection with operation of the 
                pool;
        the Secretary shall provide, from the funds 
        appropriated under subsection (c)(2) and allotted to 
        the State under paragraph (2), a grant of up to 50 
        percent of the losses incurred by the State in 
        connection with the operation of the pool.
          (2) Allotment.--The amounts appropriated under 
        subsection (c)(2) for a fiscal year (before fiscal year 
        2005) shall be made available to the States in 
        accordance with a formula that is based upon the number 
        of uninsured individuals in the States. The amount 
        appropriated under subsection (c)(2) for a fiscal year 
        beginning with fiscal year 2005 (less the portion of 
        such amount made available to carry out subsection (f)) 
        shall be made available to the States (including 
        entities that operate the high risk pool under 
        applicable State law in a State) that qualify for a 
        grant under subsection (b) as follows:
                  (A) An amount equal to \1/3\ of such amount 
                shall be allocated in equal amounts among such 
                qualifying States.
                  (B) An amount equal to \1/3\ of such amount 
                shall be allocated among such States so that 
                the amount provided to a State bears the same 
                ratio to such available amount as the number of 
                uninsured individuals in the State bears to the 
                total number of uninsured individuals in all 
                such States (as determined by the Secretary).
                  (C) An amount equal to \1/3\ of such amount 
                shall be allocated among such States so that 
                the amount provided to a State bears the same 
                ratio to such available amount as the number of 
                individuals enrolled in health care coverage 
                through the qualified high risk pool of the 
                State bears to the total number of individuals 
                so enrolled through qualified high risk pools 
                in all such States (as determined by the 
                Secretary).
          (3) Special rule for pools charging higher 
        premiums.--In the case of a qualified high risk pool of 
        a State which charges premiums that exceed 150 percent 
        of the premium for applicable standard risks, the State 
        shall use at least 50 percent of the amount of the 
        grant provided to carry out this subsection to reduce 
        premiums for enrollees.
  [(c) Funding.--Out of any money in the Treasury of the United 
States not otherwise appropriated, there are authorized and 
appropriated--
          [(1) $20,000,000 for fiscal year 2003 to carry out 
        subsection (a); and
          [(2) $40,000,000 for each of fiscal years 2003 and 
        2004 to carry out subsection (b).
Funds appropriated under this subsection for a fiscal year 
shall remain available for obligation through the end of the 
following fiscal year. Nothing in this section shall be 
construed as providing a State with an entitlement to a grant 
under this section.
  [(d) Qualified High Risk Pool and State Defined.--For 
purposes of this section, the term ``qualified high risk pool'' 
has the meaning given such term in section 2744(c)(2) and the 
term ``State'' means any of the 50 States and the District of 
Columbia.]
  (c) Authorization of Appropriations.--
          (1) Seed grants.--For the purpose of carrying out 
        subsection (a), there is authorized to be appropriated 
        $15,000,000 for fiscal year 2005.
          (2) Operation of pools.--For the purpose of carrying 
        out subsection (b), there is authorized to be 
        appropriated $50,000,000 for each of the fiscal years 
        2005 through 2009. Of the amount appropriated under the 
        preceding sentence for fiscal year 2005, up to 50 
        percent shall be available for the purpose of carrying 
        out subsection (f).
          (3) Availability; rule of construction.--Funds 
        appropriated under this subsection for a fiscal year 
        shall remain available for obligation through the end 
        of the following fiscal year. Nothing in this section 
        shall be construed as providing a State with an 
        entitlement to a grant under this section.
  (d) Definitions.--In this section:
          (1) Qualified high risk pool.--The term ``qualified 
        high risk pool'' has the meaning given such term in 
        section 2744(c)(2), except that a State may elect to 
        meet the requirement of subparagraph (A) of such 
        section (insofar as it requires the provision of 
        coverage to all eligible individuals) through providing 
        for the enrollment of eligible individuals through an 
        acceptable alternative mechanism (as defined for 
        purposes of section 2744) that includes a high risk 
        pool as a component.
          (2) Standard risk rate.--The term ``standard risk 
        rate'' means a rate that--
                  (A) is determined under the State high risk 
                pool by considering the premium rates charged 
                by other health insurers offering health 
                insurance coverage to individuals in the 
                insurance market served;
                  (B) is established using reasonable actuarial 
                techniques; and
                  (C) reflects anticipated claims experience 
                and expenses for the coverage involved.
          (3) State.--The term ``State'' means any of the 50 
        States and the District of Columbia.
  (e) Administrative Provisions; Annual Report.--
          (1) Applications.--To be eligible for a grant under 
        this section, a State shall submit to the Secretary an 
        application at such time, in such manner, and 
        containing such information as the Secretary may 
        require.
          (2) No entitlement.--Nothing in this section shall be 
        construed as providing a State with an entitlement to a 
        grant under this section.
          (3) Annual report.--The Secretary shall submit to 
        Congress an annual report on grants provided under this 
        section. Each such report shall include information on 
        the distribution of such grants among the States and 
        the use of grant funds by States.
  (f) Bonus Grants for Supplemental Consumer Benefits.--
          (1) In general.--In the case of each State that has 
        established a qualified high risk pool, the Secretary 
        shall provide, from the funds made available under 
        subsection (c)(2) to carry out this subsection, a grant 
        to be used to provide supplemental consumer benefits to 
        enrollees or potential enrollees (or defined subsets of 
        such enrollees or potential enrollees) in qualified 
        high risk pools.
          (2) Benefits.--Funds provided to a State under 
        paragraph (1) may be used only to provide one or more 
        of the following benefits:
                  (A) Low-income premium subsidies.
                  (B) A reduction in premium trends, actual 
                premiums, or other cost-sharing requirements.
                  (C) An expansion or broadening of the pool of 
                individuals eligible for coverage, such as 
                through eliminating waiting lists, increasing 
                enrollment caps, or providing flexibility in 
                enrollment rules.
          (3) Limitation.--In no case shall the amount of a 
        grant under this subsection to a State, from the amount 
        made available under subsection (c)(2) for a fiscal 
        year to carry out this subsection, exceed 10 percent of 
        the amount so made available.
          (4) Rule of construction.--Nothing in this subsection 
        shall be construed to prohibit a State that, on the 
        date of enactment of this subsection, is in the process 
        of implementing programs to provide benefits of the 
        type described in paragraph (2), from being eligible 
        for a grant under this subsection.
          (5) Funding.--
                  (A) Availability.--Funds appropriated under 
                this subsection for a fiscal year shall remain 
                available for obligation through the end of the 
                following fiscal year.
                  (B) Reallotment.--If, on June 30 of a fiscal 
                year for which funds are made available under 
                this subsection, the Secretary determines that 
                the full amounts will not be made available for 
                grants under this subsection, such remaining 
                amounts shall be made available and allotted 
                among qualifying States under subsection (b) 
                for the fiscal year in accordance with the 
                formula under subsection (b)(2).

                                  
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