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[House Report 114-784]
[From the U.S. Government Publishing Office]

114th Congress     {                                }         Report
                        HOUSE OF REPRESENTATIVES
 2d Session        {                                }          114-784
======================================================================
 
                 CO-OP CONSUMER PROTECTION ACT OF 2016

                                _______
                                

 September 22, 2016.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Brady of Texas, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 954]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 954) to amend the Internal Revenue Code of 1986 to 
exempt from the individual mandate certain individuals who had 
coverage under a terminated qualified health plan funded 
through the Consumer Operated and Oriented Plan (CO-OP) 
program, having considered the same, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.

                                CONTENTS

                                                                   Page
 I. SUMMARY AND BACKGROUND............................................2
          A. Purpose and Summary.................................     2
          B. Background and Need for Legislation.................     2
          C. Legislative History.................................     3
II. EXPLANATION OF THE BILL...........................................3
          A. Exemption from Individual Mandate for Certain 
              Individuals Who Had Coverage Under a Terminated 
              Qualified Health Plan Funded through the Consumer 
              Operated and Oriented Plan (CO-OP) Program (sec. 2 
              of the bill and sec. 5000A of the Code)............     3
III.VOTES OF THE COMMITTEE............................................6

IV. BUDGET EFFECTS OF THE BILL........................................6
          A. Committee Estimate of Budgetary Effects.............     6
              Fiscal Years.......................................     6
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures Budget Authority......................     6
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................     7
 V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE........8
          A. Committee Oversight Findings and Recommendations....     8
          B. Statement of General Performance Goals and 
              Objectives.........................................     8
          C. Information Relating to Unfunded Mandates...........     8
          D. Applicability of House Rule XXI 5(b)................     8
          E. Tax Complexity Analysis.............................     9
          F. Congressional Earmarks, Limited Tax Benefits, and 
              Limited Tariff Benefits............................     9
          G. Duplication of Federal Programs.....................     9
          H. Disclosure of Directed Rule Makings.................     9
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............10
          A. Text of Existing Law Amended or Repealed by the 
              Bill, as Reported..................................    10
          B. Changes in Existing Law Proposed by the Bill, as 
              Reported...........................................    16

    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 ``CO-OP Consumer Protection Act of 
2016''.

SEC. 2. EXEMPTION FROM INDIVIDUAL MANDATE FOR CERTAIN INDIVIDUALS WHO 
                    HAD COVERAGE UNDER A TERMINATED HEALTH PLAN FUNDED 
                    THROUGH THE CONSUMER OPERATED AND ORIENTED PLAN 
                    (CO-OP) PROGRAM.

  (a) In General.--Section 5000A(e) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new paragraph:
          ``(6) Certain individuals previously enrolled in health plans 
        funded through the consumer operated and oriented plan (CO-OP) 
        program.--Any applicable individual for any month if--
                  ``(A) such individual was enrolled in minimum 
                essential coverage offered by a qualified nonprofit 
                health insurance issuer (as defined in subsection (c) 
                of section 1322 of the Patient Protection and 
                Affordable Care Act (42 U.S.C. 18042)) receiving funds 
                with respect to such coverage through the Consumer 
                Operated and Oriented Plan program established under 
                such section,
                  ``(B) during the calendar year which includes such 
                month, such issuer terminated such coverage in the area 
                in which the individual resides, and
                  ``(C) such month ends after the date on which such 
                coverage was so terminated.''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
with respect to months beginning after December 31, 2013.

                       I. SUMMARY AND BACKGROUND

                         A. Purpose and Summary

    The bill, H.R. 954, as reported by the Committee on Ways 
and Means, temporarily exempts individuals, whose coverage 
under a plan offered by a qualified nonprofit health insurance 
issuer receiving funds through the Consumer Operated and 
Oriented Plan (CO-OP) program was terminated or otherwise 
discontinued, from the Patient Protection and Affordable Care 
Act (ACA)'s individual mandate.

                 B. Background and Need for Legislation

    Section 1332 of the ACA created the CO-OP program. The 
individual mandate was added to Section 5000(A) of the Internal 
Revenue Code (IRC) by Section 1501 of the ACA. According to the 
statute, beginning in 2014, all ``applicable individuals'' must 
have a ``minimum essential coverage'' for themselves and their 
dependents or pay a tax penalty. The law currently provides for 
several exemptions from the individual mandate, including for 
``hardship,'' as determined by the Secretary of Health and 
Human Services (Section 5000A(e)(5) of the IRC) and short 
coverage gaps (Section 5000A(e)(4) of the IRC).
    The CO-OP program was created in an attempt to artificially 
create competition in the health care market. In January 2015, 
23 CO-OPs covered enrollees in 25 states. To date, most of 
these have failed and the Administration is attempting to prop 
up the six CO-OPs that remain.
    Not only is the CO-OP program a significant financial 
drain, but its failure has had a negative effect on many 
Americans who were enrolled through one of these insurers. 
Cancelled plans can cause great disruptions--and extra, 
burdensome financial expenses--in people's lives. For instance, 
many who might have fully paid their deductible for their 
terminated CO-OP plan could risk having to start over from a 
cost-sharing perspective with a new plan. The Committee 
believes that relief from the individual mandate is necessary 
for those Americans who tried to comply with the law only to 
watch the CO-OPs collapse around them during a coverage period.

                         C. Legislative History

Background

    H.R. 954 was introduced on February 12, 2015, and was 
referred to the Committee on Ways and Means.

Committee action

    The Committee on Ways and Means marked up H.R. 954, the CO-
OP Consumer Protection Act of 2016, on September 8, 2016, and 
ordered the bill, as amended, favorably reported (with a quorum 
being present).

Committee hearings

    The issues surrounding the termination or discontinuation 
of certain CO-OPs were discussed at a Ways and Means 
Subcommittee on Health hearing on November 3, 2015, and a 
Member Day Hearing on May 17, 2016.

                      II. EXPLANATION OF THE BILL

 A. Exemption from Individual Mandate for Certain Individuals Who Had 
 Coverage Under a Terminated Qualified Health Plan Funded Through the 
Consumer Operated and Oriented Plan (CO-OP) Program (sec. 2 of the bill 
                      and sec. 5000A of the Code)

                              PRESENT LAW

Requirement for individuals to have health coverage

            In general
    Individuals are required to be covered by a health plan 
that provides minimum essential coverage or pay a tax for 
failure to maintain coverage.\1\ The tax is imposed for any 
month that an individual does not have minimum essential 
coverage unless the individual qualifies for an exemption for 
the month as described below.\2\
---------------------------------------------------------------------------
    \1\Section 5000A which was added to the Code by section 1501 of the 
Patient Protection and Affordable Care Act (``PPACA''), Pub. L. No 111-
148, enacted March 23, 2010, as amended by section 10106 of PPACA and 
1002 of the Health Care and Education Reconciliation Act of 2010 
(``HCERA''), Pub. L. No. 111-152, enacted March 30, 2010. PPACA and 
HCERA are collectively referred to as the Affordable Care Act 
(``ACA''). Section 5000A is effective for taxable years ending after 
December 31, 2013.
    \2\In the case of a taxpayer's dependent under section 152, the 
taxpayer is liable for any tax for failure to maintain the required 
coverage with respect to the dependent.
---------------------------------------------------------------------------
    Minimum essential coverage includes government-sponsored 
programs, eligible employer-sponsored plans, plans in the 
individual insurance market, grandfathered group health plans 
and grandfathered health insurance coverage, and other coverage 
as recognized by the Secretary of Health and Human Services 
(``HHS'') in coordination with the Secretary of the 
Treasury.\3\ Minimum essential coverage includes a health plan 
offered through an American Health Benefit Exchange, referred 
to as a qualified health plan.
---------------------------------------------------------------------------
    \3\Minimum essential coverage does not include coverage that 
consists of certain excepted benefits as defined in section 2791(c)(1)-
(4) of the Public Health Service Act (42 U.S.C. sec. 300gg-91(c)(1-4)). 
A parallel definition of excepted benefits is provided in section 
9832(c)(1)-(4).
---------------------------------------------------------------------------
            Tax on failure to maintain minimum essential coverage
    The tax for failure to maintain minimum essential coverage 
for any calendar month is one-twelfth of the tax calculated as 
an annual amount. The annual amount is equal to the greater of 
(1) a flat dollar amount and (2) an excess income amount, as 
described below, except that the total annual amount may not 
exceed the national average annual premium for bronze level 
qualified health plans offered through American Health Benefit 
Exchanges that year for the taxpayer's family size.
    The flat dollar amount is the lesser of (1) the sum of the 
individual annual dollar amounts for the members of the 
taxpayer's family and (2) 300 percent of the adult individual 
dollar amount. The individual adult annual dollar amount is 
phased in over the first three years as follows: $95 for 2014; 
$325 for 2015; and $695 for 2016.\4\ For an individual who has 
not attained age 18, the individual annual dollar amount is one 
half of the adult amount.
---------------------------------------------------------------------------
    \4\For years after 2016, the $695 amount is indexed to the consumer 
price index for all urban consumers, referred to as ``CPI-U,'' rounded 
to the next lowest multiple of $50.
---------------------------------------------------------------------------
    The excess income amount is a specified percentage of the 
excess of the taxpayer's household income for the taxable year 
over the threshold amount of income requiring the taxpayer to 
file an income tax return.\5\ The specified percentage of 
income is phased in as follows: one percent for 2014; two 
percent for 2015; and 2.5 percent for 2016 and after.
---------------------------------------------------------------------------
    \5\Sec. 6012(a).
---------------------------------------------------------------------------
            Exemptions
    Exemptions from the requirement to maintain minimum 
essential coverage are provided for the following: (1) an 
individual for whom coverage is unaffordable because the 
required contribution exceeds eight percent of household 
income, (2) an individual with household income below the 
income tax return filing threshold, (3) a member of an Indian 
tribe, (4) a member of one of certain recognized religious 
sects or a health sharing ministry, (5) an individual with a 
coverage gap for a continuous period of less than three months, 
and (6) an individual who is determined by the Secretary of HHS 
to have suffered a hardship with respect to the capability to 
obtain coverage.

Health plans under the CO-OP program

    The CO-OP program was established to foster the creation of 
qualified nonprofit health insurance issuers to offer qualified 
health plans in the individual and small group markets in the 
States in which the issuers are licensed to offer such 
plans.\6\ A qualified nonprofit health insurance issuer is an 
organization--
---------------------------------------------------------------------------
    \6\Sec. 1322 of PPACA. Under section 501(c)(29), a health insurer 
that receives a grant or loan under the CO-OP program generally 
qualifies for exemption from Federal income tax for periods during 
which the organization is in compliance with the requirements of the 
CO-OP program and with the terms of any such grant or loan agreement to 
which the organization is a party.
---------------------------------------------------------------------------
           That is organized as a nonprofit, member 
        corporation under State law,
           Substantially all of the activities of which 
        consist of the issuance of qualified health plans in 
        the individual and small group markets in each State in 
        which it is licensed to issue such plans and in which 
        health insurance market reforms have been implemented,
           That meets other applicable State law 
        requirements for issuers of qualified health plans,
           That was not (nor was a related entity or a 
        predecessor of either) a health insurance issuer as of 
        July 16, 2009 and is not sponsored by a State or local 
        government, any political subdivision thereof, or any 
        instrumentality of such government or political 
        subdivision,
           That meets certain governance requirements, 
        and
           That uses profits to lower premiums, improve 
        benefits, or for other programs intended to improve the 
        quality of health care delivered to its members.
    In the last few years, some qualified nonprofit health 
insurance issuers under the CO-OP program have discontinued 
offering health plans providing minimum essential coverage, 
including qualified health plans.

                           REASONS FOR CHANGE

    The midyear cancellation of health plans under the CO-OP 
program causes individuals enrolled in those plans to lose 
their health insurance coverage. In some circumstances, 
obtaining new coverage for the remainder of the year may 
present difficulties not addressed by the present-law 
exemptions from the requirement to maintain minimum essential 
coverage. The Committee wishes to ensure that individuals in 
those circumstances do not face a tax penalty in addition to 
losing their health coverage. The bill therefore provides an 
exemption from the coverage requirement for the remainder of 
the year for individuals in those circumstances.

                        EXPLANATION OF PROVISION

    Under the provision, in the case of an individual who was 
enrolled in minimum essential coverage that was offered by a 
qualified nonprofit health insurance issuer under the CO-OP 
program and that was terminated during a calendar year in the 
area in which the individual resides, an exemption from the 
requirement to maintain minimum essential coverage applies for 
any month that is included in that calendar year and that ends 
after the date on which the coverage was terminated. Thus, the 
exemption applies as of the first month for which the coverage 
was terminated and the remaining months in the calendar year.

                             EFFECTIVE DATE

    The provision applies to months beginning after December 
31, 2013.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of H.R. 954, the ``CO-OP Consumer Protection Act 
of 2016,'' on September 8, 2016.
    The bill, H.R. 954, as amended, was ordered favorably 
reported to the House of Representatives by a voice vote (with 
a quorum being present).

                     IV. BUDGET EFFECTS OF THE BILL

               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 954, as 
reported.
    The bill, as reported, is estimated to have the following 
effect on Federal fiscal year budget receipts for the period 
2017-2026:

                                                                      FISCAL YEARS
                                                                [Millions of dollars] [1]
--------------------------------------------------------------------------------------------------------------------------------------------------------
    2017         2018         2019         2020         2021         2022         2023         2024         2025         2026       2017-21     2017-26
--------------------------------------------------------------------------------------------------------------------------------------------------------
       -3           -1          [2]          [2]          [2]          [2]          [2]          [2]          [2]          [2]           -4          -4
--------------------------------------------------------------------------------------------------------------------------------------------------------
NOTE: Details do not add to totals due to rounding.
[1] Estimate includes a reduction of less than $500,000 in outlays.
[2] Loss of less than $500,000.

    Pursuant to clause 8 of rule XIII of the Rules of the House 
of Representatives, the following statement is made by the 
Joint Committee on Taxation with respect to the provisions of 
the bill amending the Internal Revenue Code of 1986: The gross 
budgetary effect (before incorporating macroeconomic effects) 
in any fiscal year is less than 0.25 percent of the current 
projected gross domestic product of the United States for that 
fiscal year; therefore, the bill is not ``major legislation'' 
for purposes of requiring that the estimate include the 
budgetary effects of changes in economic output, employment, 
capital stock and other macroeconomic variables.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee further states that the revenue-reducing provisions 
of the bill do not involve increased tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 15, 2016.
Hon. Kevin Brady,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 954, the CO-OP 
Consumer Protection Act of 2016.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Peter 
Huether.
            Sincerely,
                                             Mark P. Hadley
                                        (For Keith Hall, Director).
    Enclosure.

H.R. 954--CO-OP Consumer Protection Act of 2016

    H.R. 954 would provide an exemption from the individual 
health insurance mandate for certain individuals who had 
coverage under a health plan that was issued under the Consumer 
Operated and Oriented Plan (CO-OP) program and later 
terminated. The CO-OP program was established by the Affordable 
Care Act and included federal loans to foster the creation of 
nonprofit plans that would offer health insurance to 
individuals and small employers. Under current law, individuals 
are required to maintain minimum essential coverage under a 
health insurance plan or pay a penalty for any month that they 
do not maintain such coverage, unless they qualify for one of 
the existing exemptions.
    H.R. 954 would exempt individuals from the mandate and from 
resulting penalties (which are recorded as revenues in the 
federal budget) under certain circumstances. Individuals 
enrolled in a health plan issued through the CO-OP program 
would be exempt from the individual mandate for the remaining 
months in a calendar year if that plan was terminated partway 
through the year. The changes from enacting H.R. 954 would be 
effective retroactively, starting on January 1, 2014.
    The staff of the Joint Committee on Taxation (JCT) 
estimates that the legislation would reduce revenues by $4 
million over the 2016-2026 period. JCT also estimates that H.R. 
954 would reduce direct spending by less than $500,000 over the 
2016-2026 period, reflecting very small changes in subsidies 
for insurance purchased through health insurance marketplaces 
established by the Affordable Care Act. JCT therefore estimates 
that the legislation would increase federal budget deficits by 
$4 million over the 2016-2026 period.
    The Statutory Pay-As-You Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting 
revenues and direct spending. The net changes in revenues and 
outlays that are subject to those pay-as-you-go procedures are 
shown in the following table.

         CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 954, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON SEPTEMBER 8, 2016.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, in millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2016   2017   2018   2019   2020   2021   2022   2023   2024   2025   2026  2016-2021  2016-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT
 
Statutory Pay-As-You-Go Effects......................      0      3      1      0      0      0      0      0      0      0      0         4          4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Staff of the Joint Committee on Taxation.
Note: The net increase in the deficit includes insignificant reductions in outlays.

    JCT and CBO estimate that enacting the bill would not 
increase net direct spending in any of the four consecutive 10-
year periods beginning in 2027, and would increase on-budget 
deficits over those periods by very small amounts.
    JCT has determined that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Peter Huether. 
The estimate was approved by John McClelland, Assistant 
Director for Tax Analysis.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was as a result of the 
Committee's review of the provisions of H.R. 954 that the 
Committee concluded that it is appropriate to report the bill, 
as amended, favorably to the House of Representatives with the 
recommendation that the bill do pass.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                D. Applicability of House Rule XXI 5(b)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the bill and states that the bill does not 
involve any Federal income tax rate increases within the 
meaning of the rule.

                       E. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 (``IRS Reform Act'') 
requires the staff of the Joint Committee on Taxation (in 
consultation with the Internal Revenue Service and the Treasury 
Department) to provide a tax complexity analysis. The 
complexity analysis is required for all legislation reported by 
the Senate Committee on Finance, the House Committee on Ways 
and Means, or any committee of conference if the legislation 
includes a provision that directly or indirectly amends the 
Internal Revenue Code of 1986 and has widespread applicability 
to individuals or small businesses.
    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the IRS Reform Act because 
the bill contains no provisions that amend the Internal Revenue 
Code of 1986 and that have ``widespread applicability'' to 
individuals or small businesses, within the meaning of the 
rule.

  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   G. Duplication of Federal Programs

    In compliance with Sec. 3(g)(2) of H. Res. 5 (114th 
Congress), the Committee states that no provision of the bill 
establishes or reauthorizes: (1) a program of the Federal 
Government known to be duplicative of another Federal program, 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139, or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to the Federal Program 
Information Act (Public Law 95-220, as amended by Public Law 
98-169).

                 H. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that the bill requires no 
directed rule makings within the meaning of such section.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

  A. Text of Existing Law Amended or Repealed by the Bill, as Reported

    In compliance with clause 3(e)(1)(A) of rule XIII of the 
Rules of the House of Representatives, the text of each section 
proposed to be amended or repealed by the bill, as reported, is 
shown below:

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e)(1)(A) of rule XIII of the 
Rules of the House of Representatives, the text of each section 
proposed to be amended or repealed by the bill, as reported, is 
shown below:

                     INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *
Subtitle D--Miscellaneous Excise Taxes

           *       *       *       *       *       *       *

CHAPTER 48--MAINTENANCE OF MINIMUM ESSENTIAL COVERAGE

           *       *       *       *       *       *       *

SEC. 5000A. REQUIREMENT TO MAINTAIN MINIMUM ESSENTIAL COVERAGE.

  (a) Requirement to Maintain Minimum Essential Coverage.--An 
applicable individual shall for each month beginning after 2013 
ensure that the individual, and any dependent of the individual 
who is an applicable individual, is covered under minimum 
essential coverage for such month.
  (b) Shared Responsibility Payment.--
          (1) In general.--If a taxpayer who is an applicable 
        individual, or an applicable individual for whom the 
        taxpayer is liable under paragraph (3), fails to meet 
        the requirement of subsection (a) for 1 or more months, 
        then, except as provided in subsection (e), there is 
        hereby imposed on the taxpayer a penalty with respect 
        to such failures in the amount determined under 
        subsection (c).
          (2) Inclusion with return.--Any penalty imposed by 
        this section with respect to any month shall be 
        included with a taxpayer's return under chapter 1 for 
        the taxable year which includes such month.
          (3) Payment of penalty.--If an individual with 
        respect to whom a penalty is imposed by this section 
        for any month--
                  (A) is a dependent (as defined in section 
                152) of another taxpayer for the other 
                taxpayer's taxable year including such month, 
                such other taxpayer shall be liable for such 
                penalty, or
                  (B) files a joint return for the taxable year 
                including such month, such individual and the 
                spouse of such individual shall be jointly 
                liable for such penalty.
  (c) Amount of Penalty.--
          (1) In general.--The amount of the penalty imposed by 
        this section on any taxpayer for any taxable year with 
        respect to failures described in subsection (b)(1) 
        shall be equal to the lesser of--
                  (A) the sum of the monthly penalty amounts 
                determined under paragraph (2) for months in 
                the taxable year during which 1 or more such 
                failures occurred, or
                  (B) an amount equal to the national average 
                premium for qualified health plans which have a 
                bronze level of coverage, provide coverage for 
                the applicable family size involved, and are 
                offered through Exchanges for plan years 
                beginning in the calendar year with or within 
                which the taxable year ends.
          (2) Monthly penalty amounts.--For purposes of 
        paragraph (1)(A), the monthly penalty amount with 
        respect to any taxpayer for any month during which any 
        failure described in subsection (b)(1) occurred is an 
        amount equal to \1/12\ of the greater of the following 
        amounts:
                  (A) Flat dollar amount.--An amount equal to 
                the lesser of--
                          (i) the sum of the applicable dollar 
                        amounts for all individuals with 
                        respect to whom such failure occurred 
                        during such month, or
                          (ii) 300 percent of the applicable 
                        dollar amount (determined without 
                        regard to paragraph (3)(C)) for the 
                        calendar year with or within which the 
                        taxable year ends.
                  (B) Percentage of income.--An amount equal to 
                the following percentage of the excess of the 
                taxpayer's household income for the taxable 
                year over the amount of gross income specified 
                in section 6012(a)(1) with respect to the 
                taxpayer for the taxable year:
                          (i) 1.0 percent for taxable years 
                        beginning in 2014.
                          (ii) 2.0 percent for taxable years 
                        beginning in 2015.
                          (iii) 2.5 percent for taxable years 
                        beginning after 2015.
          (3) Applicable dollar amount.--For purposes of 
        paragraph (1)--
                  (A) In general.--Except as provided in 
                subparagraphs (B) and (C), the applicable 
                dollar amount is $695.
                  (B) Phase in.--The applicable dollar amount 
                is $95 for 2014 and $325 for 2015.
                  (C) Special rule for individuals under age 
                18.--If an applicable individual has not 
                attained the age of 18 as of the beginning of a 
                month, the applicable dollar amount with 
                respect to such individual for the month shall 
                be equal to one-half of the applicable dollar 
                amount for the calendar year in which the month 
                occurs.
                  (D) Indexing of amount.--In the case of any 
                calendar year beginning after 2016, the 
                applicable dollar amount shall be equal to 
                $695, increased by an amount equal to--
                          (i) $695, multiplied by
                          (ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for 
                        the calendar year, determined by 
                        substituting ``calendar year 2015'' for 
                        ``calendar year 1992'' in subparagraph 
                        (B) thereof.
                If the amount of any increase under clause (i) 
                is not a multiple of $50, such increase shall 
                be rounded to the next lowest multiple of $50.
          (4) Terms relating to income and families.--For 
        purposes of this section--
                  (A) Family size.--The family size involved 
                with respect to any taxpayer shall be equal to 
                the number of individuals for whom the taxpayer 
                is allowed a deduction under section 151 
                (relating to allowance of deduction for 
                personal exemptions) for the taxable year.
                  (B) Household income.--The term ``household 
                income'' means, with respect to any taxpayer 
                for any taxable year, an amount equal to the 
                sum of--
                          (i) the modified adjusted gross 
                        income of the taxpayer, plus
                          (ii) the aggregate modified adjusted 
                        gross incomes of all other individuals 
                        who--
                                  (I) were taken into account 
                                in determining the taxpayer's 
                                family size under paragraph 
                                (1), and
                                  (II) were required to file a 
                                return of tax imposed by 
                                section 1 for the taxable year.
                  (C) Modified adjusted gross income.--The term 
                ``modified adjusted gross income'' means 
                adjusted gross income increased by--
                          (i) any amount excluded from gross 
                        income under section 911, and
                          (ii) any amount of interest received 
                        or accrued by the taxpayer during the 
                        taxable year which is exempt from tax.
  (d) Applicable Individual.--For purposes of this section--
          (1) In general.--The term ``applicable individual'' 
        means, with respect to any month, an individual other 
        than an individual described in paragraph (2), (3), or 
        (4).
          (2) Religious exemptions.--
                  (A) Religious conscience exemption.--Such 
                term shall not include any individual for any 
                month if such individual has in effect an 
                exemption under section 1311(d)(4)(H) of the 
                Patient Protection and Affordable Care Act 
                which certifies that such individual is--
                          (i) a member of a recognized 
                        religious sect or division thereof 
                        which is described in section 
                        1402(g)(1), and
                          (ii) an adherent of established 
                        tenets or teachings of such sect or 
                        division as described in such section.
                  (B) Health care sharing ministry.--
                          (i) In general.--Such term shall not 
                        include any individual for any month if 
                        such individual is a member of a health 
                        care sharing ministry for the month.
                          (ii) Health care sharing ministry.--
                        The term ``health care sharing 
                        ministry'' means an organization--
                                  (I) which is described in 
                                section 501(c)(3) and is exempt 
                                from taxation under section 
                                501(a),
                                  (II) members of which share a 
                                common set of ethical or 
                                religious beliefs and share 
                                medical expenses among members 
                                in accordance with those 
                                beliefs and without regard to 
                                the State in which a member 
                                resides or is employed,
                                  (III) members of which retain 
                                membership even after they 
                                develop a medical condition,
                                  (IV) which (or a predecessor 
                                of which) has been in existence 
                                at all times since December 31, 
                                1999, and medical expenses of 
                                its members have been shared 
                                continuously and without 
                                interruption since at least 
                                December 31, 1999, and
                                  (V) which conducts an annual 
                                audit which is performed by an 
                                independent certified public 
                                accounting firm in accordance 
                                with generally accepted 
                                accounting principles and which 
                                is made available to the public 
                                upon request.
          (3) Individuals not lawfully present.--Such term 
        shall not include an individual for any month if for 
        the month the individual is not a citizen or national 
        of the United States or an alien lawfully present in 
        the United States.
          (4) Incarcerated individuals.--Such term shall not 
        include an individual for any month if for the month 
        the individual is incarcerated, other than 
        incarceration pending the disposition of charges.
  (e) Exemptions.--No penalty shall be imposed under subsection 
(a) with respect to--
          (1) Individuals who cannot afford coverage.--
                  (A) In general.--Any applicable individual 
                for any month if the applicable individual's 
                required contribution (determined on an annual 
                basis) for coverage for the month exceeds 8 
                percent of such individual's household income 
                for the taxable year described in section 
                1412(b)(1)(B) of the Patient Protection and 
                Affordable Care Act. For purposes of applying 
                this subparagraph, the taxpayer's household 
                income shall be increased by any exclusion from 
                gross income for any portion of the required 
                contribution made through a salary reduction 
                arrangement.
                  (B) Required contribution.--For purposes of 
                this paragraph, the term ``required 
                contribution'' means--
                          (i) in the case of an individual 
                        eligible to purchase minimum essential 
                        coverage consisting of coverage through 
                        an eligible-employer-sponsored plan, 
                        the portion of the annual premium which 
                        would be paid by the individual 
                        (without regard to whether paid through 
                        salary reduction or otherwise) for 
                        self-only coverage, or
                          (ii) in the case of an individual 
                        eligible only to purchase minimum 
                        essential coverage described in 
                        subsection (f)(1)(C), the annual 
                        premium for the lowest cost bronze plan 
                        available in the individual market 
                        through the Exchange in the State in 
                        the rating area in which the individual 
                        resides (without regard to whether the 
                        individual purchased a qualified health 
                        plan through the Exchange), reduced by 
                        the amount of the credit allowable 
                        under section 36B for the taxable year 
                        (determined as if the individual was 
                        covered by a qualified health plan 
                        offered through the Exchange for the 
                        entire taxable year).
                  (C) Special rules for individuals related to 
                employees.--For purposes of subparagraph 
                (B)(i), if an applicable individual is eligible 
                for minimum essential coverage through an 
                employer by reason of a relationship to an 
                employee, the determination under subparagraph 
                (A) shall be made by reference to required 
                contribution of the employee.
                  (D) Indexing.--In the case of plan years 
                beginning in any calendar year after 2014, 
                subparagraph (A) shall be applied by 
                substituting for ``8 percent'' the percentage 
                the Secretary of Health and Human Services 
                determines reflects the excess of the rate of 
                premium growth between the preceding calendar 
                year and 2013 over the rate of income growth 
                for such period.
          (2) Taxpayers with income below filing threshold.--
        Any applicable individual for any month during a 
        calendar year if the individual's household income for 
        the taxable year described in section 1412(b)(1)(B) of 
        the Patient Protection and Affordable Care Act is the 
        amount of gross income specified in section 6012(a)(1) 
        with respect to the taxpayer.
          (3) Members of Indian tribes.--Any applicable 
        individual for any month during which the individual is 
        a member of an Indian tribe (as defined in section 
        45A(c)(6)).
          (4) Months during short coverage gaps.--
                  (A) In general.--Any month the last day of 
                which occurred during a period in which the 
                applicable individual was not covered by 
                minimum essential coverage for a continuous 
                period of less than 3 months.
                  (B) Special rules.--For purposes of applying 
                this paragraph--
                          (i) the length of a continuous period 
                        shall be determined without regard to 
                        the calendar years in which months in 
                        such period occur,
                          (ii) if a continuous period is 
                        greater than the period allowed under 
                        subparagraph (A), no exception shall be 
                        provided under this paragraph for any 
                        month in the period, and
                          (iii) if there is more than 1 
                        continuous period described in 
                        subparagraph (A) covering months in a 
                        calendar year, the exception provided 
                        by this paragraph shall only apply to 
                        months in the first of such periods.
                The Secretary shall prescribe rules for the 
                collection of the penalty imposed by this 
                section in cases where continuous periods 
                include months in more than 1 taxable year.
          (5) Hardships.--Any applicable individual who for any 
        month is determined by the Secretary of Health and 
        Human Services under section 1311(d)(4)(H) to have 
        suffered a hardship with respect to the capability to 
        obtain coverage under a qualified health plan.
  (f) Minimum Essential Coverage.--For purposes of this 
section--
          (1) In general.--The term ``minimum essential 
        coverage'' means any of the following:
                  (A) Government sponsored programs.--Coverage 
                under--
                          (i) the Medicare program under part A 
                        of title XVIII of the Social Security 
                        Act,
                          (ii) the Medicaid program under title 
                        XIX of the Social Security Act,
                          (iii) the CHIP program under title 
                        XXI of the Social Security Act,
                          (iv) medical coverage under chapter 
                        55 of title 10, United States Code, 
                        including coverage under the TRICARE 
                        program;
                          (v) a health care program under 
                        chapter 17 or 18 of title 38, United 
                        States Code, as determined by the 
                        Secretary of Veterans Affairs, in 
                        coordination with the Secretary of 
                        Health and Human Services and the 
                        Secretary,
                          (vi) a health plan under section 
                        2504(e) of title 22, United States Code 
                        (relating to Peace Corps volunteers); 
                        or
                          (vii) the Nonappropriated Fund Health 
                        Benefits Program of the Department of 
                        Defense, established under section 349 
                        of the National Defense Authorization 
                        Act for Fiscal Year 1995 (Public Law 
                        103-337; 10 U.S.C. 1587 note).
                  (B) Employer-sponsored plan.--Coverage under 
                an eligible employer-sponsored plan.
                  (C) Plans in the individual market.--Coverage 
                under a health plan offered in the individual 
                market within a State.
                  (D) Grandfathered health plan.--Coverage 
                under a grandfathered health plan.
                  (E) Other coverage.--Such other health 
                benefits coverage, such as a State health 
                benefits risk pool, as the Secretary of Health 
                and Human Services, in coordination with the 
                Secretary, recognizes for purposes of this 
                subsection.
          (2) Eligible employer-sponsored plan.--The term 
        ``eligible employer-sponsored plan'' means, with 
        respect to any employee, a group health plan or group 
        health insurance coverage offered by an employer to the 
        employee which is--
                  (A) a governmental plan (within the meaning 
                of section 2791(d)(8) of the Public Health 
                Service Act), or
                  (B) any other plan or coverage offered in the 
                small or large group market within a State.
        Such term shall include a grandfathered health plan 
        described in paragraph (1)(D) offered in a group 
        market.
          (3) Excepted benefits not treated as minimum 
        essential coverage.--The term ``minimum essential 
        coverage'' shall not include health insurance coverage 
        which consists of coverage of excepted benefits--
                  (A) described in paragraph (1) of subsection 
                (c) of section 2791 of the Public Health 
                Service Act; or
                  (B) described in paragraph (2), (3), or (4) 
                of such subsection if the benefits are provided 
                under a separate policy, certificate, or 
                contract of insurance.
          (4) Individuals residing outside United States or 
        residents of territories.--Any applicable individual 
        shall be treated as having minimum essential coverage 
        for any month--
                  (A) if such month occurs during any period 
                described in subparagraph (A) or (B) of section 
                911(d)(1) which is applicable to the 
                individual, or
                  (B) if such individual is a bona fide 
                resident of any possession of the United States 
                (as determined under section 937(a)) for such 
                month.
          (5) Insurance-related terms.--Any term used in this 
        section which is also used in title I of the Patient 
        Protection and Affordable Care Act shall have the same 
        meaning as when used in such title.
  (g) Administration and Procedure.--
          (1) In general.--The penalty provided by this section 
        shall be paid upon notice and demand by the Secretary, 
        and except as provided in paragraph (2), shall be 
        assessed and collected in the same manner as an 
        assessable penalty under subchapter B of chapter 68.
          (2) Special rules.--Notwithstanding any other 
        provision of law--
                  (A) Waiver of criminal penalties.--In the 
                case of any failure by a taxpayer to timely pay 
                any penalty imposed by this section, such 
                taxpayer shall not be subject to any criminal 
                prosecution or penalty with respect to such 
                failure.
                  (B) Limitations on liens and levies.--The 
                Secretary shall not--
                          (i) file notice of lien with respect 
                        to any property of a taxpayer by reason 
                        of any failure to pay the penalty 
                        imposed by this section, or
                          (ii) levy on any such property with 
                        respect to such failure.

           *       *       *       *       *       *       *

      B. Changes in Existing Law Proposed by the Bill, as Reported

    In compliance with clause 3(e)(1)(B) of rule XIII of the 
Rules of the House of Representatives, changes in existing law 
proposed 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 italics, existing law in 
which no change is proposed is shown in roman):

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e)(1)(B) 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 (new matter 
is printed in italics and existing law in which no change is 
proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *
Subtitle D--Miscellaneous Excise Taxes

           *       *       *       *       *       *       *

CHAPTER 48--MAINTENANCE OF MINIMUM ESSENTIAL COVERAGE

           *       *       *       *       *       *       *

SEC. 5000A. REQUIREMENT TO MAINTAIN MINIMUM ESSENTIAL COVERAGE.

  (a) Requirement to Maintain Minimum Essential Coverage.--An 
applicable individual shall for each month beginning after 2013 
ensure that the individual, and any dependent of the individual 
who is an applicable individual, is covered under minimum 
essential coverage for such month.
  (b) Shared Responsibility Payment.--
          (1) In general.--If a taxpayer who is an applicable 
        individual, or an applicable individual for whom the 
        taxpayer is liable under paragraph (3), fails to meet 
        the requirement of subsection (a) for 1 or more months, 
        then, except as provided in subsection (e), there is 
        hereby imposed on the taxpayer a penalty with respect 
        to such failures in the amount determined under 
        subsection (c).
          (2) Inclusion with return.--Any penalty imposed by 
        this section with respect to any month shall be 
        included with a taxpayer's return under chapter 1 for 
        the taxable year which includes such month.
          (3) Payment of penalty.--If an individual with 
        respect to whom a penalty is imposed by this section 
        for any month--
                  (A) is a dependent (as defined in section 
                152) of another taxpayer for the other 
                taxpayer's taxable year including such month, 
                such other taxpayer shall be liable for such 
                penalty, or
                  (B) files a joint return for the taxable year 
                including such month, such individual and the 
                spouse of such individual shall be jointly 
                liable for such penalty.
  (c) Amount of Penalty.--
          (1) In general.--The amount of the penalty imposed by 
        this section on any taxpayer for any taxable year with 
        respect to failures described in subsection (b)(1) 
        shall be equal to the lesser of--
                  (A) the sum of the monthly penalty amounts 
                determined under paragraph (2) for months in 
                the taxable year during which 1 or more such 
                failures occurred, or
                  (B) an amount equal to the national average 
                premium for qualified health plans which have a 
                bronze level of coverage, provide coverage for 
                the applicable family size involved, and are 
                offered through Exchanges for plan years 
                beginning in the calendar year with or within 
                which the taxable year ends.
          (2) Monthly penalty amounts.--For purposes of 
        paragraph (1)(A), the monthly penalty amount with 
        respect to any taxpayer for any month during which any 
        failure described in subsection (b)(1) occurred is an 
        amount equal to \1/12\ of the greater of the following 
        amounts:
                  (A) Flat dollar amount.--An amount equal to 
                the lesser of--
                          (i) the sum of the applicable dollar 
                        amounts for all individuals with 
                        respect to whom such failure occurred 
                        during such month, or
                          (ii) 300 percent of the applicable 
                        dollar amount (determined without 
                        regard to paragraph (3)(C)) for the 
                        calendar year with or within which the 
                        taxable year ends.
                  (B) Percentage of income.--An amount equal to 
                the following percentage of the excess of the 
                taxpayer's household income for the taxable 
                year over the amount of gross income specified 
                in section 6012(a)(1) with respect to the 
                taxpayer for the taxable year:
                          (i) 1.0 percent for taxable years 
                        beginning in 2014.
                          (ii) 2.0 percent for taxable years 
                        beginning in 2015.
                          (iii) 2.5 percent for taxable years 
                        beginning after 2015.
          (3) Applicable dollar amount.--For purposes of 
        paragraph (1)--
                  (A) In general.--Except as provided in 
                subparagraphs (B) and (C), the applicable 
                dollar amount is $695.
                  (B) Phase in.--The applicable dollar amount 
                is $95 for 2014 and $325 for 2015.
                  (C) Special rule for individuals under age 
                18.--If an applicable individual has not 
                attained the age of 18 as of the beginning of a 
                month, the applicable dollar amount with 
                respect to such individual for the month shall 
                be equal to one-half of the applicable dollar 
                amount for the calendar year in which the month 
                occurs.
                  (D) Indexing of amount.--In the case of any 
                calendar year beginning after 2016, the 
                applicable dollar amount shall be equal to 
                $695, increased by an amount equal to--
                          (i) $695, multiplied by
                          (ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for 
                        the calendar year, determined by 
                        substituting ``calendar year 2015'' for 
                        ``calendar year 1992'' in subparagraph 
                        (B) thereof.
                If the amount of any increase under clause (i) 
                is not a multiple of $50, such increase shall 
                be rounded to the next lowest multiple of $50.
          (4) Terms relating to income and families.--For 
        purposes of this section--
                  (A) Family size.--The family size involved 
                with respect to any taxpayer shall be equal to 
                the number of individuals for whom the taxpayer 
                is allowed a deduction under section 151 
                (relating to allowance of deduction for 
                personal exemptions) for the taxable year.
                  (B) Household income.--The term ``household 
                income'' means, with respect to any taxpayer 
                for any taxable year, an amount equal to the 
                sum of--
                          (i) the modified adjusted gross 
                        income of the taxpayer, plus
                          (ii) the aggregate modified adjusted 
                        gross incomes of all other individuals 
                        who--
                                  (I) were taken into account 
                                in determining the taxpayer's 
                                family size under paragraph 
                                (1), and
                                  (II) were required to file a 
                                return of tax imposed by 
                                section 1 for the taxable year.
                  (C) Modified adjusted gross income.--The term 
                ``modified adjusted gross income'' means 
                adjusted gross income increased by--
                          (i) any amount excluded from gross 
                        income under section 911, and
                          (ii) any amount of interest received 
                        or accrued by the taxpayer during the 
                        taxable year which is exempt from tax.
  (d) Applicable Individual.--For purposes of this section--
          (1) In general.--The term ``applicable individual'' 
        means, with respect to any month, an individual other 
        than an individual described in paragraph (2), (3), or 
        (4).
          (2) Religious exemptions.--
                  (A) Religious conscience exemption.--Such 
                term shall not include any individual for any 
                month if such individual has in effect an 
                exemption under section 1311(d)(4)(H) of the 
                Patient Protection and Affordable Care Act 
                which certifies that such individual is--
                          (i) a member of a recognized 
                        religious sect or division thereof 
                        which is described in section 
                        1402(g)(1), and
                          (ii) an adherent of established 
                        tenets or teachings of such sect or 
                        division as described in such section.
                  (B) Health care sharing ministry.--
                          (i) In general.--Such term shall not 
                        include any individual for any month if 
                        such individual is a member of a health 
                        care sharing ministry for the month.
                          (ii) Health care sharing ministry.--
                        The term ``health care sharing 
                        ministry'' means an organization--
                                  (I) which is described in 
                                section 501(c)(3) and is exempt 
                                from taxation under section 
                                501(a),
                                  (II) members of which share a 
                                common set of ethical or 
                                religious beliefs and share 
                                medical expenses among members 
                                in accordance with those 
                                beliefs and without regard to 
                                the State in which a member 
                                resides or is employed,
                                  (III) members of which retain 
                                membership even after they 
                                develop a medical condition,
                                  (IV) which (or a predecessor 
                                of which) has been in existence 
                                at all times since December 31, 
                                1999, and medical expenses of 
                                its members have been shared 
                                continuously and without 
                                interruption since at least 
                                December 31, 1999, and
                                  (V) which conducts an annual 
                                audit which is performed by an 
                                independent certified public 
                                accounting firm in accordance 
                                with generally accepted 
                                accounting principles and which 
                                is made available to the public 
                                upon request.
          (3) Individuals not lawfully present.--Such term 
        shall not include an individual for any month if for 
        the month the individual is not a citizen or national 
        of the United States or an alien lawfully present in 
        the United States.
          (4) Incarcerated individuals.--Such term shall not 
        include an individual for any month if for the month 
        the individual is incarcerated, other than 
        incarceration pending the disposition of charges.
  (e) Exemptions.--No penalty shall be imposed under subsection 
(a) with respect to--
          (1) Individuals who cannot afford coverage.--
                  (A) In general.--Any applicable individual 
                for any month if the applicable individual's 
                required contribution (determined on an annual 
                basis) for coverage for the month exceeds 8 
                percent of such individual's household income 
                for the taxable year described in section 
                1412(b)(1)(B) of the Patient Protection and 
                Affordable Care Act. For purposes of applying 
                this subparagraph, the taxpayer's household 
                income shall be increased by any exclusion from 
                gross income for any portion of the required 
                contribution made through a salary reduction 
                arrangement.
                  (B) Required contribution.--For purposes of 
                this paragraph, the term ``required 
                contribution'' means--
                          (i) in the case of an individual 
                        eligible to purchase minimum essential 
                        coverage consisting of coverage through 
                        an eligible-employer-sponsored plan, 
                        the portion of the annual premium which 
                        would be paid by the individual 
                        (without regard to whether paid through 
                        salary reduction or otherwise) for 
                        self-only coverage, or
                          (ii) in the case of an individual 
                        eligible only to purchase minimum 
                        essential coverage described in 
                        subsection (f)(1)(C), the annual 
                        premium for the lowest cost bronze plan 
                        available in the individual market 
                        through the Exchange in the State in 
                        the rating area in which the individual 
                        resides (without regard to whether the 
                        individual purchased a qualified health 
                        plan through the Exchange), reduced by 
                        the amount of the credit allowable 
                        under section 36B for the taxable year 
                        (determined as if the individual was 
                        covered by a qualified health plan 
                        offered through the Exchange for the 
                        entire taxable year).
                  (C) Special rules for individuals related to 
                employees.--For purposes of subparagraph 
                (B)(i), if an applicable individual is eligible 
                for minimum essential coverage through an 
                employer by reason of a relationship to an 
                employee, the determination under subparagraph 
                (A) shall be made by reference to required 
                contribution of the employee.
                  (D) Indexing.--In the case of plan years 
                beginning in any calendar year after 2014, 
                subparagraph (A) shall be applied by 
                substituting for ``8 percent'' the percentage 
                the Secretary of Health and Human Services 
                determines reflects the excess of the rate of 
                premium growth between the preceding calendar 
                year and 2013 over the rate of income growth 
                for such period.
          (2) Taxpayers with income below filing threshold.--
        Any applicable individual for any month during a 
        calendar year if the individual's household income for 
        the taxable year described in section 1412(b)(1)(B) of 
        the Patient Protection and Affordable Care Act is the 
        amount of gross income specified in section 6012(a)(1) 
        with respect to the taxpayer.
          (3) Members of Indian tribes.--Any applicable 
        individual for any month during which the individual is 
        a member of an Indian tribe (as defined in section 
        45A(c)(6)).
          (4) Months during short coverage gaps.--
                  (A) In general.--Any month the last day of 
                which occurred during a period in which the 
                applicable individual was not covered by 
                minimum essential coverage for a continuous 
                period of less than 3 months.
                  (B) Special rules.--For purposes of applying 
                this paragraph--
                          (i) the length of a continuous period 
                        shall be determined without regard to 
                        the calendar years in which months in 
                        such period occur,
                          (ii) if a continuous period is 
                        greater than the period allowed under 
                        subparagraph (A), no exception shall be 
                        provided under this paragraph for any 
                        month in the period, and
                          (iii) if there is more than 1 
                        continuous period described in 
                        subparagraph (A) covering months in a 
                        calendar year, the exception provided 
                        by this paragraph shall only apply to 
                        months in the first of such periods.
                The Secretary shall prescribe rules for the 
                collection of the penalty imposed by this 
                section in cases where continuous periods 
                include months in more than 1 taxable year.
          (5) Hardships.--Any applicable individual who for any 
        month is determined by the Secretary of Health and 
        Human Services under section 1311(d)(4)(H) to have 
        suffered a hardship with respect to the capability to 
        obtain coverage under a qualified health plan.
          (6) Certain individuals previously enrolled in health 
        plans funded through the consumer operated and oriented 
        plan (CO-OP) program.--Any applicable individual for 
        any month if--
                  (A) such individual was enrolled in minimum 
                essential coverage offered by a qualified 
                nonprofit health insurance issuer (as defined 
                in subsection (c) of section 1322 of the 
                Patient Protection and Affordable Care Act (42 
                U.S.C. 18042)) receiving funds with respect to 
                such coverage through the Consumer Operated and 
                Oriented Plan program established under such 
                section,
                  (B) during the calendar year which includes 
                such month, such issuer terminated such 
                coverage in the area in which the individual 
                resides, and
                  (C) such month ends after the date on which 
                such coverage was so terminated.
  (f) Minimum Essential Coverage.--For purposes of this 
section--
          (1) In general.--The term ``minimum essential 
        coverage'' means any of the following:
                  (A) Government sponsored programs.--Coverage 
                under--
                          (i) the Medicare program under part A 
                        of title XVIII of the Social Security 
                        Act,
                          (ii) the Medicaid program under title 
                        XIX of the Social Security Act,
                          (iii) the CHIP program under title 
                        XXI of the Social Security Act,
                          (iv) medical coverage under chapter 
                        55 of title 10, United States Code, 
                        including coverage under the TRICARE 
                        program;
                          (v) a health care program under 
                        chapter 17 or 18 of title 38, United 
                        States Code, as determined by the 
                        Secretary of Veterans Affairs, in 
                        coordination with the Secretary of 
                        Health and Human Services and the 
                        Secretary,
                          (vi) a health plan under section 
                        2504(e) of title 22, United States Code 
                        (relating to Peace Corps volunteers); 
                        or
                          (vii) the Nonappropriated Fund Health 
                        Benefits Program of the Department of 
                        Defense, established under section 349 
                        of the National Defense Authorization 
                        Act for Fiscal Year 1995 (Public Law 
                        103-337; 10 U.S.C. 1587 note).
                  (B) Employer-sponsored plan.--Coverage under 
                an eligible employer-sponsored plan.
                  (C) Plans in the individual market.--Coverage 
                under a health plan offered in the individual 
                market within a State.
                  (D) Grandfathered health plan.--Coverage 
                under a grandfathered health plan.
                  (E) Other coverage.--Such other health 
                benefits coverage, such as a State health 
                benefits risk pool, as the Secretary of Health 
                and Human Services, in coordination with the 
                Secretary, recognizes for purposes of this 
                subsection.
          (2) Eligible employer-sponsored plan.--The term 
        ``eligible employer-sponsored plan'' means, with 
        respect to any employee, a group health plan or group 
        health insurance coverage offered by an employer to the 
        employee which is--
                  (A) a governmental plan (within the meaning 
                of section 2791(d)(8) of the Public Health 
                Service Act), or
                  (B) any other plan or coverage offered in the 
                small or large group market within a State.
        Such term shall include a grandfathered health plan 
        described in paragraph (1)(D) offered in a group 
        market.
          (3) Excepted benefits not treated as minimum 
        essential coverage.--The term ``minimum essential 
        coverage'' shall not include health insurance coverage 
        which consists of coverage of excepted benefits--
                  (A) described in paragraph (1) of subsection 
                (c) of section 2791 of the Public Health 
                Service Act; or
                  (B) described in paragraph (2), (3), or (4) 
                of such subsection if the benefits are provided 
                under a separate policy, certificate, or 
                contract of insurance.
          (4) Individuals residing outside United States or 
        residents of territories.--Any applicable individual 
        shall be treated as having minimum essential coverage 
        for any month--
                  (A) if such month occurs during any period 
                described in subparagraph (A) or (B) of section 
                911(d)(1) which is applicable to the 
                individual, or
                  (B) if such individual is a bona fide 
                resident of any possession of the United States 
                (as determined under section 937(a)) for such 
                month.
          (5) Insurance-related terms.--Any term used in this 
        section which is also used in title I of the Patient 
        Protection and Affordable Care Act shall have the same 
        meaning as when used in such title.
  (g) Administration and Procedure.--
          (1) In general.--The penalty provided by this section 
        shall be paid upon notice and demand by the Secretary, 
        and except as provided in paragraph (2), shall be 
        assessed and collected in the same manner as an 
        assessable penalty under subchapter B of chapter 68.
          (2) Special rules.--Notwithstanding any other 
        provision of law--
                  (A) Waiver of criminal penalties.--In the 
                case of any failure by a taxpayer to timely pay 
                any penalty imposed by this section, such 
                taxpayer shall not be subject to any criminal 
                prosecution or penalty with respect to such 
                failure.
                  (B) Limitations on liens and levies.--The 
                Secretary shall not--
                          (i) file notice of lien with respect 
                        to any property of a taxpayer by reason 
                        of any failure to pay the penalty 
                        imposed by this section, or
                          (ii) levy on any such property with 
                        respect to such failure.

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