II 

109TH CONGRESS 

1ST SESSION S. 160 

To amend the Internal Revenue Code of 1986 to allow individuals a refundable credit against income tax for the purchase of private health insurance, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 25, 2005 

Ms. MURKOWSKI introduced the following bill; which was read twice and 

referred to the Committee on Finance 

A BILL

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

purchase of private health insurance, 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 ‘‘Save Act’’. 
2

•S 160 IS

1 TITLE I—REFUNDABLE HEALTH 

2 INSURANCE CREDIT 

3 SEC. 101. REFUNDABLE CREDIT FOR HEALTH INSURANCE 

4 COVERAGE. 

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 the 

15 taxpayer, his spouse, and dependents. 

16 ‘‘(b) LIMITATIONS.— 

17 ‘‘(1) IN GENERAL.—The amount allowed as a 

18 credit under subsection (a) to the taxpayer for the 

19 taxable year shall not exceed the sum of the monthly 

20 limitations for coverage months during such taxable 

21 year for each individual referred to in subsection (a) 

22 for whom the taxpayer paid during the taxable year 

23 any amount for coverage under qualified health in24 surance. 

25 ‘‘(2) PHASEOUT OF AMOUNT.— 
3

•S 160 IS

1 ‘‘(A) REDUCTION BASED ON ADJUSTED

2 GROSS INCOME.—The amount determined under 

3 paragraph (1) for any taxable year shall be re4 duced (but not below zero) by the amount de5 termined under subparagraph (B). 

6 ‘‘(B) AMOUNT OF REDUCTION.—The 

7 amount determined under this subparagraph 

8 with respect to any amount determined under 

9 paragraph (1) shall be the amount which bears 

10 the same ratio to such amount determined 

11 under paragraph (1) as— 

12 ‘‘(i) the excess of— 

13 ‘‘(I) the taxpayer’s adjusted 

14 gross income for such taxable year, 

15 over 

16 ‘‘(II) the applicable dollar 

17 amount, bears to 

18 ‘‘(ii) $10,000. 

19 The rules of subparagraphs (B) and (C) of sec20 tion 219(g)(2) shall apply to any reduction 

21 under this subparagraph. 

22 ‘‘(C) DEFINITIONS.—For purposes of this 

23 paragraph— 
4

•S 160 IS

1 ‘‘(i) adjusted gross income shall be de2 termined in the same manner as under sec3 tion 408A(c)(3)(C)(i), and 

4 ‘‘(ii) the applicable dollar amount is— 

5 ‘‘(I) in the case of a taxpayer fil6 ing a joint return, an amount equal to 

7 350 percent of the poverty line (as de8 fined in section 673(2) of the Commu9 nity Services Block Grant Act, for a 

10 family of 4) for the taxable year, 

11 ‘‘(II) in the case of any other 

12 taxpayer (other than a married indi13 vidual filing a separate return), 350 

14 percent of the poverty line (as so de15 fined for an individual) for the taxable 

16 year, and 

17 ‘‘(III) in the case of a married 

18 individual filing a separate return, 

19 zero. 

20 ‘‘(3) MONTHLY LIMITATION.— 

21 ‘‘(A) IN GENERAL.—The monthly limita22 tion for an individual for each coverage month 

23 of such individual during the taxable year is the 

amount equal to 1 24 ⁄12th of— 

25 ‘‘(i) the base amount, plus 
5

•S 160 IS

1 ‘‘(ii) 50 percent of the amount paid in 

2 excess of the base amount. 

3 ‘‘(B) BASE AMOUNT.—For purposes of this 

4 paragraph, the base amount is— 

5 ‘‘(i) $1,000 if such individual is the 

6 taxpayer, 

7 ‘‘(ii) $500 if— 

8 ‘‘(I) such individual is the spouse 

9 of the taxpayer, 

10 ‘‘(II) the taxpayer and such 

11 spouse are married as of the first day 

12 of such month, and 

13 ‘‘(III) the taxpayer files a joint 

14 return for the taxable year, and 

15 ‘‘(iii) $500 if such individual is an in16 dividual for whom a deduction under sec17 tion 151(c) is allowable to the taxpayer for 

18 such taxable year. 

19 ‘‘(C) LIMITATION ON NUMBER OF INDIVID20 UALS OTHER THAN TAXPAYER.—Not more than 

21 3 individuals may be taken into account by the 

22 taxpayer under clauses (ii) and (iii) of subpara23 graph (B). 

24 ‘‘(D) SPECIAL RULE FOR MARRIED INDI25 VIDUALS.—In the case of an individual— 
6

•S 160 IS

1 ‘‘(i) who is married (within the mean2 ing of section 7703) as of the close of the 

3 taxable year but does not file a joint return 

4 for such year, and 

5 ‘‘(ii) who does not live apart from 

6 such individual’s spouse at all times during 

7 the taxable year, the limitation imposed by 

8 subparagraph (C) shall be divided equally 

9 between the individual and the individual’s 

10 spouse unless they agree on a different di11 vision. 

12 ‘‘(4) COVERAGE MONTH.—For purposes of this 

13 subsection— 

14 ‘‘(A) IN GENERAL.—The term ‘coverage 

15 month’ means, with respect to an individual, 

16 any month if— 

17 ‘‘(i) as of the first day of such month 

18 such individual is covered by qualified 

19 health insurance, and 

20 ‘‘(ii) the premium for coverage under 

21 such insurance for such month is paid by 

22 the taxpayer. 

23 ‘‘(B) EMPLOYER-SUBSIDIZED COV24 ERAGE.— 
7

•S 160 IS

1 ‘‘(i) IN GENERAL.—Such term shall 

2 not include any month for which such indi3 vidual participates in any subsidized health 

4 plan (within the meaning of section 

5 162(l)(2)) maintained by any employer of 

6 the taxpayer or of the spouse of the tax7 payer. 

8 ‘‘(ii) PREMIUMS TO NONSUBSIDIZED

9 PLANS.—If an employer of the taxpayer or 

10 the spouse of the taxpayer maintains a 

11 health plan which is not a subsidized 

12 health plan (as so defined) and which con13 stitutes qualified health insurance, em14 ployee contributions to the plan shall be 

15 treated as amounts paid for qualified 

16 health insurance. 

17 ‘‘(C) CAFETERIA PLAN AND FLEXIBLE

18 SPENDING ACCOUNT BENEFICIARIES.—Such 

19 term shall not include any month during a tax20 able year if any amount is not includible in the 

21 gross income of the taxpayer for such year 

22 under section 106 with respect to— 

23 ‘‘(i) a benefit chosen under a cafeteria 

24 plan (as defined in section 125(d)), or 
8

•S 160 IS

1 ‘‘(ii) a benefit provided under a flexi2 ble spending or similar arrangement. 

3 ‘‘(D) MEDICARE AND MEDICAID.—Such 

4 term shall not include any month with respect 

5 to an individual if, as of the first day of such 

6 month, such individual— 

7 ‘‘(i) is entitled to any benefits under 

8 title XVIII of the Social Security Act, or 

9 ‘‘(ii) is a participant in the program 

10 under title XIX or XXI of such Act. 

11 ‘‘(E) CERTAIN OTHER COVERAGE.—Such 

12 term shall not include any month during a tax13 able year with respect to an individual if, at any 

14 time during such year, any benefit is provided 

15 to such individual under— 

16 ‘‘(i) chapter 89 of title 5, United 

17 States Code, 

18 ‘‘(ii) chapter 55 of title 10, United 

19 States Code, 

20 ‘‘(iii) chapter 17 of title 38, United 

21 States Code, or 

22 ‘‘(iv) any medical care program under 

23 the Indian Health Care Improvement Act. 

24 ‘‘(F) PRISONERS.—Such term shall not in25 clude any month with respect to an individual 
9

•S 160 IS

1 if, as of the first day of such month, such indi2 vidual is imprisoned under Federal, State, or 

3 local authority. 

4 ‘‘(G) INSUFFICIENT PRESENCE IN UNITED

5 STATES.—Such term shall not include any 

6 month during a taxable year with respect to an 

7 individual if such individual is present in the 

8 United States on fewer than 183 days during 

9 such year (determined in accordance with sec10 tion 7701(b)(7)). 

11 ‘‘(5) COORDINATION WITH DEDUCTION FOR

12 HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN13 DIVIDUALS.—In the case of a taxpayer who is eligi14 ble to deduct any amount under section 162(l) for 

15 the taxable year, this section shall apply only if the 

16 taxpayer elects not to claim any amount as a deduc17 tion under such section for such year. 

18 ‘‘(c) REDUCED CREDIT FOR PARTICIPANTS IN

19 HEALTH PLANS OF EMPLOYERS.—In the case of any indi20 vidual who participates in a subsidized health plan (within 

21 the meaning of section 162(l)(2)) maintained by any em22 ployer of the taxpayer or of the spouse of the taxpayer 

23 (not including a cafeteria plan (as defined in section 

24 125(d)), there shall be allowed to the taxpayer one-half 

25 of the credit that would be allowed to the taxpayer under 
10

•S 160 IS

1 subsection (a) (determined without regard to the partici2 pation in the health plan) if the monthly limitation were 

3 determined without the addition of the amount described 

4 in subsection (b)(3)(A)(ii). 

5 ‘‘(d) QUALIFIED HEALTH INSURANCE.—For pur6 poses of this section— 

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

8 insurance’ means insurance which constitutes med9 ical care as defined in section 213(d) without regard 

10 to— 

11 ‘‘(A) paragraph (1)(C) thereof, and 

12 ‘‘(B) so much of paragraph (1)(D) thereof 

13 as relates to qualified long-term care insurance 

14 contracts. 

15 ‘‘(2) EXCLUSION OF CERTAIN OTHER CON16 TRACTS.—Such term shall not include insurance if a 

17 substantial portion of its benefits are excepted bene18 fits (as defined in section 9832(c)). 

19 ‘‘(e) MEDICAL SAVINGS ACCOUNT AND HEALTH SAV20 INGS ACCOUNT CONTRIBUTIONS.— 

21 ‘‘(1) IN GENERAL.—If a deduction would (but 

22 for paragraph (2)) be allowed under section 220 or 

23 223 to the taxpayer for a payment for the taxable 

24 year to the medical savings account or health sav25 ings account of an individual, subsection (a) shall be 
11

•S 160 IS

1 applied by treating such payment as a payment for 

2 qualified health insurance for such individual. 

3 ‘‘(2) DENIAL OF DOUBLE BENEFIT.—No deduc4 tion shall be allowed under section 220 or 223 for 

5 that portion of the payments otherwise allowable as 

6 a deduction under section 220 or 223 for the taxable 

7 year which is equal to the amount of credit allowed 

8 for such taxable year by reason of this subsection. 

9 ‘‘(f) SPECIAL RULES.— 

10 ‘‘(1) COORDINATION WITH MEDICAL EXPENSE

11 AND HIGH DEDUCTIBLE HEALTH PLAN DEDUC12 TIONS.—The amount which would (but for this 

13 paragraph) be taken into account by the taxpayer 

14 under section 213 or 224 for the taxable year shall 

15 be reduced by the credit (if any) allowed by this sec16 tion to the taxpayer for such year. 

17 ‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.—No 

18 credit shall be allowed under this section to any indi19 vidual with respect to whom a deduction under sec20 tion 151 is allowable to another taxpayer for a tax21 able year beginning in the calendar year in which 

22 such individual’s taxable year begins. 

23 ‘‘(3) DENIAL OF DOUBLE BENEFIT.—No credit 

24 shall be allowed under subsection (a) if the credit 

25 under section 35 is allowed and no credit shall be al-
12

•S 160 IS

1 lowed under 35 if a credit is allowed under this sec2 tion 35. 

3 ‘‘(4) ELECTION NOT TO CLAIM CREDIT.—This 

4 section shall not apply to a taxpayer for any taxable 

5 year if such taxpayer elects to have this section not 

6 apply for such taxable year. 

7 ‘‘(5) INFLATION ADJUSTMENT.—In the case of 

8 any taxable year beginning in a calendar year after 

9 2005, each dollar amount contained in subsection 

10 (b)(3)(B) shall be increased by an amount equal 

11 to— 

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

13 ‘‘(B) the cost-of-living adjustment deter14 mined under section 1(f)(3) for the calendar 

15 year in which the taxable year begins, deter16 mined by substituting ‘calendar year 2004’ for 

17 ‘calendar year 1992’ in subparagraph (B) 

18 thereof. 

19 Any increase determined under the preceding sen20 tence shall be rounded to the nearest multiple of $50 

21 ($25 in the case of the dollar amount in subsection 

22 (b)(3)(B)(iii)).’’. 

23 (b) INFORMATION REPORTING.— 

24 (1) IN GENERAL.—Subpart B of part III of 

25 subchapter A of chapter 61 of the Internal Revenue 
13

•S 160 IS

1 Code of 1986 (relating to information concerning 

2 transactions with other persons) is amended by in3 serting after section 6050T the following new sec4 tion: 

5 ‘‘SEC. 6050U. RETURNS RELATING TO PAYMENTS FOR 

6 QUALIFIED HEALTH INSURANCE. 

7 ‘‘(a) IN GENERAL.—Any person who, in connection 

8 with a trade or business conducted by such person, re9 ceives payments during any calendar year from any indi10 vidual for coverage of such individual or any other indi11 vidual under creditable health insurance, shall make the 

12 return described in subsection (b) (at such time as the 

13 Secretary may by regulations prescribe) with respect to 

14 each individual from whom such payments were received. 

15 ‘‘(b) FORM AND MANNER OF RETURNS.—A return 

16 is described in this subsection if such return— 

17 ‘‘(1) is in such form as the Secretary may pre18 scribe, and 

19 ‘‘(2) contains— 

20 ‘‘(A) the name, address, and TIN of the 

21 individual from whom payments described in 

22 subsection (a) were received, 

23 ‘‘(B) the name, address, and TIN of each 

24 individual who was provided by such person 

25 with coverage under creditable health insurance 
14

•S 160 IS

1 by reason of such payments and the period of 

2 such coverage, and 

3 ‘‘(C) such other information as the Sec4 retary may reasonably prescribe. 

5 ‘‘(c) CREDITABLE HEALTH INSURANCE.—For pur6 poses of this section, the term ‘creditable health insurance’ 

7 means qualified health insurance (as defined in section 

8 36(c)) other than— 

9 ‘‘(1) insurance under a subsidized group health 

10 plan maintained by an employer, or 

11 ‘‘(2) to the extent provided in regulations pre12 scribed by the Secretary, any other insurance cov13 ering an individual if no credit is allowable under 

14 section 36 with respect to such coverage. 

15 ‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID16 UALS WITH RESPECT TO WHOM INFORMATION IS RE17 QUIRED.—Every person required to make a return under 

18 subsection (a) shall furnish to each individual whose name 

19 is required under subsection (b)(2)(A) to be set forth in 

20 such return a written statement showing— 

21 ‘‘(1) the name and address of the person re22 quired to make such return and the phone number 

23 of the information contact for such person, 

24 ‘‘(2) the aggregate amount of payments de25 scribed in subsection (a) received by the person re-
15

•S 160 IS

1 quired to make such return from the individual to 

2 whom the statement is required to be furnished, and 

3 ‘‘(3) the information required under subsection 

4 (b)(2)(B) with respect to such payments. 

5 The written statement required under the preceding sen6 tence shall be furnished on or before January 31 of the 

7 year following the calendar year for which the return 

8 under subsection (a) is required to be made. 

9 ‘‘(e) RETURNS WHICH WOULD BE REQUIRED TO BE

10 MADE BY 2 OR MORE PERSONS.—Except to the extent 

11 provided in regulations prescribed by the Secretary, in the 

12 case of any amount received by any person on behalf of 

13 another person, only the person first receiving such 

14 amount shall be required to make the return under sub15 section (a).’’. 

16 (2) ASSESSABLE PENALTIES.— 

17 (A) Subparagraph (B) of section 

18 6724(d)(1) of such Code (relating to defini19 tions) is amended by redesignating clauses (xiii) 

20 through (xviii) as clauses (xiv) through (xix), 

21 respectively, and by inserting after clause (xii) 

22 the following new clause: 

23 ‘‘(xiii) section 6050U (relating to re24 turns relating to payments for qualified 

25 health insurance),’’. 
16

•S 160 IS

1 (B) Paragraph (2) of section 6724(d) of 

2 such Code is amended by striking ‘‘or’’ at the 

3 end of the next to last subparagraph, by strik4 ing the period at the end of the last subpara5 graph and inserting ‘‘, or’’, and by adding at 

6 the end the following new subparagraph: 

7 ‘‘(CC) section 6050U(d) (relating to re8 turns relating to payments for qualified health 

9 insurance).’’. 

10 (3) CLERICAL AMENDMENT.—The table of sec11 tions for subpart B of part III of subchapter A of 

12 chapter 61 of such Code is amended by inserting 

13 after the item relating to section 6050T the fol14 lowing new item:

‘‘Sec. 6050U. Returns relating to payments for qualified health insurance.’’.

15 (c) CONFORMING AMENDMENTS.— 

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

17 31, United States Code, is amended by inserting be18 fore the period ‘‘, or from section 36 of such Code’’. 

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 last 

22 item and inserting the following new items:

‘‘Sec. 36. Health insurance costs. 

‘‘Sec. 37. Overpayments of tax.’’.
17

•S 160 IS

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

2 this section shall apply to taxable years beginning after 

3 December 31, 2004. 

4 SEC. 102. ADVANCE PAYMENT OF CREDIT FOR PUR5 CHASERS OF QUALIFIED HEALTH INSUR6 ANCE. 

7 (a) IN GENERAL.—Chapter 77 of the Internal Rev8 enue Code of 1986 (relating to miscellaneous provisions) 

9 is amended by adding at the end the following new section: 

10 ‘‘SEC. 7529. ADVANCE PAYMENT OF HEALTH INSURANCE 

11 CREDIT FOR PURCHASERS OF QUALIFIED 

12 HEALTH INSURANCE. 

13 ‘‘(a) GENERAL RULE.—In the case of an eligible indi14 vidual, the Secretary shall make payments to the provider 

15 of such individual’s qualified health insurance equal to 

16 such individual’s qualified health insurance credit advance 

17 amount with respect to such provider. 

18 ‘‘(b) ELIGIBLE INDIVIDUAL.—For purposes of this 

19 section, the term ‘eligible individual’ means any indi20 vidual— 

21 ‘‘(1) who purchases qualified health insurance 

22 (as defined in section 36(c)), and 

23 ‘‘(2) for whom a qualified health insurance 

24 credit eligibility certificate is in effect. 
18

•S 160 IS

1 ‘‘(c) QUALIFIED HEALTH INSURANCE CREDIT ELIGI2 BILITY CERTIFICATE.—For purposes of this section, a 

3 qualified health insurance credit eligibility certificate is a 

4 statement furnished by an individual to the Secretary 

5 which— 

6 ‘‘(1) certifies that the individual will be eligible 

7 to receive the credit provided by section 36 for the 

8 taxable year, 

9 ‘‘(2) estimates the amount of such credit for 

10 such taxable year, and 

11 ‘‘(3) provides such other information as the 

12 Secretary may require for purposes of this section. 

13 ‘‘(d) QUALIFIED HEALTH INSURANCE CREDIT AD14 VANCE AMOUNT.—For purposes of this section, the term 

15 ‘qualified health insurance credit advance amount’ means, 

16 with respect to any provider of qualified health insurance, 

17 the Secretary’s estimate of the amount of credit allowable 

18 under section 36 to the individual for the taxable year 

19 which is attributable to the insurance provided to the indi20 vidual by such provider. 

21 ‘‘(e) REGULATIONS.—The Secretary shall prescribe 

22 such regulations as may be necessary to carry out the pur23 poses of this section, including regulations modifying re24 capture rules for any overpayment of the qualified health 

25 insurance credit advance amount which equals at least 2 
19

•S 160 IS

1 percent of the taxpayer’s adjusted gross income for the 

2 taxable year by allowing periodic payments in lieu of a 

3 lump-sum payment for any such taxpayer whose savings 

4 and income warrant such modification.’’. 

5 (b) CLERICAL AMENDMENT.—The table of sections 

6 for chapter 77 of such Code is amended by adding at the 

7 end the following new item:

‘‘Sec. 7529. Advance payment of health insurance credit for purchasers of qualified health insurance.’’.

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

9 this section shall apply to taxable year beginning after the 

10 date of the enactment of this Act. 

11 TITLE II—HEALTH SAVINGS 

12 ACCOUNTS 

13 SEC. 201. DEDUCTION OF PREMIUMS FOR HIGH DEDUCT14 IBLE HEALTH PLANS. 

15 (a) IN GENERAL.—Part VII of subchapter B of chap16 ter 1 of the Internal Revenue Code of 1986 (relating to 

17 additional itemized deductions for individuals) is amended 

18 by redesignating section 224 as section 225 and by insert19 ing after section 223 the following new section: 

20 ‘‘SEC. 224. PREMIUMS FOR HIGH DEDUCTIBLE HEALTH 

21 PLANS. 

22 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi23 vidual, there shall be allowed as a deduction for the tax24 able year the aggregate amount paid by such individual 
20

•S 160 IS

1 as premiums under a high deductible health plan with re2 spect to months during such year for which such indi3 vidual is an eligible individual with respect to such health 

4 plan. 

5 ‘‘(b) DEFINITIONS.—For purposes of this section— 

6 ‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible 

7 individual’ has the meaning given such term by sec8 tion 223(c)(1). 

9 ‘‘(2) HIGH DEDUCTIBLE HEALTH PLAN.—The 

10 term ‘high deductible health plan’ has the meaning 

11 given such term by section 223(c)(2). 

12 ‘‘(c) SPECIAL RULES.— 

13 ‘‘(1) DEDUCTION ALLOWABLE FOR ONLY 1

14 PLAN.—For purposes of this section, in the case of 

15 an individual covered by more than 1 high deductible 

16 health plan for any month, the individual may only 

17 take into account amounts paid for 1 of such plans 

18 for such month. 

19 ‘‘(2) EMPLOYER PROVIDED COVERAGE.— 

20 ‘‘(A) IN GENERAL.—No deduction shall be 

21 allowed to an individual under subsection (a) 

22 for any amount paid for coverage under a high 

23 deductible health plan for a month if that indi24 vidual participates in any coverage for such 

25 month that is excluded (in whole or in part) 
21

•S 160 IS

1 from the gross income of the individual or the 

2 individual’s spouse under section 106. 

3 ‘‘(B) CAFETERIA PLANS, ETC.—Employer 

4 contributions to a cafeteria plan or a flexible 

5 spending or similar arrangement which are ex6 cluded from gross income under section 106 

7 shall be treated for purposes of this section as 

8 paid by the employer. 

9 ‘‘(3) CONTRIBUTIONS TO HEALTH SAVINGS AC10 COUNT REQUIRED.—A deduction shall not be al11 lowed under subsection (a) for a taxable year with 

12 respect to such individual if such individual is not al13 lowed a deduction under section 223 for such tax14 able year. 

15 ‘‘(4) MEDICAL AND HEALTH SAVINGS AC16 COUNTS.—Subsection (a) shall not apply with re17 spect to any amount which is paid or distributed out 

18 of an Archer MSA or a health savings account which 

19 is not included in gross income under section 220(f) 

20 or 223(f), as the case may be. 

21 ‘‘(5) COORDINATION WITH DEDUCTION FOR

22 HEALTH INSURANCE OF SELF-EMPLOYED INDIVID23 UALS.—The amount taken into account by the tax24 payer in computing the deduction under section 
22

•S 160 IS

1 162(l) shall not be taken into account under this 

2 section. 

3 ‘‘(6) COORDINATION WITH MEDICAL EXPENSE

4 DEDUCTION.—The amount taken into account by 

5 the taxpayer in computing the deduction under this 

6 section shall not be taken into account under section 

7 213.’’. 

8 (b) DEDUCTION ALLOWED WHETHER OR NOT INDI9 VIDUAL ITEMIZES OTHER DEDUCTIONS.—Section 62(a) 

10 of the Internal Revenue Code of 1986 (defining adjusted 

11 gross income) is amended by redesignating paragraph (19) 

12 as added by section 703(a) of the American Jobs Creation 

13 Act of 2004 as paragraph (20) and by inserting after 

14 paragraph (20), as so redesignated, the following new 

15 paragraph: 

16 ‘‘(21) PREMIUMS FOR HIGH DEDUCTIBLE

17 HEALTH PLANS.—The deduction allowed by section 

18 224.’’. 

19 (c) CLERICAL AMENDMENT.—The table of sections 

20 for part VII of subchapter B of chapter 1 of the Internal 

21 Revenue Code of 1986 is amended by striking the last 

22 item and inserting the following new items:

‘‘Sec. 224. Premiums for high deductible health plans. 

‘‘Sec. 225. Cross reference.’’.
23

•S 160 IS

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

2 this section shall apply to taxable years beginning after 

3 December 31, 2004. 

4 SEC. 202. CREDIT FOR CONTRIBUTIONS TO HEALTH SAV5 INGS ACCOUNTS OF SMALL BUSINESS EM6 PLOYEES. 

7 (a) IN GENERAL.—Subpart D of part IV of sub8 chapter A of chapter 1 of the Internal Revenue Code of 

9 1986 (relating to business related credits) is amended by 

10 adding at the end the following new section: 

11 ‘‘SEC. 45J. SMALL EMPLOYER CONTRIBUTIONS TO HEALTH 

12 SAVINGS ACCOUNTS. 

13 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

14 in the case of an eligible employer, the small employer 

15 HSA contribution credit determined under this section for 

16 any taxable year with respect to each employee who is an 

17 eligible individual (as defined in section 223(c)(1)) is an 

18 amount equal to the lesser of— 

19 ‘‘(1) the amount contributed by such employer 

20 to any health savings account (as defined in section 

21 223(d) of such employee during the taxable year, or 

22 ‘‘(2) $200 ($500, if such employee has family 

23 coverage under a high deductible health plan (as de24 fined in section 223(c)(2)). 
24

•S 160 IS

1 ‘‘(b) ELIGIBLE EMPLOYER.—For purposes of this 

2 section, the term ‘eligible employer’ means, with respect 

3 to any taxable year, an employer which had no more than 

4 100 employees who received at least $5,000 of compensa5 tion from the employer for the preceding taxable year. 

6 ‘‘(c) SPECIAL RULES.—For purposes of this sec7 tion— 

8 ‘‘(1) AGGREGATION RULES.—All persons treat9 ed as a single employer under subsection (a) or (b) 

10 of section 52, or subsection (n) or (o) of section 414, 

11 shall be treated as one person. 

12 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No de13 duction shall be allowed for that portion of contribu14 tions to any health savings accounts for the taxable 

15 year which is equal to the credit determined under 

16 subsection (a). 

17 ‘‘(3) ELECTION NOT TO CLAIM CREDIT.—This 

18 section shall not apply to a taxpayer for any taxable 

19 year if such taxpayer elects to have this section not 

20 apply for such taxable year.’’. 

21 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI22 NESS CREDIT.—Section 38(b) of the Internal Revenue 

23 Code of 1986 (defining current year business credit) is 

24 amended by striking ‘‘plus’’ at the end of paragraph (18), 

25 by striking the period at the end of paragraph (19) and 
25

•S 160 IS

1 inserting ‘‘, plus’’, and by adding at the end the following 

2 new paragraph: 

3 ‘‘(20) in the case of an eligible employer (as de4 fined in section 45J(b)), the small employer HSA 

5 contribution credit determined under section 

6 45J(a).’’. 

7 (c) CONFORMING AMENDMENTS.— 

8 (1) Subsection (c) of section 196 of the Internal 

9 Revenue Code of 1986 is amended by striking ‘‘and’’ 

10 at the end of paragraph (11), by striking the period 

11 at the end of paragraph (12) and inserting ‘‘, and’’, 

12 and by adding at the end the following new para13 graph: 

14 ‘‘(13) the small employer HSA contribution 

15 credit determined under section 45J(a).’’. 

16 (2) The table of sections for subpart D of part 

17 IV of subchapter A of chapter 1 of such Code is 

18 amended by adding at the end the following new 

19 item:

‘‘Sec. 45J. Small employer contributions to health savings accounts.’’.

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

21 this section shall apply to contributions made in taxable 

22 years beginning after December 31, 2004. 
26

•S 160 IS

1 TITLE III—STATE HIGH RISK 

2 POOLS 

3 SEC. 301. SHORT TITLE. 

4 This title may be cited as the ‘‘State High Risk Pool 

5 Funding Extension Act of 2005’’. 

6 SEC. 302. EXTENSION OF FUNDING FOR OPERATION OF 

7 STATE HIGH RISK HEALTH INSURANCE 

8 POOLS. 

9 Section 2745 of the Public Health Service Act (42 

10 U.S.C. 300gg–45) is amended to read as follows: 

11 ‘‘SEC. 2745. PROMOTION OF QUALIFIED HIGH RISK POOLS. 

12 ‘‘(a) EXTENSION OF SEED GRANTS TO STATES.—

13 The Secretary shall provide from the funds appropriated 

14 under subsection (d)(1)(A) a grant of up to $1,000,000 

15 to each State that has not created a qualified high risk 

16 pool as of the date of the enactment of this section for 

17 the State’s costs of creation and initial operation of such 

18 a pool. 

19 ‘‘(b) GRANTS FOR OPERATIONAL LOSSES.— 

20 ‘‘(1) IN GENERAL.—In the case of a State that 

21 has established a qualified high risk pool that— 

22 ‘‘(A) restricts premiums charged under the 

23 pool to no more than 150 percent of the pre24 mium for applicable standard risk rates; 
27

•S 160 IS

1 ‘‘(B) offers a choice of two or more cov2 erage options through the pool; and 

3 ‘‘(C) has in effect a mechanism reasonably 

4 designed to ensure continued funding of losses 

5 incurred by the State after the end of fiscal 

6 year 2005 in connection with operation of the 

7 pool; 

8 the Secretary shall provide, from the funds appro9 priated under subsection (d)(1)(B)(i) and allotted to 

10 the State under paragraph (2), a grant for the losses 

11 incurred by the State in connection with the oper12 ation of the pool. 

13 ‘‘(2) ALLOTMENT.—The amounts appropriated 

14 under subsection (d)(1)(B)(i) for a fiscal year shall 

15 be made available to the States (or the entities that 

16 operate the high risk pool under applicable State 

17 law) as follows: 

18 ‘‘(A) An amount equal to 50 percent of the 

19 appropriated amount for the fiscal year shall be 

20 allocated in equal amounts among each eligible 

21 State that applies for assistance under this sub22 section. 

23 ‘‘(B) An amount equal to 25 percent of the 

24 appropriated amount for the fiscal year shall be 

25 allocated among the States so that the amount 
28

•S 160 IS

1 provided to a State bears the same ratio to 

2 such available amount as the number of unin3 sured individuals in the State bears to the total 

4 number of uninsured individuals in all States 

5 (as determined by the Secretary). 

6 ‘‘(C) An amount equal to 25 percent of the 

7 appropriated amount for the fiscal year shall be 

8 allocated among the States so that the amount 

9 provided to a State bears the same ratio to 

10 such available amount as the number of individ11 uals enrolled in health care coverage through 

12 the qualified high risk pool of the State bears 

13 to the total number of individuals so enrolled 

14 through qualified high risk pools in all States 

15 (as determined by the Secretary). 

16 ‘‘(c) BONUS GRANTS FOR SUPPLEMENTAL CON17 SUMER BENEFITS.— 

18 ‘‘(1) IN GENERAL.—In the case of a State that 

19 has established a qualified high risk pool, the Sec20 retary shall provide, from the funds appropriated 

21 under subsection (d)(1)(B)(ii), a grant to be used to 

22 provide supplemental consumer benefits to enrollees 

23 or potential enrollees (or defined subsets of such en24 rollees or potential enrollees) in qualified high risk 

25 pools. 
29

•S 160 IS

1 ‘‘(2) BENEFITS.—A State shall use amounts re2 ceived under a grant under this subsection to pro3 vide one or more of the following benefits: 

4 ‘‘(A) Low-income premium subsidies. 

5 ‘‘(B) A reduction in premium trends, ac6 tual premiums, or other cost-sharing require7 ments. 

8 ‘‘(C) An expansion or broadening of the 

9 pool of individuals eligible for coverage, includ10 ing eliminating waiting lists, increasing enroll11 ment caps, or providing flexibility in enrollment 

12 rules. 

13 ‘‘(D) Less stringent rules, or additional 

14 waiver authority, with respect to coverage of 

15 pre-existing conditions. 

16 ‘‘(E) Increased benefits. 

17 ‘‘(F) The establishment of disease manage18 ment programs. 

19 ‘‘(3) LIMITATION.—In allotting amounts under 

20 this subsection, the Secretary shall ensure that no 

21 State receives an amount that exceeds 10 percent of 

22 the amount appropriated for the fiscal year involved 

23 under subsection (d)(1)(B)(ii). 

24 ‘‘(4) RULE OF CONSTRUCTION.—Nothing in 

25 this subsection shall be construed to prohibit States 
30

•S 160 IS

1 that, on the date of enactment of the State High 

2 Risk Pool Funding Extension Act of 2004, are in 

3 the process of implementing programs to provide 

4 benefits of the type described in paragraph (2), from 

5 being eligible for a grant under this subsection. 

6 ‘‘(d) FUNDING.— 

7 ‘‘(1) IN GENERAL.—Out of any money in the 

8 Treasury of the United States not otherwise appro9 priated, there are authorized and appropriated— 

10 ‘‘(A) $15,000,000 for the period of fiscal 

11 years 2005 and 2006 to carry out subsection 

12 (a); and 

13 ‘‘(B) $75,000,000 for each of fiscal years 

14 2006 through 2010, of which— 

15 ‘‘(i) two-thirds of the amount appro16 priated for a fiscal year shall be made 

17 available for allotments under subsection 

18 (b)(2); and 

19 ‘‘(ii) one-third of the amount appro20 priated for a fiscal year shall be made 

21 available for allotments under subsection 

22 (c)(2). 

23 ‘‘(2) AVAILABILITY.—Funds appropriated 

24 under this subsection for a fiscal year shall remain 
31

•S 160 IS

1 available for obligation through the end of the fol2 lowing fiscal year. 

3 ‘‘(3) REALLOTMENT.—If, on June 30 of each 

4 fiscal year, the Secretary determines that all 

5 amounts appropriated under paragraph (1)(B)(ii) 

6 for the fiscal year will not be allotted, such remain7 ing amounts shall be allotted among States receiving 

8 grants under subsection (b) for the fiscal year in 

9 amounts determined pursuant to the formula under 

10 subsection (b)(2). 

11 ‘‘(4) NO ENTITLEMENT.—Nothing in this sec12 tion shall be construed as providing a State with an 

13 entitlement to a grant under this section. 

14 ‘‘(e) APPLICATIONS.—To be eligible for a grant under 

15 this section, a State shall submit to the Secretary an appli16 cation at such time, in such manner, and containing such 

17 information as the Secretary may require. 

18 ‘‘(f) DEFINITIONS.—In this section: 

19 ‘‘(1) QUALIFIED HIGH RISK POOL.— 

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

21 high risk pool’ has the meaning given such term 

22 in section 2744(c)(2), except that with respect 

23 to subparagraph (A) of such section a State 

24 may elect to provide for the enrollment of eligi25 ble individuals through— 
32

•S 160 IS

1 ‘‘(i) a combination of a qualified high 

2 risk pool and an acceptable alternative 

3 mechanism; or 

4 ‘‘(ii) other health insurance coverage 

5 described in subparagraph (B). 

6 ‘‘(B) HEALTH INSURANCE COVERAGE.—

7 Health insurance coverage described in this 

8 subparagraph is individual health insurance 

9 coverage— 

10 ‘‘(i) that meets the requirements of 

11 section 2741; 

12 ‘‘(ii) that is subject to limits on the 

13 rates charged to individuals; 

14 ‘‘(iii) that is available to all individ15 uals eligible for health insurance coverage 

16 under this title who are not able to partici17 pate in a qualified high risk pool; and 

18 ‘‘(iv) the defined rate limit of which 

19 does not exceed the limit allowed for a 

20 qualified risk pool that is otherwise eligible 

21 to receive assistance under a grant under 

22 this section. 

23 ‘‘(C) OTHER COVERAGE.—In addition to 

24 coverage described in subparagraph (B), a 

25 State may provide for the offering of health in-
33

•S 160 IS

1 surance coverage that provides first dollar cov2 erage, limits on cost-sharing, and comprehen3 sive medical, hospital and surgical coverage, if 

4 the limits on rates for such coverage do not ex5 ceed the limit described in subparagraph (B)(iv) 

6 by more than 25 percentage points. 

7 ‘‘(2) STANDARD RISK RATE.—The term ‘stand8 ard risk rate’ means a rate— 

9 ‘‘(A) determined under the State high risk 

10 pool by considering the premium rates charged 

11 by other health insurers offering health insur12 ance coverage to individuals in the insurance 

13 market served; 

14 ‘‘(B) that is established using reasonable 

15 actuarial techniques; and 

16 ‘‘(C) that reflects anticipated claims expe17 rience and expenses for the coverage involved. 

18 ‘‘(3) STATE.—The term ‘State’ means any of 

19 the 50 States and the District of Columbia.’’. 
34

•S 160 IS

1 TITLE IV—VOLUNTARY CHOICE 

2 COOPERATIVES 

3 SEC. 401. GRANTS FOR THE ESTABLISHMENT AND OPER4 ATION OF COOPERATIVES. 

5 Subpart 1 of part B of title XXVII of the Public 

6 Health Service Act (42 U.S.C. 300gg–41 et seq.) is 

7 amended by adding at the end the following: 

8 ‘‘SEC. 2746. GRANTS FOR THE ESTABLISHMENT AND OPER9 ATION OF COOPERATIVES. 

10 ‘‘(a) IN GENERAL.—The Secretary may award grants 

11 to States for the establishment and operation of health 

12 insurance purchasing cooperatives that meet the require13 ments of subsection (c). 

14 ‘‘(b) USE OF FUNDS.—Amounts provided under a 

15 grant under subsection (a) shall be used— 

16 ‘‘(1) for the establishment and operation of 

17 health insurance purchasing cooperatives that meet 

18 the requirements of this section; 

19 ‘‘(2) for the support and training of the profes20 sional staff of the cooperative; 

21 ‘‘(3) in the case of a State that is not operating 

22 a health insurance purchasing cooperative on the 

23 date on which an application for a grant under this 

24 section is submitted by the State, for the conduct of 
35

•S 160 IS

1 a feasibility study relating to the proposed activities 

2 of the cooperative; and 

3 ‘‘(4) for other activities determined appropriate 

4 by the Secretary; and 

5 ‘‘(c) REQUIREMENTS OF COOPERATIVES.—To be eli6 gible to receive a grant under subsection (a), a State shall 

7 demonstrate to the Secretary that the purchasing coopera8 tive to be established or operated under the grant— 

9 ‘‘(1) has a membership consisting solely of at 

10 least two eligible employers; 

11 ‘‘(2) is a nonprofit entity certified under State 

12 law; 

13 ‘‘(3) is organized as an independent health in14 surance purchasing entity with a commission that 

15 meets requirements similar to the requirements im16 posed with respect to the administration of State 

17 high risk pools that receive funds under section 

18 2745; 

19 ‘‘(4) is wholly owned and administered by the 

20 members of the cooperative; 

21 ‘‘(5) accepts all eligible employers within the 

22 area served by the cooperative as members if such 

23 employers request such membership; 
36

•S 160 IS

1 ‘‘(6) provides assistance to the members in 

2 pooling the health insurance purchasing power of 

3 such members; 

4 ‘‘(7) provides for the collection and distribution 

5 of data, and the conduct of other activities, to im6 prove the quality of health care decisionmaking; and 

7 ‘‘(8) meets such other requirements as the Sec8 retary determines appropriate. 

9 ‘‘(d) DUTIES OF COOPERATIVES.—Each health insur10 ance purchasing cooperative that receive funds under this 

11 section shall— 

12 ‘‘(1) enter into agreements with insurers offer13 ing health insurance coverage that meets the guide14 lines developed under subsection (e); 

15 ‘‘(2) enter into agreements with member eligible 

16 employers to provide insurance through the coopera17 tive to the employees of such employers; 

18 ‘‘(3) enroll only eligible employees and their 

19 families; 

20 ‘‘(4) provide enrollee information to the State; 

21 and 

22 ‘‘(5) carry out other functions provided for by 

23 the Secretary. 
37

•S 160 IS

1 ‘‘(e) QUALIFYING HEALTH INSURANCE COVERAGE.—

2 For purposes of this section, qualifying health insurance 

3 coverage shall be coverage that is— 

4 ‘‘(1) fully insured; 

5 ‘‘(2) approved by the department of insurance 

6 for the State in which the coverage is offered; and 

7 ‘‘(3) creditable coverage as described in section 

8 2701(c)(1). 

9 ‘‘(f) ELIGIBLE EMPLOYERS.—In this section, the 

10 term ‘eligible employer’ means an employer— 

11 ‘‘(1) that employs 100 or fewer employees (as 

12 determined in accordance with section 2791(e)(6)); 

13 or 

14 ‘‘(2) regardless of size, that self insures. 

15 ‘‘(g) AUTHORIZATION OF APPROPRIATIONS.—There 

16 is authorized to be appropriated, such sums as may be 

17 necessary to carry out this section.’’.

Æ