II 

110TH CONGRESS 

1ST SESSION S. 3554 

To provide employees of small employers with access to quality, affordable 

health insurance coverage. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 24 (legislative day, SEPTEMBER 17), 2008 

Mr. SMITH (for himself and Mr. LIEBERMAN) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To provide employees of small employers with access to 

quality, affordable health insurance coverage. 

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 ‘‘Affordable Coverage for Small Employers Act of 2008’’. 

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

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Findings. 

Sec. 3. Definitions. 

Sec. 4. National Health Coverage Policy Board. 

Sec. 5. Health Coverage Exchange Regions. 

Sec. 6. Regional Health Coverage Exchanges. 

Sec. 7. Health plan offered through an Exchange. 


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Sec. 8. Refundable credit for health insurance coverage. 

Sec. 9. Refundable credit for small employer health insurance expenses. 

Sec. 10. Reports and evaluations. 

Sec. 11. Reporting insurance status. 

1 SEC. 2. FINDINGS. 

2 Congress makes the following findings: 

3 (1) Forty-seven million Americans lack con4 sistent access to quality, affordable health coverage. 

5 The chronic problem of the uninsured ranks as one 

6 of the Nation’s most pressing health care challenges. 

7 (2) More than half of uninsured Americans are 

8 employed by small businesses, or firms with fewer 

9 than 100 employees. 

10 (3) Research shows that affordability is a key 

11 barrier to small businesses purchasing coverage in 

12 the private market. Sixty-three percent of uninsured 

13 businesses cite affordability as a major reason that 

14 they do not offer health benefits to their employees. 

15 (4) Surveys also indicate that 71 percent of 

16 small employers would offer their employees health 

17 benefits if the government provided assistance with 

18 premiums. 

19 (5) Offering health benefits is not only good for 

20 employees’ health, it is good for the health of busi21 nesses. Small employers report access to affordable 

22 health insurance coverage as a key factor in their 

23 economic performance. Of those small employers 


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1 who do offer health benefits to their employees, 64 

2 percent believe it increases productivity by keeping 

3 employees healthy and 58 percent claim it reduces 

4 absenteeism. 

5 (6) While there may be varying ideas on how 

6 best to provide affordable coverage to small employ7 ers, one thing is clear: the solution lies in a coopera8 tive effort between individuals, employers, and Fed9 eral and State governments. 

10 (7) As part of reforming the Nation’s health 

11 care system, Congress should make it a priority to 

12 reduce the number of uninsured by helping small 

13 businesses purchase affordable coverage for their 

14 employees. 

15 SEC. 3. DEFINITIONS. 

16 In this Act: 

17 (1) EMPLOYER.—The term ‘‘employer’’ has the 

18 meaning given such term under section 3(5) of the 

19 Employee Retirement Income Security Act of 1974. 

20 (2) EXCHANGE.—The term ‘‘Exchange’’ means 

21 a Regional Health Coverage Exchange established 

22 under section 6. 

23 (3) NATIONAL POLICY BOARD.—The term ‘‘Na24 tional Policy Board’’ means the National Health 

25 Coverage Policy Board established under section 4. 


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1 (4) REGION.—The term ‘‘Region’’ means a 

2 Health Coverage Exchange Region established under 

3 section 5. 

4 (5) REGIONAL BOARDS.—The term ‘‘Regional 

5 Boards’’ means the board of a Regional Health Cov6 erage Exchange established under section 6. 

7 (6) SECRETARY.—The term ‘‘Secretary’’ means 

8 the Secretary of Health and Human Services. 

9 (7) SMALL EMPLOYER.— 

10 (A) IN GENERAL.—The term ‘‘small em11 ployer’’ means, with respect to a plan year, an 

12 employer who employed an average of at least 

13 2 but not more than 100 full-time employees on 

14 business days during the preceding calendar 

15 year and who employs at least 2 employees on 

16 the first day of the plan year. Such term may 

17 include a sole proprietor if determined appro18 priate by a Regional Board. 

19 (B) APPLICATION OF CERTAIN RULES IN

20 DETERMINATION OF EMPLOYER SIZE.—For 

21 purposes of this paragraph— 

22 (i) APPLICATION OF AGGREGATION

23 RULE FOR EMPLOYERS.—All persons treat24 ed as a single employer under subsection 

25 (b), (c), (m), or (o) of section 414 of the 


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1 Internal Revenue Code of 1986 shall be 

2 treated as 1 employer. 

3 (ii) EMPLOYERS NOT IN EXISTENCE

4 IN PRECEDING YEAR.—In the case of an 

5 employer which was not in existence 

6 throughout the preceding calendar year, 

7 the determination of whether such em8 ployer is a small or large employer shall be 

9 based on the average number of employees 

10 that it is reasonably expected such em11 ployer will employ on business days in the 

12 current calendar year. 

13 (iii) PREDECESSORS.—Any reference 

14 in this subsection to an employer shall in15 clude a reference to any predecessor of 

16 such employer. 

17 (8) SOLE PROPRIETOR.—The term ‘‘sole propri18 etor’’ means a business structure in which an indi19 vidual and his or her company are considered a sin20 gle entity for Federal tax and liability purposes, and 

21 he or she reports business income or losses on his 

22 or her individual income tax return. 

23 (9) STATE.—The term ‘‘State’’ means each of 

24 the several States of the United States, the District 

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1 lating its insurance market as determined by the 

2 National Association of Insurance Commissioners. 

3 SEC. 4. NATIONAL HEALTH COVERAGE POLICY BOARD. 

4 (a) ESTABLISHMENT.— 

5 (1) IN GENERAL.—There shall be established as 

6 an independent agency a National Health Coverage 

7 Policy Board that shall be composed of 9 members, 

8 to be appointed by the President not later than 12 

9 months after the date of enactment of this Act, by 

10 and with the advice and consent of the Senate, for 

11 terms of 6 years, except that the terms of the initial 

12 members of the National Policy Board shall be stag13 gered. Upon the expiration of their terms of office, 

14 members of the National Policy Board shall continue 

15 to serve until their successors are appointed and 

16 have qualified. 

17 (2) REQUIREMENT OF EXPERTISE.—In select18 ing the members of the National Policy Board, the 

19 President shall ensure that such membership include 

20 representatives of insurance commissioners, insur21 ance issuers and producers, health care providers, 

22 small employers, health plan accreditors, actuaries, 

23 health care quality experts, and consumers, and that 

24 such members provide geographical diversity. 


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1 (3) EX OFFICIO MEMBERS.—The Secretary of 

2 Health and Human Services and the Secretary of 

3 the Treasury, or their designees, shall serve as ex 

4 officio members of the National Health Coverage 

5 Policy Board. 

6 (4) COMPENSATION.—A member of the Na7 tional Policy Board shall be entitled to compensation 

8 at the per diem equivalent of the rate provided for 

9 level IV of the Executive Schedule under section 

10 5315 of title 5, United States Code, and while so 

11 serving away from home and the member’s regular 

12 place of business, a member may be allowed travel 

13 expenses, as authorized by the Chairperson of the 

14 National Policy Board. 

15 (b) DUTIES.—The National Policy Board shall— 

16 (1) apportion the United States into Health 

17 Coverage Exchange Regions, pursuant to section 5; 

18 (2) provide for the establishment, and oversee 

19 the administration of Regional Health Coverage Ex20 changes pursuant to section 6; 

21 (3) establish and appoint members to the Re22 gional Health Coverage Exchange Board for each of 

23 the Regions established under section 6; 


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1 (4) determine a comprehensive, quality, and af2 fordable standard benefit package and cost sharing 

3 requirements in accordance with subsection (c); 

4 (5) develop and recommend maximum rating 

5 guidelines for each Exchange, which shall take into 

6 consideration existing requirements in each State in 

7 the Region; 

8 (6) establish and update regularly the quality 

9 and efficiency performance and reporting require10 ments for health plans offered through an Exchange; 

11 (7) provide technical assistance to Regional 

12 Boards as necessary; 

13 (8) submit an annual report to Congress con14 cerning the activities of the National Policy Board; 

15 and 

16 (9) carry out any other activities determined 

17 appropriate by the Secretary. 

18 (c) STANDARD BENEFIT PACKAGE.— 

19 (1) IN GENERAL.—The standard benefit pack20 age developed under subsection (b)(4) shall, at a 

21 minimum, include coverage for— 

22 (A) preventive items and services (includ23 ing well baby care, well child care, and appro24 priate immunizations), as recommended by the 

25 United States Preventive Services Task Force; 


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1 (B) chronic disease care services, which 

2 may include disease management, care coordi3 nation, and case management programs; 

4 (C) inpatient and outpatient hospital serv5 ices (including mental health care and mater6 nity care); 

7 (D) physicians’ surgical and medical serv8 ices; 

9 (E) laboratory and imaging services; and 

10 (F) dental and prescription drug coverage. 

11 (2) INITIAL PACKAGE.—The initial standard 

12 benefit package developed by the National Policy 

13 Board under subsection (b)(4) shall have benefits 

14 that are similar to or not less than the actuarial 

15 value of health benefits coverage in any of the 4 

16 largest health benefits plans (determined by enroll17 ment) offered under the Federal Employee Health 

18 Benefit Program under chapter 89 of title 5, United 

19 States Code. Such benefit package shall remain in 

20 effect for a 2-year period. 

21 (3) REVISIONS.—Not later than 2 years after 

22 the development of the standard benefit package 

23 under subsection (b)(4), and annually thereafter, the 

24 National Policy Board, in consultation with the In25 stitute of Medicine, shall review and make revisions 


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1 to such benefit package to ensure that coverage is 

2 provided for all medically reasonable and necessary 

3 items and services. Such revisions shall be made in 

4 accordance with available clinical practice guidelines 

5 and advances in medical science which have been 

6 demonstrated to meaningfully improve health out7 comes. 

8 (d) ANNUAL AUDITS.—The National Policy Board 

9 shall submit to Secretary and the appropriate committees 

10 of Congress an annual financial audit of the activities of 

11 the National Policy Board, to be conducted by an inde12 pendent party. 

13 (e) ADMINISTRATIVE PROVISIONS.— 

14 (1) CHAIRPERSON.—Of the individuals ap15 pointed to the National Policy Board under sub16 section (a)(1), one member shall be designated by 

17 the President, by and with the advice and consent 

18 of the Senate, to serve as the Chairperson of the Na19 tional Policy Board for a term of 6 years, and one 

20 shall be designated by the President, by and with 

21 the consent of the Senate, to serve as Vice Chair22 person of the National Policy Board for a term of 

23 4 years. The Chairperson of the National Policy 

24 Board, subject to its supervision, shall be its active 

25 executive officer. 


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1 (2) QUORUM; APPROVAL.— 

2 (A) QUORUM.—A majority of the members 

3 of the National Policy Board shall constitute a 

4 quorum, but a lesser number of members may 

5 hold hearings. 

6 (B) APPROVAL.—An affirmative vote of a 

7 majority of the members of the National Policy 

8 Board is required for approval of all National 

9 Policy Board decisions. 

10 (3) MEETINGS.— 

11 (A) IN GENERAL.—The National Policy 

12 Board shall meet at the call of the Chairperson. 

13 At meetings of the National Policy Board the 

14 Chairperson shall preside, and, in his or her ab15 sence, the vice chairperson shall preside. In the 

16 absence of the Chairperson and the vice chair17 person, the National Policy Board shall elect a 

18 member to act as chairperson pro tempore. 

19 (B) REGIONAL BOARD MEETINGS.—In ad20 dition to other meetings the National Policy 

21 Board may hold, the National Policy Board 

22 shall hold an annual meeting with the Regional 

23 Boards, for the purpose of having Regional 

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1 cess to health coverage for employees of small 

2 businesses and for an exchange of information. 

3 (4) HEARINGS.—The National Policy Board 

4 may hold such hearings, sit and act at such times 

5 and places, take such testimony, and receive such 

6 evidence as the National Policy Board considers ad7 visable to carry out the purposes of this section. 

8 (5) INFORMATION.—The National Policy Board 

9 may secure directly from any Federal department or 

10 agency such information as the National Policy 

11 Board considers necessary to carry out the provi12 sions of this section. Upon request of the Chair13 person of the National Policy Board, the head of 

14 such department of agency shall furnish such infor15 mation to the National Policy Board if the head of 

16 such department or agency determines it appro17 priate. 

18 (6) POSTAL SERVICES.—The National Policy 

19 Board may use the United States mails in the same 

20 manner and under the same conditions as other de21 partments and agencies of the Federal Government. 

22 (7) TRAVEL EXPENSES.—The members of the 

23 National Policy Board shall be allowed travel ex24 penses, including per diem in lieu of subsistence, at 

25 rates authorized for employees of agencies under 


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1 subchapter I of chapter 57 of title 5, United States 

2 Code, while away from their homes or regular places 

3 of business in the performance of services for the 

4 National Policy Board. 

5 (8) OFFICES.—The principal offices of the Na6 tional Policy Board shall be in the District of Co7 lumbia. 

8 (9) EXPERTS AND EMPLOYEES.—The National 

9 Policy Board shall have the power to employ such 

10 attorneys, experts, assistants, clerks, or other em11 ployees as may be deemed necessary to conduct the 

12 business of the National Policy Board. All salaries 

13 and fees shall be fixed in advance by the National 

14 Policy Board and shall be paid in the same manner 

15 as the salaries of the members of the National Pol16 icy Board. 

17 (10) ENFORCEMENT.—The National Policy 

18 Board may act in its own name and through its own 

19 attorneys in enforcing any provision of this Act, reg20 ulations promulgated hereunder, or any other law or 

21 regulation, or in any action, suit, or proceeding to 

22 which the National Policy Board is a party. 

23 (11) DETAIL OF GOVERNMENT EMPLOYEES.— 

24 Any Federal Government employee may be detailed 

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1 ment, and such detail shall be without interruption 

2 or loss of civil service status or privilege. 

3 (12) TEMPORARY AND INTERMITTENT SERV4 ICES.—The Chairperson of the National Policy 

5 Board may procure temporary and intermittent serv6 ices under section 3109(b) of title 5, United States 

7 Code, at rates for individuals which do not exceed 

8 the daily equivalent of the annual rate of basic pay 

9 prescribed for level V of the Executive Schedule 

10 under section 5316 of such title. 

11 (13) ANNUAL REQUEST FOR FUNDING.—The 

12 National Policy Board shall submit an annual re13 quest to the Secretary for funding to carry out this 

14 section. 

15 (14) AUTHORIZATION OF APPROPRIATIONS.— 

16 There is authorized to be appropriated for each fis17 cal year, such sums as may be necessary to maintain 

18 the functions of the National Policy Board. 

19 SEC. 5. HEALTH COVERAGE EXCHANGE REGIONS. 

20 (a) IN GENERAL.—The National Policy Board shall 

21 divide the United States into Health Coverage Exchange 

22 Regions. Such Regions may be reapportioned and new Re23 gions may from time to time be established by the Na24 tional Policy Board. No Region may contain less than 2 

25 States. 


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1 (b) APPORTIONMENT.— 

2 (1) IN GENERAL.—In establishing Regions 

3 under subsection (a), the National Policy Board 

4 shall ensure that such Regions are apportioned with 

5 due regard to the convenience and customary course 

6 of business, including existing State insurance rating 

7 guidelines and regulations. 

8 (2) CONSIDERATIONS.—Regions under this sec9 tion need not consist of coterminous States. In de10 termining whether a Region will consist of States 

11 that are not coterminous, the National Policy Board 

12 shall consider the market availability of health plans 

13 and whether plans in the Region can comply with 

14 State network adequacy requirements. 

15 (3) APPEALS.—A State may submit an appeal 

16 to the National Policy Board if the State desires to 

17 be assigned to another Health Coverage Exchange 

18 Region. In such an appeal, a State shall provide rea19 sonable justification that the convenience and cus20 tomary course of business of the State, including ex21 isting State insurance rating guidelines and regula22 tions, are more similar to a Region other than the 

23 Region to which the State was initially assigned by 

24 the National Policy Board. 


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1 (c) EXCHANGES.—Within each Region, the National 

2 Policy Board shall establish a health coverage exchange 

3 as provided for under section 6. 

4 SEC. 6. REGIONAL HEALTH COVERAGE EXCHANGES. 

5 (a) REGIONAL HEALTH CARE EXCHANGES.—The 

6 Board shall establish Regional Health Coverage Ex7 changes to serve as central purchasing sites for health cov8 erage, to provide information to purchasers and consumers 

9 about participating health plans, to facilitate enrollment, 

10 and to ensure health plan compliance with minimum re11 quirements for benefit design, quality, efficiency and 

12 transparency. 

13 (b) ESTABLISHMENT AND APPOINTMENT.— 

14 (1) IN GENERAL.—The National Policy Board 

15 shall establish and appoint the members of a Re16 gional Health Coverage Exchange Board for each 

17 Region. The National Policy Board shall— 

18 (A) determine the number of members of 

19 each Regional Board which shall be dependent 

20 upon the size of the Region involved; and 

21 (B) establish a process whereby State offi22 cials and other stakeholders submit nominations 

23 for appointment to each Regional Board. 

24 (2) REQUIREMENTS.—At a minimum the mem25 bership of each Regional Board shall include the 


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1 State insurance commissioner from each State in the 

2 Region involved and other members who shall be 

3 representative of health insurance issuers and pro4 ducers, health care providers, health plan 

5 accreditors, small employers, health care quality ex6 perts, and consumers. 

7 (3) TERMS.—In appointing members of a Re8 gional Board, the National Policy Board shall ensure 

9 that the terms of service for such members are stag10 gered and that no term exceeds 6 years. 

11 (c) DUTIES.—The Regional Board, shall— 

12 (1) develop common rating guidelines relating 

13 to the health insurance market for small employers, 

14 pursuant to subsection (d); 

15 (2) establish and administer the Exchange to 

16 assist small employers within the Region with pur17 chasing health coverage for themselves and their em18 ployees, as described in subsection (d); 

19 (3) provide assistance to States within the Re20 gion concerning health plan quality and efficiency 

21 compliance and enforcement; 

22 (4) consult with the National Association of In23 surance Commissioners and develop a mechanism to 

24 lessen such risk selection as may occur among plans 

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1 tion of regional risk adjustment requirements that 

2 are submitted to and approved by the National Pol3 icy Board; 

4 (5) collect data for evaluation, and for reporting 

5 to the public and the National Policy Board, con6 cerning the overall effectiveness of the Exchange, 

7 which may include number of enrollees, types of ben8 efit options offered by health insurance issuers, the 

9 rating guidelines implemented, marketing practices, 

10 quality oversight, and any enforcement procedures 

11 applied; 

12 (6) submit annual reports to the National Pol13 icy Board concerning the activities and evaluation of 

14 the Exchange; and 

15 (7) carry out other activities determined appro16 priate by the National Policy Board. 

17 (d) COMMON REGULATORY GUIDELINES; STATE

18 ADOPTION.— 

19 (1) COMMON REGULATORY GUIDELINES.— 

20 (A) IN GENERAL.—Not later than 6 

21 months after the date on which the members of 

22 the Regional Board are appointed, such Re23 gional Board shall develop and submit common 

24 rating guidelines to the National Policy Board 

25 for review and approval. 


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1 (B) APPROVAL.—The National Policy 

2 Board shall notify the Regional Board of its de3 cision with respect to common rating guidelines 

4 within 60 days of the receipt of the submission 

5 of such guidelines under subparagraph (A). If 

6 the National Policy Board does not approve 

7 such guidelines, the National Policy Board shall 

8 provide the Regional Board with a justification 

9 for such decision. The Regional Board may re10 submit modified common rating guidelines for 

11 approval within the 30-day period beginning on 

12 that date of such notification of the National 

13 Policy Board’s initial decision. 

14 (C) LIMITATION.—The common guidelines 

15 under this paragraph may not include— 

16 (i) health status as an allowable rat17 ing factor; or 

18 (ii) waiting periods or exclusion of 

19 coverage for pre-existing conditions. 

20 (D) MODIFICATIONS.—A Regional Board 

21 that desires to modify the common rating 

22 guidelines approved by the National Policy 

23 Board under subparagraph (A) shall submit a 

24 report to the National Policy Board that de25 scribes the proposed modification and how such 


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1 modification will affect consumer access to af2 fordable health coverage for review and ap3 proval. The National Policy Board shall notify 

4 the Regional Board of its decision with respect 

5 to such modification within 60 days of receipt 

6 of the modification request. Approval of such 

7 proposed modifications shall be contingent upon 

8 assurances that access to health coverage for 

9 small employers and their employees would be 

10 maintained. 

11 (E) FAILURE TO DEVELOP.—If the Re12 gional Board is unable to develop common rat13 ing guidelines within the period provided for 

14 under subparagraph (A), the National Policy 

15 Board may develop such guidelines to be ap16 plied by the Regional Board or reapportion the 

17 States within the Region involved to other Re18 gions. 

19 (2) STATE ADOPTION.— 

20 (A) IN GENERAL.—Not later than 3 years 

21 after the date on which the Regional Board is 

22 appointed, each State in the Region involved 

23 shall enact the laws necessary to regulate its 

24 small group insurance market in accordance 

25 with the guidelines developed by the Regional 


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1 Board under paragraph (1). The National Pol2 icy Board may permit a State to phase-in the 

3 enactment of the guidelines developed under 

4 paragraph (1) over a period not to exceed 3 

5 years. 

6 (B) FAILURE TO ENACT.—If a State fails 

7 to enact and implement the guidelines devel8 oped under paragraph (1) within the period 

9 provided for under subparagraph (A), the small 

10 employers in such State— 

11 (i) shall not be permitted to purchase 

12 health coverage through the Exchange; and 

13 (ii) shall not be eligible for the refund14 able income tax credit under section 36A 

15 of the Internal Revenue Code of 1986. 

16 (C) CERTAIN STATES.—States that have 

17 legislatures meeting biennially and that make a 

18 good faith effort to implement the rating guide19 lines for its Region may have the penalties de20 scribed in subparagraph (B) waived at the dis21 cretion of the National Policy Board. If a State 

22 fails to fully implement the Region’s common 

23 guidelines by the date that is 1 year after the 

24 end of its next legislative session, the National 

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1 scribed in such subparagraph with respect to 

2 such State. 

3 (D) DETERMINATION BY REGIONS WITH

4 RESPECT TO COVERAGE OF ADDITIONAL POPU5 LATIONS.—A Regional Board shall permit sole 

6 proprietors and individuals to purchase cov7 erage through the Exchange if the State in8 volved elects to permit such coverage. A State 

9 within a Region that permits sole proprietors or 

10 individuals to purchase coverage through the 

11 Exchange shall regulate the individual health 

12 insurance markets within the State in accord13 ance with the common rating guidelines pro14 vided for in this subsection. To mitigate the 

15 risk of adverse selection within such markets, 

16 the Regional Board may exercise additional 

17 flexibility by taking group size into account 

18 when developing common rating guidelines. 

19 (E) DETERMINATION BY STATES WITH RE20 SPECT TO EXCEEDING SMALL EMPLOYER SIZE

21 LIMITS.—States may request that the definition 

22 of ‘‘small employer’’ be expanded to include 

23 those small employers with more than 100 em24 ployees. Such request shall be made in writing 

25 and approved by the National Policy Board. 


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1 The National Policy Board shall take into con2 sideration the availability of refundable income 

3 tax credits under section 36A of the Internal 

4 Revenue Code of 1986, as well as potential im5 pact on access to health coverage for other 

6 small employers. The National Policy Board 

7 shall act upon a request made under this sec8 tion not later than 60 days after receipt of such 

9 request. 

10 (F) CROWD-OUT REDUCTION.—Each Re11 gional Board shall develop a plan to decrease 

12 adverse selection relating to health insurance 

13 coverage between the individual market and the 

14 Exchange for individuals and sole proprietors 

15 eligible to purchase coverage through the 

16 Health Coverage Exchange. Such plan shall be 

17 submitted to the National Policy Board for ap18 proval in conjunction with the submission of 

19 common rating guidelines described in this sub20 section. 

21 (G) STATE OPT OUT.—A State may submit 

22 a request to the National Policy Board to opt 

23 out of the requirement relating to the adoption 

24 of the common guidelines under section 6 if the 

25 State can demonstrate that existing State 


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1 guidelines are more stringent than those rec2 ommended by the Regional Board under such 

3 section. 

4 (e) ESTABLISHMENT AND ADMINISTRATION OF EX5 CHANGE.—A Regional Board shall establish and admin6 ister an Exchange through the following activities: 

7 (1) The development of streamlined health in8 surance marketing and enrollment mechanisms, 

9 through collaboration with insurance producers, 

10 which shall include the establishment and mainte11 nance of an Internet website. 

12 (2) The development of contracting processes 

13 and the conduct of negotiations with insurance 

14 issuers that desire to participate in the Exchange. 

15 (3)(A) Collaboration with participating health 

16 insurance issuers and producers to develop health 

17 coverage benefit packages to be offered through the 

18 Exchange in addition to the standard benefit pack19 age provided for in section 4. 

20 (B) If such standard benefit package does not 

21 include all mandated benefits for each State in the 

22 Region, the Regional Board may require that health 

23 plans participating in the Exchange offer additional, 

24 modified plans that meet the requirements of each 

25 State in the Region concerning mandated benefits. 


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1 Any premium adjustments for such modified plans 

2 shall be based only on the cost of the added benefits. 

3 (4) The development of guidelines concerning 

4 rules for enrollment periods during which employers 

5 may purchase health coverage through the Ex6 change. Such guidelines shall provide employers op7 erating in States that have adopted the necessary 

8 laws and regulations provided for in subsection (c), 

9 not less than 12 months for initial enrollment once 

10 an Exchange is determined to be operational by the 

11 Regional Board. 

12 (5) Assessing employers that purchase health 

13 coverage after the close of the initial enrollment pe14 riod a reasonable late enrollment penalty unless such 

15 employers are able to provide evidence of credible 

16 coverage (as provided for in a manner similar to 

17 that provided for under section 2701 of the Public 

18 Health Service Act) section prior to enrollment in a 

19 health plan in the Exchange. 

20 SEC. 7. HEALTH PLAN OFFERED THROUGH AN EXCHANGE. 

21 (a) IN GENERAL.—To be eligible to offer health care 

22 coverage through an Exchange, a health insurance issuer 

23 shall— 

24 (1) be licensed in each State within the Region 

25 in which the issuer operates or sells policies; 


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1 (2) offer at least the standard benefit package 

2 developed under section 4(b)(4), and may offer other 

3 options as approved by the Regional Board under 

4 section 6; 

5 (3) meet quality and efficiency performance and 

6 reporting requirements established by the National 

7 Policy Board under section 4; 

8 (4) rate its insurance products based on the 

9 small group market guidelines of the Region in 

10 which the product is being offered; and 

11 (5) comply with State network adequacy and all 

12 other consumer protection laws. 

13 (b) REPORTING REQUIREMENTS FOR HEALTH

14 PLANS.— 

15 (1) IN GENERAL.—As a condition of offering 

16 health care coverage through the Exchange, a health 

17 insurance issuer shall report to consumers, the Re18 gional Board, and the National Policy Board, infor19 mation concerning quality, cost, administration, and 

20 structure with respect to health plans offered by the 

21 issuer. The National Policy Board, in collaboration 

22 with the Institute of Medicine, may update and mod23 ify reporting requirements for purposes of this para24 graph on an annual basis. 


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•S 3554 IS

1 (2) QUALITY.—A health insurance issuer, with 

2 respect to a health plan offered through an Ex3 change, shall collect, analyze, and report to the Na4 tional Policy Board and consumers, information on 

5 measures of health care quality. Such measures 

6 shall— 

7 (A) include evidence-based measures of ef8 fectiveness, efficiency, patient satisfaction, and 

9 other measures as determined appropriate by 

10 the National Policy Board; and 

11 (B) at a minimum, incorporate existing 

12 quality measurement requirements by health 

13 plan accrediting entities, including measures in14 cluded in the Healthcare Effectiveness Data 

15 and Information Set (HEDIS), and the Con16 sumer Assessment of Health Plan Survey ad17 ministered by the Agency for Healthcare Re18 search and Quality. 

19 (3) COSTS.—A health insurance issuer, with re20 spect to a health plan offered through an Exchange, 

21 shall report to the public and the National Policy 

22 Board information concerning cost transparency, 

23 through the provision of cost-sharing and common 

24 cost estimates for medical procedures, health serv25 ices and prescription drugs for network hospitals 


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•S 3554 IS

1 and providers. Such cost-sharing and costs estimates 

2 shall include— 

3 (A) hospital and emergency room fees; 

4 (B) imaging and radiology; 

5 (C) laboratories and testing; 

6 (D) medical supplies and equipment; 

7 (E) physician office services and therapy 

8 services; 

9 (F) costs for prescription drugs; and 

10 (G) other data that the National Policy 

11 Board determines appropriate. 

12 (4) ADMINISTRATION; STRUCTURE.—A health 

13 insurance issuer, with respect to a health plan of14 fered through an Exchange, shall report to the Na15 tional Policy Board information concerning— 

16 (A) hospital and provider networks; 

17 (B) methods of utilization management; 

18 (C) economic and demographic data on en19 rollment, revenues, costs, and profits, which 

20 may include medical loss ratios; 

21 (D) benefit packages; 

22 (E) consumer disputes and complaints filed 

23 and resolved; and 

24 (F) solvency and reserves. 


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•S 3554 IS

1 (5) SUBMISSION.—Reporting required under 

2 this subsection shall be submitted in print and elec3 tronic formats on at least an annual basis. 

4 SEC. 8. REFUNDABLE CREDIT FOR HEALTH INSURANCE 

5 COVERAGE. 

6 (a) IN GENERAL.—Subpart C of part IV of sub7 chapter A of chapter 1 of the Internal Revenue Code of 

8 1986 (relating to refundable credits) is amended by redes9 ignating section 36 as section 37 and by inserting after 

10 section 35 the following new section: 

11 ‘‘SEC. 36. HEALTH INSURANCE COSTS. 

12 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eli13 gible individual, there shall be allowed as a credit against 

14 the tax imposed by this subtitle for the taxable year an 

15 amount equal to the applicable percentage of the pre16 miums paid by or on behalf of the taxpayer for qualified 

17 health insurance during such taxable year. 

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

19 section— 

20 ‘‘(1) IN GENERAL.—Except as provided in para21 graph (2), the term ‘eligible individual’ means— 

22 ‘‘(A) any employee of a qualifying small 

23 employer residing in a State which— 

24 ‘‘(i) has adopted and is applying the 

25 common rating guidelines developed under 


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•S 3554 IS

1 section 6 of the Affordable Coverage for 

2 Small Employers Act of 2008 in the small 

3 group market of such State, or 

4 ‘‘(ii) has been permitted by the Na5 tional Policy Board to opt out of the re6 quirement of subparagraph (A), pursuant 

7 to section 6(d)(2)(G) of such Act, or 

8 ‘‘(B) any other individual residing in such 

9 State who is permitted to purchase qualified 

10 health insurance by a Regional Health Coverage 

11 Exchange Board under section 6(d)(2)(D) of 

12 such Act. 

13 ‘‘(2) EXCEPTIONS.—Such term shall not in14 clude any individual for any month if, as of the first 

15 day of such month, such individual— 

16 ‘‘(A) is entitled to any benefits under title 

17 XVIII of the Social Security Act, 

18 ‘‘(B) is eligible for the program under title 

19 XIX or XXI of such Act, 

20 ‘‘(C) is entitled to any benefit under— 

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

22 States Code, 

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

24 States Code, 


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•S 3554 IS

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

2 States Code, or 

3 ‘‘(iv) any medical care program under 

4 the Indian Health Care Improvement Act, 

5 or 

6 ‘‘(D) is imprisoned under Federal, State, 

7 or local authority. 

8 ‘‘(c) APPLICABLE PERCENTAGE.—For purposes of 

9 this section— 

10 ‘‘(1) IN GENERAL.—The applicable percentage 

11 is equal to, in the case of a taxpayer with modified 

12 adjusted gross income for the preceding taxable 

13 year— 

14 ‘‘(A) not exceeding 150 percent of the Fed15 eral poverty level (as defined in section 673(2) 

16 of the Community Services Block Grant Act 

17 (42 U.S.C. 9902(2)) applicable to a family of 

18 the size involved, 25 percent, 

19 ‘‘(B) exceeding 150 percent but not ex20 ceeding 200 percent of such Federal poverty 

21 level, 20 percent, 

22 ‘‘(C) exceeding 200 percent but not exceed23 ing 250 percent of such Federal poverty level, 

24 15 percent, 


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•S 3554 IS

1 ‘‘(D) exceeding 250 percent but not ex2 ceeding 300 percent of such Federal poverty 

3 level, 10 percent, and 

4 ‘‘(E) exceeding 300 percent of such Fed5 eral poverty level, 0 percent. 

6 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.— 

7 The term ‘modified adjusted gross income’ means 

8 adjusted gross income determined without regard to 

9 sections 103, 135, 911, 931 and 933. 

10 ‘‘(d) QUALIFYING SMALL EMPLOYER.—For purposes 

11 of this section— 

12 ‘‘(1) IN GENERAL.—The term ‘qualifying small 

13 employer’ means any small employer which is located 

14 in a State described in subsection (b)(1)(A). 

15 ‘‘(2) SMALL EMPLOYER.— 

16 ‘‘(A) IN GENERAL.—The term ‘small em17 ployer’ means, with respect to a plan year, an 

18 employer who employed an average of at least 

19 2 but not more than 100 full-time employees on 

20 business days during the preceding calendar 

21 year and who employs at least 2 employees on 

22 the first day of the plan year. Such term may 

23 include employers described in section 

24 6(d)(2)(E) of the Affordable Coverage for Small 

25 Employers Act of 2008 and a sole proprietor if 


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•S 3554 IS

1 determined appropriate by a Regional Health 

2 Coverage Exchange Board. 

3 ‘‘(B) APPLICATION OF CERTAIN RULES IN

4 DETERMINATION OF EMPLOYER SIZE.—For 

5 purposes of this paragraph— 

6 ‘‘(i) APPLICATION OF AGGREGATION

7 RULE FOR EMPLOYERS.—All persons treat8 ed as a single employer under subsection 

9 (b), (c), (m), or (o) of section 414 shall be 

10 treated as 1 employer. 

11 ‘‘(ii) EMPLOYERS NOT IN EXISTENCE

12 IN PRECEDING YEAR.—In the case of an 

13 employer which was not in existence 

14 throughout the preceding calendar year, 

15 the determination of whether such em16 ployer is a small or large employer shall be 

17 based on the average number of employees 

18 that it is reasonably expected such em19 ployer will employ on business days in the 

20 current calendar year. 

21 ‘‘(iii) PREDECESSORS.—Any reference 

22 to an employer shall include a reference to 

23 any predecessor of such employer. 


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•S 3554 IS

1 ‘‘(3) EMPLOYER.—The term ‘employer’ has the 

2 meaning given such term under section 3(5) of the 

3 Employee Retirement Income Security Act of 1974. 

4 ‘‘(e) QUALIFIED HEALTH INSURANCE.—For pur5 poses of this section, the term ‘qualified health insurance’ 

6 means any health plan offered through a Regional Health 

7 Coverage Exchange established under section 6 of the Af8 fordable Coverage for Small Employers Act of 2008 with 

9 standard benefit package coverage developed under section 

10 4(b)(4) of such Act or a plan with benefits that are similar 

11 to or not less than the actuarial value of health benefits 

12 coverage under the standard benefit package. 

13 ‘‘(f) OTHER DEFINITIONS.—For purposes of this sec14 tion, any term used in this section which is also used in 

15 the Affordable Coverage for Small Employers Act of 2008 

16 shall have the meaning given such term by such Act. 

17 ‘‘(g) ARCHER MSA AND HEALTH SAVINGS ACCOUNT

18 CONTRIBUTIONS.— 

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

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

21 223 to the taxpayer for a payment for the taxable 

22 year to the Archer MSA or health savings account 

23 of an individual, subsection (a) shall be applied by 

24 treating such payment as a payment for qualified 

25 health insurance for such individual. 


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•S 3554 IS

1 ‘‘(2) DENIAL OF DOUBLE BENEFIT.—No deduc2 tion shall be allowed under section 220 or 223 for 

3 that portion of the payments otherwise allowable as 

4 a deduction under section 220 or 223 for the taxable 

5 year which is equal to the amount of credit allowed 

6 for such taxable year by reason of this subsection. 

7 ‘‘(h) SPECIAL RULES.—For purposes of this sec8 tion— 

9 ‘‘(1) MARRIED COUPLES MUST FILE JOINT RE10 TURN.— 

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

12 married at the close of the taxable year, the 

13 credit shall be allowed under subsection (a) only 

14 if the taxpayer and his spouse file a joint return 

15 for the taxable year. 

16 ‘‘(B) MARITAL STATUS; CERTAIN MARRIED

17 INDIVIDUALS LIVING APART.—Rules similar to 

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

19 21(e) shall apply for purposes of this para20 graph. 

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

22 credit shall be allowed under this section to any indi23 vidual with respect to whom a deduction under sec24 tion 151 is allowable to another taxpayer for a taxVerDate Aug 31 2005 23:56 Sep 26, 2008 Jkt 069200 PO 00000 Frm 00035 Fmt 6652 Sfmt 6201 E:\BILLS\S3554.IS S3554

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1 able year beginning in the calendar year in which 

2 such individual’s taxable year begins. 

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

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

5 under section 35 is allowed and no credit shall be al6 lowed under 35 if a credit is allowed under this sec7 tion. 

8 ‘‘(4) COORDINATION WITH DEDUCTION FOR

9 HEALTH INSURANCE COSTS.—In the case of a tax10 payer who is eligible to deduct any amount under 

11 section 162(l) or 213 for the taxable year, this sec12 tion shall apply only if the taxpayer elects not to 

13 claim any amount as a deduction under such section 

14 for such year. 

15 ‘‘(5) MEDICAL AND HEALTH SAVINGS AC16 COUNTS.—The credit allowed under subsection (a) 

17 for any taxable year shall be reduced by the aggre18 gate amount distributed from Archer MSAs (as de19 fined in section 220(d)) and health savings accounts 

20 (as defined in section 223(d)) which are excludable 

21 from gross income for such taxable years by reason 

22 of being used to pay premiums for coverage of an 

23 individual under qualified health insurance for any 

24 month. 


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•S 3554 IS

1 ‘‘(6) ELECTION NOT TO CLAIM CREDIT.—This 

2 section shall not apply to a taxpayer for any taxable 

3 year if such taxpayer elects to have this section not 

4 apply for such taxable year. 

5 ‘‘(7) VERIFICATION OF COVERAGE, ETC.—No 

6 credit shall be allowed under this section with re7 spect to any individual unless such individual’s cov8 erage (and such related information as the Secretary 

9 may require) is verified in such manner as the Sec10 retary may prescribe. 

11 ‘‘(8) INSURANCE WHICH COVERS OTHER INDI12 VIDUALS; TREATMENT OF PAYMENTS.—Rules similar 

13 to the rules of paragraphs (7) and (8) of section 

14 35(g) shall apply for purposes of this section. 

15 ‘‘(i) REDUCTION IN CREDIT FOR ADVANCE PAY16 MENTS.—With respect to any taxable year, the amount 

17 which would (but for this subsection) be allowed as a cred18 it to the taxpayer under subsection (a) shall be reduced 

19 (but not below zero) by the aggregate amount paid on be20 half of such taxpayer under section 7529 for months be21 ginning in such taxable year. 

22 ‘‘(j) REGULATIONS.—The Secretary shall prescribe 

23 such regulations and other guidance as may be necessary 

24 or appropriate to carry out the purposes of this section, 

25 section 6050X, and section 7529, including the application 


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•S 3554 IS

1 of the credit with respect to eligible individuals described 

2 in subsection (b)(1)(B).’’. 

3 (b) INFORMATION REPORTING.— 

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

5 subchapter A of chapter 61 of the Internal Revenue 

6 Code of 1986 (relating to information concerning 

7 transactions with other persons) is amended by in8 serting after section 6050W the following new sec9 tion: 

10 ‘‘SEC. 6050X. RETURNS RELATING TO PAYMENTS FOR 

11 QUALIFIED HEALTH INSURANCE. 

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

13 with a trade or business conducted by such person, re14 ceives payments during any calendar year from any indi15 vidual for coverage of such individual or any other indi16 vidual under creditable health insurance, shall make the 

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

18 Secretary may by regulations prescribe) with respect to 

19 each individual from whom such payments were received. 

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

21 is described in this subsection if such return— 

22 ‘‘(1) is in such form as the Secretary may pre23 scribe, and 

24 ‘‘(2) contains— 


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•S 3554 IS

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

2 individual from whom payments described in 

3 subsection (a) were received, 

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

5 individual who was provided by such person 

6 with coverage under creditable health insurance 

7 by reason of such payments and the period of 

8 such coverage, and 

9 ‘‘(C) such other information as the Sec10 retary may reasonably prescribe. 

11 ‘‘(c) CREDITABLE HEALTH INSURANCE.—For pur12 poses of this section, the term ‘creditable health insurance’ 

13 means qualified health insurance (as defined in section 

14 36(e)) other than, to the extent provided in regulations 

15 prescribed by the Secretary, any other insurance covering 

16 an individual if no credit is allowable under section 36 

17 with respect to such coverage. 

18 ‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID19 UALS WITH RESPECT TO WHOM INFORMATION IS RE20 QUIRED.—Every person required to make a return under 

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

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

23 such return a written statement showing— 


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•S 3554 IS

1 ‘‘(1) the name and address of the person re2 quired to make such return and the phone number 

3 of the information contact for such person, 

4 ‘‘(2) the aggregate amount of payments de5 scribed in subsection (a) received by the person re6 quired to make such return from the individual to 

7 whom the statement is required to be furnished, and 

8 ‘‘(3) the information required under subsection 

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

10 The written statement required under the preceding sen11 tence shall be furnished on or before January 31 of the 

12 year following the calendar year for which the return 

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

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

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

16 provided in regulations prescribed by the Secretary, in the 

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

18 another person, only the person first receiving such 

19 amount shall be required to make the return under sub20 section (a).’’. 

21 (2) ASSESSABLE PENALTIES.— 

22 (A) Subparagraph (B) of section 

23 6724(d)(1) of such Code (relating to defini24 tions) is amended by striking ‘‘or’’ at the end 

25 of clause (xxi), by striking ‘‘and’’ at the end of 


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•S 3554 IS

1 clause (xxii) and inserting ‘‘or’’, and by adding 

2 after clause (xxii) the following new clause: 

3 ‘‘(xxiii) section 6050X (relating to re4 turns relating to payments for qualified 

5 health insurance),’’. 

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

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

8 end of subparagraph (CC), by striking the pe9 riod at the end of subparagraph (DD) and in10 serting ‘‘, or’’ and by adding at the end the fol11 lowing new subparagraph: 

12 ‘‘(EE) section 6050X(d) (relating to re13 turns relating to payments for qualified health 

14 insurance).’’. 

15 (3) CLERICAL AMENDMENT.—The table of sec16 tions for subpart B of part III of subchapter A of 

17 chapter 61 of such Code is amended by inserting 

18 after the item relating to section 6050W the fol19 lowing new item: 

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

20 (c) CONFORMING AMENDMENTS.— 

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

22 31, United States Code, is amended by inserting be23 fore the period ‘‘, or from section 36 of such Code’’. 

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

25 IV of subchapter A of chapter 1 of the Internal RevVerDate Aug 31 2005 23:56 Sep 26, 2008 Jkt 069200 PO 00000 Frm 00041 Fmt 6652 Sfmt 6201 E:\BILLS\S3554.IS S3554

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•S 3554 IS

1 enue Code of 1986 is amended by striking the last 

2 item and inserting the following new items: 

‘‘Sec. 36. Health insurance costs. 

‘‘Sec. 37. Overpayments of tax.’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2008. 

6 (e) ADVANCE PAYMENT OF CREDIT FOR PUR7 CHASERS OF QUALIFIED HEALTH INSURANCE.— 

8 (1) IN GENERAL.—Chapter 77 of the Internal 

9 Revenue Code of 1986 (relating to miscellaneous 

10 provisions) is amended by adding at the end the fol11 lowing new section: 

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

13 CREDIT FOR PURCHASERS OF QUALIFIED 

14 HEALTH INSURANCE. 

15 ‘‘(a) GENERAL RULE.—In the case of an eligible indi16 vidual, the Secretary shall make payments to the provider 

17 of such individual’s qualified health insurance equal to 

18 such individual’s qualified health insurance credit advance 

19 amount with respect to such provider. 

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

21 section, the term ‘eligible individual’ means any indi22 vidual— 

23 ‘‘(1) who purchases qualified health insurance 

24 (as defined in section 36(e)), and 


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•S 3554 IS

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

2 credit eligibility certificate is in effect. 

3 ‘‘(c) QUALIFIED HEALTH INSURANCE CREDIT ELIGI4 BILITY CERTIFICATE.—For purposes of this section, a 

5 qualified health insurance credit eligibility certificate is a 

6 statement furnished by an individual to the Secretary 

7 which— 

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

9 to receive the credit provided by section 36 for the 

10 taxable year, 

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

12 such taxable year, and 

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

14 Secretary may require for purposes of this section. 

15 ‘‘(d) QUALIFIED HEALTH INSURANCE CREDIT AD16 VANCE AMOUNT.—For purposes of this section, the term 

17 ‘qualified health insurance credit advance amount’ means, 

18 with respect to any provider of qualified health insurance, 

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

20 under section 36 to the individual for the taxable year 

21 which is attributable to the insurance provided to the indi22 vidual by such provider.’’. 

23 (2) CLERICAL AMENDMENT.—The table of sec24 tions for chapter 77 of the Internal Revenue Code 


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•S 3554 IS

1 of 1986 is amended by adding at the end the fol2 lowing new item: 

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

qualified health insurance.’’. 

3 (3) EFFECTIVE DATE.—The amendments made 

4 by this section shall apply to taxable years beginning 

5 after December 31, 2008. 

6 SEC. 9. REFUNDABLE CREDIT FOR SMALL EMPLOYER 

7 HEALTH INSURANCE EXPENSES. 

8 (a) IN GENERAL.—Subpart C of part IV of sub9 chapter A of chapter 1 of the Internal Revenue Code of 

10 1986 (relating to refundable credits), as amended by sec11 tion 8, is amended by inserting after section 36 the fol12 lowing new section: 

13 ‘‘SEC. 36A. SMALL EMPLOYER HEALTH INSURANCE EX14 PENSES. 

15 ‘‘(a) DETERMINATION OF AMOUNT.—In the case of 

16 a qualifying small employer, there shall be allowed as a 

17 credit against the tax imposed by this subtitle for the tax18 able year an amount equal to the applicable percentage 

19 of the employer’s contribution during such taxable year 

20 towards the cost of qualified employee health insurance 

21 expenses. No amount paid or incurred pursuant to a sal22 ary reduction arrangement shall be taken into account 

23 under the preceding sentence. 


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•S 3554 IS

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

2 subsection (a), the applicable percentage is equal to, in 

3 the case of an employer contribution of— 

4 ‘‘(1) at least 50 but less than 60 percent of the 

5 cost of qualified employee health insurance expenses, 

6 10 percent, 

7 ‘‘(2) at least 60 but less than 70 percent of 

8 such cost, 15 percent, 

9 ‘‘(3) at least 70 but less than 80 percent of 

10 such cost, 20 percent, and 

11 ‘‘(4) at least 80 percent of such cost, 25 per12 cent. 

13 ‘‘(c) DEFINITIONS.—For purposes of this section— 

14 ‘‘(1) QUALIFYING SMALL EMPLOYER.—The 

15 term ‘qualifying small employer’ has the meaning 

16 given such term by section 36(d). 

17 ‘‘(2) QUALIFIED EMPLOYEE HEALTH INSUR18 ANCE EXPENSES.— 

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

20 employee health insurance expenses’ means any 

21 expenses for qualified health insurance (as de22 fined in section 36(e)) to the extent attributable 

23 to coverage— 

24 ‘‘(i) provided to any employee while 

25 such employee is a qualified employee, or 


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•S 3554 IS

1 ‘‘(ii) for the employer, in the case of 

2 a sole proprietor. 

3 ‘‘(B) QUALIFIED EMPLOYEE.—The term 

4 ‘qualified employee’ means any individual de5 scribed in section 36(b) (determined without re6 gard to paragraph (1)(B) thereof). 

7 ‘‘(d) CERTAIN RULES MADE APPLICABLE.—For pur8 poses of this section, rules similar to the rules of section 

9 52 shall apply. 

10 ‘‘(e) COORDINATION WITH ADVANCE PAYMENTS OF

11 CREDIT.—With respect to any taxable year, the amount 

12 which would (but for this subsection) be allowed as a cred13 it to the taxpayer under subsection (a) shall be reduced 

14 by the aggregate amount paid on behalf of such taxpayer 

15 under section 7530 for months beginning in such taxable 

16 year. If the amount determined under this subsection is 

17 less than zero, the taxpayer shall owe additional tax in 

18 such amount under this chapter. 

19 ‘‘(f) CREDITS FOR NONPROFIT ORGANIZATIONS.— 

20 Any credit which would be allowable under subsection (a) 

21 with respect to a qualifying small employer if such quali22 fying small employer were not exempt from tax under this 

23 chapter shall be treated as a credit allowable under this 

24 subpart to such qualifying small employer.’’. 


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•S 3554 IS

1 (b) ADVANCE PAYMENTS OF CREDIT.—Chapter 77 

2 of the Internal Revenue Code of 1986, as amended by sec3 tion 8, is amended by inserting after section 7529 the fol4 lowing new section: 

5 ‘‘SEC. 7530. ADVANCE PAYMENT OF CREDIT FOR HEALTH 

6 INSURANCE COSTS FOR QUALIFYING SMALL 

7 EMPLOYERS. 

8 ‘‘(a) GENERAL RULE.—Not later than December 31, 

9 2008, the Secretary shall establish a program for making 

10 monthly payments on behalf of any qualifying small em11 ployer to providers of qualified health insurance for quali12 fied employees of such employer. The amount of the 

13 monthly payment for a qualifying small employer shall be 

14 one twelfth of the amount of the credit for the tax year 

15 to which the qualifying small employer is entitled under 

16 section 36A. If a monthly payment is made by the Sec17 retary for which the employer is not entitled to a cor18 responding credit, the employer shall owe additional tax 

19 in such amount under this chapter. 

20 ‘‘(b) DEFINITIONS.—Any term used in this section 

21 which is also used in section 36A shall have the meaning 

22 given such term by section 36A.’’. 

23 (c) CONFORMING AMENDMENTS.— 


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•S 3554 IS

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

2 31, United States Code, as amended by section 8, is 

3 amended by inserting ‘‘or 36A’’ after ‘‘36’’. 

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

5 IV of subchapter A of chapter 1 of the Internal Rev6 enue Code of 1986, as amended by section 8, is 

7 amended by inserting after the item relating to sec8 tion 36 the following new item: 

‘‘Sec. 36A. Small employer health insurance expenses.’’. 

9 (3) The table of sections for chapter 77 of such 

10 Code, as amended by section 8, is amended by add11 ing at the end the following new item: 

‘‘Sec. 7530. Advance payment of credit for health insurance costs for qualifying 

small employers.’’. 

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

13 this section shall apply to amounts paid or incurred in tax14 able years beginning after December 31, 2008. 

15 SEC. 10. REPORTS AND EVALUATIONS. 

16 (a) ANNUAL REPORT TO CONGRESS.—Not later than 

17 1 year after the date of enactment of this Act, and bienni18 ally thereafter, the Governmental Accountability Office 

19 shall submit to the National Policy Board and the appro20 priate committees of Congress a report concerning the ac21 tivities of the National Policy Board and the Regional 

22 Boards under this Act. 


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•S 3554 IS

1 (b) INSTITUTE OF MEDICINE.—Not later than 6 

2 months after the date of enactment of this Act, and annu3 ally thereafter, the National Policy Board shall contract 

4 with the Institute of Medicine to review and make rec5 ommendations concerning the standard benefit package 

6 developed under section 4 and submit such recommenda7 tions to the National Policy Board and the appropriate 

8 committees of Congress. 

9 SEC. 11. REPORTING INSURANCE STATUS. 

10 The Secretary of the Treasury shall develop a process 

11 to enable individuals to report the health insurance status 

12 of each member in their household on their Federal in13 come tax return. 

Æ 


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