II 

109TH CONGRESS 

2D SESSION S. 2382 

To establish a national health program administered by the Office of Personnel Management to offer health benefits plans to individuals who 

are not Federal employees, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MARCH 7, 2006 

Mr. DURBIN (for himself, Mrs. LINCOLN, Mr. REID, Mr. BAUCUS, Mr. KENNEDY, Mr. KERRY, Mr. BINGAMAN, Mrs. BOXER, Ms. CANTWELL, Mr. 

CARPER, Mrs. CLINTON, Mr. DODD, Mr. HARKIN, Mr. JOHNSON, Mr. 

KOHL, Ms. LANDRIEU, Mr. LAUTENBERG, Ms. MIKULSKI, Mr. NELSON

of Florida, Mr. PRYOR, Mr. MENENDEZ, Mr. ROCKEFELLER, and Mr. 

LEAHY) introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To establish a national health program administered by the 

Office of Personnel Management to offer health benefits 

plans to individuals who are not Federal employees, 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 ‘‘Small Employers 

5 Health Benefits Program Act of 2006’’. 


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1 SEC. 2. DEFINITIONS. 

2 (a) IN GENERAL.—In this Act, the terms ‘‘member 

3 of family’’, ‘‘health benefits plan’’, ‘‘carrier’’, ‘‘employee 

4 organizations’’, and ‘‘dependent’’ have the meanings given 

5 such terms in section 8901 of title 5, United States Code. 

6 (b) OTHER TERMS.—In this Act: 

7 (1) EMPLOYEE.—The term ‘‘employee’’ has the 

8 meaning given such term under section 3(6) of the 

9 Employee Retirement Income Security Act of 1974 

10 (29 U.S.C. 1002(6)). Such term shall not include an 

11 employee of the Federal Government. 

12 (2) EMPLOYER.—The term ‘‘employer’’ has the 

13 meaning given such term under section 3(5) of the 

14 Employee Retirement Income Security Act of 1974 

15 (29 U.S.C. 1002(5)), except that such term shall in16 clude only employers who employed an average of at 

17 least 1 but not more than 100 employees on busi18 ness days during the year preceding the date of ap19 plication. Such term shall not include the Federal 

20 Government. 

21 (3) HEALTH STATUS-RELATED FACTOR.—The 

22 term ‘‘health status-related factor’’ has the meaning 

23 given such term in section 2791(d)(9) of the Public 

24 Health Service Act (42 U.S.C. 300gg–91(d)(9)). 

25 (4) OFFICE.—The term ‘‘Office’’ means the Of26 fice of Personnel Management. 


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1 (5) PARTICIPATING EMPLOYER.—The term 

2 ‘‘participating employer’’ means an employer that— 

3 (A) elects to provide health insurance cov4 erage under this Act to its employees; and 

5 (B) is not offering other comprehensive 

6 health insurance coverage to such employees. 

7 (c) APPLICATION OF CERTAIN RULES IN DETER8 MINATION OF EMPLOYER SIZE.—For purposes of sub9 section (b)(2): 

10 (1) APPLICATION OF AGGREGATION RULE FOR

11 EMPLOYERS.—All persons treated as a single em12 ployer under subsection (b), (c), (m), or (o) of sec13 tion 414 of the Internal Revenue Code of 1986 shall 

14 be treated as 1 employer. 

15 (2) EMPLOYERS NOT IN EXISTENCE IN PRE16 CEDING YEAR.—In the case of an employer which 

17 was not in existence for the full year prior to the 

18 date on which the employer applies to participate, 

19 the determination of whether such employer meets 

20 the requirements of subsection (b)(2) shall be based 

21 on the average number of employees that it is rea22 sonably expected such employer will employ on busi23 ness days in the employer’s first full year. 


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1 (3) PREDECESSORS.—Any reference in this 

2 subsection to an employer shall include a reference 

3 to any predecessor of such employer. 

4 (d) WAIVER AND CONTINUATION OF PARTICIPA5 TION.— 

6 (1) WAIVER.—The Office may waive the limita7 tions relating to the size of an employer which may 

8 participate in the health insurance program estab9 lished under this Act on a case by case basis if the 

10 Office determines that such employer makes a com11 pelling case for such a waiver. In making determina12 tions under this paragraph, the Office may consider 

13 the effects of the employment of temporary and sea14 sonal workers and other factors. 

15 (2) CONTINUATION OF PARTICIPATION.—An 

16 employer participating in the program under this 

17 Act that experiences an increase in the number of 

18 employees so that such employer has in excess of 

19 100 employees, may not be excluded from participa20 tion solely as a result of such increase in employees. 

21 (e) TREATMENT OF HEALTH BENEFITS PLAN AS

22 GROUP HEALTH PLAN.—A health benefits plan offered 

23 under this Act shall be treated as a group health plan for 

24 purposes of applying the Employee Retirement Income Se25 curity Act of 1974 (29 U.S.C. 1001 et seq.) except to the 


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1 extent that a provision of this Act expressly provides oth2 erwise. 

3 SEC. 3. HEALTH INSURANCE COVERAGE FOR NON-FEDERAL 

4 EMPLOYEES. 

5 (a) ADMINISTRATION.—The Office shall administer a 

6 health insurance program for non-Federal employees and 

7 employers in accordance with this Act. 

8 (b) REGULATIONS.—Except as provided under this 

9 Act, the Office shall prescribe regulations to apply the pro10 visions of chapter 89 of title 5, United States Code, to 

11 the greatest extent practicable to participating carriers, 

12 employers, and employees covered under this Act. 

13 (c) LIMITATIONS.—In no event shall the enactment 

14 of this Act result in— 

15 (1) any increase in the level of individual or 

16 Federal Government contributions required under 

17 chapter 89 of title 5, United States Code, including 

18 copayments or deductibles; 

19 (2) any decrease in the types of benefits offered 

20 under such chapter 89; or 

21 (3) any other change that would adversely af22 fect the coverage afforded under such chapter 89 to 

23 employees and annuitants and members of family 

24 under that chapter. 


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1 (d) ENROLLMENT.—The Office shall develop methods 

2 to facilitate enrollment under this Act, including the use 

3 of the Internet. 

4 (e) CONTRACTS FOR ADMINISTRATION.—The Office 

5 may enter into contracts for the performance of appro6 priate administrative functions under this Act. 

7 (f) SEPARATE RISK POOL.—In the administration of 

8 this Act, the Office shall ensure that covered employees 

9 under this Act are in a risk pool that is separate from 

10 the risk pool maintained for covered individuals under 

11 chapter 89 of title 5, United States Code. 

12 (g) RULE OF CONSTRUCTION.—Nothing in this Act 

13 shall be construed to require a carrier that is participating 

14 in the program under chapter 89 of title 5, United States 

15 Code, to provide health benefits plan coverage under this 

16 Act. 

17 SEC. 4. CONTRACT REQUIREMENT. 

18 (a) IN GENERAL.—The Office may enter into con19 tracts with qualified carriers offering health benefits plans 

20 of the type described in section 8903 or 8903a of title 

21 5, United States Code, without regard to section 5 of title 

22 41, United States Code, or other statutes requiring com23 petitive bidding, to provide health insurance coverage to 

24 employees of participating employers under this Act. Each 

25 contract shall be for a uniform term of at least 1 year, 


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1 but may be made automatically renewable from term to 

2 term in the absence of notice of termination by either 

3 party. In entering into such contracts, the Office shall en4 sure that health benefits coverage is provided for individ5 uals only, individuals with one or more children, married 

6 individuals without children, and married individuals with 

7 one or more children. 

8 (b) ELIGIBILITY.—A carrier shall be eligible to enter 

9 into a contract under subsection (a) if such carrier— 

10 (1) is licensed to offer health benefits plan cov11 erage in each State in which the plan is offered; and 

12 (2) meets such other requirements as deter13 mined appropriate by the Office. 

14 (c) STATEMENT OF BENEFITS.— 

15 (1) IN GENERAL.—Each contract under this 

16 Act shall contain a detailed statement of benefits of17 fered and shall include information concerning such 

18 maximums, limitations, exclusions, and other defini19 tions of benefits as the Office considers necessary or 

20 desirable. 

21 (2) ENSURING A RANGE OF PLANS.—The Office 

22 shall ensure that a range of health benefits plans are 

23 available to participating employers under this Act, 

24 at least one of which shall be a plan that provides 

25 the same benefits as the government-wide plan availVerDate Aug 31 2005 21:48 Mar 08, 2006 Jkt 049200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2382.IS S2382

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1 able to Federal employees as described in section 

2 8903(1) of title 5, United States Code. 

3 (3) PARTICIPATING PLANS.—The Office shall 

4 not prohibit the offering of any health benefits plan 

5 to a participating employer if such plan is eligible to 

6 participate in the Federal Employees Health Bene7 fits Program. 

8 (4) NATIONWIDE PLAN.—With respect to all 

9 nationwide plans other than the plan required under 

10 paragraph (2), the Office shall develop a benefit 

11 package that shall be offered in the case of a con12 tract for a health benefit plan that is to be offered 

13 on a nationwide basis. 

14 (d) STANDARDS.—The minimum standards pre15 scribed for health benefits plans under section 8902(e) of 

16 title 5, United States Code, and for carriers offering plans, 

17 shall apply to plans and carriers under this Act. Approval 

18 of a plan may be withdrawn by the Office only after notice 

19 and opportunity for hearing to the carrier concerned with20 out regard to subchapter II of chapter 5 and chapter 7 

21 of title 5, United States Code. 

22 (e) CONVERSION.— 

23 (1) IN GENERAL.—A contract may not be made 

24 or a plan approved under this section if the carrier 

25 under such contract or plan does not offer to each 


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1 enrollee whose enrollment in the plan is ended, ex2 cept by a cancellation of enrollment, a temporary ex3 tension of coverage during which the individual may 

4 exercise the option to convert, without evidence of 

5 good health, to a nongroup contract providing health 

6 benefits. An enrollee who exercises this option shall 

7 pay the full periodic charges of the nongroup con8 tract. 

9 (2) NONCANCELLABLE.—The benefits and cov10 erage made available under paragraph (1) may not 

11 be canceled by the carrier except for fraud, over-in12 surance, or nonpayment of periodic charges. 

13 (f) REQUIREMENT OF PAYMENT FOR OR PROVISION

14 OF HEALTH SERVICE.—Each contract entered into under 

15 this Act shall require the carrier to agree to pay for or 

16 provide a health service or supply in an individual case 

17 if the Office finds that the employee, annuitant, family 

18 member, former spouse, or person having continued cov19 erage under section 8905a of title 5, United States Code, 

20 is entitled thereto under the terms of the contract. 

21 SEC. 5. ELIGIBILITY. 

22 An individual shall be eligible to enroll in a plan 

23 under this Act if such individual— 

24 (1) is an employee of an employer described in 

25 section 2(b)(2), or is a self employed individual as 


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1 defined in section 401(c)(1)(B) of the Internal Rev2 enue Code of 1986; and 

3 (2) is not otherwise enrolled or eligible for en4 rollment in a plan under chapter 89 of title 5, 

5 United States Code. 

6 SEC. 6. ALTERNATIVE CONDITIONS TO FEDERAL EM7 PLOYEE PLANS. 

8 (a) TREATMENT OF EMPLOYEE.—For purposes of 

9 enrollment in a health benefits plan under this Act, an 

10 individual who had coverage under a health insurance plan 

11 and is not a qualified beneficiary as defined under section 

12 4980B(g)(1) of the Internal Revenue Code of 1986 shall 

13 be treated in a similar manner as an individual who begins 

14 employment as an employee under chapter 89 of title 5, 

15 United States Code. 

16 (b) PREEXISTING CONDITION EXCLUSIONS.— 

17 (1) IN GENERAL.—Each contract under this 

18 Act may include a preexisting condition exclusion as 

19 defined under section 9801(b)(1) of the Internal 

20 Revenue Code of 1986. 

21 (2) EXCLUSION PERIOD.—A preexisting condi22 tion exclusion under this subsection shall provide for 

23 coverage of a preexisting condition to begin not later 

24 than 6 months after the date on which the coverage 

25 of the individual under a health benefits plan comVerDate Aug 31 2005 21:48 Mar 08, 2006 Jkt 049200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2382.IS S2382

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1 mences, reduced by the aggregate 1 day for each day 

2 that the individual was covered under a health insur3 ance plan immediately preceding the date the indi4 vidual submitted an application for coverage under 

5 this Act. This provision shall be applied notwith6 standing the applicable provision for the reduction of 

7 the exclusion period provided for in section 

8 701(a)(3) of the Employee Retirement Income Secu9 rity Act of 1974 (29 U.S.C. 1181(a)(3)). 

10 (c) RATES AND PREMIUMS.— 

11 (1) IN GENERAL.—Rates charged and pre12 miums paid for a health benefits plan under this 

13 Act— 

14 (A) shall be determined in accordance with 

15 this subsection; 

16 (B) may be annually adjusted subject to 

17 paragraph (3); 

18 (C) shall be negotiated in the same manner 

19 as rates and premiums are negotiated under 

20 such chapter 89; and 

21 (D) shall be adjusted to cover the adminis22 trative costs of the Office under this Act. 

23 (2) DETERMINATIONS.—In determining rates 

24 and premiums under this Act, the following provi25 sions shall apply: 


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1 (A) IN GENERAL.—A carrier that enters 

2 into a contract under this Act shall determine 

3 that amount of premiums to assess for coverage 

4 under a health benefits plan based on an com5 munity rate that may be annually adjusted— 

6 (i) for the geographic area involved if 

7 the adjustment is based on geographical 

8 divisions that are not smaller than a met9 ropolitan statistical area and the carrier 

10 provides evidence of geographic variation 

11 in cost of services; 

12 (ii) based on whether such coverage is 

13 for an individual, two adults, one adult and 

14 one or more children, or a family; and 

15 (iii) based on the age of covered indi16 viduals (subject to subparagraph (C)). 

17 (B) LIMITATION.—Premium rates charged 

18 for coverage under this Act shall not vary based 

19 on health-status related factors, gender, class of 

20 business, or claims experience 

21 (C) AGE ADJUSTMENTS.— 

22 (i) IN GENERAL.—With respect to 

23 subparagraph (A)(iii), in making adjust24 ments based on age, the Office shall estab25 lish no more than 5 age brackets to be 


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1 used by the carrier in establishing rates. 

2 The rates for any age bracket may not 

3 vary by more than 50 percent above or 

4 below the community rate on the basis of 

5 attained age. Age-related premiums may 

6 not vary within age brackets. 

7 (ii) AGE 65 AND OLDER.—With re8 spect to subparagraph (A)(iii), a carrier 

9 may develop separate rates for covered in10 dividuals who are 65 years of age or older 

11 for whom medicare is the primary payor 

12 for health benefits coverage which is not 

13 covered under medicare. 

14 (3) READJUSTMENTS.—Any readjustment in 

15 rates charged or premiums paid for a health benefits 

16 plan under this Act shall be made in advance of the 

17 contract term in which they will apply and on a 

18 basis which, in the judgment of the Office, is con19 sistent with the practice of the Office for the Fed20 eral Employees Health Benefits Program. 

21 (d) TERMINATION AND REENROLLMENT.—If an indi22 vidual who is enrolled in a health benefits plan under this 

23 Act terminates the enrollment, the individual shall not be 

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1 riod following the expiration of 6 months after the date 

2 of such termination. 

3 (e) CONTINUED APPLICABILITY OF STATE LAW.— 

4 (1) HEALTH INSURANCE OR PLANS.— 

5 (A) LOCAL PLANS.—With respect to a con6 tract entered into under this Act under which 

7 a carrier will offer health benefits plan coverage 

8 in a limited geographic area, State mandated 

9 benefit laws in effect in the State in which the 

10 plan is offered shall continue to apply to such 

11 health benefits plan. 

12 (B) RATING RULES.—The rating require13 ments under subparagraphs (A) and (B) of sub14 section (c)(2) shall supercede State rating rules 

15 for qualified plans under this Act, except with 

16 respect to States that provide a rating variance 

17 with respect to age that is less than the Federal 

18 limit or that provide for some form of commu19 nity rating. 

20 (2) LIMITATION.—Nothing in this subsection 

21 shall be construed to preempt— 

22 (A) any State or local law or regulation ex23 cept those laws and regulations described in 

24 subparagraph (B) of paragraph (1); 


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1 (B) any State grievance, claims, and ap2 peals procedure law, except to the extent that 

3 such law is preempted under section 514 of the 

4 Employee Retirement Income Security Act of 

5 1974; and 

6 (C) State network adequacy laws. 

7 (f) RULE OF CONSTRUCTION.—Nothing in this Act 

8 shall be construed to limit the application of the service9 charge system used by the Office for determining profits 

10 for participating carriers under chapter 89 of title 5, 

11 United States Code. 

12 SEC. 7. ENCOURAGING PARTICIPATION BY CARRIERS 

13 THROUGH ADJUSTMENTS FOR RISK. 

14 (a) APPLICATION OF RISK CORRIDORS.— 

15 (1) IN GENERAL.—This section shall only apply 

16 to carriers with respect to health benefits plans of17 fered under this Act during any of calendar years 

18 2007 through 2009. 

19 (2) NOTIFICATION OF COSTS UNDER THE

20 PLAN.—In the case of a carrier that offers a health 

21 benefits plan under this Act in any of calendar years 

22 2007 through 2009, the carrier shall notify the Of23 fice, before such date in the succeeding year as the 

24 Office specifies, of the total amount of costs incurred 

25 in providing benefits under the health benefits plan 


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1 for the year involved and the portion of such costs 

2 that is attributable to administrative expenses. 

3 (3) ALLOWABLE COSTS DEFINED.—For pur4 poses of this section, the term ‘‘allowable costs’’ 

5 means, with respect to a health benefits plan offered 

6 by a carrier under this Act, for a year, the total 

7 amount of costs described in paragraph (2) for the 

8 plan and year, reduced by the portion of such costs 

9 attributable to administrative expenses incurred in 

10 providing the benefits described in such paragraph. 

11 (b) ADJUSTMENT OF PAYMENT.— 

12 (1) NO ADJUSTMENT IF ALLOWABLE COSTS

13 WITHIN 3 PERCENT OF TARGET AMOUNT.—If the al14 lowable costs for the carrier with respect to the 

15 health benefits plan involved for a calendar year are 

16 at least 97 percent, but do not exceed 103 percent, 

17 of the target amount for the plan and year involved, 

18 there shall be no payment adjustment under this 

19 section for the plan and year. 

20 (2) INCREASE IN PAYMENT IF ALLOWABLE

21 COSTS ABOVE 103 PERCENT OF TARGET AMOUNT.— 

22 (A) COSTS BETWEEN 103 AND 108 PER23 CENT OF TARGET AMOUNT.—If the allowable 

24 costs for the carrier with respect to the health 

25 benefits plan involved for the year are greater 


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1 than 103 percent, but not greater than 108 

2 percent, of the target amount for the plan and 

3 year, the Office shall reimburse the carrier for 

4 such excess costs through payment to the car5 rier of an amount equal to 75 percent of the 

6 difference between such allowable costs and 103 

7 percent of such target amount. 

8 (B) COSTS ABOVE 108 PERCENT OF TAR9 GET AMOUNT.—If the allowable costs for the 

10 carrier with respect to the health benefits plan 

11 involved for the year are greater than 108 per12 cent of the target amount for the plan and 

13 year, the Office shall reimburse the carrier for 

14 such excess costs through payment to the car15 rier in an amount equal to the sum of— 

16 (i) 3.75 percent of such target 

17 amount; and 

18 (ii) 90 percent of the difference be19 tween such allowable costs and 108 percent 

20 of such target amount. 

21 (3) REDUCTION IN PAYMENT IF ALLOWABLE

22 COSTS BELOW 97 PERCENT OF TARGET AMOUNT.— 

23 (A) COSTS BETWEEN 92 AND 97 PERCENT

24 OF TARGET AMOUNT.—If the allowable costs for 

25 the carrier with respect to the health benefits 


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1 plan involved for the year are less than 97 per2 cent, but greater than or equal to 92 percent, 

3 of the target amount for the plan and year, the 

4 carrier shall be required to pay into the contin5 gency reserve fund maintained under section 

6 8909(b)(2) of title 5, United States Code, an 

7 amount equal to 75 percent of the difference 

8 between 97 percent of the target amount and 

9 such allowable costs. 

10 (B) COSTS BELOW 92 PERCENT OF TARGET

11 AMOUNT.—If the allowable costs for the carrier 

12 with respect to the health benefits plan involved 

13 for the year are less than 92 percent of the tar14 get amount for the plan and year, the carrier 

15 shall be required to pay into the stabilization 

16 fund under section 8909(b)(2) of title 5, United 

17 States Code, an amount equal to the sum of— 

18 (i) 3.75 percent of such target 

19 amount; and 

20 (ii) 90 percent of the difference be21 tween 92 percent of such target amount 

22 and such allowable costs. 

23 (4) TARGET AMOUNT DESCRIBED.— 

24 (A) IN GENERAL.—For purposes of this 

25 subsection, the term ‘‘target amount’’ means, 


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1 with respect to a health benefits plan offered by 

2 a carrier under this Act in any of calendar 

3 years 2007 through 2011, an amount equal 

4 to— 

5 (i) the total of the monthly premiums 

6 estimated by the carrier and approved by 

7 the Office to be paid for enrollees in the 

8 plan under this Act for the calendar year 

9 involved; reduced by 

10 (ii) the amount of administrative ex11 penses that the carrier estimates, and the 

12 Office approves, will be incurred by the 

13 carrier with respect to the plan for such 

14 calendar year. 

15 (B) SUBMISSION OF TARGET AMOUNT.— 

16 Not later than December 31, 2006, and each 

17 December 31 thereafter through calendar year 

18 2010, a carrier shall submit to the Office a de19 scription of the target amount for such carrier 

20 with respect to health benefits plans provided 

21 by the carrier under this Act. 

22 (c) DISCLOSURE OF INFORMATION.— 

23 (1) IN GENERAL.—Each contract under this 

24 Act shall provide— 


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1 (A) that a carrier offering a health benefits 

2 plan under this Act shall provide the Office 

3 with such information as the Office determines 

4 is necessary to carry out this subsection includ5 ing the notification of costs under subsection 

6 (a)(2) and the target amount under subsection 

7 (b)(4)(B); and 

8 (B) that the Office has the right to inspect 

9 and audit any books and records of the organi10 zation that pertain to the information regarding 

11 costs provided to the Office under such sub12 sections. 

13 (2) RESTRICTION ON USE OF INFORMATION.— 

14 Information disclosed or obtained pursuant to the 

15 provisions of this subsection may be used by officers, 

16 employees, and contractors of the Office only for the 

17 purposes of, and to the extent necessary in, carrying 

18 out this section. 

19 SEC. 8. ENCOURAGING PARTICIPATION BY CARRIERS 

20 THROUGH REINSURANCE. 

21 (a) ESTABLISHMENT.—The Office shall establish a 

22 reinsurance fund to provide payments to carriers that ex23 perience one or more catastrophic claims during a year 

24 for health benefits provided to individuals enrolled in a 

25 health benefits plan under this Act. 


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1 (b) ELIGIBILITY FOR PAYMENTS.—To be eligible for 

2 a payment from the reinsurance fund for a plan year, a 

3 carrier under this Act shall submit to the Office an appli4 cation that contains— 

5 (1) a certification by the carrier that the carrier 

6 paid for at least one episode of care during the year 

7 for covered health benefits for an individual in an 

8 amount that is in excess of $50,000; and 

9 (2) such other information determined appro10 priate by the Office. 

11 (c) PAYMENT.— 

12 (1) IN GENERAL.—The amount of a payment 

13 from the reinsurance fund to a carrier under this 

14 section for a catastrophic episode of care shall be de15 termined by the Office but shall not exceed an 

16 amount equal to 80 percent of the applicable cata17 strophic claim amount. 

18 (2) APPLICABLE CATASTROPHIC CLAIM

19 AMOUNT.—For purposes of paragraph (1), the appli20 cable catastrophic episode of care amount shall be 

21 equal to the difference between— 

22 (A) the amount of the catastrophic claim; 

23 and 

24 (B) $50,000. 


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1 (3) LIMITATION.—In determining the amount 

2 of a payment under paragraph (1), if the amount of 

3 the catastrophic claim exceeds the amount that 

4 would be paid for the healthcare items or services in5 volved under title XVIII of the Social Security Act 

6 (42 U.S.C. 1395 et seq.), the Office shall use the 

7 amount that would be paid under such title XVIII 

8 for purposes of paragraph (2)(A). 

9 (d) DEFINITION.—In this section, the term ‘‘cata10 strophic claim’’ means a claim submitted to a carrier, by 

11 or on behalf of an enrollee in a health benefits plan under 

12 this Act, that is in excess of $50,000. 

13 (e) TERMINATION OF FUND.—The reinsurance fund 

14 established under subsection (a) shall terminate on the 

15 date that is 2 years after the date on which the first con16 tract period becomes effective under this Act. 

17 SEC. 9. CONTINGENCY RESERVE FUND. 

18 Beginning on October 1, 2010, the Office may use 

19 amounts appropriated under section 14(a) that remain un20 obligated to establish a contingency reserve fund to pro21 vide assistance to carriers offering health benefits plans 

22 under this Act that experience unanticipated financial 

23 hardships (as determined by the Office). 


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1 SEC. 10. EMPLOYER PARTICIPATION. 

2 (a) REGULATIONS.—The Office shall prescribe regu3 lations providing for employer participation under this 

4 Act, including the offering of health benefits plans under 

5 this Act to employees. 

6 (b) ENROLLMENT AND OFFERING OF OTHER COV7 ERAGE.— 

8 (1) ENROLLMENT.—A participating employer 

9 shall ensure that each eligible employee has an op10 portunity to enroll in a plan under this Act. 

11 (2) PROHIBITION ON OFFERING OTHER COM12 PREHENSIVE HEALTH BENEFIT COVERAGE.—A par13 ticipating employer may not offer a health insurance 

14 plan providing comprehensive health benefit coverage 

15 to employees other than a health benefits plan 

16 that— 

17 (A) meets the requirements described in 

18 section 4(a); and 

19 (B) is offered only through the enrollment 

20 process established by the Office under section 

21 3. 

22 (3) OFFER OF SUPPLEMENTAL COVERAGE OP23 TIONS.— 

24 (A) IN GENERAL.—A participating em25 ployer may offer supplementary coverage op26 tions to employees. 


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1 (B) DEFINITION.—In subparagraph (A), 

2 the term ‘‘supplementary coverage’’ means ben3 efits described as ‘‘excepted benefits’’ under 

4 section 2791(c) of the Public Health Service 

5 Act (42 U.S.C. 300gg–91(c)). 

6 (c) RULE OF CONSTRUCTION.—Except as provided in 

7 section 15, nothing in this Act shall be construed to re8 quire that an employer make premium contributions on 

9 behalf of employees. 

10 SEC. 11. ADMINISTRATION THROUGH REGIONAL ADMINIS11 TRATIVE ENTITIES. 

12 (a) IN GENERAL.—In order to provide for the admin13 istration of the benefits under this Act with maximum effi14 ciency and convenience for participating employers and 

15 health care providers and other individuals and entities 

16 providing services to such employers, the Office is author17 ized to enter into contracts with eligible entities to per18 form, on a regional basis, one or more of the following: 

19 (1) Collect and maintain all information relat20 ing to individuals, families, and employers partici21 pating in the program under this Act in the region 

22 served. 

23 (2) Receive, disburse, and account for payments 

24 of premiums to participating employers by individVerDate Aug 31 2005 21:48 Mar 08, 2006 Jkt 049200 PO 00000 Frm 00024 Fmt 6652 Sfmt 6201 E:\BILLS\S2382.IS S2382

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1 uals in the region served, and for payments by par2 ticipating employers to carriers. 

3 (3) Serve as a channel of communication be4 tween carriers, participating employers, and individ5 uals relating to the administration of this Act. 

6 (4) Otherwise carry out such activities for the 

7 administration of this Act, in such manner, as may 

8 be provided for in the contract entered into under 

9 this section. 

10 (5) The processing of grievances and appeals. 

11 (b) APPLICATION.—To be eligible to receive a con12 tract under subsection (a), an entity shall prepare and 

13 submit to the Office an application at such time, in such 

14 manner, and containing such information as the Office 

15 may require. 

16 (c) PROCESS.— 

17 (1) COMPETITIVE BIDDING.—All contracts 

18 under this section shall be awarded through a com19 petitive bidding process on a bi-annual basis. 

20 (2) REQUIREMENT.—No contract shall be en21 tered into with any entity under this section unless 

22 the Office finds that such entity will perform its ob23 ligations under the contract efficiently and effec24 tively and will meet such requirements as to finanVerDate Aug 31 2005 21:48 Mar 08, 2006 Jkt 049200 PO 00000 Frm 00025 Fmt 6652 Sfmt 6201 E:\BILLS\S2382.IS S2382

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1 cial responsibility, legal authority, and other matters 

2 as the Office finds pertinent. 

3 (3) PUBLICATION OF STANDARDS AND CRI4 TERIA.—The Office shall publish in the Federal 

5 Register standards and criteria for the efficient and 

6 effective performance of contract obligations under 

7 this section, and opportunity shall be provided for 

8 public comment prior to implementation. In estab9 lishing such standards and criteria, the Office shall 

10 provide for a system to measure an entity’s perform11 ance of responsibilities. 

12 (4) TERM.—Each contract under this section 

13 shall be for a term of at least 1 year, and may be 

14 made automatically renewable from term to term in 

15 the absence of notice by either party of intention to 

16 terminate at the end of the current term, except that 

17 the Office may terminate any such contract at any 

18 time (after such reasonable notice and opportunity 

19 for hearing to the entity involved as the Office may 

20 provide in regulations) if the Office finds that the 

21 entity has failed substantially to carry out the con22 tract or is carrying out the contract in a manner in23 consistent with the efficient and effective adminis24 tration of the program established by this Act. 


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1 (d) TERMS OF CONTRACT.—A contract entered into 

2 under this section shall include— 

3 (1) a description of the duties of the con4 tracting entity; 

5 (2) an assurance that the entity will furnish to 

6 the Office such timely information and reports as 

7 the Office determines appropriate; 

8 (3) an assurance that the entity will maintain 

9 such records and afford such access thereto as the 

10 Office finds necessary to assure the correctness and 

11 verification of the information and reports under 

12 paragraph (2) and otherwise to carry out the pur13 poses of this Act; 

14 (4) an assurance that the entity shall comply 

15 with such confidentiality and privacy protection 

16 guidelines and procedures as the Office may require; 

17 and 

18 (5) such other terms and conditions not incon19 sistent with this section as the Office may find nec20 essary or appropriate. 

21 SEC. 12. COORDINATION WITH SOCIAL SECURITY BENE22 FITS. 

23 Benefits under this Act shall, with respect to an indi24 vidual who is entitled to benefits under part A of title 

25 XVIII of the Social Security Act, be offered (for use in 


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1 coordination with those medicare benefits) to the same ex2 tent and in the same manner as if coverage were under 

3 chapter 89 of title 5, United States Code. 

4 SEC. 13. PUBLIC EDUCATION CAMPAIGN. 

5 (a) IN GENERAL.—In carrying out this Act, the Of6 fice shall develop and implement an educational campaign 

7 to provide information to employers and the general public 

8 concerning the health insurance program developed under 

9 this Act. 

10 (b) ANNUAL PROGRESS REPORTS.—Not later than 1 

11 year and 2 years after the implementation of the campaign 

12 under subsection (a), the Office shall submit to the appro13 priate committees of Congress a report that describes the 

14 activities of the Office under subsection (a), including a 

15 determination by the office of the percentage of employers 

16 with knowledge of the health benefits programs provided 

17 for under this Act. 

18 (c) PUBLIC EDUCATION CAMPAIGN.—There is au19 thorized to be appropriated to carry out this section, such 

20 sums as may be necessary for each of fiscal years 2007 

21 and 2008. 

22 SEC. 14. APPROPRIATIONS. 

23 There are authorized to be appropriated to the Office, 

24 such sums as may be necessary in each fiscal year for the 


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1 development and administration of the program under this 

2 Act. 

3 SEC. 15. REFUNDABLE CREDIT FOR SMALL BUSINESS EM4 PLOYEE HEALTH INSURANCE EXPENSES. 

5 (a) IN GENERAL.—Subpart C of part IV of sub6 chapter A of chapter 1 of the Internal Revenue Code of 

7 1986 (relating to refundable credits) is amended by redes8 ignating section 36 as section 37 and inserting after sec9 tion 35 the following new section: 

10 ‘‘SEC. 36. SMALL BUSINESS EMPLOYEE HEALTH INSURANCE 

11 EXPENSES. 

12 ‘‘(a) DETERMINATION OF AMOUNT.—In the case of 

13 a qualified small employer, there shall be allowed as a 

14 credit against the tax imposed by this subtitle for the tax15 able year an amount equal to the sum of— 

16 ‘‘(1) the expense amount described in sub17 section (b), and 

18 ‘‘(2) the expense amount described in sub19 section (c), paid by the taxpayer during the taxable 

20 year. 

21 ‘‘(b) SUBSECTION (b) EXPENSE AMOUNT.—For pur22 poses of this section— 

23 ‘‘(1) IN GENERAL.—The expense amount de24 scribed in this subsection is the applicable percentVerDate Aug 31 2005 21:48 Mar 08, 2006 Jkt 049200 PO 00000 Frm 00029 Fmt 6652 Sfmt 6201 E:\BILLS\S2382.IS S2382

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1 age of the amount of qualified employee health in2 surance expenses of each qualified employee. 

3 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

4 of paragraph (1)— 

5 ‘‘(A) IN GENERAL.—The applicable per6 centage is equal to— 

7 ‘‘(i) 25 percent in the case of self-only 

8 coverage, 

9 ‘‘(ii) 35 percent in the case of family 

10 coverage (as defined in section 220(c)(5)), 

11 and 

12 ‘‘(iii) 30 percent in the case of cov13 erage for two adults or one adult and one 

14 or more children. 

15 ‘‘(B) BONUS FOR PAYMENT OF GREATER

16 PERCENTAGE OF PREMIUMS.—The applicable 

17 percentage otherwise specified in subparagraph 

18 (A) shall be increased by 5 percentage points 

19 for each additional 10 percent of the qualified 

20 employee health insurance expenses of each 

21 qualified employee exceeding 60 percent which 

22 are paid by the qualified small employer. 

23 ‘‘(c) SUBSECTION (c) EXPENSE AMOUNT.—For pur24 poses of this section— 


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1 ‘‘(1) IN GENERAL.—The expense amount de2 scribed in this subsection is, with respect to the first 

3 credit year of a qualified small employer which is an 

4 eligible employer, 10 percent of the qualified em5 ployee health insurance expenses of each qualified 

6 employee. 

7 ‘‘(2) FIRST CREDIT YEAR.—For purposes of 

8 paragraph (1), the term ‘first credit year’ means the 

9 taxable year which includes the date that the health 

10 insurance coverage to which the qualified employee 

11 health insurance expenses relate becomes effective. 

12 ‘‘(d) LIMITATION BASED ON WAGES.— With respect 

13 to a qualified employee whose wages at an annual rate 

14 during the taxable year exceed $25,000, the percentage 

15 which would (but for this section) be taken into account 

16 as the percentage for purposes of subsection (b)(2) or 

17 (c)(1) for the taxable year shall be reduced by an amount 

18 equal to the product of such percentage and the percent19 age that such qualified employee’s wages in excess of 

20 $25,000 bears to $5,000. 

21 ‘‘(e) DEFINITIONS.—For purposes of this section— 

22 ‘‘(1) QUALIFIED SMALL EMPLOYER.—The term 

23 ‘qualified small employer’ means any employer (as 

24 defined in section 2(b)(2) of the Small Employers 

25 Health Benefits Program Act of 2006) which— 


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1 ‘‘(A) is a participating employer (as de2 fined in section 2(b)(5) of such Act), 

3 ‘‘(B) pays or incurs at least 60 percent of 

4 the qualified employee health insurance ex5 penses of each qualified employee for self-only 

6 coverage, and 

7 ‘‘(C) pays or incurs at least 50 percent of 

8 the qualified employee health insurance ex9 penses of each qualified employee for all other 

10 categories of coverage. 

11 ‘‘(2) QUALIFIED EMPLOYEE HEALTH INSUR12 ANCE EXPENSES.— 

13 ‘‘(A) IN GENERAL.—The term ‘qualified 

14 employee health insurance expenses’ means any 

15 amount paid by an employer for health insur16 ance coverage under such Act to the extent 

17 such amount is attributable to coverage pro18 vided to any employee while such employee is a 

19 qualified employee. 

20 ‘‘(B) EXCEPTION FOR AMOUNTS PAID

21 UNDER SALARY REDUCTION ARRANGEMENTS.— 

22 No amount paid or incurred for health insur23 ance coverage pursuant to a salary reduction 

24 arrangement shall be taken into account under 

25 subparagraph (A). 


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1 ‘‘(3) QUALIFIED EMPLOYEE.— 

2 ‘‘(A) DEFINITION.— 

3 ‘‘(i) IN GENERAL.—The term ‘quali4 fied employee’ means, with respect to any 

5 period, an employee (as defined in section 

6 2(b)(1) of such Act) of an employer if the 

7 total amount of wages paid or incurred by 

8 such employer to such employee at an an9 nual rate during the taxable year exceeds 

10 $5,000 but does not exceed $30,000. 

11 ‘‘(ii) ANNUAL ADJUSTMENT.—For 

12 each taxable year after 2007, the dollar 

13 amounts specified for the preceding taxable 

14 year (after the application of this subpara15 graph) shall be increased by the same per16 centage as the average percentage increase 

17 in premiums under the Federal Employees 

18 Health Benefits Program under chapter 89 

19 of title 5, United States Code for the cal20 endar year in which such taxable year be21 gins over the preceding calendar year. 

22 ‘‘(B) WAGES.—The term ‘wages’ has the 

23 meaning given such term by section 3121(a) 

24 (determined without regard to any dollar limita25 tion contained in such section). 


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1 ‘‘(f) CERTAIN RULES MADE APPLICABLE.—For pur2 poses of this section, rules similar to the rules of section 

3 52 shall apply. 

4 ‘‘(g) CREDITS FOR NONPROFIT ORGANIZATIONS.— 

5 Any credit which would be allowable under subsection (a) 

6 with respect to a qualified small business if such qualified 

7 small business were not exempt from tax under this chap8 ter shall be treated as a credit allowable under this sub9 part to such qualified small business.’’. 

10 (b) CONFORMING AMENDMENTS.— 

11 (1) Paragraph (2) of section 1324(b) of title 

12 31, United States Code, is amended by inserting be13 fore the period ‘‘, or from section 36 of such Code’’. 

14 (2) The table of sections for subpart C of part 

15 IV of subchapter A of chapter 1 of the Internal Rev16 enue Code of 1986 is amended by striking the last 

17 item and inserting the following new items: 

‘‘Sec. 36. Small business employee health insurance expenses. 

‘‘Sec. 37. Overpayments of tax.’’. 

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

19 this section shall apply to amounts paid or incurred in tax20 able years beginning after December 31, 2006. 

21 SEC. 16. EFFECTIVE DATE. 

22 Except as provided in section 10(e), this Act shall 

23 take effect on the date of enactment of this Act and shall 


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1 apply to contracts that take effect with respect to calendar 

2 year 2007 and each calendar year thereafter. 

Æ 


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