I

104TH CONGRESS

2D SESSION H. R. 4110

To amend the Internal Revenue Code of 1986 to require that group health

plans and insurers offer access to coverage for children and to assist

families in the purchase of such coverage.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 18, 1996

Mr. STARK introduced the following bill; which was referred to the Committee

on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to require

that group health plans and insurers offer access to

coverage for children and to assist families in the purchase of such 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.

4 This Act may be cited as the ‘‘Children Health Insur5 ance Act of 1996’’.

6 SEC. 2. HEALTH INSURANCE AVAILABILITY FOR CHILDREN.

7 (a) IN GENERAL.—The Internal Revenue Code of

8 1986 (as amended by the Health Insurance Portability
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1 and Accountability Act of 1996) is amended by adding at

2 the end the following:

3 ‘‘Subtitle L—Health Insurance

4 Availability for Children

5 ‘‘CHAPTER 101—HEALTH INSURANCE

6 AVAILABILITY FOR CHILDREN

‘‘Sec. 9901. Excise tax on failure to meet requirement of access

to coverage.

‘‘Sec. 9902. Requirement of access to coverage.

‘‘Sec. 9903. Definitions.

7 ‘‘SEC. 9901. EXCISE TAX ON FAILURE TO MEET REQUIRE8 MENT OF ACCESS TO COVERAGE.

9 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed

10 a tax on the failure of—

11 ‘‘(1) a group health plan to meet the coverage

12 requirements of section 9902(a); and

13 ‘‘(2) an insurer that offers health insurance

14 coverage (other than to a group health plan subject

15 to paragraph (1)) to meet the requirements of sec16 tion 9902(b).

17 ‘‘(b) AMOUNT OF TAX.—

18 ‘‘(1) GROUP HEALTH PLAN.—

19 ‘‘(A) IN GENERAL.—The amount of tax

20 imposed by subsection (a)(1) on any failure

21 with respect to a participant or beneficiary of a

22 group health plan shall be 25 percent of each
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1 premium received by the group health plan for

2 the plan year in which such failure occurs.

3 ‘‘(B) SELF-INSURED PLANS.—In the case

4 that the group health plan is self-insured, the

5 cost to the plan of the coverage of participants

6 and beneficiaries shall be treated as the pre7 mium received for the purposes of subpara8 graph (A).

9 ‘‘(2) INSURER OFFERING INDIVIDUAL HEALTH

10 INSURANCE COVERAGE.—The amount of tax im11 posed by subsection (a)(2) on any failure of an in12 surer with respect to an individual described in para13 graph (1) or (2) of section 9902(b) shall be 25 per14 cent of the total amount of the premiums paid to the

15 insurer for such coverage for the plan year in which

16 such failure occurs.

17 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—

18 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

19 DISCOVERED EXERCISING REASONABLE DILI20 GENCE.—No tax shall be imposed by subsection (a)

21 on any failure during any period for which it is es22 tablished to the satisfaction of the Secretary that

23 none of the persons referred to in subsection (e)

24 knew, or exercising reasonable diligence would have

25 known, that such failure existed.
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1 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR2 RECTED WITHIN 30 DAYS.—No tax shall be imposed

3 by subsection (a) on any failure if—

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

5 cause and not to willful neglect, and

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

7 30-day period beginning on the 1st date any of

8 the persons referred to in subsection (e) knew,

9 or exercising reasonable diligence would have

10 known, that such failure existed.

11 ‘‘(3) WAIVER.—In the case of a failure which is

12 due to reasonable cause and not to willful neglect,

13 the Secretary may waive part or all of the tax im14 posed by subsection (a) to the extent that the pay15 ment of such tax would be excessive relative to the

16 failure involved.

17 ‘‘(d) TAX NOT TO APPLY TO CERTAIN PLANS.—This

18 section shall not apply to—

19 ‘‘(1) any governmental plan (within the mean20 ing of section 414(d)), or

21 ‘‘(2) any church plan (within the meaning of

22 section 414(e)).

23 ‘‘(e) LIABILITY FOR TAX.—The following shall be re24 sponsible for the tax imposed by subsection (a):
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1 ‘‘(1) In the case of the tax imposed by sub2 section (a)(1) on a group health plan, the plan.

3 ‘‘(2) In the case of the tax imposed by sub4 section (a)(2) on an insurer offering health insur5 ance coverage, the insurer.

6 ‘‘SEC. 9902. REQUIREMENT OF ACCESS TO COVERAGE.

7 ‘‘(a) GROUP HEALTH PLANS.—

8 ‘‘(1) IN GENERAL.—Each group health plan

9 that provides coverage to any participant (or bene10 ficiary) must offer qualifying coverage for each

11 qualifying young dependent of an individual who is

12 a participant or beneficiary under the plan.

13 ‘‘(2) TIMING OF OFFER.—The offer under para14 graph (1) shall be made at the time a person first

15 becomes a qualifying young dependent and at least

16 annually thereafter.

17 ‘‘(b) HEALTH INSURANCE COVERAGE.—Each insurer

18 that offers health insurance coverage in the individual

19 market must offer qualifying coverage for each individual

20 who is under 21 years of age, residing in the United

21 States, and a citizen or national of the United States (or

22 alien permanently residing in the United States under

23 color of law).

24 ‘‘(c) QUALIFYING COVERAGE.—For purposes of this

25 section—
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1 ‘‘(1) IN GENERAL.—The term ‘qualifying cov2 erage’ means coverage of health care benefits that

3 provides for at least the following benefits, without

4 any limitation based on a pre-existing condition with

5 respect to such benefits and without any waiting pe6 riod for coverage with respect to such benefits:

7 ‘‘(A) MEDICARE BENEFITS.—Benefits pro8 vided under parts A and B of title XVIII of the

9 Social Security Act, or benefits determined to

10 be actuarially equivalent to (or greater than)

11 such benefits; except that in no case shall the

12 coinsurance attributable to benefits under part

13 B of such title exceed (with respect to provision

14 of an item or service) the lesser of $10 or 10

15 percent of the recognized payment amount with

16 respect to such item or service (determined

17 without regard to cost-sharing).

18 ‘‘(B) WELL CHILD CARE BENEFITS.—

19 ‘‘(i) IN GENERAL.—Payment for the

20 following items and services, without the

21 application of deductibles, coinsurance, and

22 copayments:

23 ‘‘(I) Newborn and well-baby care,

24 including normal newborn care and
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1 pediatrician services for high-risk de2 liveries.

3 ‘‘(II) Well-child care, including

4 routine office visits, routine immuni5 zations (including the vaccine itself),

6 routine laboratory tests, and preven7 tive dental care.

8 ‘‘(ii) PERIODICITY SCHEDULE.—The

9 Secretary, in consultation with the Amer10 ican Academy of Pediatrics, shall establish

11 a schedule of periodicity for services de12 scribed in clause (i) which reflects the gen13 eral, appropriate frequency with which

14 such services should be provided to health

15 children.

16 ‘‘(2) MANAGED CARE PERMITTED.—Nothing in

17 this section shall be construed as limiting the provid18 ers through whom the benefits described in para19 graph (1) may be provided so long as there is rea20 sonable access to such benefits.

21 ‘‘(d) QUALIFYING YOUNG DEPENDENT.—For pur22 poses of this section, the term ‘qualifying young depend23 ent’ means an individual who is under 21 years of age,

24 residing in the United States, is a citizen or national of

25 the United States (or alien permanently residing in the
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1 United States under color of law), and a dependent (as

2 defined in section 152) of the individual.

3 ‘‘SEC. 9903. DEFINITIONS.

4 ‘‘In this chapter—

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

6 health plan’ has the meaning given such term in sec7 tion 5000(b)(1), but does not include such a plan

8 that has medical benefits that only consist of cov9 erage described in paragraph (2)(B).

10 ‘‘(2) HEALTH INSURANCE COVERAGE.—

11 ‘‘(A) IN GENERAL.—Except as provided in

12 subparagraph (B), the term ‘health insurance

13 coverage’ means benefits consisting of medical

14 care (provided directly, through insurance or re15 imbursement, or otherwise) under any hospital

16 or medical service policy or certificate, hospital

17 or medical service plan contract, or health

18 maintenance organization group contract of19 fered by an insurer or a health maintenance or20 ganization.

21 ‘‘(B) EXCEPTION.—Such term does not in22 clude coverage under any separate policy, cer23 tificate, or contract only for one or more of any

24 of the following:
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1 ‘‘(i) Coverage for accident, credit-only,

2 vision, disability income, long-term care,

3 nursing home care, community-based care

4 dental, on-site medical clinics, or employee

5 assistance programs, or any combination

6 thereof.

7 ‘‘(ii) Medicare supplemental health in8 surance (within the meaning of section

9 1882(g)(1) of the Social Security Act (42

10 U.S.C. 1395ss(g)(1))) and similar supple11 mental coverage provided under a group

12 health plan.

13 ‘‘(iii) Coverage issued as a supplement

14 to liability insurance.

15 ‘‘(iv) Liability insurance, including

16 general liability insurance and automobile

17 liability insurance.

18 ‘‘(v) Workers’ compensation or similar

19 insurance.

20 ‘‘(vi) Automobile medical-payment in21 surance.

22 ‘‘(vii) Coverage for a specified disease

23 or illness.

24 ‘‘(viii) Hospital or fixed indemnity in25 surance.
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1 ‘‘(ix) Short-term limited duration in2 surance.

3 ‘‘(x) Such other coverage, comparable

4 to that described in previous clauses, as

5 may be specified in regulations prescribed

6 under this title.

7 ‘‘(3) HEALTH MAINTENANCE ORGANIZATION.—

8 The term ‘health maintenance organization’

9 means—

10 ‘‘(A) a federally qualified health mainte11 nance organization (as defined in section

12 1301(a) of the Public Health Service Act (42

13 U.S.C. 300e(a))),

14 ‘‘(B) an organization recognized under

15 State law as a health maintenance organization,

16 or

17 ‘‘(C) a similar organization regulated

18 under State law for solvency in the same man19 ner and to the same extent as such a health

20 maintenance organization,

21 if it is subject to State law which regulates insur22 ance (within the meaning of section 514(b)(2) of the

23 Employee Retirement Income Security Act of 1974).

24 ‘‘(4) INSURER.—The term ‘insurer’ means an

25 insurance company, insurance service, or insurance
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1 organization (including a health maintenance organi2 zation) which is licensed to engage in the business

3 of insurance in a State and which is subject to State

4 law which regulates insurance (within the meaning

5 of section 514(b)(2)(A) of the Employee Retirement

6 Income Security Act of 1974).

7 ‘‘(5) INDIVIDUAL MARKET.—The term ‘individ8 ual market’ means the market for health insurance

9 coverage offered to individuals and not to employers

10 or in connection with a group health plan and does

11 not include the market for such coverage issued only

12 by an insurer that makes such coverage available

13 only on the basis of affiliation with an association.

14 ‘‘(6) INCORPORATION OF CERTAIN DEFINI15 TIONS.—The terms ‘beneficiary’ and ‘participant’

16 have the meanings given such terms in section 3 of

17 the Employee Retirement Income Security Act of

18 1974.’’.

19 (b) CLERICAL AMENDMENT.—The table of contents

20 for the Internal Revenue Code of 1986 is amended by add21 ing after the item relating to subtitle K the following new

22 item:

‘‘Subtitle L. Health Insurance Availability for Children.’’

23 (c) EFFECTIVE DATE.—The requirement of section

24 9902 of the Internal Revenue Code of 1986 (as added by

25 subsection (a) of this section) shall take effect on January
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1 1, 1998, and shall apply to coverage offered on or after

2 such date regardless of whether the plan year began before

3 such date.

4 SEC. 3. REFUNDABLE TAX CREDIT FOR PURCHASE OF

5 HEALTH COVERAGE FOR CHILDREN.

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

8 1986 is amended by redesignating section 35 as section

9 36 and by inserting after section 34 the following new sec10 tion:

11 ‘‘SEC. 35. PURCHASE OF HEALTH COVERAGE FOR CHIL12 DREN.

13 ‘‘(a) GENERAL RULE.—In the case of an individual,

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

15 by this subtitle for the taxable year an amount equal to

16 80 percent of the qualified health premiums paid in the

17 taxable year by the taxpayer.

18 ‘‘(b) APPLICATION OF CREDIT AGAINST TAX LIABIL19 ITY.—

20 ‘‘(1) IN GENERAL.—The credit allowable under

21 subsection (a) shall be applied against tax liability at

22 the rate of $0.50 of credit for each $1 of tax liabil23 ity.
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1 ‘‘(2) TAX LIABILITY.—For the purposes of

2 paragraph (1), the term ‘tax liability’ means the ex3 cess (if any) of—

4 ‘‘(A) the sum of—

5 ‘‘(i) the tax imposed by this chapter

6 for the taxable year (reduced by the credits

7 allowable against such tax other than the

8 credits allowable under this subpart), and

9 ‘‘(ii) the taxpayer’s social security

10 taxes for such taxable year, over

11 ‘‘(B) the credit allowed for the taxable year

12 under section 32.

13 ‘‘(3) SOCIAL SECURITY TAXES.—For purposes

14 of paragraph (2)—

15 ‘‘(A) IN GENERAL.—The term ‘social secu16 rity taxes’ means, with respect to any taxpayer

17 for any taxable year—

18 ‘‘(i) the amount of the taxes imposed

19 by sections 3101 and 3201(a) on amounts

20 received by the taxpayer during the cal21 endar year in which the taxable year be22 gins,

23 ‘‘(ii) one-half of the amount of the

24 taxes imposed by section 1401 on the self-
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1 employment income of the taxpayer for the

2 taxable year, and

3 ‘‘(iii) one-half of the amount of the

4 taxes imposed by section 3211(a)(1) on

5 amounts received by the taxpayer during

6 the calendar year in which the taxable year

7 begins.

8 ‘‘(B) COORDINATION WITH SPECIAL RE9 FUND OF SOCIAL SECURITY TAXES.—The term

10 ‘social security taxes’ shall not include any

11 taxes to the extent the taxpayer is entitled to

12 a special refund of such taxes under section

13 6413(c).

14 ‘‘(C) SPECIAL RULE.—Any amounts paid

15 pursuant to an agreement under section 3121(l)

16 (relating to agreements entered into by Amer17 ican employers with respect to foreign affiliates)

18 which are equivalent to the taxes referred to in

19 subparagraph (A)(i) shall be treated as taxes

20 referred to in such subparagraph.

21 ‘‘(c) DEFINITIONS.—For the purposes of this sec22 tion—

23 ‘‘(1) QUALIFIED HEALTH PREMIUM.—The term

24 ‘qualified health premium’ means the amount paid

25 for health coverage of a qualifying young dependent.
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1 ‘‘(2) HEALTH COVERAGE.—The term ‘health

2 coverage’ means health insurance coverage (as de3 fined by section 9902(b)) that includes qualifying

4 coverage (as defined by section 9902(c)).

5 ‘‘(3) QUALIFYING YOUNG DEPENDENT.—The

6 term ‘qualifying young dependent’ has the meaning

7 given such term by section 9902(d).’’.

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

9 for subpart C of part IV of subchapter A of chapter 1

10 is amended by striking the item relating to section 35 and

11 inserting the following new items:

‘‘Sec. 35. Purchase of health coverage for children.

‘‘Sec. 36. Overpayments of tax.’’

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

13 this section shall apply to taxable years beginning after

14 December 31, 1997.

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