II

104TH CONGRESS

1ST SESSION S. 18

To provide improved access to health care, enhance informed individual choice

regarding health care services, lower health care costs through the use

of appropriate providers, improve the quality of health care, improve

access to long-term care, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 4, 1995

Mr. SPECTER introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To provide improved access to health care, enhance informed

individual choice regarding health care services, lower

health care costs through the use of appropriate providers, improve the quality of health care, improve access

to long-term care, 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; TABLE OF CONTENTS.

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

5 ‘‘Health Care Assurance Act of 1995’’.

6 (b) TABLE OF CONTENTS.—The table of contents for

7 this Act is as follows:
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Sec. 1. Short title; table of contents.

TITLE I—HEALTH CARE INSURANCE COVERAGE

Subtitle A—Definitions

Sec. 100. Definitions.

Subtitle B—Increased Availability and Continuity of Health Coverage

PART 1—REFORM OF HEALTH INSURANCE MARKETPLACE FOR SMALL

EMPLOYERS

Subpart A—Insurance Market Reform

Sec. 111. Requirement for insurers to offer qualified health insurance plans.

Sec. 112. Actuarial equivalence in benefits permitted.

Sec. 113. Establishment of health insurance plan standards.

Subpart B—Additional Standards for Health Insurance Plans Offered to

Small Employers

Sec. 121. General issuance requirements.

Sec. 122. Rating limitations for community-rated market.

Sec. 123. Rating practices and payment of premiums.

Subpart C—Small Employer Purchasing Groups

Sec. 131. Qualified small employer purchasing groups.

Sec. 132. Agreements with small employers.

Sec. 133. Enrolling eligible employees, eligible individuals, and certain uninsured individuals in qualified health insurance plans.

Sec. 134. Receipt of premiums.

Sec. 135. Marketing activities.

Sec. 136. Grants to States and qualified small employer purchasing groups.

Sec. 137. Qualified small employer purchasing groups established by a State.

PART 2—STANDARDS APPLICABLE TO ALL HEALTH INSURANCE PLANS

Sec. 141. Coverage requirements.

PART 3—ENFORCEMENT OF STANDARDS FOR HEALTH INSURANCE PLANS

Sec. 151. Enforcement by excise tax on insurers.

PART 4—EFFECTIVE DATES

Sec. 161. Effective dates.

Subtitle C—Required Coverage Options for Eligible Employees and

Dependents of Small Employers

Sec. 171. Requiring small employers to offer coverage for eligible individuals.

Sec. 172. Compliance with applicable requirements through multiple employer

health arrangements.

Sec. 173. Enforcement by excise tax on small employers.

Subtitle D—Required Coverage Options for Individuals Insured Through

Association Plans
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PART 1—QUALIFIED ASSOCIATION PLANS

Sec. 181. Treatment of qualified association plans.

Sec. 182. Qualified association plan defined.

Sec. 183. Definitions and special rules.

PART 2—SPECIAL RULE FOR CHURCH, MULTIEMPLOYER, AND COOPERATIVE

PLANS

Sec. 191. Special rule for church, multiemployer, and cooperative plans.

PART 3—ENFORCEMENT

Sec. 1001. Enforcement by excise tax on qualified associations.

Subtitle E—1-Year Extension of Medicare Select

Sec. 1011. 1-year extension of period for issuance of medicare select policies.

Subtitle F—Tax Provisions

Sec. 1021. Deduction for health insurance costs of self-employed individuals.

Sec. 1022. Amendments to COBRA.

TITLE II—PRIMARY AND PREVENTIVE CARE SERVICES

Sec. 201. Grants to States for healthy start initiatives.

Sec. 202. Reauthorization of certain programs providing primary and preventive care.

Sec. 203. Comprehensive school health education program.

Sec. 204. Comprehensive early childhood health education program.

TITLE III—PATIENT’S RIGHT TO DECLINE MEDICAL TREATMENT

Sec. 301. Patient’s right to decline medical treatment.

TITLE IV—PRIMARY AND PREVENTIVE CARE PROVIDERS

Sec. 401. Expanded coverage of certain nonphysician providers under the medicare program.

Sec. 402. Requiring coverage of certain nonphysician providers under the medicaid program.

Sec. 403. Medical student tutorial program grants.

Sec. 404. General medical practice grants.

TITLE V—COST CONTAINMENT

Sec. 501. New drug clinical trials program.

Sec. 502. Medical treatment effectiveness.

Sec. 503. National health insurance data and claims system.

Sec. 504. Health care cost containment and quality information program.

TITLE VI—LONG-TERM CARE

Subtitle A—Tax Treatment of Qualified Long-Term Care Insurance Policies

and Services

Sec. 601. Amendment of 1986 Code.

Sec. 602. Qualified long-term care services treated as medical care.

Sec. 603. Definition of qualified long-term care insurance policy.
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Sec. 604. Treatment of qualified long-term care insurance as accident and

health insurance for purposes of taxation of insurance companies.

Sec. 605. Treatment of accelerated death benefits under life insurance contracts.

Subtitle B—Tax Incentives for Purchase of Qualified Long-Term Care

Insurance

Sec. 611. Credit for qualified long-term care premiums.

Sec. 612. Exclusion from gross income of benefits received under qualified longterm care insurance policies.

Sec. 613. Employer deduction for contributions made for long-term care insurance.

Sec. 614. Inclusion of qualified long-term care insurance in cafeteria plans.

Sec. 615. Exclusion from gross income for amounts received on cancellation of

life insurance policies and used for qualified long-term care insurance policies.

Sec. 616. Use of gain from sale of principal residence for purchase of qualified

long-term health care insurance.

1 TITLE I—HEALTH CARE

2 INSURANCE COVERAGE

3 Subtitle A—Definitions

4 SEC. 100. DEFINITIONS.

5 For purposes of this title:

6 (1) DEPENDENT.—The term ‘‘dependent’’

7 means, with respect to any individual, any person

8 who is—

9 (A) the spouse or surviving spouse of the

10 individual; or

11 (B) under regulations of the Secretary, a

12 child (including an adopted child) of such indi13 vidual and—

14 (i) under 19 years of age; or

15 (ii) under 25 years of age and a full16 time student.
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1 (2) ELIGIBLE EMPLOYEE.—The term ‘‘eligible

2 employee’’ means, with respect to an employer, an

3 employee who normally performs on a monthly basis

4 at least 30 hours of service per week for that em5 ployer.

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

7 individual’’ means, with respect to an eligible em8 ployee, such employee, and any dependent of such

9 employee.

10 (4) EMPLOYER.—The term ‘‘employer’’ shall

11 have the meaning given such term in section 3(5) of

12 the Employee Retirement Income Security Act of

13 1974.

14 (5) GROUP HEALTH PLAN.—The term ‘‘group

15 health plan’’ means an employee welfare benefit plan

16 providing medical care (as defined in section 213(d)

17 of the Internal Revenue Code of 1986) to partici18 pants or beneficiaries directly or through insurance,

19 reimbursement, or otherwise, but does not include

20 any type of coverage excluded from the definition of

21 a health insurance plan under paragraph (6)(B).

22 (6) HEALTH INSURANCE PLAN.—

23 (A) IN GENERAL.—Except as provided in

24 subparagraph (B), the term ‘‘health insurance

25 plan’’ means any hospital or medical service
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1 policy or certificate, hospital, or medical service

2 plan contract, or health maintenance organiza3 tion group contract offered by an insurer.

4 (B) EXCEPTION.—Such term does not in5 clude any of the following:

6 (i) Coverage only for accident, dental,

7 vision, disability income, or long-term care

8 insurance, or any combination thereof.

9 (ii) Medicare supplemental health in10 surance.

11 (iii) Coverage issued as a supplement

12 to liability insurance.

13 (iv) Worker’s compensation or similar

14 insurance.

15 (v) Automobile medical-payment in16 surance.

17 (vi) Any combination of the insurance

18 described in clauses (i) through (v).

19 (7) HEALTH MAINTENANCE ORGANIZATION.—

20 The term ‘‘health maintenance organization’’ in21 cludes an organization recognized under State law as

22 a health maintenance organization or managed care

23 organization or a similar organization regulated

24 under State law for solvency that offers to provide
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1 health services on a prepaid, at-risk basis primarily

2 through a defined set of providers.

3 (8) INSURER.—The term ‘‘insurer’’ means any

4 person that offers a health insurance plan includ5 ing—

6 (A) a licensed insurance company;

7 (B) a prepaid hospital or medical service

8 plan;

9 (C) a health maintenance organization;

10 (D) a self-insurer carrier;

11 (E) a reinsurance carrier; and

12 (F) a multiple small employer welfare ar13 rangement (a combination of small employers

14 associated for the purpose of providing health

15 insurance plan coverage for their employees).

16 (9) NAIC.—The term ‘‘NAIC’’ means the Na17 tional Association of Insurance Commissioners.

18 (10) QUALIFIED HEALTH INSURANCE PLAN.—

19 The term ‘‘qualified health insurance plan’’ shall

20 have the meaning given such term in section 111(b).

21 (11) SECRETARY.—The term ‘‘Secretary’’

22 means the Secretary of Health and Human Services.

23 (12) SMALL EMPLOYER.—The term ‘‘small em24 ployer’’ means, with respect to a calendar year, an

25 employer that normally employs more than 1 but not
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1 more than 50 eligible employees on a typical busi2 ness day. For the purposes of this paragraph, the

3 term ‘‘employee’’ includes a self-employed individual.

4 For purposes of determining if an employer is a

5 small employer, rules similar to the rules of sub6 section (b) and (c) of section 414 of the Internal

7 Revenue Code of 1986 shall apply.

8 (13) STATE.—The term ‘‘State’’ means the 50

9 States, the District of Columbia, Puerto Rico, the

10 Virgin Islands, Guam, and American Samoa.

11 Subtitle B—Increased Availability

12 and Continuity of Health Coverage

13 PART 1—REFORM OF HEALTH INSURANCE

14 MARKETPLACE FOR SMALL EMPLOYERS

15 Subpart A—Insurance Market Reform

16 SEC. 111. REQUIREMENT FOR INSURERS TO OFFER QUALI17 FIED HEALTH INSURANCE PLANS.

18 (a) REQUIREMENT TO OFFER.—Each insurer that

19 makes available a health insurance plan to a small em20 ployer in a State shall make available to each small em21 ployer in the State a qualified health insurance plan (as

22 defined in subsection (b)).

23 (b) QUALIFIED HEALTH INSURANCE PLAN.—The

24 term ‘‘qualified health insurance plan’’ means a health in25 surance plan (whether a managed-care plan, indemnity
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1 plan, or other plan) that is designed to provide standard

2 coverage (consistent with section 112(b)).

3 (c) MARKETING REQUIREMENTS.—The requirements

4 of subsection (a) are not met unless the plan described

5 in subsection (a) is made available to small employers

6 using at least the marketing methods and other sales prac7 tices which are used in selling other health insurance plans

8 within the same class of business made available by the

9 insurer.

10 SEC. 112. ACTUARIAL EQUIVALENCE IN BENEFITS PER11 MITTED.

12 (a) SET OF RULES OF ACTUARIAL EQUIVALENCE.—

13 (1) INITIAL DETERMINATION.—The NAIC is

14 requested to submit to the Secretary, within 6

15 months after the date of the enactment of this Act,

16 a set of rules which the NAIC determines is suffi17 cient for determining, in the case of any health in18 surance plan and for purposes of this section, the

19 actuarial value of the coverage offered by the plan.

20 (2) CERTIFICATION.—If the Secretary deter21 mines that the NAIC has submitted a set of rules

22 that comply with the requirements of paragraph (1),

23 the Secretary shall certify such set of rules for use

24 under this subtitle. If the Secretary determines that

25 such a set of rules has not been submitted or does
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1 not comply with such requirements, the Secretary

2 shall promptly establish a set of rules that meets

3 such requirements.

4 (b) STANDARD COVERAGE.—

5 (1) IN GENERAL.—A health insurance plan is

6 considered to provide standard coverage consistent

7 with this subsection if the benefits are determined,

8 in accordance with the set of actuarial equivalence

9 rules certified under subsection (a), to have a value

10 that is within 5 percentage points of the target actu11 arial value for standard coverage established under

12 paragraph (2).

13 (2) INITIAL DETERMINATION OF TARGET ACTU14 ARIAL VALUE FOR STANDARD COVERAGE.—

15 (A) INITIAL DETERMINATION.—

16 (i) IN GENERAL.—The NAIC is re17 quested to submit to the Secretary, within

18 6 months after the date of the enactment

19 of this Act, a target actuarial value for

20 standard coverage equal to the average ac21 tuarial value of the coverage described in

22 clause (ii). No specific procedure or treat23 ment, or classes thereof, is required to be

24 considered in such determination by this

25 Act or through regulations. The determina-
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1 tion of such value shall be based on a rep2 resentative distribution of the population

3 of eligible employees offered such coverage

4 and a single set of standardized utilization

5 and cost factors.

6 (ii) COVERAGE DESCRIBED.—The cov7 erage described in this clause is coverage

8 for medically necessary and appropriate

9 services consisting of medical and surgical

10 services, medical equipment, preventive

11 services, and emergency transportation in

12 frontier areas. No specific procedure or

13 treatment, or classes thereof, is required to

14 be covered in such a plan, by this Act or

15 through regulations.

16 (B) CERTIFICATION.—If the Secretary de17 termines that the NAIC has submitted a target

18 actuarial value for standard coverage that com19 plies with the requirements of subparagraph

20 (A), the Secretary shall certify such value for

21 use under this subtitle. If the Secretary deter22 mines that a target actuarial value has not been

23 submitted or does not comply with the require24 ments of subparagraph (A), the Secretary shall
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1 promptly determine a target actuarial value

2 that meets such requirements.

3 (c) SUBSEQUENT REVISIONS.—

4 (1) NAIC.—The NAIC may submit from time

5 to time to the Secretary revisions of the set of rules

6 of actuarial equivalence and target actuarial values

7 previously established or determined under this sec8 tion if the NAIC determines that revisions are nec9 essary to take into account changes in the relevant

10 types of health benefits provisions or in demographic

11 conditions which form the basis for the set of rules

12 of actuarial equivalence or the target actuarial val13 ues. The provisions of subsection (a)(2) shall apply

14 to such a revision in the same manner as they apply

15 to the initial determination of the set of rules.

16 (2) SECRETARY.—The Secretary may by regu17 lation revise the set of rules of actuarial equivalence

18 and target actuarial values from time to time if the

19 Secretary determines such revisions are necessary to

20 take into account changes described in paragraph

21 (1).

22 SEC. 113. ESTABLISHMENT OF HEALTH INSURANCE PLAN

23 STANDARDS.

24 (a) ESTABLISHMENT OF GENERAL STANDARDS.—
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1 (1) ROLE OF NAIC.—The NAIC is requested to

2 submit to the Secretary, within 9 months after the

3 date of the enactment of this Act, model regulations

4 that specify standards with respect to the require5 ment, under section 111(a), that insurers make

6 available qualified health insurance plans. If the

7 NAIC develops recommended regulations specifying

8 such standards within such period, the Secretary

9 shall review the standards. Such review shall be

10 completed within 60 days after the date the regula11 tions are developed. Unless the Secretary determines

12 within such period that the standards do not meet

13 the requirement under section 111(a), such stand14 ards shall serve as the standards under this section,

15 with such amendments as the Secretary deems nec16 essary.

17 (2) CONTINGENCY.—If the NAIC does not de18 velop such model regulations within the period de19 scribed in paragraph (1), or the Secretary deter20 mines that such regulations do not specify standards

21 that meet the requirement under section 111(a), the

22 Secretary shall specify, within 15 months after the

23 date of the enactment of this Act, standards to carry

24 out such requirement.
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1 (3) EFFECTIVE DATE.—The standards specified

2 in the model regulations shall apply to health insur3 ance plans in a State on or after the respective date

4 the standards are implemented in the State under

5 subsection (b).

6 (4) NO PREEMPTION OF STATE LAW.—A State

7 may implement standards for health insurance plans

8 made available to small employers that are more

9 stringent than the requirements under this section,

10 except that a State may not implement standards

11 that prevent the offering by an insurer of at least

12 one health insurance plan that provides standard

13 coverage (as described in section 112(b)).

14 (b) APPLICATION OF STANDARDS THROUGH

15 STATES.—

16 (1) IN GENERAL.—Each State shall submit to

17 the Secretary, by the deadline specified in paragraph

18 (2), a report on the steps the State is taking to im19 plement and enforce the standards with respect to

20 insurers, and qualified health insurance plans of21 fered, not later than such deadline.

22 (2) DEADLINE FOR REPORT.—

23 (A) 1 YEAR AFTER STANDARDS ESTAB24 LISHED.—Subject to subparagraph (B), the

25 deadline under this paragraph is 1 year after
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1 the date the standards are established under

2 subsection (a).

3 (B) EXCEPTION FOR LEGISLATION.—In

4 the case of a State which the Secretary identi5 fies, in consultation with the NAIC, as—

6 (i) requiring State legislation (other

7 than legislation appropriating funds) in

8 order for insurers and qualified health in9 surance plans offered to meet the stand10 ards established under subsection (a), but

11 (ii) having a legislature which is not

12 scheduled to meet in 1997 in a legislative

13 session in which such legislation may be

14 considered,

15 the date specified in this paragraph is the first

16 day of the first calendar quarter beginning after

17 the close of the first legislative session of the

18 State legislature that begins on or after Janu19 ary 1, 1998. For purposes of the previous sen20 tence, in the case of a State that has a 2-year

21 legislative session, each year of such session

22 shall be deemed to be a separate regular session

23 of the State legislature.

24 (3) FEDERAL ROLE.—If the Secretary deter25 mines that a State has failed to submit a report by
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1 the deadline specified under paragraph (1) or finds

2 that the State has not implemented and provided

3 adequate enforcement of the standards under such

4 paragraph, the Secretary shall notify the State and

5 provide the State a period of 60 days in which to

6 submit the report or to implement and enforce the

7 standards. If, after that 60-day period, the Secretary

8 finds that the failure has not been corrected, the

9 Secretary shall provide for the implementation and

10 enforcement of the standards in the State in such a

11 way as the Secretary determines to be appropriate.

12 Such implementation and enforcement shall take ef13 fect with respect to insurers and qualified health in14 surance plans offered or renewed on or after 3

15 months after the date of the Secretary’s finding

16 under the previous sentence and until the date the

17 Secretary finds that such a failure has been cor18 rected.

19 Subpart B—Additional Standards for Health

20 Insurance Plans Offered to Small Employers

21 SEC. 121. GENERAL ISSUANCE REQUIREMENTS.

22 (a) GENERAL RULE.—Any insurer offering a health

23 insurance plan to a small employer shall meet the follow24 ing requirements:
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1 (1) The guaranteed issue requirements of sub2 section (b).

3 (2) The mandatory registration and disclosure

4 requirements of subsection (c).

5 (b) GUARANTEED ISSUE.—

6 (1) IN GENERAL.—The requirements of this

7 subsection are met if the insurer offering a health

8 insurance plan to small employers in the State—

9 (A) accepts every small employer in the

10 State that applies for coverage under the plan;

11 and

12 (B) accepts for enrollment under the plan

13 every eligible individual who applies for enroll14 ment on a timely basis (consistent with para15 graph (3)).

16 (2) SPECIAL RULES FOR HEALTH MAINTE17 NANCE ORGANIZATIONS.—In the case of a plan of18 fered by a health maintenance organization, the plan

19 may—

20 (A) limit the employers that may apply for

21 coverage to those with eligible individuals resid22 ing in the service area of the plan;

23 (B) limit the individuals who may be en24 rolled under the plan to those who reside in the

25 service area of the plan; and
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1 (C) within the service area of the plan,

2 deny coverage to such employers if the plan

3 demonstrates that—

4 (i) it will not have the capacity to de5 liver services adequately to enrollees of any

6 additional groups because of its obligations

7 to existing group contract holders and en8 rollees; and

9 (ii) it is applying this subparagraph

10 uniformly to all employers without regard

11 to the health status, claims experience, or

12 duration of coverage of those employers

13 and their employees.

14 (3) CLARIFICATION OF TIMELY ENROLL15 MENT.—

16 (A) GENERAL INITIAL ENROLLMENT RE17 QUIREMENT.—Except as provided in this para18 graph, a health insurance plan may consider en19 rollment of an eligible individual not to be time20 ly if the eligible employee or dependent fails to

21 enroll in the plan during an initial enrollment

22 period, if such period is at least 30 days long.

23 (B) ENROLLMENT DUE TO LOSS OF PRE24 VIOUS EMPLOYER COVERAGE.—Enrollment in a
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1 health insurance plan is considered to be timely

2 in the case of an eligible individual who—

3 (i) was covered under another health

4 insurance plan or group health plan at the

5 time of the individual’s initial enrollment

6 period;

7 (ii) stated at the time of the initial en8 rollment period that coverage under a

9 health insurance plan or a group health

10 plan was the reason for declining enroll11 ment;

12 (iii) lost coverage under another

13 health insurance plan or group health plan

14 (as a result of the termination of the other

15 plan’s coverage, termination or reduction

16 of employment, or other reason); and

17 (iv) requests enrollment within 30

18 days after termination of such coverage.

19 (C) REQUIREMENT APPLIES DURING OPEN

20 ENROLLMENT PERIODS.—Each health insur21 ance plan shall provide for at least one period

22 (of not less than 30 days) each year during

23 which enrollment under the plan shall be con24 sidered to be timely.
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1 (D) EXCEPTION FOR COURT ORDERS.—

2 Enrollment of a spouse or minor child of an

3 employee shall be considered to be timely if—

4 (i) a court has ordered that coverage

5 be provided for the spouse or child under

6 a covered employee’s group health plan;

7 and

8 (ii) a request for enrollment is made

9 within 30 days after the date the court is10 sues the order.

11 (E) ENROLLMENT OF SPOUSES AND DE12 PENDENTS.—

13 (i) IN GENERAL.—Enrollment of the

14 spouse (including a child of the spouse)

15 and any dependent child of an eligible em16 ployee shall be considered to be timely if a

17 request for enrollment is made either—

18 (I) within 30 days of the date of

19 the marriage or of the date of the

20 birth or adoption of a child, if family

21 coverage is available as of such date;

22 or

23 (II) within 30 days of the date

24 family coverage is first made avail25 able.
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1 (ii) COVERAGE.—If a plan makes

2 family coverage available and enrollment is

3 made under the plan on a timely basis

4 under clause (i)(I), the coverage shall be5 come effective not later than the first day

6 of the first month beginning after the date

7 of the marriage or the date of birth or

8 adoption of the child (as the case may be).

9 (4) FINANCIAL CAPACITY EXCEPTION.—Para10 graph (1) shall not require any insurer to issue a

11 health insurance plan to the extent that the issuance

12 of such plan would result in such insurer violating

13 the financial solvency standards (if any) established

14 by the State in which such plan is to be issued.

15 (5) DELIVERY CAPACITY EXCEPTION.—

16 (A) IN GENERAL.—Paragraph (1) shall not

17 prohibit an insurer from ceasing enrollment

18 under a health insurance plan if—

19 (i) the insurer ceases to enroll any

20 new small employers under the plan; and

21 (ii) the insurer can demonstrate to the

22 Secretary that its provider capacity to

23 serve previously covered groups or individ24 uals (and additional individuals who will be

25 expected to enroll because of affiliation
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1 with such previously covered groups or in2 dividuals) will be impaired if it is required

3 to enroll other small employers.

4 (B) FIRST-COME-FIRST-SERVED.—An in5 surer is only eligible to exercise the exceptions

6 provided for in subparagraph (A) if such in7 surer provides for enrollment on a first-come8 first-served basis (except in the case of addi9 tional individuals described in subparagraph

10 (A)(ii)).

11 (6) ADDITIONAL EXCEPTIONS.—Paragraph (1)

12 shall not apply to a failure to issue a health insur13 ance plan to a small employer if—

14 (A) such employer is unable to pay the

15 premium for such contract; or

16 (B) in the case of a small employer with

17 fewer than 15 employees, such employer fails to

18 enroll a minimum percentage of the employer’s

19 employees for coverage under such plan, so long

20 as such percentage is enforced uniformly for all

21 small employers of comparable size.

22 (7) EXCEPTION FOR ALTERNATIVE STATE PRO23 GRAMS.—
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1 (A) IN GENERAL.—Paragraph (1) shall not

2 apply if the State in which the health insurance

3 plan is issued—

4 (i) has a program which—

5 (I) assures the availability of

6 health insurance plans to small em7 ployers through the equitable distribu8 tion of high risk groups among all in9 surers offering such contracts to such

10 small employers; and

11 (II) is consistent with a model

12 program developed by the NAIC;

13 (ii) has a qualified State-run reinsur14 ance program; or

15 (iii) has a program which the Sec16 retary has determined assures all small

17 employers in the State an opportunity to

18 purchase a health insurance plan without

19 regard to any risk characteristic.

20 (B) REINSURANCE PROGRAM.—

21 (i) PROGRAM REQUIREMENTS.—For

22 purposes of subparagraph (A)(ii), a State23 run reinsurance program is qualified if

24 such program is one of the NAIC reinsur25 ance program models developed under
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1 clause (ii) or is a variation of one of such

2 models, as approved by the Secretary.

3 (ii) MODELS.—Not later than 120

4 days after the date of the enactment of

5 this Act, the NAIC shall develop several

6 models for a reinsurance program, includ7 ing options for program funding.

8 (c) MANDATORY REGISTRATION REQUIREMENTS.—

9 The requirements of this subsection are met if the insurer

10 offering health insurance plans to small employers in any

11 State registers with the State commissioner or super12 intendent of insurance or other State authority responsible

13 for regulation of health insurance.

14 SEC. 122. RATING LIMITATIONS FOR COMMUNITY-RATED

15 MARKET.

16 (a) STANDARD PREMIUMS WITH RESPECT TO COM17 MUNITY-RATED ELIGIBLE EMPLOYEES AND ELIGIBLE IN18 DIVIDUALS.—

19 (1) IN GENERAL.—Each health insurance plan

20 offered to a small employer shall establish within

21 each community rating area in which the plan is to

22 be offered, a standard premium for enrollment of eli23 gible employees and eligible individuals for the

24 standard coverage (as defined under section 112(b)).
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1 (2) ESTABLISHMENT OF COMMUNITY RATING

2 AREA.—

3 (A) IN GENERAL.—Not later than January

4 1, 1996, each State shall, in accordance with

5 subparagraph (B), provide for the division of

6 the State into 1 or more community rating

7 areas. The State may revise the boundaries of

8 such areas from time to time consistent with

9 this paragraph.

10 (B) GEOGRAPHIC AREA VARIATIONS.—For

11 purposes of subparagraph (A), a State—

12 (i) may not identify an area that di13 vides a 3-digit zip code, a county, or all

14 portions of a metropolitan statistical area;

15 (ii) shall not permit premium rates for

16 coverage offered in a portion of an inter17 state metropolitan statistical area to vary

18 based on the State in which the coverage

19 is offered; and

20 (iii) may, upon agreement with one or

21 more adjacent States, identify multi-State

22 geographic areas consistent with clauses (i)

23 and (ii).

24 (3) ELIGIBLE INDIVIDUALS.—For purposes of

25 this section, the term ‘‘eligible individuals’’ includes
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1 certain uninsured individuals (as described in section

2 133).

3 (b) UNIFORM PREMIUMS WITHIN COMMUNITY RAT4 ING AREAS.—

5 (1) IN GENERAL.—Subject to paragraphs (2)

6 and (3), the standard premium for each health in7 surance plan shall be the same, but shall not include

8 the costs of premium processing and enrollment that

9 may vary depending on whether the method of en10 rollment is through a qualified small employer pur11 chasing group (established under subpart C),

12 through a small employer, or through a broker.

13 (2) APPLICATION TO ENROLLEES.—

14 (A) IN GENERAL.—The premium charged

15 for coverage in a health insurance plan which

16 covers eligible employees and eligible individuals

17 shall be the product of—

18 (i) the standard premium (established

19 under paragraph (1));

20 (ii) in the case of enrollment other

21 than individual enrollment, the family ad22 justment factor specified under subpara23 graph (B); and

24 (iii) the age adjustment factor (speci25 fied under subparagraph (C)).
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•S 18 IS

1 (B) FAMILY ADJUSTMENT FACTOR.—

2 (i) IN GENERAL.—The standards es3 tablished under section 113 shall specify

4 family adjustment factors that reflect the

5 relative actuarial costs of benefit packages

6 based on family classes of enrollment (as

7 compared with such costs for individual en8 rollment).

9 (ii) CLASSES OF ENROLLMENT.—For

10 purposes of this Act, there are 4 classes of

11 enrollment:

12 (I) Coverage only of an individual

13 (referred to in this Act as the ‘‘indi14 vidual’’ enrollment or class of enroll15 ment).

16 (II) Coverage of a married couple

17 without children (referred to in this

18 Act as the ‘‘couple-only’’ enrollment

19 or class of enrollment).

20 (III) Coverage of an individual

21 and one or more children (referred to

22 in this Act as the ‘‘single parent’’ en23 rollment or class of enrollment).

24 (IV) Coverage of a married cou25 ple and one or more children (referred
28

•S 18 IS

1 to in this Act as the ‘‘dual parent’’

2 enrollment or class of enrollment).

3 (iii) REFERENCES TO FAMILY AND

4 COUPLE CLASSES OF ENROLLMENT.—In

5 this subtitle:

6 (I) FAMILY.—The terms ‘‘family

7 enrollment’’ and ‘‘family class of en8 rollment’’ refer to enrollment in a

9 class of enrollment described in any

10 subclause of clause (ii) (other than

11 subclause (I)).

12 (II) COUPLE.—The term ‘‘couple

13 class of enrollment’’ refers to enroll14 ment in a class of enrollment de15 scribed in subclause (II) or (IV) of

16 clause (ii).

17 (iv) SPOUSE; MARRIED; COUPLE.—

18 (I) IN GENERAL.—In this sub19 title, the terms ‘‘spouse’’ and ‘‘mar20 ried’’ mean, with respect to an indi21 vidual, another individual who is the

22 spouse of, or is married to, the indi23 vidual, as determined under applicable

24 State law.
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•S 18 IS

1 (II) COUPLE.—The term ‘‘cou2 ple’’ means an individual and the indi3 vidual’s spouse.

4 (C) AGE ADJUSTMENT FACTOR.—The Sec5 retary, in consultation with the NAIC, shall

6 specify uniform age categories and maximum

7 rating increments for age adjustment factors

8 that reflect the relative actuarial costs of bene9 fit packages among enrollees. For individuals

10 who have attained age 18 but not age 65, the

11 highest age adjustment factor may not exceed 3

12 times the lowest age adjustment factor.

13 (3) ADMINISTRATIVE CHARGES.—

14 (A) IN GENERAL.—In accordance with the

15 standards established under section 113, a

16 health insurance plan which covers eligible em17 ployees and eligible individuals may add a sepa18 rately-stated administrative charge which is

19 based on identifiable differences in legitimate

20 administrative costs and which is applied uni21 formly for individuals enrolling through the

22 same method of enrollment. Nothing in this

23 subparagraph may be construed as preventing a

24 qualified small employer purchasing group from
30

•S 18 IS

1 negotiating a unique administrative charge with

2 an insurer for a health insurance plan.

3 (B) ENROLLMENT THROUGH A QUALIFIED

4 SMALL EMPLOYER PURCHASING GROUP.—In the

5 case of an administrative charge under subpara6 graph (A) for enrollment through a qualified

7 small employer purchasing group, such charge

8 may not exceed the lowest charge of such plan

9 for enrollment other than through a qualified

10 small employer purchasing group in such area.

11 (c) TREATMENT OF NEGOTIATED RATE AS COMMU12 NITY RATE.—Notwithstanding any other provision of this

13 section, an insurer which negotiates a premium rate (ex14 clusive of any administrative charge described in sub15 section (b)(3)) with a qualified small employer purchasing

16 group in a community rating area shall charge the same

17 premium rate to all eligible employees and eligible individ18 uals.

19 SEC. 123. RATING PRACTICES AND PAYMENT OF PRE20 MIUMS.

21 (a) FULL DISCLOSURE OF RATING PRACTICES.—

22 (1) IN GENERAL.—An insurer shall fully dis23 close rating practices for such plan to the appro24 priate certifying authority (as determined under sec25 tion 121(c)).
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•S 18 IS

1 (2) NOTICE ON EXPIRATION.—An insurer shall

2 provide for notice of the terms for renewal of a

3 health insurance plan at the time of the offering of

4 the plan and at least 90 days before the date of ex5 piration of the plan.

6 (3) ACTUARIAL CERTIFICATION.—Each insurer

7 shall file annually with the appropriate certifying au8 thority a written statement by a member of the

9 American Academy of Actuaries (or other individual

10 acceptable to such authority) who is not an employee

11 of the insurer certifying that, based upon an exam12 ination by the individual which includes a review of

13 the appropriate records and of the actuarial assump14 tions of such insurer and methods used by the in15 surer in establishing premium rates and administra16 tive charges for health insurance plans—

17 (A) such insurer is in compliance with the

18 applicable provisions of this subtitle; and

19 (B) the rating methods are actuarially

20 sound.

21 Each insurer shall retain a copy of such statement

22 at its principal place of business for examination by

23 any individual.

24 (b) PAYMENT OF PREMIUMS.—
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1 (1) IN GENERAL.—With respect to a new en2 rollee in a health insurance plan, the plan may re3 quire advanced payment of an amount equal to the

4 monthly applicable premium for the plan at the time

5 such individual is enrolled.

6 (2) NOTIFICATION OF FAILURE TO RECEIVE

7 PREMIUM.—If a health insurance plan fails to re8 ceive payment on a premium due with respect to an

9 eligible employee or eligible individual covered under

10 the plan, the plan shall provide notice of such failure

11 to the employee or individual within the 20-day pe12 riod after the date on which such premium payment

13 was due. A plan may not terminate the enrollment

14 of an eligible employee or eligible individual unless

15 such employee or individual has been notified of any

16 overdue premiums and has been provided a reason17 able opportunity to respond to such notice.

18 Subpart C—Small Employer Purchasing Groups

19 SEC. 131. QUALIFIED SMALL EMPLOYER PURCHASING

20 GROUPS.

21 (a) QUALIFIED SMALL EMPLOYER PURCHASING

22 GROUPS DESCRIBED.—

23 (1) IN GENERAL.—A qualified small employer

24 purchasing group is an entity that—
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1 (A) is a nonprofit entity certified under

2 State law;

3 (B) has a membership consisting solely of

4 small employers;

5 (C) is administered solely under the au6 thority and control of its member employers;

7 (D) with respect to each State in which its

8 members are located, consists of not fewer than

9 the number of small employers established by

10 the State as appropriate for such a group;

11 (E) offers a program under which qualified

12 health insurance plans are offered to eligible

13 employees and eligible individuals through its

14 member employers and to certain uninsured in15 dividuals in accordance with section 122; and

16 (F) an insurer, agent, broker, or any other

17 individual or entity engaged in the sale of insur18 ance—

19 (i) does not form or underwrite; and

20 (ii) does not hold or control any right

21 to vote with respect to.

22 (2) STATE CERTIFICATION.—A qualified small

23 employer purchasing group formed under this sec24 tion shall submit an application to the State for cer25 tification. The State shall determine whether to
34

•S 18 IS

1 issue a certification and otherwise ensure compliance

2 with the requirements of this Act.

3 (3) SPECIAL RULE.—Notwithstanding para4 graph (1)(B), an employer member of a small em5 ployer purchasing group that has been certified by

6 the State as meeting the requirements of paragraph

7 (1) may retain its membership in the group if the

8 number of employees of the employer increases such

9 that the employer is no longer a small employer.

10 (b) BOARD OF DIRECTORS.—Each qualified small

11 employer purchasing group established under this section

12 shall be governed by a board of directors or have active

13 input from an advisory board consisting of individuals and

14 businesses participating in the group.

15 (c) DOMICILIARY STATE.—For purposes of this sec16 tion, a qualified small employer purchasing group operat17 ing in more than one State shall be certified by the State

18 in which the group is domiciled.

19 (d) MEMBERSHIP.—

20 (1) IN GENERAL.—A qualified small employer

21 purchasing group shall accept all small employers

22 and certain uninsured individuals residing within the

23 area served by the group as members if such em24 ployers or individuals request such membership.
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1 (2) VOTING.—Members of a qualified small em2 ployer purchasing group shall have voting rights

3 consistent with the rules established by the State.

4 (e) DUTIES OF QUALIFIED SMALL EMPLOYER PUR5 CHASING GROUPS.—Each qualified small employer pur6 chasing group shall—

7 (1) enter into agreements with insurers offering

8 qualified health insurance plans;

9 (2) enter into agreements with small employers

10 under section 132;

11 (3) enroll only eligible employees, eligible indi12 viduals, and certain uninsured individuals in quali13 fied health insurance plans, in accordance with sec14 tion 133;

15 (4) provide enrollee information to the State;

16 (5) meet the marketing requirements under sec17 tion 135; and

18 (6) carry out other functions provided for under

19 this Act.

20 (f) LIMITATION ON ACTIVITIES.—A qualified small

21 employer purchasing group shall not—

22 (1) perform any activity involving approval or

23 enforcement of payment rates for providers;

24 (2) perform any activity (other than the report25 ing of noncompliance) relating to compliance of
36

•S 18 IS

1 qualified health insurance plans with the require2 ments of this Act;

3 (3) assume financial risk in relation to any such

4 health plan; or

5 (4) perform other activities identified by the

6 State as being inconsistent with the performance of

7 its duties under this Act.

8 (g) RULES OF CONSTRUCTION.—

9 (1) ESTABLISHMENT NOT REQUIRED.—Nothing

10 in this section shall be construed as requiring—

11 (A) that a State organize, operate or oth12 erwise establish a qualified small employer pur13 chasing group, or otherwise require the estab14 lishment of purchasing groups; and

15 (B) that there be only one qualified small

16 employer purchasing group established with re17 spect to a community rating area.

18 (2) SINGLE ORGANIZATION SERVING MULTIPLE

19 AREAS AND STATES.—Nothing in this section shall

20 be construed as preventing a single entity from

21 being a qualified small employer purchasing group in

22 more than one community rating area or in more

23 than one State.

24 (3) VOLUNTARY PARTICIPATION.—Nothing in

25 this section shall be construed as requiring any indi-
37

•S 18 IS

1 vidual or small employer to purchase a qualified

2 health insurance plan exclusively through a qualified

3 small employer purchasing group.

4 SEC. 132. AGREEMENTS WITH SMALL EMPLOYERS.

5 (a) IN GENERAL.—A qualified small employer pur6 chasing group shall offer to enter into an agreement under

7 this section with each small employer that employs eligible

8 employees in the area served by the group.

9 (b) PAYROLL DEDUCTION.—

10 (1) IN GENERAL.—Under an agreement under

11 this section between a small employer and a quali12 fied small employer purchasing group, the small em13 ployer shall deduct premiums from an eligible em14 ployee’s wages.

15 (2) ADDITIONAL PREMIUMS.—If the amount

16 withheld under paragraph (1) is not sufficient to

17 cover the entire cost of the premiums, the eligible

18 employee shall be responsible for paying directly to

19 the qualified small employer purchasing group the

20 difference between the amount of such premiums

21 and the amount withheld.
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1 SEC. 133. ENROLLING ELIGIBLE EMPLOYEES, ELIGIBLE IN2 DIVIDUALS, AND CERTAIN UNINSURED INDI3 VIDUALS IN QUALIFIED HEALTH INSURANCE

4 PLANS.

5 (a) IN GENERAL.—Each qualified small employer

6 purchasing group shall offer—

7 (1) eligible employees,

8 (2) eligible individuals, and

9 (3) certain uninsured individuals,

10 the opportunity to enroll in any qualified health insurance

11 plan which has an agreement with the qualified small em12 ployer purchasing group for the community rating area

13 in which such employees and individuals reside.

14 (b) UNINSURED INDIVIDUALS.—For purposes of this

15 section, an individual is described in subsection (a)(3) if

16 such individual is an uninsured individual who is not an

17 eligible employee of a small employer that is a member

18 of a qualified small employer purchasing group or a de19 pendent of such individual.

20 SEC. 134. RECEIPT OF PREMIUMS.

21 (a) ENROLLMENT CHARGE.—The amount charged by

22 a qualified small employer purchasing group for coverage

23 under a qualified health insurance plan shall be equal to

24 the sum of—

25 (1) the premium rate offered by such health

26 plan;
39

•S 18 IS

1 (2) the administrative charge for such health

2 plan; and

3 (3) the purchasing group administrative charge

4 for enrollment of eligible employees, eligible individ5 uals and certain uninsured individuals through the

6 group.

7 (b) DISCLOSURE OF PREMIUM RATES AND ADMINIS8 TRATIVE CHARGES.—Each qualified small employer pur9 chasing group shall, prior to the time of enrollment, dis10 close to enrollees and other interested parties the premium

11 rate for a qualified health insurance plan, the administra12 tive charge for such plan, and the administrative charge

13 of the group, separately.

14 SEC. 135. MARKETING ACTIVITIES.

15 Each qualified small employer purchasing group shall

16 market qualified health insurance plans to members

17 through the entire community rating area served by the

18 purchasing group.

19 SEC. 136. GRANTS TO STATES AND QUALIFIED SMALL EM20 PLOYER PURCHASING GROUPS.

21 (a) IN GENERAL.—The Secretary shall award grants

22 to States and small employer purchasing groups to assist

23 such States and groups in planning, developing, and oper24 ating qualified small employer purchasing groups.
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•S 18 IS

1 (b) APPLICATION REQUIREMENTS.—To be eligible to

2 receive a grant under this section, a State or small em3 ployer purchasing group shall prepare and submit to the

4 Secretary an application in such form, at such time, and

5 containing such information, certifications, and assur6 ances as the Secretary shall reasonably require.

7 (c) USE OF FUNDS.—Amounts awarded under this

8 section may be used to finance the costs associated with

9 planning, developing, and operating a qualified small em10 ployer purchasing group. Such costs may include the costs

11 associated with—

12 (1) engaging in education and outreach efforts

13 to inform small employers, insurers, and the public

14 about the small employer purchasing group;

15 (2) soliciting bids and negotiating with insurers

16 to make available health care benefit plans;

17 (3) preparing the documentation required to re18 ceive certification by the Secretary as a qualified

19 small employer purchasing group; and

20 (4) such other activities determined appropriate

21 by the Secretary.

22 (d) AUTHORIZATION OF APPROPRIATIONS.—There

23 are authorized to be appropriated for awarding grants

24 under this subsection such sums as may be necessary.
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1 SEC. 137. QUALIFIED SMALL EMPLOYER PURCHASING

2 GROUPS ESTABLISHED BY A STATE.

3 A State may establish a system in all or part of the

4 State under which qualified small employer purchasing

5 groups are the sole mechanism through which health care

6 coverage for the eligible employees of small employers shall

7 be purchased or provided.

8 PART 2—STANDARDS APPLICABLE TO ALL

9 HEALTH INSURANCE PLANS

10 SEC. 141. COVERAGE REQUIREMENTS.

11 (a) GENERAL RULE.—Any insurer offering a health

12 insurance plan shall meet the coverage requirements of

13 subsection (b).

14 (b) COVERAGE REQUIREMENTS.—

15 (1) IN GENERAL.—The requirements of this

16 subsection are met with respect to any health insur17 ance plan if, under the terms and operation of the

18 plan, the following requirements are met:

19 (A) GUARANTEED ELIGIBILITY.—No indi20 vidual (and any dependent of the individual eli21 gible for coverage) may be denied, limited, con22 ditioned, or excluded from coverage under (or

23 benefits of) the plan for any reason, including

24 health status, medical condition, claims experi25 ence, receipt of health care, medical history, an26 ticipated need for health care expenses, disabil-
42

•S 18 IS

1 ity, or lack of evidence of insurability, of the

2 individual.

3 (B) LIMITATIONS ON COVERAGE OF PRE4 EXISTING CONDITIONS.—Any limitation under

5 the plan on any preexisting condition—

6 (i) may not extend beyond the 6-

7 month period beginning with the date an

8 insured is first covered by the plan;

9 (ii) may only apply to preexisting con10 ditions which manifested themselves, or for

11 which medical care or advice was sought or

12 recommended, during the 3-month period

13 preceding the date an insured is first cov14 ered by the plan;

15 (iii) may not extend to an individual

16 who, as of the date of birth, was covered

17 under the plan; and

18 (iv) may not relate to pregnancy.

19 (C) GUARANTEED RENEWABILITY.—

20 (i) IN GENERAL.—The plan must be

21 renewed at the election of the insured un22 less the plan is terminated for cause.

23 (ii) CAUSE.—For purposes of this

24 subparagraph, the term ‘‘cause’’ means—
43

•S 18 IS

1 (I) nonpayment of the required

2 premiums;

3 (II) fraud or misrepresentation of

4 the insured or their representatives;

5 (III) noncompliance with the

6 plan’s minimum participation require7 ments;

8 (IV) noncompliance with the

9 plan’s employer contribution require10 ments; or

11 (V) repeated misuse of a provider

12 network provision in the plan.

13 (2) WAITING PERIODS.—Paragraph (1)(A) shall

14 not apply to any period an employee is excluded

15 from coverage under the plan solely by reason of a

16 requirement applicable to all employees that a mini17 mum period of service with the employer is required

18 before the employee is eligible for such coverage.

19 (3) DETERMINATION OF PERIODS FOR RULES

20 RELATING TO PREEXISTING CONDITIONS.—For pur21 poses of paragraph (1)(B), the date on which an in22 sured is first covered by a plan shall be the

23 earlier of—

24 (A) the date on which coverage under such

25 plan begins; or
44

•S 18 IS

1 (B) the first day of any continuous

2 period—

3 (i) during which the insured was cov4 ered under one or more other health insur5 ance arrangements; and

6 (ii) in the case of an employee, which

7 does not end more than 120 days before

8 the date employment with the employer be9 gins.

10 (4) CESSATION OF BUSINESS.—

11 (A) IN GENERAL.—Except as otherwise

12 provided in this paragraph, an insurer shall not

13 be treated as failing to meet the requirements

14 of paragraph (1)(C) if such insurer terminates

15 the class of business which includes the health

16 insurance plan.

17 (B) NOTICE REQUIREMENT.—Subpara18 graph (A) shall apply only if the insurer gives

19 notice of the decision to terminate at least 90

20 days before the expiration of the plan.

21 (C) 5-YEAR MORATORIUM.—If, within 5

22 years of the year in which an insurer terminates

23 a class of business under subparagraph (A),

24 such insurer establishes a new class of business,
45

•S 18 IS

1 the issuance of plans in that year shall be treat2 ed as a failure to which this section applies.

3 (D) TRANSFERS.—If, upon a failure to

4 renew a plan to which subparagraph (A) ap5 plies, an insurer offers to transfer such plan to

6 another class of business, such transfer must be

7 made without regard to risk characteristics.

8 (5) CLASS OF BUSINESS.—

9 (A) IN GENERAL.—Except as provided in

10 subparagraph (B), the term ‘‘class of business’’

11 means, with respect to health care insurance

12 provided to persons, all health care insurance

13 provided to such persons.

14 (B) ESTABLISHMENT OF GROUPINGS.—

15 (i) IN GENERAL.—An issuer may es16 tablish separate classes of business with re17 spect to health care insurance provided to

18 all persons but only if such classes are

19 based on one or more of the following:

20 (I) Business marketed and sold

21 through insurers not participating in

22 the marketing and sale of such insur23 ance to other persons.

24 (II) Business acquired from other

25 insurers as a distinct grouping.
46

•S 18 IS

1 (III) Business provided through

2 an association of not less than 20

3 small employers which was established

4 for purposes other than obtaining in5 surance.

6 (IV) Business related to managed

7 care plans.

8 (V) Any other business which the

9 Secretary determines needs to be sep10 arately grouped to prevent a substan11 tial threat to the solvency of the

12 insurer.

13 (ii) EXCEPTION ALLOWED.—Except

14 as provided in subparagraph (C), an in15 surer may not establish more than one dis16 tinct group of persons for each category

17 specified in clause (i).

18 (C) SPECIAL RULE.—An insurer may es19 tablish up to 2 groups under each category in

20 subparagraph (A) or (B) to account for dif21 ferences in characteristics (other than dif22 ferences in plan benefits) of health insurance

23 plans that are expected to produce substantial

24 variation in health care costs.
47

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1 PART 3—ENFORCEMENT OF STANDARDS FOR

2 HEALTH INSURANCE PLANS

3 SEC. 151. ENFORCEMENT BY EXCISE TAX ON INSURERS.

4 (a) IN GENERAL.—Chapter 43 of the Internal Reve5 nue Code of 1986 (relating to qualified pension, etc.,

6 plans) is amended by adding at the end the following new

7 section:

8 ‘‘SEC. 4980C. FAILURE OF INSURER TO COMPLY WITH CER9 TAIN STANDARDS FOR HEALTH INSURANCE

10 PLANS.

11 ‘‘(a) IMPOSITION OF TAX.—

12 ‘‘(1) IN GENERAL.—There is hereby imposed a

13 tax on the failure of an insurer to comply with the

14 requirements applicable to such insurer under parts

15 1 and 2 of subtitle B of title I of the Health Care

16 Assurance Act of 1995.

17 ‘‘(2) EXCEPTION.—Paragraph (1) shall not

18 apply to a failure by an insurer in a State if the Sec19 retary of Health and Human Services determines

20 that the State has in effect a regulatory enforcement

21 mechanism that provides adequate sanctions with re22 spect to such a failure by such an insurer.

23 ‘‘(b) AMOUNT OF TAX.—

24 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

25 the amount of the tax imposed by subsection (a)

26 shall be $100 for each day during which such failure
48

•S 18 IS

1 persists for each person to which such failure re2 lates. A rule similar to the rule of section

3 4980B(b)(3) shall apply for purposes of this section.

4 ‘‘(2) LIMITATION.—The amount of the tax im5 posed by subsection (a) for an insurer with respect

6 to a health insurance plan shall not exceed 25 per7 cent of the amounts received under the plan for cov8 erage during the period such failure persists.

9 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

10 section shall be paid by the insurer.

11 ‘‘(d) LIMITATIONS ON AMOUNT OF TAX.—

12 ‘‘(1) TAX NOT TO APPLY TO FAILURES COR13 RECTED WITHIN 30 DAYS.—No tax shall be imposed

14 by subsection (a) on any failure if—

15 ‘‘(A) such failure was due to reasonable

16 cause and not to willful neglect, and

17 ‘‘(B) such failure is corrected during the

18 30-day period (or such period as the Secretary

19 may determine appropriate) beginning on the

20 first date the insurer knows, or exercising rea21 sonable diligence could have known, that such

22 failure existed.

23 ‘‘(2) WAIVER BY SECRETARY.—In the case of a

24 failure which is due to reasonable cause and not to

25 willful neglect, the Secretary may waive part or all
49

•S 18 IS

1 of the tax imposed by subsection (a) to the extent

2 that the payment of such tax would be excessive rel3 ative to the failure involved.

4 ‘‘(e) DEFINITIONS.—For purposes of this section, the

5 terms ‘health insurance plan’ and ‘insurer’ have the mean6 ings given such terms in section 100 of the Health Care

7 Assurance Act of 1995.’’.

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

9 for such chapter 43 is amended by adding at the end the

10 following new item:

‘‘Sec. 4980C. Failure of insurer to comply with certain standards

for health insurance plans.’’.

11 PART 4—EFFECTIVE DATES

12 SEC. 161. EFFECTIVE DATES.

13 (a) IN GENERAL.—Except as provided in this sub14 title, the provisions of this subtitle are effective on the date

15 of the enactment of this Act.

16 (b) EXCEPTION.—The provisions of section 121(b)

17 shall apply to contracts which are issued, or renewed, after

18 the date which is 18 months after the date of the enact19 ment of this Act.
50

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1 Subtitle C—Required Coverage Op2 tions for Eligible Employees and

3 Dependents of Small Employers

4 SEC. 171. REQUIRING SMALL EMPLOYERS TO OFFER COV5 ERAGE FOR ELIGIBLE INDIVIDUALS.

6 (a) REQUIREMENT TO OFFER.—Each small em7 ployer shall make available with respect to each eligible

8 employee a group health plan under which—

9 (1) coverage of each eligible individual with re10 spect to such an eligible employee may be elected on

11 an annual basis for each plan year;

12 (2) coverage is provided for at least the stand13 ard coverage specified in section 112(b); and

14 (3) each eligible employee electing such cov15 erage may elect to have any premiums owed by the

16 employee collected through payroll deduction.

17 (b) NO EMPLOYER CONTRIBUTION REQUIRED.—An

18 employer is not required under subsection (a) to make any

19 contribution to the cost of coverage under a group health

20 plan described in such subsection.

21 (c) SPECIAL RULES.—

22 (1) EXCLUSION OF NEW EMPLOYERS AND CER23 TAIN VERY SMALL EMPLOYERS.—Subsection (a)

24 shall not apply to any small employer for any plan

25 year if, as of the beginning of such plan year—
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1 (A) such employer (including any prede2 cessor thereof) has been an employer for less

3 than 2 years;

4 (B) such employer has no more than 2 eli5 gible employees; or

6 (C) no more than 2 eligible employees are

7 not covered under any group health plan.

8 (2) EXCLUSION OF FAMILY MEMBERS.—Under

9 such procedures as the Secretary may prescribe, any

10 relative of a small employer may be, at the election

11 of the employer, excluded from consideration as an

12 eligible employee for purposes of applying the re13 quirements of subsection (a). In the case of a small

14 employer that is not an individual, an employee who

15 is a relative of a key employee (as defined in section

16 416(i)(1) of the Internal Revenue Code of 1986) of

17 the employer may, at the election of the key em18 ployee, be considered a relative excludable under this

19 paragraph.

20 (3) OPTIONAL APPLICATION OF WAITING PE21 RIOD.—A group health plan shall not be treated as

22 failing to meet the requirements of subsection (a)

23 solely because a period of service by an eligible em24 ployee of not more than 60 days is required under
52

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1 the plan for coverage under the plan of eligible indi2 viduals with respect to such employee.

3 (d) CONSTRUCTION.—Nothing in this section shall be

4 construed as limiting the group health plans, or types of

5 coverage under such a plan, that an employer may offer

6 to an employee.

7 SEC. 172. COMPLIANCE WITH APPLICABLE REQUIREMENTS

8 THROUGH MULTIPLE EMPLOYER HEALTH AR9 RANGEMENTS.

10 (a) IN GENERAL.—In any case in which an eligible

11 employee is, for any plan year, a participant in a group

12 health plan which is a multiemployer plan, the require13 ments of section 171(a) shall be deemed to be met with

14 respect to such employee for such plan year if the em15 ployer requirements of subsection (b) are met with respect

16 to the eligible employee, irrespective of whether, or to what

17 extent, the employer makes employer contributions on be18 half of the eligible employee.

19 (b) EMPLOYER REQUIREMENTS.—The employer re20 quirements of this subsection are met under a plan with

21 respect to an eligible employee if—

22 (1) the employee is eligible under the plan to

23 elect coverage on an annual basis and is provided a

24 reasonable opportunity to make the election in such
53

•S 18 IS

1 form and manner and at such times as are provided

2 by the plan;

3 (2) coverage is provided for at least the stand4 ard coverage specified in section 112(b);

5 (3) the employer facilitates collection of any

6 employee contributions under the plan and permits

7 the employee to elect to have employee contributions

8 under the plan collected through payroll deduction;

9 and

10 (4) in the case of a plan to which part 1 of sub11 title B of title I of the Employee Retirement Income

12 Security Act of 1974 does not otherwise apply, the

13 employer provides to the employee a summary plan

14 description described in section 102(a)(1) of such

15 Act in the form and manner and at such times as

16 are required under such part 1 with respect to em17 ployee welfare benefit plans.

18 SEC. 173. ENFORCEMENT BY EXCISE TAX ON SMALL EM19 PLOYERS.

20 (a) IN GENERAL.—Chapter 47 of the Internal Reve21 nue Code of 1986 (relating to excise taxes on certain

22 group health plans) is amended by inserting after section

23 5000 the following new section:
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1 ‘‘SEC. 5000A. SMALL EMPLOYER REQUIREMENTS.

2 ‘‘(a) GENERAL RULE.—There is hereby imposed a

3 tax on the failure of any small employer to comply with

4 the requirements of subtitle C of title I of the Health Care

5 Assurance Act of 1995.

6 ‘‘(b) AMOUNT OF TAX.—The amount of tax imposed

7 by subsection (a) shall be equal to $100 for each day for

8 each individual for which such a failure occurs.

9 ‘‘(c) LIMITATION ON TAX.—

10 ‘‘(1) TAX NOT TO APPLY WHERE FAILURES

11 CORRECTED WITHIN 30 DAYS.—No tax shall be im12 posed by subsection (a) with respect to any failure

13 if—

14 ‘‘(A) such failure was due to reasonable

15 cause and not to willful neglect, and

16 ‘‘(B) such failure is corrected during the

17 30-day period (or such period as the Secretary

18 may determine appropriate) beginning on the

19 1st date any of the individuals on whom the tax

20 is imposed knew, or exercising reasonable dili21 gence would have known, that such failure ex22 isted.

23 ‘‘(2) WAIVER BY SECRETARY.—In the case of a

24 failure which is due to reasonable cause and not to

25 willful neglect, the Secretary may waive part or all

26 of the tax imposed by subsection (a) to the extent
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1 that the payment of such tax would be excessive rel2 ative to the failure involved.’’.

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

4 for such chapter 47 is amended by adding at the end the

5 following new item:

‘‘Sec. 5000A. Small employer requirements.’’.

6 Subtitle D—Required Coverage Op7 tions for Individuals Insured

8 Through Association Plans

9 PART 1—QUALIFIED ASSOCIATION PLANS

10 SEC. 181. TREATMENT OF QUALIFIED ASSOCIATION PLANS.

11 (a) GENERAL RULE.—For purposes of this subtitle,

12 in the case of a qualified association plan—

13 (1) except as otherwise provided in this part,

14 the plan shall meet all applicable requirements of

15 subpart A of part 1 and part 2 of subtitle B and

16 subtitle C for group health plans offered to and by

17 small employers;

18 (2) if such plan is certified as meeting such re19 quirements and the requirements of this part, such

20 plan shall be treated as a plan established and main21 tained by a small employer, and individuals enrolled

22 in such plan shall be treated as eligible employees;

23 and

24 (3) any individual who is a member of the asso25 ciation not enrolling in the plan shall not be treated
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1 as an eligible employee solely by reason of member2 ship in such association.

3 (b) ELECTION TO BE TREATED AS PURCHASING CO4 OPERATIVE.—Subsection (a) shall not apply to a qualified

5 association plan if—

6 (1) the health plan sponsor makes an irrev7 ocable election to be treated as a qualified small em8 ployer purchasing group for purposes of subpart C

9 of subtitle B; and

10 (2) such sponsor meets all requirements of this

11 title applicable to a purchasing cooperative.

12 SEC. 182. QUALIFIED ASSOCIATION PLAN DEFINED.

13 (a) GENERAL RULE.—For purposes of this part, a

14 plan is a qualified association plan if the plan is a multiple

15 employer welfare arrangement or similar arrangement—

16 (1) which is maintained by a qualified associa17 tion;

18 (2) which has at least 500 participants in the

19 United States;

20 (3) under which the benefits provided consist

21 solely of medical care (as defined in section 213(d)

22 of the Internal Revenue Code of 1986);

23 (4) which may not condition participation in the

24 plan, or terminate coverage under the plan, on the
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1 basis of the health status or health claims experience

2 of any employee or member or dependent of either;

3 (5) which provides for bonding, in accordance

4 with regulations providing rules similar to the rules

5 under section 412 of the Employee Retirement In6 come Security Act of 1974, of all persons operating

7 or administering the plan or involved in the financial

8 affairs of the plan; and

9 (6) which notifies each participant or provider

10 that it is certified as meeting the requirements of

11 this subtitle applicable to it.

12 (b) SELF-INSURED PLANS.—In the case of a plan

13 which is not fully insured (within the meaning of section

14 514(b)(6)(D) of the Employee Retirement Income Secu15 rity Act of 1974), the plan shall be treated as a qualified

16 association plan only if—

17 (1) the plan meets minimum financial solvency

18 and cash reserve requirements for claims which are

19 established by the Secretary of Labor and which

20 shall be in lieu of any other such requirements under

21 this subtitle;

22 (2) the plan provides an annual funding report

23 (certified by an independent actuary) and annual fi24 nancial statements to the Secretary of Labor and

25 other interested parties; and
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1 (3) the plan appoints a plan sponsor who is re2 sponsible for operating the plan and ensuring com3 pliance with applicable Federal and State laws.

4 (c) CERTIFICATION.—

5 (1) IN GENERAL.—A plan shall not be treated

6 as a qualified association plan for any period unless

7 there is in effect a certification by the Secretary of

8 Labor that the plan meets the requirements of this

9 part. For purposes of this subtitle, the Secretary of

10 Labor shall be the appropriate certifying authority

11 with respect to the plan.

12 (2) FEE.—The Secretary of Labor shall require

13 a $5,000 fee for the original certification under

14 paragraph (1) and may charge a reasonable annual

15 fee to cover the costs of processing and reviewing the

16 annual statements of the plan.

17 (3) EXPEDITED PROCEDURES.—The Secretary

18 of Labor may by regulation provide for expedited

19 registration, certification, and comment procedures.

20 (4) AGREEMENTS.—The Secretary of Labor

21 may enter into agreements with the States to carry

22 out the Secretary’s responsibilities under this part.

23 (d) AVAILABILITY.—Notwithstanding any other pro24 vision of this subtitle, a qualified association plan may

25 limit coverage to individuals who are members of the
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1 qualified association establishing or maintaining the plan,

2 an employee of such member, or a dependent of either.

3 (e) SPECIAL RULES FOR EXISTING PLANS.—In the

4 case of a plan in existence on January 1, 1995—

5 (1) the requirements of subsection (a) (other

6 than paragraph (4), (5), and (6) thereof) shall not

7 apply;

8 (2) no original certification shall be required

9 under this part; and

10 (3) no annual report or funding statement shall

11 be required before January 1, 1997, but the plan

12 shall file with the Secretary of Labor a description

13 of the plan and the name of the plan sponsor.

14 SEC. 183. DEFINITIONS AND SPECIAL RULES.

15 (a) QUALIFIED ASSOCIATION.—For purposes of this

16 part, the term ‘‘qualified association’’ means any organiza17 tion which—

18 (1) is organized and maintained in good faith

19 by a trade association, an industry association, a

20 professional association, a chamber of commerce, a

21 religious organization, a public entity association, or

22 other business association serving a common or simi23 lar industry;

24 (2) is organized and maintained for substantial

25 purposes other than to provide a health plan;
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1 (3) has a constitution, bylaws, or other similar

2 governing document which states its purpose; and

3 (4) receives a substantial portion of its financial

4 support from its active, affiliated, or federation

5 members.

6 (b) MULTIPLE EMPLOYER WELFARE ARRANGE7 MENT.—For purposes of this subchapter, the term ‘‘mul8 tiple employer welfare arrangement’’ has the meaning

9 given such term by section 3(40) of the Employee Retire10 ment Income Security Act of 1974.

11 (c) COORDINATION WITH PART 2.—The term ‘‘quali12 fied association plan’’ shall not include a plan to which

13 part 2 applies.

14 PART 2—SPECIAL RULE FOR CHURCH,

15 MULTIEMPLOYER, AND COOPERATIVE PLANS

16 SEC. 191. SPECIAL RULE FOR CHURCH, MULTIEMPLOYER,

17 AND COOPERATIVE PLANS.

18 (a) GENERAL RULE.—For purposes of this subtitle,

19 in the case of a group health plan to which this section

20 applies—

21 (1) except as otherwise provided in this part,

22 the plan shall be required to meet all applicable re23 quirements of subpart A of part 1 and part 2 of

24 subtitle B and subtitle C for group health plans of25 fered to and by small employers;
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1 (2) if such plan is certified as meeting such re2 quirements, such plan shall be treated as a plan es3 tablished and maintained by a small employer and

4 individuals enrolled in such plan shall be treated as

5 eligible employees; and

6 (3) any individual eligible to enroll in the plan

7 who does not enroll in the plan shall not be treated

8 as an eligible employee solely by reason of being eli9 gible to enroll in the plan.

10 (b) MODIFIED STANDARDS.—

11 (1) CERTIFYING AUTHORITY.—For purposes of

12 this subtitle, the Secretary of Labor shall be the ap13 propriate certifying authority with respect to a plan

14 to which this section applies.

15 (2) AVAILABILITY.—Rules similar to the rules

16 of subsection (e) of section 182 shall apply to a plan

17 to which this section applies.

18 (3) ACCESS.—An employer which, pursuant to

19 a collective bargaining agreement, offers an em20 ployee the opportunity to enroll in a plan described

21 in subsection (c)(2) shall not be required to make

22 any other plan available to the employee.

23 (4) TREATMENT UNDER STATE LAWS.—A

24 church plan described in subsection (c)(1) which is

25 certified as meeting the requirements of this section
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1 shall not be deemed to be a multiple employer wel2 fare arrangement or an insurance company or other

3 insurer, or to be engaged in the business of insur4 ance, for purposes of any State law purporting to

5 regulate insurance companies or insurance contracts.

6 (c) PLANS TO WHICH SECTION APPLIES.—This sec7 tion shall apply to a health plan which—

8 (1) is a church plan (as defined in section

9 414(e) of the Internal Revenue Code of 1986) which

10 has at least 100 participants in the United States;

11 (2) is a multiemployer plan (as defined in sec12 tion 3(37) of the Employee Retirement Income Se13 curity Act of 1974) which is maintained by a health

14 plan sponsor described in section 3(16)(B)(iii) of

15 such Act and which has at least 500 participants in

16 the United States; or

17 (3) is a plan which is maintained by a rural

18 electric cooperative or a rural telephone cooperative

19 association (within the meaning of section 3(40) of

20 such Act) and which has at least 500 participants in

21 the United States.
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1 PART 3—ENFORCEMENT

2 SEC. 1001. ENFORCEMENT BY EXCISE TAX ON QUALIFIED

3 ASSOCIATIONS.

4 (a) IN GENERAL.—Chapter 43 of the Internal Reve5 nue Code of 1986 (relating to qualified pension, etc.,

6 plans), as amended by section 151, is amended by adding

7 at the end the following new section:

8 ‘‘SEC. 4980D. FAILURE OF QUALIFIED ASSOCIATIONS, ETC.,

9 TO COMPLY WITH CERTAIN STANDARDS FOR

10 HEALTH INSURANCE PLANS.

11 ‘‘(a) IMPOSITION OF TAX.—

12 ‘‘(1) IN GENERAL.—There is hereby imposed a

13 tax on the failure of a qualified association (as de14 fined in section 183 of the Health Care Assurance

15 Act of 1995), church plan (as defined in section

16 414(e) of the Internal Revenue Code of 1986), mul17 tiemployer plan (as defined in section 3(37) of the

18 Employee Retirement Income Security Act of 1974),

19 or plan maintained by a rural electric cooperative or

20 a rural telephone cooperative association (within the

21 meaning of section 3(40) of such Act) to comply

22 with the requirements applicable to such association

23 or plans under parts 1 and 2 of subtitle D of title

24 I of the Health Care Assurance Act of 1995.

25 ‘‘(2) EXCEPTION.—Paragraph (1) shall not

26 apply to a failure by a qualified association, church
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1 plan, multiemployer plan, or plan maintained by a

2 rural electric cooperative or a rural telephone coop3 erative association in a State if the Secretary of

4 Health and Human Services determines that the

5 State has in effect a regulatory enforcement mecha6 nism that provides adequate sanctions with respect

7 to such a failure by such a qualified association or

8 plan.

9 ‘‘(b) AMOUNT OF TAX.—The amount of the tax im10 posed by subsection (a) shall be $100 for each day during

11 which such failure persists for each person to which such

12 failure relates. A rule similar to the rule of section

13 4980B(b)(3) shall apply for purposes of this section.

14 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

15 section shall be paid by the qualified association or plan.

16 ‘‘(d) LIMITATIONS ON AMOUNT OF TAX.—

17 ‘‘(1) TAX NOT TO APPLY TO FAILURES COR18 RECTED WITHIN 30 DAYS.—No tax shall be imposed

19 by subsection (a) on any failure if—

20 ‘‘(A) such failure was due to reasonable

21 cause and not to willful neglect, and

22 ‘‘(B) such failure is corrected during the

23 30-day period (or such period as the Secretary

24 may determine appropriate) beginning on the

25 first date the qualified association, church plan,
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1 multiemployer plan, or plan maintained by a

2 rural electric cooperative or a rural telephone

3 cooperative association knows, or exercising rea4 sonable diligence could have known, that such

5 failure existed.

6 ‘‘(2) WAIVER BY SECRETARY.—In the case of a

7 failure which is due to reasonable cause and not to

8 willful neglect, the Secretary may waive part or all

9 of the tax imposed by subsection (a) to the extent

10 that the payment of such tax would be excessive rel11 ative to the failure involved.’’.

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

13 for such chapter 43, as amended by section 151, is amend14 ed by adding at the end the following new item:

‘‘Sec. 4980D. Failure of qualified associations, etc., to comply

with certain standards for health insurance plans.’’.

15 Subtitle E—1-Year Extension of

16 Medicare Select

17 SEC. 1011. 1-YEAR EXTENSION OF PERIOD FOR ISSUANCE

18 OF MEDICARE SELECT POLICIES.

19 (a) IN GENERAL.—Section 4358(c) of the Omnibus

20 Budget Reconciliation Act of 1990 (42 U.S.C. 1320c–3

note) is amended by striking ‘‘31 21 ⁄2-year’’ and inserting

‘‘41 22 ⁄2-year’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall take effect as if included in the enact3 ment of the Omnibus Budget Reconciliation Act of 1990.

4 Subtitle F—Tax Provisions

5 SEC. 1021. DEDUCTION FOR HEALTH INSURANCE COSTS OF

6 SELF-EMPLOYED INDIVIDUALS.

7 (a) PHASE-IN DEDUCTION.—Section 162(l) of the In8 ternal Revenue Code of 1986 (relating to special rules for

9 health insurance costs of self-employed individuals) is

10 amended—

11 (1) by striking paragraph (6); and

12 (2) by striking paragraph (1) and inserting the

13 following:

14 ‘‘(1) ALLOWANCE OF DEDUCTION.—

15 ‘‘(A) IN GENERAL.—In the case of an indi16 vidual who is an employee within the meaning

17 of section 401(c)(1), there shall be allowed as

18 a deduction under this section an amount equal

19 to the applicable percentage of the amount paid

20 during the taxable year for insurance which

21 constitutes medical care for the taxpayer, his

22 spouse, and dependents.

23 ‘‘(B) APPLICABLE PERCENTAGE.—For

24 purposes of subparagraph (A), the applicable

25 percentage shall be determined as follows:
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‘‘If the taxable year The applicable

begins in: percentage is:

1994 or 1995 ................................................. 25 percent

1996 or 1997 ................................................. 50 percent

1998 or 1999 ................................................. 75 percent

2000 or thereafter ......................................... 100 percent.

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

2 this section shall apply to taxable years beginning after

3 December 31, 1993.

4 SEC. 1022. AMENDMENTS TO COBRA.

5 (a) LOWER COST COVERAGE OPTIONS.—Subpara6 graph (A) of section 4980B(f)(2) of the Internal Revenue

7 Code of 1986 (relating to continuation coverage require8 ments of group health plans) is amended to read as

9 follows:

10 ‘‘(A) TYPE OF BENEFIT COVERAGE.—The

11 coverage must consist of coverage which, as of

12 the time the coverage is being provided—

13 ‘‘(i) is identical to the coverage pro14 vided under the plan to similarly situated

15 beneficiaries under the plan with respect to

16 whom a qualifying event has not occurred,

17 ‘‘(ii) is so identical, except such cov18 erage is offered with an annual $1,000 de19 ductible, and

20 ‘‘(iii) is so identical, except such cov21 erage is offered with an annual $3,000 de22 ductible.
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1 If coverage under the plan is modified for any

2 group of similarly situated beneficiaries, the

3 coverage shall also be modified in the same

4 manner for all individuals who are qualified

5 beneficiaries under the plan pursuant to this

6 subsection in connection with such group.’’.

7 (b) TERMINATION OF COBRA COVERAGE AFTER

8 ELIGIBLE FOR EMPLOYER-BASED COVERAGE FOR 90

9 DAYS.—Clause (iv) of section 4980B(f)(2)(B) of such

10 Code (relating to period of coverage) is amended—

11 (1) by striking ‘‘or’’ at the end of subclause (I),

12 (2) by redesignating subclause (II) as subclause

13 (III), and

14 (3) by inserting after subclause (I) the follow15 ing new subclause:

16 ‘‘(II) eligible for such employer17 based coverage for more than 90 days,

18 or’’.

19 (c) REDUCTION OF PERIOD OF COVERAGE.—Clause

20 (i) of section 4980B(f)(2)(B) of such Code (relating to pe21 riod of coverage) is amended by striking ‘‘18 months’’

22 each place it appears and inserting ‘‘24 months’’.

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

24 this section shall apply to qualifying events occurring after

25 the date of the enactment of this Act.
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1 TITLE II—PRIMARY AND

2 PREVENTIVE CARE SERVICES

3 SEC. 201. GRANTS TO STATES FOR HEALTHY START INITIA4 TIVES.

5 (a) IN GENERAL.—The Secretary shall make grants

6 to States with applications approved under this section in

7 order to significantly reduce infant mortality and low birth

8 weight births and improve the health and well-being of

9 pregnant women, mothers, infants, and their families over

10 a 5-year period through accelerated implementation of in11 novative strategies.

12 (b) PROJECTS DESCRIBED.—

13 (1) IN GENERAL.—In order to achieve the pur14 poses described in subsection (a), grant funds under

15 this section shall be used to conduct projects in eligi16 ble project areas (as defined in paragraph (3)). A

17 project under this section shall be conducted by a

18 community-based consortium (as defined in para19 graph (4)) located in such eligible project area.

20 (2) CERTAIN ACTIVITIES.—A community-based

21 consortium conducting a project under this section

22 shall—

23 (A) have the ability to maximize and co24 ordinate existing Federal, State, and local re25 sources and acquire additional resources;
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1 (B) ensure substantial involvement in

2 State and local maternal and child health agen3 cies and other agencies;

4 (C) have a demonstrated ability to effec5 tively manage the project’s fiscal resources;

6 (D) have the leadership capability to

7 achieve the project goals and objectives; and

8 (E) target communities in which problems

9 are most severe, resources can be concentrated,

10 implementation is manageable, and progress

11 can be measured.

12 (3) ELIGIBLE PROJECT AREA.—The term ‘‘eli13 gible project area’’ means an area which is composed

14 of one or more contiguous or noncontiguous geo15 graphic areas which have—

16 (A) an average annual infant mortality

17 rate of 150 percent of the State’s average an18 nual infant mortality rate based upon an aver19 age of the most recently available official vital

20 statistics data for the previous 5-year period;

21 and

22 (B) at least 50 infant deaths per year, but

23 not more than 200 infant deaths per year.

24 (4) COMMUNITY-BASED CONSORTIUM.—The

25 term ‘‘community-based consortium’’ means a group
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1 of project area providers and consumers, including

2 public health departments, community and migrant

3 health centers, hospitals, local professional associa4 tions, medical schools, grant-making foundations,

5 civic groups, schools, churches, social and fraternal

6 organizations, and residents of areas to be served.

7 (5) DURATION.—A project receiving funds

8 under this section shall operate for no more than 5

9 years.

10 (c) APPLICATION.—

11 (1) IN GENERAL.—To be eligible to receive a

12 grant under this section a State shall prepare and

13 submit to the Secretary for approval an application

14 at such time, in such manner, and containing such

15 information, as the Secretary may require, including

16 a description of the use to which the State will apply

17 any amounts received under the grant and the infor18 mation required under paragraph (3). A State may

19 submit only one application under this subsection.

20 (2) APPLICATIONS ON BEHALF OF CONSOR21 TIA.—Applications for grant funds shall be submit22 ted under paragraph (1) on behalf of a community23 based consortium located in an eligible project area.

24 Such applications shall be approved by the highest
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1 elected official of the city or county in which the

2 consortium is based.

3 (3) INFORMATION REQUIRED.—The information

4 required is a detailed description of the following:

5 (A) The extent to which the State has jus6 tified and documented the need for the project

7 to be funded by the grant and developed meas8 urable goals and objectives for meeting the

9 need.

10 (B) The level of community commitment

11 and involvement with the project.

12 (C) The extent to which the community13 based consortium operating in the project area

14 has demonstrated plans for coordinating and

15 maximizing existing and proposed Federal,

16 State, and local and private resources.

17 (D) The extent of the involvement of State

18 and local providers of primary care and public

19 health services in the project.

20 (E) The State’s approach to planning for

21 a public education campaign to address the

22 maintenance of early and continuous prenatal

23 care and of preventive health practices during

24 pregnancy and infancy.
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1 (F) Other factors which the Secretary de2 termines will increase the potential of projects

3 to reduce by 50 percent the rate of infant mor4 tality.

5 (d) FUNDING.—

6 (1) AUTHORIZATION OF APPROPRIATIONS.—For

7 the purposes of carrying out this section, there are

8 authorized to be appropriated $150,000,000 for fis9 cal year 1996, $250,000,000 for fiscal year 1997,

10 and $300,000,000 for fiscal years 1998 through

11 2001.

12 (2) DISTRIBUTION OF FUNDS.—

13 (A) IN GENERAL.—For a fiscal year, each

14 State shall be allocated an amount equal to the

15 applicable percentage determined under sub16 paragraph (B) of the total amount available

17 under this section for all States.

18 (B) APPLICABLE PERCENTAGE.—The ap19 plicable percentage for a State for a fiscal year

20 is the amount (expressed as a percentage) equal

21 to—

22 (i) the amount available to the State

23 in the preceding fiscal year under title V of

24 the Social Security Act; divided by
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1 (ii) the total amount available to all

2 States in the preceding fiscal year under

3 such title.

4 SEC. 202. REAUTHORIZATION OF CERTAIN PROGRAMS PRO5 VIDING PRIMARY AND PREVENTIVE CARE.

6 (a) IMMUNIZATION PROGRAMS.—Section

7 317(j)(1)(A) of the Public Health Service Act (42 U.S.C.

8 247b(j)(1)(A)) is amended—

9 (1) by striking ‘‘and such sums’’ and inserting

10 ‘‘such sums’’; and

11 (2) by striking ‘‘each of the fiscal years 1992

12 through 1995’’ and inserting ‘‘each of the fiscal

13 years 1992 through 1995, $600,000,000 for fiscal

14 years 1996 and 1997, and such sums as may be nec15 essary for each of the fiscal years 1998 through

16 2000’’.

17 (b) TUBERCULOSIS PREVENTION GRANTS.—Section

18 317(j)(2) of the Public Health Service Act (42 U.S.C.

19 247b(j)(2)) is amended—

20 (1) by striking ‘‘and such sums’’ and inserting

21 ‘‘such sums’’; and

22 (2) by striking ‘‘each of the fiscal years 1992

23 through 1995’’ and inserting ‘‘each of the fiscal

24 years 1992 through 1995, $150,000,000 for fiscal
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1 year 1996, and such sums as may be necessary for

2 each of the fiscal years 1997 through 1999’’.

3 (c) SEXUALLY TRANSMITTED DISEASES.—Section

4 318(d)(1) of the Public Health Service Act (42 U.S.C.

5 247c(d)(1)) is amended—

6 (1) by striking ‘‘and such sums’’ and inserting

7 ‘‘such sums’’; and

8 (2) by inserting before the first period the fol9 lowing: ‘‘$125,000,000 for fiscal years 1996 and

10 1997, and such sums as may be necessary for each

11 of the fiscal years 1998 through 2000’’.

12 (d) MIGRANT HEALTH CENTERS.—Section

13 329(h)(1)(A) of the Public Health Service Act (42 U.S.C.

14 254b(h)(1)(A)) is amended by striking ‘‘and 1991, and

15 such sums as may be necessary for each of the fiscal years

16 1992 through 1994’’ and inserting ‘‘through 1995,

17 $80,000,000 for fiscal year 1996, and such sums as may

18 be necessary for each of the fiscal years 1997 through

19 1999’’.

20 (e) COMMUNITY HEALTH CENTERS.—Section

21 330(g)(1)(A) of the Public Health Service Act (42 U.S.C.

22 254c(g)(1)(A)) is amended by striking ‘‘and 1991, and

23 such sums as may be necessary for each of the fiscal years

24 1992 through 1994’’ and inserting ‘‘through 1995,

25 $700,000,000 for fiscal year 1996, and such sums as may
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1 be necessary for each of the fiscal years 1997 through

2 1999’’.

3 (f) HEALTH CARE SERVICES FOR THE HOMELESS.—

4 Section 340(q)(1) of the Public Health Service Act (42

5 U.S.C. 256(q)(1)) is amended—

6 (1) by striking ‘‘and such’’ and inserting

7 ‘‘such’’; and

8 (2) by striking ‘‘and 1994.’’ and inserting

9 ‘‘through 1995, $90,000,000 for fiscal years 1996

10 and 1997, and such sums as may be necessary for

11 each of the fiscal years 1998 through 2000.’’.

12 (g) FAMILY PLANNING PROJECT GRANTS.—Section

13 1001(d) of the Public Health Service Act (42 U.S.C.

14 300(d)) is amended—

15 (1) by striking ‘‘and $158,400,000’’ and insert16 ing ‘‘$158,400,000’’; and

17 (2) by inserting before the period the following:

18 ‘‘; $200,000,000 for fiscal year 1996, and such sums

19 as may be necessary for each of the fiscal years

20 1997 through 1999’’.

21 (h) BREAST AND CERVICAL CANCER PREVENTION.—

22 Section 1509(a) of the Public Health Service Act (42

23 U.S.C. 300n–5(a)) is amended—

24 (1) by striking ‘‘and such sums’’ and inserting

25 ‘‘such sums’’; and
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1 (2) by striking ‘‘for each of the fiscal years

2 1992 and 1993’’ and inserting ‘‘for each of the fiscal

3 years 1992 through 1995, $100,000,000 for fiscal

4 year 1996, and such sums as may be necessary for

5 each of the fiscal years 1997 through 1999’’.

6 (i) PREVENTIVE HEALTH AND HEALTH SERVICES

7 BLOCK GRANT.—Section 1901(a) of the Public Health

8 Service Act (42 U.S.C. 300w(a)) is amended by striking

9 ‘‘$205,000,000’’ and inserting ‘‘$235,000,000’’.

10 (j) HIV EARLY INTERVENTION.—Section 2655 of the

11 Public Health Service Act (42 U.S.C. 300ff–55) is

12 amended—

13 (1) by striking ‘‘and such sums’’ and inserting

14 ‘‘such sums’’; and

15 (2) by inserting before the period ‘‘,

16 $650,000,000 for fiscal year 1996, and such sums

17 as may be necessary for each of the fiscal years

18 1997 through 1999’’.

19 (k) MATERNAL AND CHILD HEALTH SERVICES

20 BLOCK GRANT.—Section 501(a) of the Social Security

21 Act (42 U.S.C. 701(a)) is amended by striking

22 ‘‘$705,000,000 for fiscal year 1994 and each fiscal year

23 thereafter’’ and inserting ‘‘$705,000,000 for fiscal years

24 1994 and 1995, $800,000,000 for fiscal year 1996, and
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1 such sums as may be necessary in each of the fiscal years

2 1997 through 1999’’.

3 SEC. 203. COMPREHENSIVE SCHOOL HEALTH EDUCATION

4 PROGRAM.

5 (a) PURPOSE.—It is the purpose of this section to

6 establish a comprehensive school health education and pre7 vention program for elementary and secondary school stu8 dents.

9 (b) PROGRAM AUTHORIZED.—The Secretary of Edu10 cation (referred to in this section as the ‘‘Secretary’’),

11 through the Office of Comprehensive School Health Edu12 cation established in subsection (e), shall award grants to

13 States from allotments under subsection (c) to enable such

14 States to—

15 (1) award grants to local or intermediate edu16 cational agencies, and consortia thereof, to enable

17 such agencies or consortia to establish, operate, and

18 improve local programs of comprehensive health edu19 cation and prevention, early health intervention, and

20 health education, in elementary and secondary

21 schools (including preschool, kindergarten, inter22 mediate, and junior high schools); and

23 (2) develop training, technical assistance, and

24 coordination activities for the programs assisted pur25 suant to paragraph (1).
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1 (c) RESERVATIONS AND STATE ALLOTMENTS.—

2 (1) RESERVATIONS.—From the sums appro3 priated pursuant to the authority of subsection (f)

4 for any fiscal year, the Secretary shall reserve—

5 (A) 1 percent for payments to Guam,

6 American Samoa, the Virgin Islands, the Re7 public of the Marshall Islands, the Federated

8 States of Micronesia, the Northern Mariana Is9 lands, and the Republic of Palau, to be allotted

10 in accordance with their respective needs; and

11 (B) 1 percent for payments to the Bureau

12 of Indian Affairs.

13 (2) STATE ALLOTMENTS.—From the remainder

14 of the sums not reserved under paragraph (1), the

15 Secretary shall allot to each State an amount which

16 bears the same ratio to the amount of such remain17 der as the school-age population of the State bears

18 to the school-age population of all States, except

19 that no State shall be allotted less than an amount

20 equal to 0.5 percent of such remainder.

21 (3) REALLOTMENT.—The Secretary may reallot

22 any amount of any allotment to a State to the extent

23 that the Secretary determines that the State will not

24 be able to obligate such amount within 2 years of al-
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1 lotment. Any such reallotment shall be made on the

2 same basis as an allotment under paragraph (2).

3 (d) USE OF FUNDS.—Grant funds provided to local

4 or intermediate educational agencies, or consortia thereof,

5 under this section may be used to improve elementary and

6 secondary education in the areas of—

7 (1) personal health and fitness;

8 (2) prevention of chronic diseases;

9 (3) prevention and control of communicable dis10 eases;

11 (4) nutrition;

12 (5) substance use and abuse;

13 (6) accident prevention and safety;

14 (7) community and environmental health;

15 (8) mental and emotional health;

16 (9) parenting and the challenges of raising chil17 dren; and

18 (10) the effective use of the health services de19 livery system.

20 (e) OFFICE OF COMPREHENSIVE SCHOOL HEALTH

21 EDUCATION.—The Secretary shall establish within the Of22 fice of the Secretary an Office of Comprehensive School

23 Health Education which shall have the following respon24 sibilities:
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1 (1) To recommend mechanisms for the coordi2 nation of school health education programs con3 ducted by the various departments and agencies of

4 the Federal Government.

5 (2) To advise the Secretary on formulation of

6 school health education policy within the Depart7 ment of Education.

8 (3) To disseminate information on the benefits

9 to health education of utilizing a comprehensive

10 health curriculum in schools.

11 (f) AUTHORIZATION OF APPROPRIATIONS.—

12 (1) IN GENERAL.—There are authorized to be

13 appropriated $50,000,000 for fiscal year 1996 and

14 such sums as may be necessary for each of the fiscal

15 years 1997 and 1998 to carry out this section.

16 (2) AVAILABILITY.—Funds appropriated pursu17 ant to the authority of paragraph (1) in any fiscal

18 year shall remain available for obligation and ex19 penditure until the end of the fiscal year succeeding

20 the fiscal year for which such funds were appro21 priated.
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1 SEC. 204. COMPREHENSIVE EARLY CHILDHOOD HEALTH

2 EDUCATION PROGRAM.

3 (a) PURPOSE.—It is the purpose of this section to

4 establish a comprehensive early childhood health education

5 program.

6 (b) PROGRAM.—The Secretary of Health and Human

7 Services (referred to in this section as the ‘‘Secretary’’)

8 shall conduct a program of awarding grants to agencies

9 conducting Head Start training to enable such agencies

10 to provide training and technical assistance to Head Start

11 teachers and other child care providers. Such program

12 shall—

13 (1) establish a training system through the

14 Head Start agencies and organizations conducting

15 Head Start training for the purpose of enhancing

16 teacher skills and providing comprehensive early

17 childhood health education curriculum;

18 (2) enable such agencies and organizations to

19 provide training to day care providers in order to

20 strengthen the skills of the early childhood workforce

21 in providing health education;

22 (3) provide technical support for health edu23 cation programs and curricula; and

24 (4) provide cooperation with other early child25 hood providers to ensure coordination of such pro-
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1 grams and the transition of students into the public

2 school environment.

3 (c) USE OF FUNDS.—Grant funds under this section

4 may be used to provide training and technical assistance

5 in the areas of—

6 (1) personal health and fitness;

7 (2) prevention of chronic diseases;

8 (3) prevention and control of communicable dis9 eases;

10 (4) dental health;

11 (5) nutrition;

12 (6) substance use and abuse;

13 (7) accident prevention and safety;

14 (8) community and environmental health;

15 (9) mental and emotional health; and

16 (10) strengthening the role of parent involve17 ment.

18 (d) RESERVATION FOR INNOVATIVE PROGRAMS.—

19 The Secretary shall reserve 5 percent of the funds appro20 priated pursuant to the authority of subsection (e) in each

21 fiscal year for the development of innovative model health

22 education programs or curricula.

23 (e) AUTHORIZATION OF APPROPRIATIONS.—There

24 are authorized to be appropriated $40,000,000 for fiscal
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1 year 1996 and such sums as may be necessary for each

2 of the fiscal years 1997 and 1998 to carry out this section.

3 TITLE III—PATIENT’S RIGHT TO

4 DECLINE MEDICAL TREATMENT

5 SEC. 301. PATIENT’S RIGHT TO DECLINE MEDICAL TREAT6 MENT.

7 (a) RIGHT TO DECLINE MEDICAL TREATMENT.—

8 (1) RIGHTS OF COMPETENT ADULTS.—

9 (A) IN GENERAL.—Except as provided in

10 subparagraph (B), a State may not restrict the

11 right of a competent adult to consent to, or to

12 decline, medical treatment.

13 (B) LIMITATIONS.—

14 (i) AFFECT ON THIRD PARTIES.—A

15 State may impose limitations on the right

16 of a competent adult to decline treatment

17 if such limitations protect third parties (in18 cluding minor children) from harm.

19 (ii) TREATMENT WHICH IS NOT MEDI20 CALLY INDICATED.—Nothing in this sub21 section shall be construed to require that

22 any individual be offered, or to state that

23 any individual may demand, medical treat24 ment which the health care provider does

25 not have available, or which is, under pre-
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1 vailing medical standards, either futile or

2 otherwise not medically indicated.

3 (2) RIGHTS OF INCAPACITATED ADULTS.—

4 (A) IN GENERAL.—Except as provided in

5 subparagraph (B)(i) of paragraph (1), States

6 may not restrict the right of an incapacitated

7 adult to consent to, or to decline, medical treat8 ment as exercised through the documents speci9 fied in this paragraph, or through similar docu10 ments or other written methods of directive

11 which evidence the adult’s treatment choices.

12 (B) ADVANCE DIRECTIVES AND POWERS

13 OF ATTORNEY.—

14 (i) IN GENERAL.—In order to facili15 tate the communication, despite incapacity,

16 of an adult’s treatment choices, the Sec17 retary, in consultation with the Attorney

18 General, shall develop a national advance

19 directive form that—

20 (I) shall not limit or otherwise

21 restrict, except as provided in sub22 paragraph (B)(i) of paragraph (1), an

23 adult’s right to consent to, or to de24 cline, medical treatment; and

25 (II) shall, at minimum—
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1 (aa) provide the means for

2 an adult to declare such adult’s

3 own treatment choices in the

4 event of a terminal condition;

5 (bb) provide the means for

6 an adult to declare, at such

7 adult’s option, treatment choices

8 in the event of other conditions

9 which are medically incurable,

10 and from which such adult likely

11 will not recover; and

12 (cc) provide the means by

13 which an adult may, at such

14 adult’s option, declare such

15 adult’s wishes with respect to all

16 forms of medical treatment, in17 cluding forms of medical treat18 ment such as the provision of nu19 trition and hydration by artificial

20 means which may be, in some cir21 cumstances, relatively nonburden22 some.

23 (ii) NATIONAL DURABLE POWER OF

24 ATTORNEY FORM.—The Secretary, in con25 sultation with the Attorney General, shall
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1 develop a national durable power of attor2 ney form for health care decisionmaking.

3 The form shall provide a means for any

4 adult to designate another adult or adults

5 to exercise the same decisionmaking pow6 ers which would otherwise be exercised by

7 the patient if the patient were competent.

8 (iii) HONORED BY ALL HEALTH CARE

9 PROVIDERS.—The national advance direc10 tive and durable power of attorney forms

11 developed by the Secretary shall be hon12 ored by all health care providers.

13 (iv) LIMITATIONS.—No individual

14 shall be required to execute an advance di15 rective. This section makes no presumption

16 concerning the intention of an individual

17 who has not executed an advance directive.

18 An advance directive shall be sufficient,

19 but not necessary, proof of an adult’s

20 treatment choices with respect to the cir21 cumstances addressed in the advance direc22 tive.

23 (C) DEFINITION.—For purposes of this

24 paragraph, the term ‘‘incapacity’’ means the in25 ability to understand or to communicate con-
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1 cerning the nature and consequences of a health

2 care decision (including the intended benefits

3 and foreseeable risks of, and alternatives to,

4 proposed treatment options), and to reach an

5 informed decision concerning health care.

6 (3) HEALTH CARE PROVIDERS.—

7 (A) IN GENERAL.—No health care provider

8 may provide treatment to an adult contrary to

9 the adult’s wishes as expressed personally, by

10 an advance directive as provided for in para11 graph (2)(B), or by a similar written advance

12 directive form or another written method of di13 rective which clearly and convincingly evidence

14 the adult’s treatment choices. A health provider

15 who acts in good faith pursuant to the preced16 ing sentence shall be immune from criminal or

17 civil liability or discipline for professional mis18 conduct.

19 (B) HEALTH CARE PROVIDERS UNDER

20 THE MEDICARE AND MEDICAID PROGRAMS.—

21 Any health care provider who knowingly pro22 vides services to an adult contrary to the adult’s

23 wishes as expressed personally, by an advance

24 directive as provided for in paragraph (2)(B),

25 or by a similar written advance directive form
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1 or another written method of directive which

2 clearly and convincingly evidence the adult’s

3 treatment choices, shall be denied payment for

4 such services under titles XVIII and XIX of the

5 Social Security Act.

6 (C) TRANSFERS.—Health care providers

7 who object to the provision of medical care in

8 accordance with an adult’s wishes shall transfer

9 the adult to the care of another health care pro10 vider.

11 (4) DEFINITION.—For purposes of this sub12 section, the term ‘‘adult’’ means—

13 (A) an individual who is 18 years of age or

14 older; or

15 (B) an emancipated minor.

16 (b) FEDERAL RIGHT ENFORCEABLE IN FEDERAL

17 COURTS.—The rights recognized in this section may be

18 enforced by filing a civil action in an appropriate district

19 court of the United States.

20 (c) SUICIDE AND HOMICIDE.—Nothing in this section

21 shall be construed to permit, condone, authorize, or ap22 prove suicide or mercy killing, or any affirmative act to

23 end a human life.
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1 (d) RIGHTS GRANTED BY STATES.—Nothing in this

2 section shall impair or supersede rights granted by State

3 law which exceed the rights recognized by this section.

4 (e) EFFECT ON OTHER LAWS.—

5 (1) IN GENERAL.—Except as specified in para6 graph (2), written policies and written information

7 adopted by health care providers pursuant to sec8 tions 4206 and 4751 of the Omnibus Budget Rec9 onciliation Act of 1990 (Public Law 101–508), shall

10 be modified within 6 months after the enactment of

11 this section to conform to the provisions of this sec12 tion.

13 (2) DELAY PERIOD FOR UNIFORM FORMS.—

14 Health care providers shall modify any written forms

15 distributed as written information under sections

16 4206 and 4751 of the Omnibus Budget Reconcili17 ation Act of 1990 (Public Law 101–508) not later

18 than 6 months after promulgation of the forms re19 ferred to in clauses (i) and (ii) of subsection

20 (a)(2)(B) by the Secretary.

21 (f) INFORMATION PROVIDED TO CERTAIN INDIVID22 UALS.—The Secretary shall provide on a periodic basis

23 written information regarding an individual’s right to con24 sent to, or to decline, medical treatment as provided in
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1 this section to individuals who are beneficiaries under ti2 tles II, XVI, XVIII, and XIX of the Social Security Act.

3 (g) RECOMMENDATIONS TO CONGRESS ON ISSUES

4 RELATING TO A PATIENT’S RIGHT OF SELF-DETERMINA5 TION.—Not later than 180 days after the date of the en6 actment of this Act, and annually thereafter for a period

7 of 3 years, the Secretary shall provide recommendations

8 to Congress concerning the medical, legal, ethical, social,

9 and educational issues related to in this section. In devel10 oping recommendations under this subsection the Sec11 retary shall address the following issues:

12 (1) The contents of the forms referred to in

13 clauses (i) and (ii) of subsection (a)(2)(B).

14 (2) Issues pertaining to the education and

15 training of health care professionals concerning pa16 tients’ self-determination rights.

17 (3) Issues pertaining to health care profes18 sionals’ duties with respect to patients’ rights, and

19 health care professionals’ roles in identifying, assess20 ing, and presenting for patient consideration medi21 cally indicated treatment options.

22 (4) Issues pertaining to the education of pa23 tients concerning their rights to consent to, and de24 cline, treatment, including how individuals might

25 best be informed of such rights prior to hospitaliza-
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1 tion and how uninsured individuals, and individuals

2 not under the regular care of a physician or another

3 provider, might best be informed of their rights.

4 (5) Issues relating to appropriate standards to

5 be adopted concerning decisionmaking by incapaci6 tated adult patients whose treatment choices are not

7 known.

8 (6) Such other issues as the Secretary may

9 identify.

10 (h) EFFECTIVE DATE.—

11 (1) IN GENERAL.—This section shall take effect

12 on the date that is 6 months after the date of enact13 ment of this Act.

14 (2) SUBSECTION (g).—The provisions of sub15 section (g) shall take effect on the date of enactment

16 of this Act.

17 TITLE IV—PRIMARY AND

18 PREVENTIVE CARE PROVIDERS

19 SEC. 401. EXPANDED COVERAGE OF CERTAIN

20 NONPHYSICIAN PROVIDERS UNDER THE

21 MEDICARE PROGRAM.

22 (a) IN GENERAL.—Section 1833(a)(1) of the Social

23 Security Act (42 U.S.C. 1395l(a)(1)) is amended—

24 (1) in subparagraph (K), by striking ‘‘80 per25 cent’’ and all that follows through ‘‘physician)’’ and
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1 inserting ‘‘85 percent of the fee schedule amount

2 provided under section 1848 for the same service

3 performed by a physician’’; and

4 (2) by amending subparagraph (O) to read as

5 follows: ‘‘(O) with respect to services described in

6 section 1861(s)(2)(K) (relating to services provided

7 by a nurse practitioner, clinical nurse specialist, or

8 physician assistant) the amounts paid shall be 85

9 percent of the fee schedule amount provided under

10 section 1848 for the same service performed by a

11 physician, and’’.

12 (b) NURSE PRACTITIONERS AND PHYSICIAN ASSIST13 ANTS.—Section 1842(b)(12) of the Social Security Act

14 (42 U.S.C. 1395u(b)(12)) is amended to read as follows:

15 ‘‘(12) With respect to services described in clause (i),

16 (ii), or (iv) of section 1861(s)(2)(K) (relating to physician

17 assistants and nurse practitioners)—

18 ‘‘(A) payment under this part may only be

19 made on an assignment-related basis; and

20 ‘‘(B) the prevailing charges determined under

21 paragraph (3) shall not exceed—

22 ‘‘(i) in the case of services performed as an

23 assistant at surgery, 85 percent of the amount

24 that would otherwise be recognized if performed
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1 by a physician who is serving as an assistant at

2 surgery, or

3 ‘‘(ii) in other cases, 85 percent of the fee

4 schedule amount specified in section 1848 for

5 such services performed by physicians who are

6 not specialists.’’.

7 (c) DIRECT PAYMENT FOR ALL NURSE PRACTITION8 ERS OR CLINICAL NURSE SPECIALISTS.—(1) Section

9 1832(a)(2)(B)(iv) of the Social Security Act (42 U.S.C.

10 1395k(a)(2)(B)(iv)) is amended by striking ‘‘provided in

11 a rural area (as defined in section 1886(d)(2)(D))’’.

12 (2) Subparagraph (C) of section 1842(b)(6) of such

13 Act (42 U.S.C. 1395u(b)(6)) is amended by striking

14 ‘‘shall’’ and inserting ‘‘may’’.

15 (d) REMOVAL OF RESTRICTIONS ON SETTINGS.—

16 Section 1861(s)(2)(K) of the Social Security Act (42

17 U.S.C. 1395x(s)(2)(K)) is amended—

18 (1) in clause (i), by striking ‘‘(I) in a hospital’’

19 and all that follows through ‘‘professional shortage

20 area,’’;

21 (2) in clause (ii), by striking ‘‘in a skilled’’ and

22 all that follows through ‘‘1919(a)’’; and

23 (3) in clause (iii), by striking ‘‘in a rural’’ and

24 all that follows through ‘‘(d)(2)(D))’’.
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1 SEC. 402. REQUIRING COVERAGE OF CERTAIN

2 NONPHYSICIAN PROVIDERS UNDER THE

3 MEDICAID PROGRAM.

4 Section 1905(a) of the Social Security Act (42 U.S.C.

5 1396d(a)) is amended—

6 (1) by striking ‘‘and’’ at the end of paragraph

7 (24),

8 (2) by redesignating paragraph (25) as para9 graph (26), and

10 (3) by inserting after paragraph (24) the fol11 lowing new paragraph:

12 ‘‘(25) services furnished by a physician assist13 ant, nurse practitioner, clinical nurse specialist (as

14 defined in section 1861(aa)(5)), and certified reg15 istered nurse anesthetist (as defined in section

16 1861(bb)(2)); and’’.

17 SEC. 403. MEDICAL STUDENT TUTORIAL PROGRAM

18 GRANTS.

19 Part C of title VII of the Public Health Service Act

20 is amended by adding at the end thereof the following new

21 section:

22 ‘‘SEC. 753. MEDICAL STUDENT TUTORIAL PROGRAM

23 GRANTS.

24 ‘‘(a) ESTABLISHMENT.—The Secretary shall estab25 lish a program to award grants to eligible schools of medi26 cine or osteopathic medicine to enable such schools to pro-
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1 vide medical students for tutorial programs or as partici2 pants in clinics designed to interest high school or college

3 students in careers in general medical practice.

4 ‘‘(b) APPLICATION.—To be eligible to receive a grant

5 under this section, a school of medicine or osteopathic

6 medicine shall prepare and submit to the Secretary an ap7 plication at such time, in such manner, and containing

8 such information as the Secretary may require, including

9 assurances that the school will use amounts received under

10 the grant in accordance with subsection (c).

11 ‘‘(c) USE OF FUNDS.—

12 ‘‘(1) IN GENERAL.—Amounts received under a

13 grant awarded under this section shall be used to—

14 ‘‘(A) fund programs under which students

15 of the grantee are provided as tutors for high

16 school and college students in the areas of

17 mathematics, science, health promotion and

18 prevention, first aide, nutrition and prenatal

19 care;

20 ‘‘(B) fund programs under which students

21 of the grantee are provided as participants in

22 clinics and seminars in the areas described in

23 paragraph (1); and
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1 ‘‘(C) conduct summer institutes for high

2 school and college students to promote careers

3 in medicine.

4 ‘‘(2) DESIGN OF PROGRAMS.—The programs,

5 institutes, and other activities conducted by grantees

6 under paragraph (1) shall be designed to—

7 ‘‘(A) give medical students desiring to

8 practice general medicine access to the local

9 community;

10 ‘‘(B) provide information to high school

11 and college students concerning medical school

12 and the general practice of medicine; and

13 ‘‘(C) promote careers in general medicine.

14 ‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—There

15 are authorized to be appropriated to carry out this section,

16 $5,000,000 for fiscal year 1996, and such sums as may

17 be necessary for fiscal year 1997.’’.

18 SEC. 404. GENERAL MEDICAL PRACTICE GRANTS.

19 Part C of title VII of the Public Health Service Act

20 (as amended by section 403) is further amended by adding

21 at the end thereof the following new section:

22 ‘‘SEC. 754. GENERAL MEDICAL PRACTICE GRANTS.

23 ‘‘(a) ESTABLISHMENT.—The Secretary shall estab24 lish a program to award grants to eligible public or private

25 nonprofit schools of medicine or osteopathic medicine, hos-
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1 pitals, residency programs in family medicine or pediat2 rics, or to a consortium of such entities, to enable such

3 entities to develop effective strategies for recruiting medi4 cal students interested in the practice of general medicine

5 and placing such students into general practice positions

6 upon graduation.

7 ‘‘(b) APPLICATION.—To be eligible to receive a grant

8 under this section, an entity of the type described in sub9 section (a) shall prepare and submit to the Secretary an

10 application at such time, in such manner, and containing

11 such information as the Secretary may require, including

12 assurances that the entity will use amounts received under

13 the grant in accordance with subsection (c).

14 ‘‘(c) USE OF FUNDS.—Amounts received under a

15 grant awarded under this section shall be used to fund

16 programs under which effective strategies are developed

17 and implemented for recruiting medical students inter18 ested in the practice of general medicine and placing such

19 students into general practice positions upon graduation.

20 ‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—There

21 are authorized to be appropriated to carry out this section,

22 $25,000,000 for each of the fiscal years 1996 through

23 2000, and such sums as may be necessary for fiscal years

24 thereafter.’’.
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1 TITLE V—COST CONTAINMENT

2 SEC. 501. NEW DRUG CLINICAL TRIALS PROGRAM.

3 Part B of title IV of the Public Health Service Act

4 (42 U.S.C. 284 et seq.) is amended by adding at the end

5 the following new section:

6 ‘‘SEC. 409B. NEW DRUG CLINICAL TRIALS PROGRAM.

7 ‘‘(a) IN GENERAL.—The Director of the National In8 stitutes of Health (referred to in this section as the ‘Direc9 tor’) is authorized to establish and implement a program

10 for the conduct of clinical trials with respect to new drugs

11 and disease treatments determined to be promising by the

12 Director. In determining the drugs and disease treatments

13 that are to be the subject of such clinical trials, the Direc14 tor shall give priority to those drugs and disease treat15 ments targeted toward the diseases determined—

16 ‘‘(1) to be the most costly to treat;

17 ‘‘(2) to have the highest mortality; or

18 ‘‘(3) to affect the greatest number of individ19 uals.

20 ‘‘(b) AUTHORIZATION OF APPROPRIATIONS.—There

21 are authorized to be appropriated to carry out this section,

22 $120,000,000 for fiscal year 1996, and such sums as may

23 be necessary for each of the fiscal years 1997 through

24 2000.’’.
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1 SEC. 502. MEDICAL TREATMENT EFFECTIVENESS.

2 (a) RESEARCH ON COST-EFFECTIVE METHODS OF

3 HEALTH CARE.—Section 926 of the Public Health Service

4 Act (42 U.S.C. 299c–5) is amended—

5 (1) in subsection (a), by striking ‘‘and’’ and in6 serting ‘‘and such sums as may be necessary for

7 each of the fiscal years 1996 through 1998’’; and

8 (2) by adding at the end the following new sub9 section:

10 ‘‘(f) USE OF ADDITIONAL APPROPRIATIONS.—Within

11 amounts appropriated under subsection (a) for each of the

12 fiscal years 1995 through 1997 that are in excess of the

13 amounts appropriated under such subsection for fiscal

14 year 1993, the Secretary shall give priority to expanding

15 research conducted to determine the most cost-effective

16 methods of health care and for developing and disseminat17 ing new practice guidelines related to such methods. In

18 utilizing such amounts, the Secretary shall give priority

19 to diseases and disorders that the Secretary determines

20 are the most costly to the United States and evidence a

21 wide variation in current medical practice.’’.

22 (b) RESEARCH ON MEDICAL TREATMENT OUT23 COMES.—

24 (1) IMPOSITION OF TAX ON HEALTH INSUR25 ANCE POLICIES.—
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1 (A) IN GENERAL.—Chapter 36 of the In2 ternal Revenue Code of 1986 (relating to cer3 tain other excise taxes) is amended by adding

4 at the end thereof the following new subchapter:

5 ‘‘Subchapter G—Tax on Health Insurance

6 Policies

‘‘Sec. 4501. Imposition of tax.

‘‘Sec. 4502. Liability for tax.

7 ‘‘SEC. 4501. IMPOSITION OF TAX.

8 ‘‘(a) GENERAL RULE.—There is hereby imposed a

9 tax equal to .001 cent on each dollar, or fractional part

10 thereof, of the premium paid on a policy of health

11 insurance.

12 ‘‘(b) DEFINITION.—For purposes of subsection (a),

13 the term ‘policy of health insurance’ means any policy or

14 other instrument by whatever name called whereby a con15 tract of insurance is made, continued, or renewed with re16 spect to the health of an individual or group of individuals.

17 ‘‘SEC. 4502. LIABILITY FOR TAX.

18 ‘‘The tax imposed by this subchapter shall be paid,

19 on the basis of a return, by any person who makes, signs,

20 issues, or sells any of the documents and instruments sub21 ject to the tax, or for whose use or benefit the same are

22 made, signed, issued, or sold. The United States or any

23 agency or instrumentality thereof shall not be liable for

24 the tax.’’.
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1 (B) CONFORMING AMENDMENT.—The

2 table of subchapters for chapter 36 of the Inter3 nal Revenue Code of 1986 is amended by add4 ing at the end thereof the following new item:

‘‘SUBCHAPTER G. Tax on health insurance policies.’’.

5 (2) ESTABLISHMENT OF TRUST FUND.—

6 (A) IN GENERAL.—Subchapter A of chap7 ter 98 of such Code (relating to trust fund

8 code) is amended by adding at the end thereof

9 the following new section:

10 ‘‘SEC. 9512. TRUST FUND FOR MEDICAL TREATMENT OUT11 COMES RESEARCH.

12 ‘‘(a) CREATION OF TRUST FUND.—There is estab13 lished in the Treasury of the United States a trust fund

14 to be known as the ‘Trust Fund for Medical Treatment

15 Outcomes Research’ (referred to in this section as the

16 ‘Trust Fund’), consisting of such amounts as may be ap17 propriated or credited to the Trust Fund as provided in

18 this section or section 9602(b).

19 ‘‘(b) TRANSFERS TO TRUST FUND.—There is hereby

20 appropriated to the Trust Fund an amount equivalent to

21 the taxes received in the Treasury under section 4501 (re22 lating to tax on health insurance policies).

23 ‘‘(c) DISTRIBUTION OF AMOUNTS IN TRUST FUND.—

24 On an annual basis the Secretary shall distribute the

25 amounts in the Trust Fund to the Secretary of Health
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1 and Human Services. Such amounts shall be available to

2 the Secretary of Health and Human Services to pay for

3 research activities related to medical treatment out4 comes.’’.

5 (B) CONFORMING AMENDMENT.—The

6 table of sections for subchapter A of chapter 98

7 of such Code is amended by adding at the end

8 thereof the following new item:

‘‘Sec. 9512. Trust Fund for Medical Treatment Outcomes Research.’’.

9 (3) EFFECTIVE DATE.—The amendments made

10 by this subsection shall apply to policies issued after

11 December 31, 1995.

12 SEC. 503. NATIONAL HEALTH INSURANCE DATA AND

13 CLAIMS SYSTEM.

14 (a) IN GENERAL.—Using advanced technologies to

15 the maximum extent practicable, the Secretary of Health

16 and Human Services (referred to in this section as the

17 ‘‘Secretary’’) shall establish and maintain a national

18 health insurance data and claims system, which shall be

19 comprised of—

20 (1) a centralized national data base for health

21 insurance and health outcomes information;

22 (2) a standardized, universal mechanism for

23 electronically processing health insurance and health

24 outcomes data; and
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1 (3) a standardized system for uniform claims

2 and uniform transmission of claims.

3 (b) NATIONAL DATA BASE FOR HEALTH INSURANCE

4 INFORMATION.—The national data base for health insur5 ance and health outcomes information shall—

6 (1) be centrally located;

7 (2) rely on advanced technologies to the maxi8 mum extent practicable; and

9 (3) be readily accessible for data input and re10 trieval.

11 (c) STANDARDIZED SYSTEM FOR UNIFORM CLAIMS

12 AND TRANSMISSION OF CLAIMS.—

13 (1) CONSULTATION WITH THE NAIC.—The Sec14 retary shall consult with the National Association of

15 Insurance Commissioners in connection with the es16 tablishment of the system under subsection (a)(3).

17 (2) USE OF RECOGNIZED STANDARDS.—The

18 Secretary shall, to the maximum extent practicable,

19 establish standards for the system under subsection

20 (a)(3) that are consistent with standards that are

21 widely recognized and adopted.

22 (3) TIMING FOR ESTABLISHMENT OF SYS23 TEM.—

24 (A) IN GENERAL.—Not later than 12

25 months after the date of the enactment of this
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1 Act, the Secretary shall establish standards for

2 the system under subsection (a)(3).

3 (B) REVIEW.—Not later than 24 months

4 after standards have been established under

5 subparagraph (A), the Secretary shall review

6 such standards and make any modifications de7 termined appropriate by the Secretary.

8 (d) CONFIDENTIALITY.—The Secretary shall ensure

9 that all patient information collected under this section is

10 managed so that confidentiality is protected.

11 (e) AUTHORIZATION OF APPROPRIATIONS.—There

12 shall be authorized to be appropriated such sums as may

13 be necessary to carry out the purposes of this section.

14 SEC. 504. HEALTH CARE COST CONTAINMENT AND QUALITY

15 INFORMATION PROGRAM.

16 (a) GRANT PROGRAM.—

17 (1) IN GENERAL.—The Secretary of Health and

18 Human Services (referred to in this section as the

19 ‘‘Secretary’’) shall make grants to States that estab20 lish or operate health care cost containment and

21 quality information systems (as defined in subsection

22 (f)(1)). In order to be eligible for a grant under this

23 section, a State must establish or operate a system

24 which, at a minimum, meets the Federal standards

25 established under subsection (c).
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1 (2) USE OF FUNDS.—States may use grant

2 funds received under this section only to establish a

3 health care cost containment and quality informa4 tion system or to improve an existing system oper5 ated by the State.

6 (b) SUBMISSION OF APPLICATIONS.—To be eligible

7 for a grant under this section, a State must submit an

8 application to the Secretary within 2 years after the date

9 of the enactment of this section. Such application shall

10 be submitted in a manner determined appropriate by the

11 Secretary and shall include the designation of a State

12 agency that will operate the health care cost containment

13 and quality information system for the State. The Sec14 retary shall approve or disapprove a State application

15 within 6 months after its submission.

16 (c) MINIMUM FEDERAL STANDARDS.—Not later than

17 6 months after the date of the enactment of this section,

18 the Secretary, after consultation with the Agency for

19 Health Care Policy and Research, other Federal agencies,

20 the Joint Commission on Accreditation of Hospitals,

21 States, health care providers, consumers, insurers, health

22 maintenance organizations, businesses, academic health

23 centers, and labor organizations that purchase health care,

24 shall establish Federal standards for the operation of
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1 health care cost containment and quality information sys2 tems by States receiving grants under this section.

3 (d) COLLECTION AND PUBLIC DISSEMINATION OF

4 INFORMATION BY STATES.—

5 (1) IN GENERAL.—A State receiving a grant

6 under this section shall require that a health care

7 cost containment and quality information system will

8 collect at least the information described in para9 graph (2) and publicly disseminate such information

10 in a useful format to appropriate persons such as

11 businesses, consumers of health care services, labor

12 organizations, health plans, hospitals, and other

13 States.

14 (2) INFORMATION DESCRIBED.—The informa15 tion described in this paragraph is the following:

16 (A) Information on hospital charges.

17 (B) Clinical data.

18 (C) Demographic data.

19 (D) Information regarding treatment of in20 dividuals by particular health care providers.

21 (3) ELECTRONIC TRANSMISSION OF INFORMA22 TION.—The State program under this section shall

23 provide that any information described in paragraph

24 (2) with respect to which the Secretary has estab25 lished standards for data elements and information
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1 transactions under section 503 shall be transmitted

2 to the State health care cost containment and qual3 ity information system in accordance with such

4 standards.

5 (4) PRIVACY AND CONFIDENTIALITY.—The

6 State cost containment and quality information sys7 tem shall ensure that patient privacy and confiden8 tiality is protected at all times.

9 (e) COMPLIANCE.—If the Secretary determines that

10 a State receiving grant funds under this section has failed

11 to operate a system in accordance with the terms of its

12 approved application, the Secretary may withhold payment

13 of such funds until the State remedies such noncompli14 ance.

15 (f) DEFINITIONS.—For purposes of this section—

16 (1) the term ‘‘health care cost containment and

17 quality information system’’ means a system which

18 is established or operated by a State in order to col19 lect and disseminate the information described in

20 subsection (d)(2) in accordance with subsection

21 (d)(1) for the purpose of providing information on

22 health care costs and outcomes in the State; and

23 (2) the term ‘‘State’’ means a State, the Dis24 trict of Columbia, the Commonwealth of Puerto

25 Rico, the Virgin Islands, Guam, American Samoa,
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1 and includes the Commonwealth of the Northern

2 Mariana Islands.

3 (g) AUTHORIZATION.—

4 (1) IN GENERAL.—There are authorized to be

5 appropriated for the purpose of carrying out this

6 section not more than $150,000,000 for fiscal years

7 1996 through 1998, and such sums as may be nec8 essary thereafter, to remain available until expended.

9 (2) ALLOCATION TO STATES.—The Secretary

10 shall allocate the amounts available for grants under

11 this section in any fiscal year in accordance with a

12 formula developed by the Secretary which takes into

13 account—

14 (A) the number of hospitals in a State rel15 ative to the total number of hospitals in all

16 States;

17 (B) the population of the State relative to

18 the total population of all States; and

19 (C) the type of system operated or in20 tended to be operated by the State, including

21 whether the State establishes an independent

22 State agency to operate the system.
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1 TITLE VI—LONG-TERM CARE

2 Subtitle A—Tax Treatment of

3 Qualified Long-Term Care In4 surance Policies and Services

5 SEC. 601. AMENDMENT OF 1986 CODE.

6 Except as otherwise expressly provided, whenever in

7 this title an amendment or repeal is expressed in terms

8 of an amendment to, or repeal of, a section or other provi9 sion, the reference shall be considered to be made to a

10 section or other provision of the Internal Revenue Code

11 of 1986.

12 SEC. 602. QUALIFIED LONG-TERM CARE SERVICES TREAT13 ED AS MEDICAL CARE.

14 (a) GENERAL RULE.—Paragraph (1) of section

15 213(d) (defining medical care) is amended by striking

16 ‘‘or’’ at the end of subparagraph (B), by redesignating

17 subparagraph (C) as subparagraph (D), and by inserting

18 after subparagraph (B) the following new subparagraph:

19 ‘‘(C) for qualified long-term care services

20 (as defined in subsection (g)), or’’.

21 (b) QUALIFIED LONG-TERM CARE SERVICES DE22 FINED.—Section 213 (relating to the deduction for medi23 cal, dental, etc., expenses) is amended by adding at the

24 end the following new subsections:
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1 ‘‘(g) QUALIFIED LONG-TERM CARE SERVICES.—For

2 purposes of this section—

3 ‘‘(1) IN GENERAL.—The term ‘qualified long4 term care services’ means necessary diagnostic, cur5 ing, mitigating, treating, preventive, therapeutic, and

6 rehabilitative services, and maintenance and per7 sonal care services (whether performed in a residen8 tial or nonresidential setting) which—

9 ‘‘(A) are required by an individual during

10 any period the individual is an incapacitated in11 dividual (as defined in paragraph (2)),

12 ‘‘(B) have as their primary purpose—

13 ‘‘(i) the provision of needed assistance

14 with 1 or more activities of daily living (as

15 defined in paragraph (3)), or

16 ‘‘(ii) protection from threats to health

17 and safety due to severe cognitive impair18 ment, and

19 ‘‘(C) are provided pursuant to a continuing

20 plan of care prescribed by a licensed profes21 sional (as defined in paragraph (4)).

22 ‘‘(2) INCAPACITATED INDIVIDUAL.—The term

23 ‘incapacitated individual’ means any individual

24 who—
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1 ‘‘(A) is unable to perform, without sub2 stantial assistance from another individual (in3 cluding assistance involving cueing or substan4 tial supervision), at least 2 activities of daily

5 living as defined in paragraph (3), or

6 ‘‘(B) has severe cognitive impairment as

7 defined by the Secretary in consultation with

8 the Secretary of Health and Human Services.

9 Such term shall not include any individual otherwise

10 meeting the requirements of the preceding sentence

11 unless a licensed professional within the preceding

12 12-month period has certified that such individual

13 meets such requirements.

14 ‘‘(3) ACTIVITIES OF DAILY LIVING.—Each of

15 the following is an activity of daily living:

16 ‘‘(A) Eating.

17 ‘‘(B) Toileting.

18 ‘‘(C) Transferring.

19 ‘‘(D) Bathing.

20 ‘‘(E) Dressing.

21 ‘‘(4) LICENSED PROFESSIONAL.—The term ‘li22 censed professional’ means—

23 ‘‘(A) a physician or registered professional

24 nurse, or
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1 ‘‘(B) any other individual who meets such

2 requirements as may be prescribed by the Sec3 retary after consultation with the Secretary of

4 Health and Human Services.

5 ‘‘(5) CERTAIN SERVICES NOT INCLUDED.—The

6 term ‘qualified long-term care services’ shall not in7 clude any services provided to an individual—

8 ‘‘(A) by a relative (directly or through a

9 partnership, corporation, or other entity) unless

10 the relative is a licensed professional with re11 spect to such services, or

12 ‘‘(B) by a corporation or partnership which

13 is related (within the meaning of section 267(b)

14 or 707(b)) to the individual.

15 For purposes of this paragraph, the term ‘relative’

16 means an individual bearing a relationship to the in17 dividual which is described in paragraphs (1)

18 through (8) of section 152(a).

19 ‘‘(h) SPECIAL RULE FOR CERTAIN LONG-TERM

20 CARE EXPENSES.—For purposes of subsection (a), the

21 term ‘dependent’ shall include any parent or grandparent

22 of the taxpayer for whom the taxpayer has expenses for

23 qualified long-term care services described in subsection

24 (g), but only to the extent of such expenses.’’.

25 (c) TECHNICAL AMENDMENTS.—
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1 (1) Subparagraph (D) of section 213(d)(1) (as

2 redesignated by subsection (a)) is amended to read

3 as follows:

4 ‘‘(D) for insurance (including amounts

5 paid as premiums under part B of title XVIII

6 of the Social Security Act, relating to supple7 mentary medical insurance for the aged) cover8 ing medical care referred to in—

9 ‘‘(i) subparagraphs (A) and (B), or

10 ‘‘(ii) subparagraph (C), but only if

11 such insurance is provided under a quali12 fied long-term care insurance policy (as de13 fined in section 7705(a)) and the amount

14 paid for such insurance is not disallowed

15 under section 7705(b).’’

16 (2) Paragraph (6) of section 213(d) is amend17 ed—

18 (A) by striking ‘‘subparagraphs (A) and

19 (B)’’ and inserting ‘‘subparagraph (A), (B),

20 and (C)’’, and

21 (B) by striking ‘‘paragraph (1)(C)’’ in sub22 paragraph (A) and inserting ‘‘paragraph

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

2 this section shall apply to taxable years beginning after

3 December 31, 1995.

4 SEC. 603. DEFINITION OF QUALIFIED LONG-TERM CARE IN5 SURANCE POLICY.

6 (a) IN GENERAL.—Chapter 79 (relating to defini7 tions) is amended by adding at the end the following new

8 section:

9 ‘‘SEC. 7705. QUALIFIED LONG-TERM CARE INSURANCE POL10 ICY.

11 ‘‘(a) QUALIFIED LONG-TERM CARE INSURANCE POL12 ICY.—For purposes of this title—

13 ‘‘(1) IN GENERAL.—The term ‘qualified long14 term care insurance policy’ means any long-term

15 care policy that—

16 ‘‘(A) limits benefits under such policy to

17 individuals who are certified by a licensed pro18 fessional (as defined in section 213(g)(4)) with19 in the preceding 12-month period—

20 ‘‘(i) as being unable to perform, with21 out substantial assistance from another in22 dividual (including assistance involving

23 cueing or substantial supervision), 2 or

24 more activities of daily living (as defined in

25 section 213(g)(3)), or
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1 ‘‘(ii) having a severe cognitive impair2 ment (as defined in section 213(g)(2)(B)),

3 and

4 ‘‘(B) satisfies the requirements of para5 graphs (2), (3), (4), (5), and (6).

6 ‘‘(2) PREMIUM REQUIREMENTS.—The require7 ments of this paragraph are met with respect to a

8 policy if such policy provides that premium pay9 ments may not be made earlier than the date such

10 payments would have been made if the contract pro11 vided for level annual payments over the life expect12 ancy of the insured or 20 years, whichever is short13 er. A policy shall not be treated as failing to meet

14 the requirements of the preceding sentence solely by

15 reason of a provision in the policy providing for a

16 waiver of premiums if the insured becomes an indi17 vidual certified in accordance with paragraph (1)(A).

18 ‘‘(3) PROHIBITION OF CASH VALUE.—The re19 quirements of this paragraph are met if the policy

20 does not provide for a cash value or other money

21 that can be paid, assigned, pledged as collateral for

22 a loan, or borrowed, other than as provided in para23 graph (4).

24 ‘‘(4) REFUNDS OF PREMIUMS AND DIVI25 DENDS.—The requirements of this paragraph are
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1 met with respect to a policy if such policy provides

2 that—

3 ‘‘(A) policyholder dividends are required to

4 be applied as a reduction in future premiums

5 or, to the extent permitted under paragraph

6 (6), to increase benefits described in subsection

7 (a)(2),

8 ‘‘(B) refunds of premiums upon a partial

9 surrender or a partial cancellation are required

10 to be applied as a reduction in future pre11 miums, and

12 ‘‘(C) any refund on the death of the in13 sured, or on a complete surrender or cancella14 tion of the policy, cannot exceed the aggregate

15 premiums paid under the contract.

16 Any refund on a complete surrender or cancellation

17 of the policy shall be includible in gross income to

18 the extent that any deduction or exclusion was allow19 able with respect to the premiums.

20 ‘‘(5) COORDINATION WITH OTHER ENTITLE21 MENTS.—The requirements of this paragraph are

22 met with respect to a policy if such policy does not

23 pay, or provide reimbursement for, expenses in24 curred to the extent that such expenses are also paid

25 or reimbursed under title XVIII of the Social Secu-
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1 rity Act or are paid or reimbursed under a qualified

2 health insurance plan (as defined in section 100(10)

3 of the Health Care Assurance Act of 1995).

4 ‘‘(6) MAXIMUM BENEFIT.—

5 ‘‘(A) IN GENERAL.—The requirements of

6 this paragraph are met if the benefits payable

7 under the policy for any period (whether on a

8 periodic basis or otherwise) may not exceed the

9 dollar amount in effect for such period.

10 ‘‘(B) NONREIMBURSEMENT PAYMENTS

11 PERMITTED.—Benefits shall include all pay12 ments described in subsection (a)(2) to or on

13 behalf of an insured individual without regard

14 to the expenses incurred during the period to

15 which the payments relate. For purposes of sec16 tion 213(a), such payments shall be treated as

17 compensation for expenses paid for medical

18 care.

19 ‘‘(C) DOLLAR AMOUNT.—The dollar

20 amount in effect under this paragraph shall be

21 $150 per day (or the equivalent amount within

22 the calendar year in the case of payments on

23 other than a per diem basis).

24 ‘‘(D) ADJUSTMENTS FOR INCREASED

25 COSTS.—
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1 ‘‘(i) IN GENERAL.—In the case of any

2 calendar year after 1996, the dollar

3 amount in effect under subparagraph (C)

4 for any period or portion thereof occurring

5 during such calendar year shall be equal to

6 the sum of—

7 ‘‘(I) the amount in effect under

8 subparagraph (C) for the preceding

9 calendar year (after application of this

10 subparagraph), plus

11 ‘‘(II) the product of the amount

12 referred to in subclause (I) multiplied

13 by the cost-of-living adjustment for

14 the calendar year.

15 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

16 For purposes of clause (i), the cost-of-liv17 ing adjustment for any calendar year is the

18 percentage (if any) by which the cost index

19 under clause (iii) for the preceding cal20 endar year exceeds such index for the sec21 ond preceding calendar year.

22 ‘‘(iii) COST INDEX.—The Secretary, in

23 consultation with the Secretary of Health

24 and Human Services, shall before January

25 1, 1997, establish a cost index to measure
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1 increases in costs of nursing home and

2 similar facilities. The Secretary may from

3 time to time revise such index to the extent

4 necessary to accurately measure increases

5 or decreases in such costs.

6 ‘‘(iv) SPECIAL RULE FOR CALENDAR

7 YEAR 1997.—Notwithstanding clause (ii),

8 for purposes of clause (i), the cost-of-living

9 adjustment for calendar year 1997 is the

10 sum of 1.5 percent plus the percentage by

11 which the CPI for calendar year 1996 (as

12 defined in section 1(f)(4)) exceeds the CPI

13 for calendar year 1995 (as so defined).

14 ‘‘(E) PERIOD.—For purposes of this para15 graph, a period begins on the date that an indi16 vidual has a condition which would qualify for

17 certification under subsection (b)(1)(A) and

18 ends on the earlier of the date upon which—

19 ‘‘(i) such individual has not been so

20 certified within the preceding 12-months,

21 or

22 ‘‘(ii) the individual’s condition ceases

23 to be such as to qualify for certification

24 under subsection (b)(1)(A).
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1 ‘‘(F) AGGREGATION RULE.—For purposes

2 of this paragraph, all policies issued with re3 spect to the same insured shall be treated as

4 one policy.

5 ‘‘(b) TREATMENT OF COVERAGE PROVIDED AS PART

6 OF A LIFE INSURANCE CONTRACT.—No deduction shall

7 be allowed under section 213(a) for charges against a life

8 insurance contract’s cash surrender value (within the

9 meaning of section 7702(f)(2)(A)), unless such charges

10 are includible in income as a result of the application of

11 section 72(e)(10) and the coverage provided by the rider

12 is a qualified long-term care insurance policy under sub13 section (a).’’.

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

15 for chapter 79 is amended by inserting after the item re16 lating to section 7704 the following new item:

‘‘Sec. 7705. Qualified long-term care insurance.’’.

17 SEC. 604. TREATMENT OF QUALIFIED LONG-TERM CARE IN18 SURANCE AS ACCIDENT AND HEALTH INSUR19 ANCE FOR PURPOSES OF TAXATION OF IN20 SURANCE COMPANIES.

21 (a) IN GENERAL.—Section 818 (relating to other

22 definitions and special rules) is amended by adding at the

23 end the following new subsection:

24 ‘‘(g) QUALIFIED LONG-TERM CARE INSURANCE

25 TREATED AS ACCIDENT OR HEALTH INSURANCE.—For
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1 purposes of this subchapter, any reference to

2 noncancellable accident or health insurance contracts shall

3 be treated as including a reference to qualified long-term

4 care insurance.’’.

5 (b) EFFECTIVE DATE.—The amendment made by

6 this section shall apply to taxable years beginning after

7 December 31, 1995.

8 SEC. 605. TREATMENT OF ACCELERATED DEATH BENEFITS

9 UNDER LIFE INSURANCE CONTRACTS.

10 (a) EXCLUSION OF AMOUNTS RECEIVED.—Section

11 101 (relating to certain death benefits) is amended by

12 adding at the end the following new subsection:

13 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

14 DEATH BENEFITS.—

15 ‘‘(1) IN GENERAL.—For purposes of this sec16 tion, any amount paid to an individual under a life

17 insurance contract on the life of an insured who is

18 a terminally ill individual, who has a dread disease,

19 or who has been permanently confined to a nursing

20 home shall be treated as an amount paid by reason

21 of the death of such insured.

22 ‘‘(2) TERMINALLY ILL INDIVIDUAL.—For pur23 poses of this subsection, the term ‘terminally ill indi24 vidual’ means an individual who has been certified

25 by a physician, licensed under State law, as having
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1 an illness or physical condition which can reasonably

2 be expected to result in death in 12 months or less.

3 ‘‘(3) DREAD DISEASE.—For purposes of this

4 subsection, the term ‘dread disease’ means a medical

5 condition which has been certified by a physician as

6 having required or requiring extraordinary medical

7 intervention without which the insured would die, or

8 a medical condition which would, in the absence of

9 extensive or extraordinary medical treatment, result

10 in a drastically limited life span.

11 ‘‘(4) PERMANENTLY CONFINED TO A NURSING

12 HOME.—For purposes of this subsection, an individ13 ual has been permanently confined to a nursing

14 home if the individual is presently confined to a

15 nursing home and has been certified by a physician,

16 licensed under State law, as having an illness or cog17 nitive impairment or loss of functional capacity

18 which can reasonably be expected to result in the in19 dividual remaining in a nursing home for the rest of

20 the individual’s life.’’.

21 (b) TREATMENT OF QUALIFIED ACCELERATED

22 DEATH BENEFIT RIDERS AS LIFE INSURANCE.—

23 (1) IN GENERAL.—Section 818 (relating to

24 other definitions and special rules), as amended by
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1 section 603, is amended by adding at the end the

2 following new subsection:

3 ‘‘(h) QUALIFIED ACCELERATED DEATH BENEFIT

4 RIDERS TREATED AS LIFE INSURANCE.—For purposes of

5 this part—

6 ‘‘(1) IN GENERAL.—Any reference to a life in7 surance contract shall be treated as including a ref8 erence to a qualified accelerated death benefit rider

9 on such contract.

10 ‘‘(2) QUALIFIED ACCELERATED DEATH BENE11 FIT RIDER.—For purposes of this subsection, the

12 term ‘qualified accelerated death benefit rider’

13 means any rider or addendum on, or other provision

14 of, a life insurance contract which provides for pay15 ments to an individual on the life of an insured upon

16 such insured becoming a terminally ill individual (as

17 defined in section 101(g)(2)), incurring a dread dis18 ease (as defined in section 101(g)(3)), or being per19 manently confined to a nursing home (as defined in

20 section 101(g)(4)).’’.

21 (2) DEFINITIONS OF LIFE INSURANCE AND

22 MODIFIED ENDOWMENT CONTRACTS.—

23 (A) RIDER TREATED AS QUALIFIED ADDI24 TIONAL BENEFIT.—Subparagraph (A) of sec25 tion 7702(f)(5) (relating to definition of life in-
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1 surance contract) is amended by striking ‘‘or’’

2 at the end of clause (iv), by redesignating

3 clause (v) as clause (vi), and by inserting after

4 clause (iv) the following new clause:

5 ‘‘(v) any qualified accelerated death

6 benefit rider (as defined in section

7 818(h)(2)), or any qualified long-term care

8 insurance which reduces the death benefit,

9 or’’.

10 (B) TRANSITIONAL RULE.—For purposes

11 of applying section 7702 or 7702A of the Inter12 nal Revenue Code of 1986 to any contract (or

13 determining whether either such section applies

14 to such contract), the issuance of a rider or ad15 dendum on, or other provision of, a life insur16 ance contract permitting the acceleration of

17 death benefits (as described in section 101(g))

18 or for qualified long-term care insurance shall

19 not be treated as a modification or material

20 change of such contract.

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

22 this section shall apply to taxable years beginning after

23 December 31, 1995.
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1 Subtitle B—Tax Incentives for Pur2 chase of Qualified Long-Term

3 Care Insurance

4 SEC. 611. CREDIT FOR QUALIFIED LONG-TERM CARE

5 PREMIUMS.

6 (a) GENERAL RULE.—Subpart C of part IV of sub7 chapter A of chapter 1 (relating to refundable credits) is

8 amended by redesignating section 35 as section 36 and

9 by inserting after section 34 the following new section:

10 ‘‘SEC. 35. LONG-TERM CARE INSURANCE CREDIT.

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

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

13 by this subtitle for the taxable year an amount equal to

14 the applicable percentage of the premiums for a qualified

15 long-term care insurance policy (as defined in section

16 7705(a)) paid during such taxable year for such individual

17 or the spouse of such individual.

18 ‘‘(b) APPLICABLE PERCENTAGE.—

19 ‘‘(1) IN GENERAL.—For purposes of this sec20 tion, the term ‘applicable percentage’ means 28 per21 cent reduced (but not below zero) by 1 percentage

22 point for each $1,000 (or fraction thereof) by which

23 the taxpayer’s adjusted gross income for the taxable

24 year exceeds the base amount.
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1 ‘‘(2) BASE AMOUNT.—For purposes of para2 graph (1) the term ‘base amount’ means—

3 ‘‘(A) except as otherwise provided in this

4 paragraph, $25,000,

5 ‘‘(B) $40,000 in the case of a joint return,

6 and

7 ‘‘(C) zero in the case of a taxpayer who—

8 ‘‘(i) is married at the close of the tax9 able year (within the meaning of section

10 7703) but does not file a joint return for

11 such taxable year, and

12 ‘‘(ii) does not live apart from his or

13 her spouse at all times during the taxable

14 year.

15 ‘‘(c) COORDINATION WITH MEDICAL EXPENSE DE16 DUCTION.—Any amount allowed as a credit under this

17 section shall not be taken into account under section

18 213.’’.

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

20 for subpart C of part IV of subchapter A of chapter 1

21 is amended by striking the item relating to section 35 and

22 inserting the following:

‘‘Sec. 35. Long-term care insurance credit.

‘‘Sec. 36. Overpayments of tax.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1995.

4 SEC. 612. EXCLUSION FROM GROSS INCOME OF BENEFITS

5 RECEIVED UNDER QUALIFIED LONG-TERM

6 CARE INSURANCE POLICIES.

7 (a) IN GENERAL.—Section 105 (relating to amounts

8 received under accident and health plans) is amended by

9 adding at the end the following new subsection:

10 ‘‘(j) SPECIAL RULES RELATING TO QUALIFIED

11 LONG-TERM CARE INSURANCE POLICY.—For purposes of

12 section 104, this section, and section 106—

13 ‘‘(1) BENEFITS TREATED AS PAYABLE FOR

14 SICKNESS, ETC.—Any benefit received through a

15 qualified long-term care insurance policy shall be

16 treated as amounts received through accident or

17 health insurance for personal injuries or sickness.

18 ‘‘(2) EXPENSES FOR WHICH REIMBURSEMENT

19 PROVIDED UNDER QUALIFIED LONG-TERM CARE IN20 SURANCE POLICY TREATED AS INCURRED FOR MEDI21 CAL CARE OR FUNCTIONAL LOSS.—

22 ‘‘(A) EXPENSES.—Expenses incurred by

23 the taxpayer or spouse, or by the dependent,

24 parent, or grandparent of either, to the extent

25 of benefits paid under a qualified long-term
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1 care insurance policy shall be treated for pur2 poses of subsection (b) as incurred for medical

3 care (as defined in section 213(d)).

4 ‘‘(B) BENEFITS.—Benefits received under

5 a qualified long-term care insurance policy shall

6 be treated for purposes of subsection (c) as pay7 ment for the permanent loss or loss of use of

8 a member or function of the body or the perma9 nent disfigurement of the taxpayer or spouse,

10 or the dependent, parent, or grandparent of

11 either.

12 ‘‘(3) REFERENCES TO ACCIDENT AND HEALTH

13 PLANS.—Any reference to an accident or health plan

14 shall be treated as including a reference to a plan

15 providing qualified long-term care services (as de16 fined in section 213(a)).’’.

17 (b) EFFECTIVE DATE.—The amendment made by

18 this section shall apply to taxable years beginning after

19 December 31, 1995.

20 SEC. 613. EMPLOYER DEDUCTION FOR CONTRIBUTIONS

21 MADE FOR LONG-TERM CARE INSURANCE.

22 (a) IN GENERAL.—Subparagraph (B) of section

23 404(b)(2) (relating to plans providing certain deferred

24 benefits) is amended to read as follows:
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1 ‘‘(B) EXCEPTIONS.—Subparagraph (A)

2 shall not apply to—

3 ‘‘(i) any benefit provided through a

4 welfare benefit fund (as defined in section

5 419(e)), or

6 ‘‘(ii) any benefit provided under a

7 qualified long-term care insurance policy

8 through the payment (in whole or in part)

9 of premiums for such policy by an em10 ployer pursuant to a plan for its active or

11 retired employees, but only if any refund

12 or premium is applied to reduce the future

13 costs of the plan or increase benefits under

14 the plan.’’.

15 (b) EFFECTIVE DATE.—The amendment made by

16 this section shall apply to taxable years beginning after

17 December 31, 1995.

18 SEC. 614. INCLUSION OF QUALIFIED LONG-TERM CARE IN19 SURANCE IN CAFETERIA PLANS.

20 (a) IN GENERAL.—Paragraph (2) of section 125(d)

21 (relating to the exclusion of deferred compensation) is

22 amended by adding at the end the following new

23 subparagraph:

24 ‘‘(D) EXCEPTION FOR QUALIFIED LONG25 TERM CARE INSURANCE POLICIES.—For pur-
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1 poses of subparagraph (A), amounts paid or in2 curred for any qualified long-term care insur3 ance policy shall not be treated as deferred

4 compensation to the extent section 404(b)(2)(A)

5 does not apply to such amounts by reason of

6 section 404(b)(2)(B)(ii).’’.

7 (b) CONFORMING AMENDMENT.—Subsection (f) of

8 section 125 (relating to qualified benefits) is amended by

9 striking ‘‘and such term includes’’ and inserting the fol10 lowing: ‘‘, qualified long-term care insurance policies,

11 and’’.

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

13 this section shall apply to taxable years beginning after

14 December 31, 1995.

15 SEC. 615. EXCLUSION FROM GROSS INCOME FOR AMOUNTS

16 RECEIVED ON CANCELLATION OF LIFE IN17 SURANCE POLICIES AND USED FOR QUALI18 FIED LONG-TERM CARE INSURANCE POLI19 CIES.

20 (a) IN GENERAL.—

21 (1) EXCLUSION FROM GROSS INCOME.—

22 (A) IN GENERAL.—Part III of subchapter

23 B of chapter 1 (relating to items specifically ex24 cluded from gross income) is amended by redes25 ignating section 136 as section 137 and by in-
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1 serting after section 135 the following new sec2 tion:

3 ‘‘SEC. 136. AMOUNTS RECEIVED ON CANCELLATION, ETC.

4 OF LIFE INSURANCE CONTRACTS AND USED

5 TO PAY PREMIUMS FOR QUALIFIED LONG6 TERM CARE INSURANCE.

7 ‘‘No amount (which but for this section would be in8 cludible in the gross income of an individual) shall be in9 cluded in gross income on the whole or partial surrender,

10 cancellation, or exchange of any life insurance contract

11 during the taxable year if—

‘‘(1) such individual has attained age 591 12 ⁄2 on

13 or before the date of the transaction, and

14 ‘‘(2) the amount otherwise includible in gross

15 income is used during such year to pay for any

16 qualified long-term care insurance policy which—

17 ‘‘(A) is for the benefit of such individual or

18 the spouse of such individual if such spouse has

attained age 591 19 ⁄2 on or before the date of the

20 transaction, and

21 ‘‘(B) may not be surrendered for cash.’’.

22 (B) CLERICAL AMENDMENT.—The table of

23 sections for such part III is amended by strik24 ing the last item and inserting the following

25 new items:
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‘‘Sec. 136. Amounts received on cancellation, etc. of life insurance

contracts and used to pay premiums for qualified

long-term care insurance.

‘‘Sec. 137. Cross references to other Acts.’’.

1 (2) CERTAIN EXCHANGES NOT TAXABLE.—Sub2 section (a) of section 1035 (relating to certain ex3 changes of insurance contracts) is amended by strik4 ing the period at the end of paragraph (3) and in5 serting ‘‘; or’’, and by adding at the end the follow6 ing new paragraph:

7 ‘‘(4) in the case of an individual who has attained age 591 8 ⁄2, a contract of life insurance or an

9 endowment or annuity contract for a qualified long10 term care insurance policy, if such policy may not be

11 surrendered for cash.’’.

12 (b) EFFECTIVE DATE.—The amendments made by

13 this section shall apply to taxable years beginning after

14 December 31, 1995.

15 SEC. 616. USE OF GAIN FROM SALE OF PRINCIPAL RESI16 DENCE FOR PURCHASE OF QUALIFIED LONG17 TERM HEALTH CARE INSURANCE.

18 (a) IN GENERAL.—Subsection (d) of section 121 (re19 lating to 1-time exclusion of gain from sale of principal

20 residence by individual who has attained age 55) is

21 amended by adding at the end the following new

22 paragraph:
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1 ‘‘(10) ELIGIBILITY OF HOME EQUITY CONVER2 SION SALE-LEASEBACK TRANSACTION FOR

3 EXCLUSION.—

4 ‘‘(A) IN GENERAL.—For purposes of this

5 section, the term ‘sale or exchange’ includes a

6 home equity conversion sale-leaseback

7 transaction.

8 ‘‘(B) HOME EQUITY CONVERSION SALE9 LEASEBACK TRANSACTION.—For purposes of

10 subparagraph (A), the term ‘home equity con11 version sale-leaseback’ means a transaction in

12 which—

13 ‘‘(i) the seller-lessee—

14 ‘‘(I) has attained the age of 55

15 before the date of the transaction,

16 ‘‘(II) sells property which during

17 the 5-year period ending on the date

18 of the transaction has been owned and

19 used as a principal residence by such

20 seller-lessee for periods aggregating 3

21 years or more,

22 ‘‘(III) uses a portion of the pro23 ceeds from such sale to purchase a

24 qualified long-term care insurance pol-
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1 icy, which policy may not be surren2 dered for cash,

3 ‘‘(IV) obtains occupancy rights in

4 such property pursuant to a written

5 lease requiring a fair rental, and

6 ‘‘(V) receives no option to repur7 chase the property at a price less than

8 the fair market price of the property

9 unencumbered by any leaseback at the

10 time such option is exercised, and

11 ‘‘(ii) the purchaser-lessor—

12 ‘‘(I) is a person,

13 ‘‘(II) is contractually responsible

14 for the risks and burdens of owner15 ship and receives the benefits of own16 ership (other than the seller-lessee’s

17 occupancy rights) after the date of

18 such transaction, and

19 ‘‘(III) pays a purchase price for

20 the property that is not less than the

21 fair market price of such property en22 cumbered by a leaseback, and taking

23 into account the terms of the lease.

24 ‘‘(C) ADDITIONAL DEFINITIONS.—For pur25 poses of subparagraph (B)—
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1 ‘‘(i) OCCUPANCY RIGHTS.—The term

2 ‘occupancy rights’ means the right to oc3 cupy the property for any period of time,

4 including a period of time measured by the

5 life of the seller-lessee on the date of the

6 sale-leaseback transaction (or the life of

7 the surviving seller-lessee, in the case of

8 jointly held occupancy rights), or a periodic

9 term subject to a continuing right of re10 newal by the seller-lessee (or by the surviv11 ing seller-lessee, in the case of jointly held

12 occupancy rights).

13 ‘‘(ii) FAIR RENTAL.—The term ‘fair

14 rental’ means a rental for any subsequent

15 year which equals or exceeds the rental for

16 the first year of a sale-leaseback

17 transaction.’’.

18 (b) EFFECTIVE DATE.—The amendment made by

19 this section shall apply to sales after December 31, 1995,

20 in taxable years beginning after such date.

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