II 

109TH CONGRESS 

2D SESSION S. 2510 

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 

APRIL 5, 2006 

Mr. DURBIN (for himself, Mrs. LINCOLN, Mr. REID, Mr. BAUCUS, Mr. KENNEDY, Mr. KERRY, Mr. BINGAMAN, Mr. CARPER, Mr. DAYTON, Mr. HARKIN, Mr. KOHL, Mr. NELSON of Florida, Ms. CANTWELL, Mrs. CLINTON, 

Mr. DODD, Mr. LEAHY, Ms. MIKULSKI, Mr. PRYOR, Mr. LIEBERMAN, 

Mr. LAUTENBERG, Mr. JOHNSON, Mr. MENENDEZ, Mr. ROCKEFELLER, 

and Mrs. BOXER) 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 (3) PARTICIPATING PLANS.—The Office shall 

25 not prohibit the offering of any health benefits plan 


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1 to a participating employer if such plan is eligible to 

2 participate in the Federal Employees Health Bene3 fits Program. 

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

5 nationwide plans, the Office shall develop a benefit 

6 package that shall be offered in the case of a con7 tract for a health benefit plan that is to be offered 

8 on a nationwide basis that meets all State benefit 

9 mandates. 

10 (d) STANDARDS.—The minimum standards pre11 scribed for health benefits plans under section 8902(e) of 

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

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

14 of a plan may be withdrawn by the Office only after notice 

15 and opportunity for hearing to the carrier concerned with16 out regard to subchapter II of chapter 5 and chapter 7 

17 of title 5, United States Code. 

18 (e) CONVERSION.— 

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

20 or a plan approved under this section if the carrier 

21 under such contract or plan does not offer to each 

22 enrollee whose enrollment in the plan is ended, ex23 cept by a cancellation of enrollment, a temporary ex24 tension of coverage during which the individual may 

25 exercise the option to convert, without evidence of 


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1 good health, to a nongroup contract providing health 

2 benefits. An enrollee who exercises this option shall 

3 pay the full periodic charges of the nongroup con4 tract. 

5 (2) NONCANCELLABLE.—The benefits and cov6 erage made available under paragraph (1) may not 

7 be canceled by the carrier except for fraud, over-in8 surance, or nonpayment of periodic charges. 

9 (f) REQUIREMENT OF PAYMENT FOR OR PROVISION

10 OF HEALTH SERVICE.—Each contract entered into under 

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

12 provide a health service or supply in an individual case 

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

14 member, former spouse, or person having continued cov15 erage under section 8905a of title 5, United States Code, 

16 is entitled thereto under the terms of the contract. 

17 SEC. 5. ELIGIBILITY. 

18 An individual shall be eligible to enroll in a plan 

19 under this Act if such individual— 

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

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

22 defined in section 401(c)(1)(B) of the Internal Rev23 enue Code of 1986; and 


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1 (2) is not otherwise enrolled or eligible for en2 rollment in a plan under chapter 89 of title 5, 

3 United States Code. 

4 SEC. 6. ALTERNATIVE CONDITIONS TO FEDERAL EM5 PLOYEE PLANS. 

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

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

8 individual who had coverage under a health insurance plan 

9 and is not a qualified beneficiary as defined under section 

10 4980B(g)(1) of the Internal Revenue Code of 1986 shall 

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

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

13 United States Code. 

14 (b) PREEXISTING CONDITION EXCLUSIONS.— 

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

16 Act may include a preexisting condition exclusion as 

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

18 Revenue Code of 1986. 

19 (2) EXCLUSION PERIOD.—A preexisting condi20 tion exclusion under this subsection shall provide for 

21 coverage of a preexisting condition to begin not later 

22 than 6 months after the date on which the coverage 

23 of the individual under a health benefits plan com24 mences, reduced by the aggregate 1 day for each day 

25 that the individual was covered under a health insurVerDate Aug 31 2005 05:25 Apr 08, 2006 Jkt 049200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2510.IS S2510

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1 ance plan immediately preceding the date the indi2 vidual submitted an application for coverage under 

3 this Act. This provision shall be applied notwith4 standing the applicable provision for the reduction of 

5 the exclusion period provided for in section 

6 701(a)(3) of the Employee Retirement Income Secu7 rity Act of 1974 (29 U.S.C. 1181(a)(3)). 

8 (c) RATES AND PREMIUMS.— 

9 (1) IN GENERAL.—Rates charged and pre10 miums paid for a health benefits plan under this 

11 Act— 

12 (A) shall be determined in accordance with 

13 this subsection; 

14 (B) may be annually adjusted subject to 

15 paragraph (3); 

16 (C) shall be negotiated in the same manner 

17 as rates and premiums are negotiated under 

18 such chapter 89; and 

19 (D) shall be adjusted to cover the adminis20 trative costs of the Office under this Act. 

21 (2) DETERMINATIONS.—In determining rates 

22 and premiums under this Act, the following provi23 sions shall apply: 

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

25 into a contract under this Act shall determine 


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1 that amount of premiums to assess for coverage 

2 under a health benefits plan based on an com3 munity rate that may be annually adjusted— 

4 (i) for the geographic area involved if 

5 the adjustment is based on geographical 

6 divisions that are not smaller than a met7 ropolitan statistical area and the carrier 

8 provides evidence of geographic variation 

9 in cost of services; 

10 (ii) based on whether such coverage is 

11 for an individual, two adults, one adult and 

12 one or more children, or a family; and 

13 (iii) based on the age of covered indi14 viduals (subject to subparagraph (C)). 

15 (B) LIMITATION.—Premium rates charged 

16 for coverage under this Act shall not vary based 

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

18 business, or claims experience 

19 (C) AGE ADJUSTMENTS.— 

20 (i) IN GENERAL.—With respect to 

21 subparagraph (A)(iii), in making adjust22 ments based on age, the Office shall estab23 lish no more than 5 age brackets to be 

24 used by the carrier in establishing rates. 

25 The rates for any age bracket may not 


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1 vary by more than 50 percent above or 

2 below the community rate on the basis of 

3 attained age. Age-related premiums may 

4 not vary within age brackets. 

5 (ii) AGE 65 AND OLDER.—With re6 spect to subparagraph (A)(iii), a carrier 

7 may develop separate rates for covered in8 dividuals who are 65 years of age or older 

9 for whom medicare is the primary payor 

10 for health benefits coverage which is not 

11 covered under medicare. 

12 ‘‘(3) READJUSTMENTS.—Any readjustment in 

13 rates charged or premiums paid for a health benefits 

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

15 contract term in which they will apply and on a 

16 basis which, in the judgment of the Office, is con17 sistent with the practice of the Office for the Fed18 eral Employees Health Benefits Program. 

19 (d) TERMINATION AND REENROLLMENT.—If an indi20 vidual who is enrolled in a health benefits plan under this 

21 Act terminates the enrollment, the individual shall not be 

22 eligible for reenrollment until the first open enrollment pe23 riod following the expiration of 6 months after the date 

24 of such termination. 

25 (e) CONTINUED APPLICABILITY OF STATE LAW.— 


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1 (1) HEALTH INSURANCE OR PLANS.— 

2 (A) PLANS.—With respect to a contract 

3 entered into under this Act under which a car4 rier will offer health benefits plan coverage, 

5 State mandated benefit laws in effect in the 

6 State in which the plan is offered shall continue 

7 to apply. 

8 (B) RATING RULES.—The rating require9 ments under subparagraphs (A) and (B) of sub10 section (c)(2) shall supercede State rating rules 

11 for qualified plans under this Act, except with 

12 respect to States that provide a rating variance 

13 with respect to age that is less than the Federal 

14 limit or that provide for some form of commu15 nity rating. 

16 (2) LIMITATION.—Nothing in this subsection 

17 shall be construed to preempt— 

18 (A) any State or local law or regulation ex19 cept those laws and regulations described in 

20 subparagraph (B) of paragraph (1); 

21 (B) any State grievance, claims, and ap22 peals procedure law, except to the extent that 

23 such law is preempted under section 514 of the 

24 Employee Retirement Income Security Act of 

25 1974; and 


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1 (C) State network adequacy laws. 

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

3 shall be construed to limit the application of the service4 charge system used by the Office for determining profits 

5 for participating carriers under chapter 89 of title 5, 

6 United States Code. 

7 SEC. 7. ENCOURAGING PARTICIPATION BY CARRIERS 

8 THROUGH ADJUSTMENTS FOR RISK. 

9 (a) APPLICATION OF RISK CORRIDORS.— 

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

11 to carriers with respect to health benefits plans of12 fered under this Act during any of calendar years 

13 2007 through 2009. 

14 (2) NOTIFICATION OF COSTS UNDER THE

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

16 benefits plan under this Act in any of calendar years 

17 2007 through 2009, the carrier shall notify the Of18 fice, before such date in the succeeding year as the 

19 Office specifies, of the total amount of costs incurred 

20 in providing benefits under the health benefits plan 

21 for the year involved and the portion of such costs 

22 that is attributable to administrative expenses. 

23 (3) ALLOWABLE COSTS DEFINED.—For pur24 poses of this section, the term ‘‘allowable costs’’ 

25 means, with respect to a health benefits plan offered 


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

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

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

4 attributable to administrative expenses incurred in 

5 providing the benefits described in such paragraph. 

6 (b) ADJUSTMENT OF PAYMENT.— 

7 (1) NO ADJUSTMENT IF ALLOWABLE COSTS

8 WITHIN 3 PERCENT OF TARGET AMOUNT.—If the al9 lowable costs for the carrier with respect to the 

10 health benefits plan involved for a calendar year are 

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

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

13 there shall be no payment adjustment under this 

14 section for the plan and year. 

15 (2) INCREASE IN PAYMENT IF ALLOWABLE

16 COSTS ABOVE 103 PERCENT OF TARGET AMOUNT.— 

17 (A) COSTS BETWEEN 103 AND 108 PER18 CENT OF TARGET AMOUNT.—If the allowable 

19 costs for the carrier with respect to the health 

20 benefits plan involved for the year are greater 

21 than 103 percent, but not greater than 108 

22 percent, of the target amount for the plan and 

23 year, the Office shall reimburse the carrier for 

24 such excess costs through payment to the car25 rier of an amount equal to 75 percent of the 


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1 difference between such allowable costs and 103 

2 percent of such target amount. 

3 (B) COSTS ABOVE 108 PERCENT OF TAR4 GET AMOUNT.—If the allowable costs for the 

5 carrier with respect to the health benefits plan 

6 involved for the year are greater than 108 per7 cent of the target amount for the plan and 

8 year, the Office shall reimburse the carrier for 

9 such excess costs through payment to the car10 rier in an amount equal to the sum of— 

11 (i) 3.75 percent of such target 

12 amount; and 

13 (ii) 90 percent of the difference be14 tween such allowable costs and 108 percent 

15 of such target amount. 

16 (3) REDUCTION IN PAYMENT IF ALLOWABLE

17 COSTS BELOW 97 PERCENT OF TARGET AMOUNT.— 

18 (A) COSTS BETWEEN 92 AND 97 PERCENT

19 OF TARGET AMOUNT.—If the allowable costs for 

20 the carrier with respect to the health benefits 

21 plan involved for the year are less than 97 per22 cent, but greater than or equal to 92 percent, 

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

24 carrier shall be required to pay into the contin25 gency reserve fund maintained under section 


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1 8909(b)(2) of title 5, United States Code, an 

2 amount equal to 75 percent of the difference 

3 between 97 percent of the target amount and 

4 such allowable costs. 

5 (B) COSTS BELOW 92 PERCENT OF TARGET

6 AMOUNT.—If the allowable costs for the carrier 

7 with respect to the health benefits plan involved 

8 for the year are less than 92 percent of the tar9 get amount for the plan and year, the carrier 

10 shall be required to pay into the stabilization 

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

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

13 (i) 3.75 percent of such target 

14 amount; and 

15 (ii) 90 percent of the difference be16 tween 92 percent of such target amount 

17 and such allowable costs. 

18 (4) TARGET AMOUNT DESCRIBED.— 

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

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

21 with respect to a health benefits plan offered by 

22 a carrier under this Act in any of calendar 

23 years 2007 through 2011, an amount equal 

24 to— 


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1 (i) the total of the monthly premiums 

2 estimated by the carrier and approved by 

3 the Office to be paid for enrollees in the 

4 plan under this Act for the calendar year 

5 involved; reduced by 

6 (ii) the amount of administrative ex7 penses that the carrier estimates, and the 

8 Office approves, will be incurred by the 

9 carrier with respect to the plan for such 

10 calendar year. 

11 (B) SUBMISSION OF TARGET AMOUNT.— 

12 Not later than December 31, 2006, and each 

13 December 31 thereafter through calendar year 

14 2010, a carrier shall submit to the Office a de15 scription of the target amount for such carrier 

16 with respect to health benefits plans provided 

17 by the carrier under this Act. 

18 (c) DISCLOSURE OF INFORMATION.— 

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

20 Act shall provide— 

21 (A) that a carrier offering a health benefits 

22 plan under this Act shall provide the Office 

23 with such information as the Office determines 

24 is necessary to carry out this subsection includ25 ing the notification of costs under subsection 


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

2 (b)(4)(B); and 

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

4 and audit any books and records of the organi5 zation that pertain to the information regarding 

6 costs provided to the Office under such sub7 sections. 

8 (2) RESTRICTION ON USE OF INFORMATION.— 

9 Information disclosed or obtained pursuant to the 

10 provisions of this subsection may be used by officers, 

11 employees, and contractors of the Office only for the 

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

13 out this section. 

14 SEC. 8. ENCOURAGING PARTICIPATION BY CARRIERS 

15 THROUGH REINSURANCE. 

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

17 reinsurance fund to provide payments to carriers that ex18 perience one or more catastrophic claims during a year 

19 for health benefits provided to individuals enrolled in a 

20 health benefits plan under this Act. 

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

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

23 carrier under this Act shall submit to the Office an appli24 cation that contains— 


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

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

3 for covered health benefits for an individual in an 

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

5 (2) such other information determined appro6 priate by the Office. 

7 (c) PAYMENT.— 

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

9 from the reinsurance fund to a carrier under this 

10 section for a catastrophic episode of care shall be de11 termined by the Office but shall not exceed an 

12 amount equal to 80 percent of the applicable cata13 strophic claim amount. 

14 (2) APPLICABLE CATASTROPHIC CLAIM

15 AMOUNT.—For purposes of paragraph (1), the appli16 cable catastrophic episode of care amount shall be 

17 equal to the difference between— 

18 (A) the amount of the catastrophic claim; 

19 and 

20 (B) $50,000. 

21 (3) LIMITATION.—In determining the amount 

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

23 the catastrophic claim exceeds the amount that 

24 would be paid for the healthcare items or services in25 volved under title XVIII of the Social Security Act 


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1 (42 U.S.C. 1395 et seq.), the Office shall use the 

2 amount that would be paid under such title XVIII 

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

4 (d) DEFINITION.—In this section, the term ‘‘cata5 strophic claim’’ means a claim submitted to a carrier, by 

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

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

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

9 established under subsection (a) shall terminate on the 

10 date that is 2 years after the date on which the first con11 tract period becomes effective under this Act. 

12 SEC. 9. CONTINGENCY RESERVE FUND. 

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

14 amounts appropriated under section 14(a) that remain un15 obligated to establish a contingency reserve fund to pro16 vide assistance to carriers offering health benefits plans 

17 under this Act that experience unanticipated financial 

18 hardships (as determined by the Office). 

19 SEC. 10. EMPLOYER PARTICIPATION. 

20 (a) REGULATIONS.—The Office shall prescribe regu21 lations providing for employer participation under this 

22 Act, including the offering of health benefits plans under 

23 this Act to employees. 

24 (b) ENROLLMENT AND OFFERING OF OTHER COV25 ERAGE.— 


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1 (1) ENROLLMENT.—A participating employer 

2 shall ensure that each eligible employee has an op3 portunity to enroll in a plan under this Act. 

4 (2) PROHIBITION ON OFFERING OTHER COM5 PREHENSIVE HEALTH BENEFIT COVERAGE.—A par6 ticipating employer may not offer a health insurance 

7 plan providing comprehensive health benefit coverage 

8 to employees other than a health benefits plan 

9 that— 

10 (A) meets the requirements described in 

11 section 4(a); and 

12 (B) is offered only through the enrollment 

13 process established by the Office under section 

14 3. 

15 (3) OFFER OF SUPPLEMENTAL COVERAGE OP16 TIONS.— 

17 (A) IN GENERAL.—A participating em18 ployer may offer supplementary coverage op19 tions to employees. 

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

21 the term ‘‘supplementary coverage’’ means ben22 efits described as ‘‘excepted benefits’’ under 

23 section 2791(c) of the Public Health Service 

24 Act (42 U.S.C. 300gg–91(c)). 


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

2 section 15, nothing in this Act shall be construed to re3 quire that an employer make premium contributions on 

4 behalf of employees. 

5 SEC. 11. ADMINISTRATION THROUGH REGIONAL ADMINIS6 TRATIVE ENTITIES. 

7 (a) IN GENERAL.—In order to provide for the admin8 istration of the benefits under this Act with maximum effi9 ciency and convenience for participating employers and 

10 health care providers and other individuals and entities 

11 providing services to such employers, the Office is author12 ized to enter into contracts with eligible entities to per13 form, on a regional basis, one or more of the following: 

14 (1) Collect and maintain all information relat15 ing to individuals, families, and employers partici16 pating in the program under this Act in the region 

17 served. 

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

19 of premiums to participating employers by individ20 uals in the region served, and for payments by par21 ticipating employers to carriers. 

22 (3) Serve as a channel of communication be23 tween carriers, participating employers, and individ24 uals relating to the administration of this Act. 


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1 (4) Otherwise carry out such activities for the 

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

3 be provided for in the contract entered into under 

4 this section. 

5 (5) The processing of grievances and appeals. 

6 (b) APPLICATION.—To be eligible to receive a con7 tract under subsection (a), an entity shall prepare and 

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

9 manner, and containing such information as the Office 

10 may require. 

11 (c) PROCESS.— 

12 (1) COMPETITIVE BIDDING.—All contracts 

13 under this section shall be awarded through a com14 petitive bidding process on a bi-annual basis. 

15 (2) REQUIREMENT.—No contract shall be en16 tered into with any entity under this section unless 

17 the Office finds that such entity will perform its ob18 ligations under the contract efficiently and effec19 tively and will meet such requirements as to finan20 cial responsibility, legal authority, and other matters 

21 as the Office finds pertinent. 

22 (3) PUBLICATION OF STANDARDS AND CRI23 TERIA.—The Office shall publish in the Federal 

24 Register standards and criteria for the efficient and 

25 effective performance of contract obligations under 


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1 this section, and opportunity shall be provided for 

2 public comment prior to implementation. In estab3 lishing such standards and criteria, the Office shall 

4 provide for a system to measure an entity’s perform5 ance of responsibilities. 

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

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

8 made automatically renewable from term to term in 

9 the absence of notice by either party of intention to 

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

11 the Office may terminate any such contract at any 

12 time (after such reasonable notice and opportunity 

13 for hearing to the entity involved as the Office may 

14 provide in regulations) if the Office finds that the 

15 entity has failed substantially to carry out the con16 tract or is carrying out the contract in a manner in17 consistent with the efficient and effective adminis18 tration of the program established by this Act. 

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

20 under this section shall include— 

21 (1) a description of the duties of the con22 tracting entity; 

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

24 the Office such timely information and reports as 

25 the Office determines appropriate; 


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1 (3) an assurance that the entity will maintain 

2 such records and afford such access thereto as the 

3 Office finds necessary to assure the correctness and 

4 verification of the information and reports under 

5 paragraph (2) and otherwise to carry out the pur6 poses of this Act; 

7 (4) an assurance that the entity shall comply 

8 with such confidentiality and privacy protection 

9 guidelines and procedures as the Office may require; 

10 and 

11 (5) such other terms and conditions not incon12 sistent with this section as the Office may find nec13 essary or appropriate. 

14 SEC. 12. COORDINATION WITH SOCIAL SECURITY BENE15 FITS. 

16 Benefits under this Act shall, with respect to an indi17 vidual who is entitled to benefits under part A of title 

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

19 coordination with those medicare benefits) to the same ex20 tent and in the same manner as if coverage were under 

21 chapter 89 of title 5, United States Code. 

22 SEC. 13. PUBLIC EDUCATION CAMPAIGN. 

23 (a) IN GENERAL.—In carrying out this Act, the Of24 fice shall develop and implement an educational campaign 

25 to provide information to employers and the general public 


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1 concerning the health insurance program developed under 

2 this Act. 

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

4 year and 2 years after the implementation of the campaign 

5 under subsection (a), the Office shall submit to the appro6 priate committees of Congress a report that describes the 

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

8 determination by the office of the percentage of employers 

9 with knowledge of the health benefits programs provided 

10 for under this Act. 

11 (c) PUBLIC EDUCATION CAMPAIGN.—There is au12 thorized to be appropriated to carry out this section, such 

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

14 and 2008. 

15 SEC. 14. APPROPRIATIONS. 

16 There are authorized to be appropriated to the Office, 

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

18 development and administration of the program under this 

19 Act. 

20 SEC. 15. REFUNDABLE CREDIT FOR SMALL BUSINESS EM21 PLOYEE HEALTH INSURANCE EXPENSES. 

22 (a) IN GENERAL.—Subpart C of part IV of sub23 chapter A of chapter 1 of the Internal Revenue Code of 

24 1986 (relating to refundable credits) is amended by redesVerDate Aug 31 2005 05:25 Apr 08, 2006 Jkt 049200 PO 00000 Frm 00028 Fmt 6652 Sfmt 6201 E:\BILLS\S2510.IS S2510

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1 ignating section 36 as section 37 and inserting after sec2 tion 35 the following new section: 

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

4 EXPENSES. 

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

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

7 credit against the tax imposed by this subtitle for the tax8 able year an amount equal to the sum of— 

9 ‘‘(1) the expense amount described in sub10 section (b), and 

11 ‘‘(2) the expense amount described in sub12 section (c), paid by the taxpayer during the taxable 

13 year. 

14 ‘‘(b) SUBSECTION (b) EXPENSE AMOUNT.—For pur15 poses of this section— 

16 ‘‘(1) IN GENERAL.—The expense amount de17 scribed in this subsection is the applicable percent18 age of the amount of qualified employee health in19 surance expenses of each qualified employee. 

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

21 of paragraph (1)— 

22 ‘‘(A) IN GENERAL.—The applicable per23 centage is equal to— 

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

25 coverage, 


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

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

3 and 

4 ‘‘(iii) 30 percent in the case of cov5 erage for two adults or one adult and one 

6 or more children. 

7 ‘‘(B) BONUS FOR PAYMENT OF GREATER

8 PERCENTAGE OF PREMIUMS.—The applicable 

9 percentage otherwise specified in subparagraph 

10 (A) shall be increased by 5 percentage points 

11 for each additional 10 percent of the qualified 

12 employee health insurance expenses of each 

13 qualified employee exceeding 60 percent which 

14 are paid by the qualified small employer. 

15 ‘‘(c) SUBSECTION (c) EXPENSE AMOUNT.—For pur16 poses of this section— 

17 ‘‘(1) IN GENERAL.—The expense amount de18 scribed in this subsection is, with respect to the first 

19 credit year of a qualified small employer which is an 

20 eligible employer, 10 percent of the qualified em21 ployee health insurance expenses of each qualified 

22 employee. 

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

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

25 taxable year which includes the date that the health 


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1 insurance coverage to which the qualified employee 

2 health insurance expenses relate becomes effective. 

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

4 to a qualified employee whose wages at an annual rate 

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

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

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

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

9 equal to the product of such percentage and the percent10 age that such qualified employee’s wages in excess of 

11 $25,000 bears to $5,000. 

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

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

14 ‘qualified small employer’ means any employer (as 

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

16 Health Benefits Program Act of 2006) which— 

17 ‘‘(A) is a participating employer (as de18 fined in section 2(b)(5) of such Act), 

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

20 the qualified employee health insurance ex21 penses of each qualified employee for self-only 

22 coverage, and 

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

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1 penses of each qualified employee for all other 

2 categories of coverage. 

3 ‘‘(2) QUALIFIED EMPLOYEE HEALTH INSUR4 ANCE EXPENSES.— 

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

6 employee health insurance expenses’ means any 

7 amount paid by an employer for health insur8 ance coverage under such Act to the extent 

9 such amount is attributable to coverage pro10 vided to any employee while such employee is a 

11 qualified employee. 

12 ‘‘(B) EXCEPTION FOR AMOUNTS PAID

13 UNDER SALARY REDUCTION ARRANGEMENTS.— 

14 No amount paid or incurred for health insur15 ance coverage pursuant to a salary reduction 

16 arrangement shall be taken into account under 

17 subparagraph (A). 

18 ‘‘(3) QUALIFIED EMPLOYEE.— 

19 ‘‘(A) DEFINITION.— 

20 ‘‘(i) IN GENERAL.—The term ‘quali21 fied employee’ means, with respect to any 

22 period, an employee (as defined in section 

23 2(b)(1) of such Act) of an employer if the 

24 total amount of wages paid or incurred by 

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1 nual rate during the taxable year exceeds 

2 $5,000 but does not exceed $30,000. 

3 ‘‘(ii) ANNUAL ADJUSTMENT.—For 

4 each taxable year after 2007, the dollar 

5 amounts specified for the preceding taxable 

6 year (after the application of this subpara7 graph) shall be increased by the same per8 centage as the average percentage increase 

9 in premiums under the Federal Employees 

10 Health Benefits Program under chapter 89 

11 of title 5, United States Code for the cal12 endar year in which such taxable year be13 gins over the preceding calendar year. 

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

15 meaning given such term by section 3121(a) 

16 (determined without regard to any dollar limita17 tion contained in such section). 

18 ‘‘(f) CERTAIN RULES MADE APPLICABLE.—For pur19 poses of this section, rules similar to the rules of section 

20 52 shall apply. 

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

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

23 with respect to a qualified small business if such qualified 

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1 ter shall be treated as a credit allowable under this sub2 part to such qualified small business.’’. 

3 (b) CONFORMING AMENDMENTS.— 

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

5 31, United States Code, is amended by inserting be6 fore the period ‘‘, or from section 36 of such Code’’. 

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

8 IV of subchapter A of chapter 1 of the Internal Rev9 enue Code of 1986 is amended by striking the last 

10 item and inserting the following new items: 

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

‘‘Sec. 37. Overpayments of tax.’’. 

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

12 this section shall apply to amounts paid or incurred in tax13 able years beginning after December 31, 2006. 

14 SEC. 16. EFFECTIVE DATE. 

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

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

17 apply to contracts that take effect with respect to calendar 

18 year 2007 and each calendar year thereafter. 

Æ 


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