II

106TH CONGRESS

2D SESSION S. 2337

To amend the Internal Revenue Code of 1986 to allow individuals a refundable credit against income tax for the purchase of private health insurance, and to establish State health insurance safety-net programs.

IN THE SENATE OF THE UNITED STATES

MARCH 30, 2000

Mr. SANTORUM (for himself and Mr. KYL) introduced the following bill; which

was read twice and referred to the Committee on Finance

A BILL

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

purchase of private health insurance, and to establish

State health insurance safety-net programs.

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 ‘‘Fair Care for the Un5 insured Act’’.
2

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1 TITLE I—REFUNDABLE CREDIT

2 FOR HEALTH INSURANCE

3 COVERAGE

4 SEC. 101. 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 35 as section 36 and by inserting after

10 section 34 the following:

11 ‘‘SEC. 35. HEALTH INSURANCE COSTS.

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

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

14 by this subtitle an amount equal to the amount paid dur15 ing the taxable year for qualified health insurance for the

16 taxpayer and the taxpayer’s spouse and dependents.

17 ‘‘(b) LIMITATIONS.—

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

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

20 taxable year shall not exceed the sum of the monthly

21 limitations for coverage months during such taxable

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

23 for whom the taxpayer paid during the taxable year

24 any amount for coverage under qualified health in25 surance.
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1 ‘‘(2) MONTHLY LIMITATION.—

2 ‘‘(A) IN GENERAL.—The monthly limita3 tion for an individual for each coverage month

4 of such individual during the taxable year is the

5 amount equal to 1/12 of—

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

7 taxpayer,

8 ‘‘(ii) $1,000 if—

9 ‘‘(I) such individual is the spouse

10 of the taxpayer,

11 ‘‘(II) the taxpayer and such

12 spouse are married as of the first day

13 of such month, and

14 ‘‘(III) the taxpayer files a joint

15 return for the taxable year, and

16 ‘‘(iii) $1,000 if such individual is an

17 individual for whom a deduction under sec18 tion 151(c) is allowable to the taxpayer for

19 such taxable year.

20 ‘‘(B) LIMITATION TO 1 DEPENDENT.—Not

21 more than 1 individual may be taken into ac22 count by the taxpayer under subparagraph

23 (A)(iii).

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

25 subsection—
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1 ‘‘(A) IN GENERAL.—The term ‘coverage

2 month’ means, with respect to an individual,

3 any month if—

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

5 such individual is covered by qualified

6 health insurance, and

7 ‘‘(ii) the premium for coverage under

8 such insurance for such month is paid by

9 the taxpayer.

10 ‘‘(B) EMPLOYER-SUBSIDIZED COV11 ERAGE.—Such term shall not include any

12 month for which such individual eligible to par13 ticipate in any subsidized health plan (within

14 the meaning of section 162(l)(2)) maintained by

15 any employer of the taxpayer or of the spouse

16 of the taxpayer.

17 ‘‘(C) CAFETERIA PLAN AND FLEXIBLE

18 SPENDING ACCOUNT BENEFICIARIES.—Such

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

21 gross income of the taxpayer for such year

22 under section 106 with respect to—

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

24 plan (as defined in section 125(d)), or
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1 ‘‘(ii) a benefit provided under a flexi2 ble spending or similar arrangement.

3 ‘‘(D) MEDICARE, MEDICAID, AND SCHIP.—

4 Such term shall not include any month with re5 spect to an individual if, as of the first day of

6 such month, such individual—

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

8 title XVIII of the Social Security Act, or

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

10 under title XIX or XXI of such Act.

11 ‘‘(E) CERTAIN OTHER COVERAGE.—Such

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

14 time during such year, any benefit is provided

15 to such individual under—

16 ‘‘(i) chapter 17 of title 38, United

17 States Code, or

18 ‘‘(ii) any medical care program under

19 the Indian Health Care Improvement Act.

20 ‘‘(F) PRISONERS.—Such term shall not in21 clude any month with respect to an individual

22 if, as of the first day of such month, such indi23 vidual is imprisoned under Federal, State, or

24 local authority.
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1 ‘‘(G) INSUFFICIENT PRESENCE IN UNITED

2 STATES.—Such term shall not include any

3 month during a taxable year with respect to an

4 individual if such individual is present in the

5 United States on fewer than 183 days during

6 such year (determined in accordance with sec7 tion 7701(b)(7)).

8 ‘‘(4) COORDINATION WITH DEDUCTION FOR

9 HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN10 DIVIDUALS.—In the case of a taxpayer who is eligi11 ble to deduct any amount under section 162(l) for

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

13 taxpayer elects not to claim any amount as a deduc14 tion under such section for such year.

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

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

18 insurance’ means insurance which constitutes med19 ical care as defined in section 213(d) without regard

20 to—

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

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

23 as relates to qualified long-term care insurance

24 contracts.
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1 ‘‘(2) EXCLUSION OF CERTAIN OTHER CON2 TRACTS.—Such term shall not include insurance if a

3 substantial portion of its benefits are excepted bene4 fits (as defined in section 9832(c)).

5 ‘‘(d) MEDICAL SAVINGS ACCOUNT CONTRIBU6 TIONS.—

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

8 for paragraph (2)) be allowed under section 220 to

9 the taxpayer for a payment for the taxable year to

10 the medical savings account of an individual, sub11 section (a) shall be applied by treating such payment

12 as a payment for qualified health insurance for such

13 individual.

14 ‘‘(2) DENIAL OF DOUBLE BENEFIT.—No deduc15 tion shall be allowed under section 220 for that por16 tion of the payments otherwise allowable as a deduc17 tion under section 220 for the taxable year which is

18 equal to the amount of credit allowed for such tax19 able year by reason of this subsection.

20 ‘‘(e) SPECIAL RULES.—

21 ‘‘(1) COORDINATION WITH MEDICAL EXPENSE

22 DEDUCTION.—The amount which would (but for this

23 paragraph) be taken into account by the taxpayer

24 under section 213 for the taxable year shall be re-
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1 duced by the credit (if any) allowed by this section

2 to the taxpayer for such year.

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

4 credit shall be allowed under this section to any indi5 vidual with respect to whom a deduction under sec6 tion 151 is allowable to another taxpayer for a tax7 able year beginning in the calendar year in which

8 such individual’s taxable year begins.

9 ‘‘(3) INFLATION ADJUSTMENT.—In the case of

10 any taxable year beginning in a calendar year after

11 2001, each dollar amount contained in subsection

12 (b)(2)(A) shall be increased by an amount equal

13 to—

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

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

17 year in which the taxable year begins, deter18 mined by substituting ‘calendar year 2000’ for

19 ‘calendar year 1992’ in subparagraph (B)

20 thereof.

21 Any increase determined under the preceding sen22 tence shall be rounded to the nearest multiple of $50

23 ($25 in the case of the dollar amount in subsection

24 (b)(2)(A)(iii)).’’.
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1 (b) MAINTENANCE OF EFFORT REQUIREMENT.—

2 Section 162 of the Internal Revenue Code of 1986 (relat3 ing to trade or business expenses) is amended by redesig4 nating subsection (p) as subsection (q) and by inserting

5 after subsection (o) the following new subsection:

6 ‘‘(p) GROUP HEALTH PLAN MAINTENANCE OF EF7 FORT.—No deduction shall be allowed under this chapter

8 to an employer for any amount paid or incurred in connec9 tion with a group health plan (as defined in subsection

10 (n)(3)) for any taxable year in which occurs the date of

11 introduction of the Fair Care for the Uninsured Act unless

12 such plan remains in effect for at least 6 months after

13 the date of the enactment of such Act.’’.

14 (c) INFORMATION REPORTING.—

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

16 subchapter A of chapter 61 of the Internal Revenue

17 Code of 1986 (relating to information concerning

18 transactions with other persons) is amended by in19 serting after section 6050S the following:

20 ‘‘SEC. 6050T. RETURNS RELATING TO PAYMENTS FOR

21 QUALIFIED HEALTH INSURANCE.

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

23 with a trade or business conducted by such person, re24 ceives payments during any calendar year from any indi25 vidual for coverage of such individual or any other indi-
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1 vidual under creditable health insurance, shall make the

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

3 Secretary may by regulations prescribe) with respect to

4 each individual from whom such payments were received.

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

6 is described in this subsection if such return—

7 ‘‘(1) is in such form as the Secretary may pre8 scribe, and

9 ‘‘(2) contains—

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

11 individual from whom payments described in

12 subsection (a) were received,

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

14 individual who was provided by such person

15 with coverage under creditable health insurance

16 by reason of such payments and the period of

17 such coverage, and

18 ‘‘(C) such other information as the Sec19 retary may reasonably prescribe.

20 ‘‘(c) CREDITABLE HEALTH INSURANCE.—For pur21 poses of this section, the term ‘creditable health insurance’

22 means qualified health insurance (as defined in section

23 35(c)) other than—

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

25 plan maintained by an employer, or
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1 ‘‘(2) to the extent provided in regulations pre2 scribed by the Secretary, any other insurance cov3 ering an individual if no credit is allowable under

4 section 35 with respect to such coverage.

5 ‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID6 UALS WITH RESPECT TO WHOM INFORMATION IS RE7 QUIRED.—Every person required to make a return under

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

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

10 such return a written statement showing—

11 ‘‘(1) the name and address of the person re12 quired to make such return and the phone number

13 of the information contact for such person,

14 ‘‘(2) the aggregate amount of payments de15 scribed in subsection (a) received by the person re16 quired to make such return from the individual to

17 whom the statement is required to be furnished, and

18 ‘‘(3) the information required under subsection

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

20 The written statement required under the preceding sen21 tence shall be furnished on or before January 31 of the

22 year following the calendar year for which the return

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

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

25 MADE BY 2 OR MORE PERSONS.—Except to the extent
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1 provided in regulations prescribed by the Secretary, in the

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

3 another person, only the person first receiving such

4 amount shall be required to make the return under sub5 section (a).’’.

6 (2) ASSESSABLE PENALTIES.—

7 (A) Subparagraph (B) of section

8 6724(d)(1) of such Code (relating to defini9 tions) is amended by redesignating clauses (xi)

10 through (xvii) as clauses (xii) through (xviii),

11 respectively, and by inserting after clause (x)

12 the following:

13 ‘‘(xi) section 6050T (relating to re14 turns relating to payments for qualified

15 health insurance),’’.

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

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

18 end of the next to last subparagraph, by strik19 ing the period at the end of the last subpara20 graph and inserting ‘‘, or’’, and by adding at

21 the end the following:

22 ‘‘(BB) section 6050T(d) (relating to re23 turns relating to payments for qualified health

24 insurance).’’.
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1 (3) CLERICAL AMENDMENT.—The table of sec2 tions for subpart B of part III of subchapter A of

3 chapter 61 of such Code is amended by inserting

4 after the item relating to section 6050S the fol5 lowing:

‘‘Sec. 6050T. Returns relating to payments for qualified health

insurance.’’.

6 (d) CONFORMING AMENDMENTS.—

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

8 31, United States Code, is amended by inserting be9 fore the period ‘‘, or from section 35 of such Code’’.

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

11 IV of subchapter A of chapter 1 of the Internal Rev12 enue Code of 1986 is amended by striking the last

13 item and inserting the following:

‘‘Sec. 35. Health insurance costs.

‘‘Sec. 36. Overpayments of tax.’’.

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

15 this section shall apply to taxable years beginning after

16 December 31, 2000.

17 SEC. 102. ADVANCE PAYMENT OF CREDIT FOR PUR18 CHASERS OF QUALIFIED HEALTH INSUR19 ANCE.

20 (a) IN GENERAL.—Chapter 77 of the Internal Rev21 enue Code of 1986 (relating to miscellaneous provisions)

22 is amended by adding at the end the following:
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1 ‘‘SEC. 7527. ADVANCE PAYMENT OF HEALTH INSURANCE

2 CREDIT FOR PURCHASERS OF QUALIFIED

3 HEALTH INSURANCE.

4 ‘‘(a) GENERAL RULE.—In the case of an eligible indi5 vidual, the Secretary shall make payments to the provider

6 of such individual’s qualified health insurance equal to

7 such individual’s qualified health insurance credit advance

8 amount with respect to such provider.

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

10 section, the term ‘eligible individual’ means any

11 individual—

12 ‘‘(1) who purchases qualified health insurance

13 (as defined in section 35(c)), and

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

15 credit eligibility certificate is in effect.

16 ‘‘(c) QUALIFIED HEALTH INSURANCE CREDIT ELIGI17 BILITY CERTIFICATE.—For purposes of this section, a

18 qualified health insurance credit eligibility certificate is a

19 statement furnished by an individual to the Secretary

20 which—

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

22 to receive the credit provided by section 35 for the

23 taxable year,

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

25 such taxable year, and
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1 ‘‘(3) provides such other information as the

2 Secretary may require for purposes of this section.

3 ‘‘(d) QUALIFIED HEALTH INSURANCE CREDIT AD4 VANCE AMOUNT.—For purposes of this section, the term

5 ‘qualified health insurance credit advance amount’ means,

6 with respect to any provider of qualified health insurance,

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

8 under section 35 to the individual for the taxable year

9 which is attributable to the insurance provided to the indi10 vidual by such provider.

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

12 such regulations as may be necessary to carry out the pur13 poses of this section.’’.

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

15 for chapter 77 of the Internal Revenue Code of 1986 is

16 amended by adding at the end the following:

‘‘Sec. 7527. Advance payment of health insurance credit for purchasers of qualified health insurance.’’.

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

18 this section shall take effect on January 1, 2001.

19 TITLE II—ASSURING HEALTH IN20 SURANCE COVERAGE FOR UN21 INSURABLE INDIVIDUALS

22 SEC. 201. ESTABLISHMENT OF HEALTH INSURANCE SAFETY

23 NETS.

24 (a) IN GENERAL.—
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1 (1) REQUIREMENT.—For years beginning with

2 2001, each health insurer, health maintenance orga3 nization, and health service organization shall be a

4 participant in a health insurance safety net (in this

5 title referred to as a ‘‘safety net’’) established by the

6 State in which it operates.

7 (2) FUNCTIONS.—Any safety net shall assure,

8 in accordance with this title, the availability of quali9 fied health insurance coverage to uninsurable indi10 viduals.

11 (3) FUNDING.—Any safety net shall be funded

12 by an assessment against health insurers, health

13 service organizations, and health maintenance orga14 nizations on a pro rata basis of uninsurable individ15 uals covered in the State in which the safety net op16 erates. The costs of the assessment may be added by

17 a health insurer, health service organization, or

18 health maintenance organization to the costs of its

19 health insurance or health coverage provided in the

20 State.

21 (4) GUARANTEED RENEWABLE.—Coverage

22 under a safety net shall be guaranteed renewable ex23 cept for nonpayment of premiums, material mis24 representation, fraud, medicare eligibility under title

25 XVIII of the Social Security Act (42 U.S.C. 1395 et
17

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1 seq.), loss of dependent status, or eligibility for other

2 health insurance coverage.

3 (b) DEADLINE.—Safety nets required under sub4 section (a) shall be established not later than January 1,

5 2001.

6 (c) WAIVER.—This title shall not apply in the case

7 of insurers and organizations operating in a State if the

8 State has established a similar comprehensive health in9 surance program that assures the availability of qualified

10 health insurance coverage to all eligible individuals resid11 ing in the State.

12 (d) RECOMMENDATION FOR COMPLIANCE REQUIRE13 MENT.—Not later than January 1, 2002, the Secretary

14 of Health and Human Services shall submit to Congress

15 a recommendation on appropriate sanctions for States

16 that fail to meet the requirement of subsection (a).

17 SEC. 202. UNINSURABLE INDIVIDUALS ELIGIBLE FOR COV18 ERAGE.

19 (a) UNINSURABLE AND ELIGIBLE INDIVIDUAL DE20 FINED.—In this title:

21 (1) UNINSURABLE INDIVIDUAL.—The term

22 ‘‘uninsurable individual’’ means, with respect to a

23 State, an eligible individual who presents proof of

24 uninsurability by a private insurer in accordance
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1 with subsection (b) or proof of a condition previously

2 recognized as uninsurable by the State.

3 (2) ELIGIBLE INDIVIDUAL.—

4 (A) IN GENERAL.—The term ‘‘eligible indi5 vidual’’ means, with respect to a State, a citizen

6 or national of the United States (or an alien

7 lawfully admitted) who is a resident of the

8 State for at least 90 days.

9 (B) EXCEPTION.—An individual is not an

10 ‘‘eligible individual’’ if the individual—

11 (i) is covered by or eligible for benefits

12 under a State medicaid plan approved

13 under title XIX of the Social Security Act

14 (42 U.S.C. 1396 et seq.),

15 (ii) has voluntarily terminated safety

16 net coverage within the past 6 months,

17 (iii) has received the maximum benefit

18 payable under the safety net,

19 (iv) is an inmate in a public institu20 tion, or

21 (v) is eligible for other public or pri22 vate health care programs (including pro23 grams that pay for directly, or reimburse,

24 otherwise eligible individuals with pre25 miums charged for safety net coverage).
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1 (b) PROOF OF UNINSURABILITY.—

2 (1) IN GENERAL.—The proof of uninsurability

3 for an individual shall be in the form of—

4 (A) a notice of rejection or refusal to issue

5 substantially similar insurance,

6 (B) a notice of refusal to insure except at

7 a rate in excess of the plan rate which applies

8 to persons in good health, or

9 (C) an offer to insure only subject to a re10 duction or an exclusion of coverage for a pre11 existing condition for a period exceeding 6

12 months.

13 (2) EXCEPTION.—A State may waive the re14 quirement of proof described in paragraph (1) in the

15 case of an individual who demonstrates a provable

16 medical or health condition.

17 SEC. 203. QUALIFIED HEALTH INSURANCE COVERAGE

18 UNDER SAFETY NET.

19 In this title, the term ‘‘qualified health insurance cov20 erage’’ means, with respect to a State, health insurance

21 coverage that provides benefits typical of major medical

22 insurance available in the individual health insurance mar23 ket in such State.

24 SEC. 204. FUNDING OF SAFETY NET.

25 (a) LIMITATIONS ON PREMIUMS.—
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1 (1) IN GENERAL.—The premium established

2 under a safety net may not exceed 125 percent of

3 the applicable standard risk rate, except as provided

4 in paragraph (2).

5 (2) SURCHARGE FOR AVOIDABLE HEALTH

6 RISKS.—A safety net may impose a surcharge on

7 premiums for individuals with avoidable high risks,

8 such as smoking.

9 (b) ADDITIONAL FUNDING.—A safety net shall pro10 vide for additional funding through an assessment on all

11 health insurers, health service organizations, and health

12 maintenance organizations in the State through a non13 profit association consisting of all such insurers and orga14 nizations doing business in the State on an equitable and

15 pro rata basis consistent with section 201.

16 SEC. 205. ADMINISTRATION.

17 A safety net in a State shall be administered through

18 a contract with 1 or more insurers or third party adminis19 trators operating in the State.

Æ