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108TH CONGRESS 

2D SESSION H. R. 3748

To amend the Internal Revenue Code of 1986 to allow individuals a refundable and advanceable credit against income tax for health insurance 

costs. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 28, 2004

Mr. SHADEGG introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL

To amend the Internal Revenue Code of 1986 to allow individuals a refundable and advanceable credit against income tax for health insurance costs.

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; CONSTITUTIONAL AUTHORITY. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Health Care Cost Integrity and Fairness Act of 2004’’. 

6 (b) CONSTITUTIONAL AUTHORITY TO ENACT THIS

7 LEGISLATION.—The constitutional authority upon which 

8 this Act rests is the power of Congress to regulate com9 merce with foreign nations and among the several States, 
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1 set forth in article I, section 8 of the United States Con2 stitution. 

3 SEC. 2. REFUNDABLE AND ADVANCEABLE CREDIT FOR 

4 HEALTH INSURANCE COSTS. 

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

7 1986 (relating to refundable credits) is amended by redes8 ignating section 36 as section 37 and by inserting after 

9 section 35 the following new section: 

10 ‘‘SEC. 36. HEALTH INSURANCE COSTS. 

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

12 there shall be allowed as a credit against the tax imposed 

13 by this subtitle an amount equal to the amount paid dur14 ing the taxable year for qualified health insurance for cov15 erage of the taxpayer, his spouse, and dependents. 

16 ‘‘(b) LIMITATIONS.—

17 ‘‘(1) MAXIMUM CREDIT.—

18 ‘‘(A) IN GENERAL.—The amount allowed 

19 as a credit under subsection (a) to the taxpayer 

20 for the taxable year shall not exceed the sum of 

21 the monthly limitations for months during such 

22 taxable year. 

23 ‘‘(B) MONTHLY LIMITATION.—The month24 ly limitation for any month is the amount equal 

to 1 25 ⁄12 of the lesser of—
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1 ‘‘(i) the product of $1,000 multiplied 

2 by the number of individuals taken into ac3 count under subsection (a) who are covered 

4 under qualified health insurance as of the 

5 first day of such month, or 

6 ‘‘(ii) $3,000. 

7 ‘‘(2) EMPLOYER SUBSIDIZED COVERAGE.—Sub8 section (a) shall not apply to amounts paid for cov9 erage of any individual for any month for which 

10 such individual participates in any subsidized health 

11 plan maintained by any employer of the taxpayer or 

12 of the spouse of the taxpayer. The rule of the last 

13 sentence of section 162(l)(2)(B) shall apply for pur14 poses of the preceding sentence. 

15 ‘‘(c) QUALIFIED HEALTH INSURANCE.—For pur16 poses of this section—

17 ‘‘(1) IN GENERAL.—The term ‘qualified health 

18 insurance’ means insurance which constitutes med19 ical care if—

20 ‘‘(A) such insurance meets the require21 ments of section 223(c)(2)(A)(ii), 

22 ‘‘(B) there is no exclusion from, or limita23 tion on, coverage for any preexisting medical 

24 condition of any applicant who, on the date the 

25 application is made, has been continuously in-
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1 sured during the 1-year period ending on the 

2 date of the application under—

3 ‘‘(i) qualified health insurance (deter4 mined without regard to this subpara5 graph), or 

6 ‘‘(ii) a program described in—

7 ‘‘(I) title XVIII or XIX of the 

8 Social Security Act, 

9 ‘‘(II) chapter 55 of title 10, 

10 United States Code, 

11 ‘‘(III) chapter 17 of title 38, 

12 United States Code, 

13 ‘‘(IV) chapter 89 of title 5, 

14 United States Code, or 

15 ‘‘(V) the Indian Health Care Im16 provement Act, and 

17 ‘‘(C) in the case of each applicant who has 

18 not been continuously so insured during the 1-

19 year period ending on the date the application 

20 is made, the exclusion from, or limitation on, 

21 coverage for any preexisting medical condition 

22 does not extend beyond the period after such 

23 date equal to the lesser of—

24 ‘‘(i) the number of months imme25 diately prior to such date during which the 
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1 individual was not so insured since the ill2 ness or condition in question was first di3 agnosed, or 

4 ‘‘(ii) 1 year. 

5 ‘‘(2) EXCLUSION OF CERTAIN PLANS.—Such 

6 term does not include—

7 ‘‘(A) insurance if substantially all of its 

8 coverage is coverage described in section 

9 223(c)(1)(B), 

10 ‘‘(B) insurance under a program described 

11 in paragraph (1)(B)(ii). 

12 ‘‘(3) TRANSITION RULE FOR 2004.—In the case 

13 of applications made during 2004, the requirements 

14 of subparagraphs (C) and (D) of paragraph (1) are 

15 met only if the insurance does not exclude from cov16 erage, or limit coverage for, any preexisting medical 

17 condition of any applicant. 

18 ‘‘(d) SPECIAL RULES.—

19 ‘‘(1) COORDINATION WITH MEDICAL DEDUC20 TION, ETC.—Any amount paid by a taxpayer for in21 surance to which subsection (a) applies shall not be 

22 taken into account in computing the amount allow23 able to the taxpayer as a credit under section 35 or 

24 as a deduction under section 162(l) or 213(a). 
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1 ‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.—No 

2 credit shall be allowed under this section to any indi3 vidual with respect to whom a deduction under sec4 tion 151 is allowable to another taxpayer for a tax5 able year beginning in the calendar year in which 

6 such individual’s taxable year begins. 

7 ‘‘(3) MARRIED COUPLES MUST FILE JOINT RE8 TURN.—

9 ‘‘(A) IN GENERAL.—If the taxpayer is 

10 married at the close of the taxable year, the 

11 credit shall be allowed under subsection (a) only 

12 if the taxpayer and his spouse file a joint return 

13 for the taxable year. 

14 ‘‘(B) MARITAL STATUS; CERTAIN MARRIED

15 INDIVIDUALS LIVING APART.—Rules similar to 

16 the rules of paragraphs (3) and (4) of section 

17 21(e) shall apply for purposes of this para18 graph. 

19 ‘‘(4) VERIFICATION OF COVERAGE, ETC.—No 

20 credit shall be allowed under this section to any indi21 vidual unless such individual’s coverage under quali22 fied health insurance, and the amount paid for such 

23 coverage, are verified in such manner as the Sec24 retary may prescribe. 
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1 ‘‘(5) COORDINATION WITH ADVANCE PAYMENTS

2 OF CREDIT.—With respect to any taxable year, the 

3 amount which would (but for this subsection) be al4 lowed as a credit to the taxpayer under subsection 

5 (a) shall be reduced (but not below zero) by the ag6 gregate amount paid on behalf of such taxpayer 

7 under section 7528 for months beginning in such 

8 taxable year. 

9 ‘‘(6) COST-OF-LIVING ADJUSTMENT.—In the 

10 case of any taxable year beginning in a calendar 

11 year after 2004, each dollar amount contained in 

12 subsection (b)(1)(B) shall be increased by an 

13 amount equal to—

14 ‘‘(A) such dollar amount, multiplied by 

15 ‘‘(B) the cost-of-living adjustment deter16 mined under section 1(f)(3) for the calendar 

17 year in which the taxable year begins by sub18 stituting ‘calendar year 2003’ for ‘calendar year 

19 1992’ in subparagraph (B) thereof. 

20 Any increase determined under the preceding sen21 tence shall be rounded to the nearest multiple of 

22 $10.’’. 

23 (b) ADVANCE PAYMENT OF CREDIT.—Chapter 77 of 

24 such Code (relating to miscellaneous provisions) is amend25 ed by adding at the end the following new section: 
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1 ‘‘SEC. 7528. ADVANCE PAYMENT OF CREDIT FOR HEALTH 

2 INSURANCE COSTS. 

3 ‘‘(a) GENERAL RULE.—The Secretary shall establish 

4 a program for making payments on behalf of individuals 

5 to providers of qualified health insurance (as defined in 

6 section 36(c)) for such individuals. 

7 ‘‘(b) LIMITATION ON ADVANCE PAYMENTS DURING

8 ANY TAXABLE YEAR.—The Secretary may make pay9 ments under subsection (a) only to the extent that the 

10 total amount of such payments made on behalf of any indi11 vidual during the taxable year does not exceed the amount 

12 allowable as a credit to such individual for such year under 

13 section 36 (determined without regard to subsection (d)(5) 

14 thereof).’’. 

15 (c) CONFORMING AMENDMENTS.—

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

17 31, United States Code, is amended by inserting ‘‘or 

18 36’’ after ‘‘section 35’’. 

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

20 IV of subchapter A of chapter 1 of the Internal Rev21 enue Code of 1986 is amended by striking the item 

22 relating to section 36 and inserting the following 

23 new items:

‘‘Sec. 36. Health insurance costs. 

‘‘Sec. 37. Overpayments of tax.’’.
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1 (3) The table of sections for chapter 77 of such 

2 Code is amended by adding at the end the following 

3 new item:

‘‘Sec. 7528. Advance payment of credit for health insurance costs.’’.

4 (d) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to taxable years beginning after 

6 December 31, 2003.

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