II

106TH CONGRESS

2D SESSION S. 2994

To amend the Internal Revenue Code of 1986 to provide tax incentives

to encourage small business health plans, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JULY 27, 2000

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

the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide

tax incentives to encourage small business health plans,

and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Health Insurance Eq5 uity Act of 2000’’.

6 SEC. 2. CERTAIN GRANTS BY PRIVATE FOUNDATIONS TO

7 QUALIFIED HEALTH BENEFIT PURCHASING

8 COALITIONS.

9 (a) IN GENERAL.—Section 4942 of the Internal Rev10 enue Code of 1986 (relating to taxes on failure to dis-
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1 tribute income) is amended by adding at the end the fol2 lowing:

3 ‘‘(k) CERTAIN QUALIFIED HEALTH BENEFIT PUR4 CHASING COALITION DISTRIBUTIONS.—

5 ‘‘(1) IN GENERAL.—For purposes of subsection

6 (g) and section 4945(d)(5), a qualified health benefit

7 purchasing coalition distribution by a private foun8 dation shall be considered to be a distribution for a

9 charitable purpose.

10 ‘‘(2) QUALIFIED HEALTH BENEFIT PUR11 CHASING COALITION DISTRIBUTION.—For purposes

12 of paragraph (1)—

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

14 health benefit purchasing coalition distribution’

15 means any amount paid by a private foundation

16 to or on behalf of a qualified health benefit pur17 chasing coalition (as defined in section 9841)

18 for purposes of payment or reimbursement of

19 start-up costs paid or incurred in connection

20 with the establishment and maintenance of such

21 coalition.

22 ‘‘(B) EXCLUSIONS.—Such term shall not

23 include any amount used by a qualified health

24 benefit purchasing coalition (as so defined)—

25 ‘‘(i) for the purchase of real property,
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1 ‘‘(ii) as payment to, or for the benefit

2 of, members (or employees or affiliates of

3 such members) of such coalition, or

4 ‘‘(iii) for start-up costs paid or in5 curred more than 24 months after the date

6 of establishment of such coalition.

7 ‘‘(3) TERMINATION.—This subsection shall not

8 apply—

9 ‘‘(A) to qualified health benefit purchasing

10 coalition distributions paid or incurred after

11 December 31, 2008, and

12 ‘‘(B) with respect to start-up costs of a co13 alition which are paid or incurred after Decem14 ber 31, 2010.’’.

15 (b) EFFECTIVE DATE.—The amendment made by

16 this subsection shall apply to qualified health benefit pur17 chasing coalition distributions, as defined in section

18 4942(k)(2) of the Internal Revenue Code of 1986, as

19 added by subsection (a), paid in taxable years beginning

20 after December 31, 2000.

21 SEC. 3. SMALL BUSINESS HEALTH PLAN TAX CREDIT.

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

24 1986 (relating to business-related credits) is amended by

25 adding at the end the following:
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1 ‘‘SEC. 45D. EMPLOYEE HEALTH INSURANCE EXPENSES.

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

3 in the case of a small employer (as defined in section

4 4980D(d)(2)), the employee health insurance expenses

5 credit determined under this section for the taxable year

6 is an amount equal to the applicable percentage of the

7 amount paid by the taxpayer during the taxable year for

8 qualified employee health insurance expenses.

9 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of

10 subsection (a), the applicable percentage is—

11 ‘‘(1) in the case of insurance purchased as a

12 member of a qualified health benefit purchasing coa13 lition (as defined in section 9841), 25 percent, and

14 ‘‘(2) in the case of insurance not described in

15 paragraph (1), 20 percent.

16 ‘‘(c) PER EMPLOYEE DOLLAR LIMITATION.—

17 ‘‘(1) IN GENERAL.—The amount of qualified

18 employee health insurance expenses taken into ac19 count under subsection (a) with respect to any quali20 fied employee for any taxable year shall not exceed

21 the sum of the monthly limitations for coverage

22 months of such employee during such taxable year.

23 ‘‘(2) MONTHLY LIMITATION.—The monthly lim24 itation for each coverage month during the taxable

year is equal to 1 25 ⁄12 of—
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1 ‘‘(A) $2,000 in the case of self-only cov2 erage, and

3 ‘‘(B) $5,000 in the case of family coverage.

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

5 subsection, the term ‘coverage month’ means, with

6 respect to an individual, any month if—

7 ‘‘(A) as of the first day of such month

8 such individual is covered by the taxpayer’s new

9 health plan, and

10 ‘‘(B) the premium for coverage under such

11 plan for such month is paid by the taxpayer.

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

13 ‘‘(1) QUALIFIED EMPLOYEE.—

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

15 employee’ means, with respect to any period, an

16 employee of an employer if—

17 ‘‘(i) the total amount of wages paid or

18 incurred by such employer with respect to

19 such employee for the taxable year exceeds

20 $10,000, and

21 ‘‘(ii) the employee is not a highly com22 pensated employee.

23 ‘‘(B) TREATMENT OF CERTAIN EMPLOY24 EES.—For purposes of subparagraph (A), the

25 term ‘employee’ shall include—
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1 ‘‘(i) an employee within the meaning

2 of section 401(c)(1), and

3 ‘‘(ii) a leased employee within the

4 meaning of section 414(n).

5 ‘‘(C) EXCLUSION OF CERTAIN EMPLOY6 EES.—

7 ‘‘(i) IN GENERAL.—If a plan—

8 ‘‘(I) prescribes minimum age and

9 service requirements as a condition of

10 coverage, and

11 ‘‘(II) excludes all employees not

12 meeting such requirements from cov13 erage,

14 then such employees shall be excluded from

15 consideration for purposes of this para16 graph.

17 ‘‘(ii) COLLECTIVE BARGAINING

18 AGREEMENT.—For purposes of this para19 graph, there shall be excluded from consid20 eration employees who are included in a

21 unit of employees covered by an agreement

22 between employee representatives and one

23 or more employers, if there is evidence that

24 health insurance benefits were the subject
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1 of good faith bargaining between such em2 ployee representatives and such employer.

3 ‘‘(iii) LIMITS ON MINIMUM REQUIRE4 MENTS.—Rules similar to the rules of sec5 tion 410(a) shall apply with respect to

6 minimum age and service requirements

7 under clause (i).

8 ‘‘(D) WAGES.—The term ‘wages’—

9 ‘‘(i) has the meaning given such term

10 by section 3121(a) (determined without re11 gard to any dollar limitation contained in

12 such section), and

13 ‘‘(ii) in the case of an employee de14 scribed in subparagraph (B)(i), includes

15 the net earnings from self-employment (as

16 defined in section 1402(a) and as so deter17 mined).

18 ‘‘(2) QUALIFIED EMPLOYEE HEALTH INSUR19 ANCE EXPENSES.—

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

21 employee health insurance expenses’ means any

22 amount paid or incurred by an employer during

23 the applicable period for health insurance cov24 erage provided under a new health plan to the

25 extent such amount is attributable to coverage
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1 provided to any employee who is not a highly

2 compensated employee.

3 ‘‘(B) EXCEPTION FOR AMOUNTS PAID

4 UNDER SALARY REDUCTION ARRANGEMENTS.—

5 No amount paid or incurred for health insur6 ance coverage pursuant to a salary reduction

7 arrangement shall be taken into account under

8 subparagraph (A).

9 ‘‘(C) HEALTH INSURANCE COVERAGE.—

10 The term ‘health insurance coverage’ has the

11 meaning given such term by section 9832(b)(1).

12 ‘‘(D) NEW HEALTH PLAN.—For purposes

13 of this paragraph, the term ‘new health plan’

14 means any arrangement of the employer which

15 provides health insurance coverage to employees

16 if—

17 ‘‘(i) such employer (or predecessor

18 employer) did not establish or maintain

19 such arrangement (or any similar arrange20 ment) at any time during the 2 taxable

21 years ending prior to the taxable year in

22 which the credit under this section is first

23 allowed, and

24 ‘‘(ii) such arrangement covers at least

25 70 percent of the qualified employees of
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1 such employer who are not otherwise cov2 ered by health insurance.

3 ‘‘(E) APPLICABLE PERIOD.—For purposes

4 of subparagraph (A), the applicable period with

5 respect to an employer shall be the 4-year pe6 riod beginning on the date such employer estab7 lishes a new health plan.

8 ‘‘(3) HIGHLY COMPENSATED EMPLOYEE.—The

9 term ‘highly compensated employee’ means an em10 ployee who for the preceding year had compensation

11 from the employer in excess of $75,000.

12 ‘‘(e) CERTAIN RULES MADE APPLICABLE.—For pur13 poses of this section, rules similar to the rules of section

14 52 shall apply.

15 ‘‘(f) DISALLOWANCE OF DEDUCTION.—No deduction

16 shall be allowed for that portion of the qualified employee

17 health insurance expenses for the taxable year which is

18 equal to the amount of the credit determined under sub19 section (a).

20 ‘‘(g) TERMINATION.—This section shall not apply to

21 expenses paid or incurred by an employer with respect to

22 any arrangement established on or after January 1,

23 2009.’’.

24 (b) CREDIT TO BE PART OF GENERAL BUSINESS

25 CREDIT.—Section 38(b) of the Internal Revenue Code of
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1 1986 (relating to current year business credit) is amended

2 by striking ‘‘plus’’ at the end of paragraph (11), by strik3 ing the period at the end of paragraph (12) and inserting

4 ‘‘, plus’’, and by adding at the end the following:

5 ‘‘(13) the employee health insurance expenses

6 credit determined under section 45D.’’

7 (c) NO CARRYBACKS.—Subsection (d) of section 39

8 of the Internal Revenue Code of 1986 (relating to

9 carryback and carryforward of unused credits) is amended

10 by adding at the end the following:

11 ‘‘(9) NO CARRYBACK OF SECTION 45D CREDIT

12 BEFORE EFFECTIVE DATE.—No portion of the un13 used business credit for any taxable year which is

14 attributable to the employee health insurance ex15 penses credit determined under section 45D may be

16 carried back to a taxable year ending before the date

17 of the enactment of section 45D.’’

18 (d) CLERICAL AMENDMENT.—The table of sections

19 for subpart D of part IV of subchapter A of chapter 1

20 of the Internal Revenue Code of 1986 is amended by add21 ing at the end the following:

‘‘Sec. 45D. Employee health insurance expenses.’’

22 (e) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to amounts paid or incurred in tax24 able years beginning after December 31, 2000, for ar-
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1 rangements established after the date of the enactment

2 of this Act.

3 SEC. 4. QUALIFIED HEALTH BENEFIT PURCHASING COALI4 TION.

5 (a) IN GENERAL.—Chapter 100 of the Internal Rev6 enue Code of 1986 (relating to group health plan require7 ments) is amended by adding at the end the following new

8 subchapter:

9 ‘‘Subchapter D—Qualified Health Benefit

10 Purchasing Coalition

‘‘Sec. 9841. Qualified health benefit purchasing coalition.

11 ‘‘SEC. 9841. QUALIFIED HEALTH BENEFIT PURCHASING CO12 ALITION.

13 ‘‘(a) IN GENERAL.—A qualified health benefit pur14 chasing coalition is a private not-for-profit corporation

15 which—

16 ‘‘(1) is licensed to provide health insurance in

17 the State in which the employers to which such coa18 lition is providing insurance is located, and

19 ‘‘(2) establishes to the Secretary, under State

20 certification procedures or other procedures as the

21 Secretary may provide by regulation, that such coali22 tion meets the requirements of this section.

23 ‘‘(b) BOARD OF DIRECTORS.—
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1 ‘‘(1) IN GENERAL.—Each purchasing coalition

2 under this section shall be governed by a Board of

3 Directors.

4 ‘‘(2) ELECTION.—The Secretary shall establish

5 procedures governing election of such Board.

6 ‘‘(3) MEMBERSHIP.—The Board of Directors

7 shall—

8 ‘‘(A) be composed of small employers and

9 employee representatives of such employers, but

10 ‘‘(B) not include other interested parties,

11 such as service providers, health insurers, or in12 surance agents or brokers which may have a

13 conflict of interest with the purposes of the coa14 lition.

15 ‘‘(c) MEMBERSHIP OF COALITION.—

16 ‘‘(1) IN GENERAL.—A purchasing coalition—

17 ‘‘(A) shall accept all small employers resid18 ing within the area served by the coalition as

19 members if such employers request such mem20 bership, and

21 ‘‘(B) may accept any other employers re22 siding with such area.

23 ‘‘(2) VOTING.—Members of a purchasing coali24 tion shall have voting rights consistent with the rules

25 established by the State.
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1 ‘‘(d) DUTIES OF PURCHASING COALITIONS.—Each

2 purchasing coalition shall—

3 ‘‘(1) enter into agreements with employers to

4 provide health insurance benefits to employees of

5 such employers,

6 ‘‘(2) enter into agreements with 3 or more un7 affiliated, qualified licensed health plans, to offer

8 benefits to members,

9 ‘‘(3) offer to members at least 1 open enroll10 ment period per calendar year,

11 ‘‘(4) serve a significant geographical area, and

12 ‘‘(5) carry out other functions provided for

13 under this section.

14 ‘‘(e) LIMITATION ON ACTIVITIES.—A purchasing coa15 lition shall not—

16 ‘‘(1) perform any activity (including certifi17 cation or enforcement) relating to compliance or li18 censing of health plans,

19 ‘‘(2) assume insurance or financial risk in rela20 tion to any health plan, or

21 ‘‘(3) perform other activities identified by the

22 State as being inconsistent with the performance of

23 its duties under this section.

24 ‘‘(f) ADDITIONAL REQUIREMENTS FOR PURCHASING

25 COALITIONS.—As provided by the Secretary in regula-
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1 tions, a purchasing coalition shall be subject to require2 ments similar to the requirements of a group health plan

3 under this chapter.

4 ‘‘(g) DEFINITION OF SMALL EMPLOYER.—The term

5 ‘small employer’ has the meaning given such term by sec6 tion 4980D(d)(2).’’.

7 (b) CONFORMING AMENDMENT.—The table of sub8 chapters for chapter 100 of the Internal Revenue Code

9 of 1986 is amended by adding at the end the following

10 item:

‘‘Subchapter D. Qualified health benefit purchasing coalition.’’.

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