II 

110TH CONGRESS 

1ST SESSION S. 1298 

To amend the Social Security Act to establish a Federal Reinsurance Program 

for Catastrophic Health Care Costs. 

IN THE SENATE OF THE UNITED STATES 

MAY 3, 2007 

Mr. KERRY (for himself and Mr. REED) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To amend the Social Security Act to establish a Federal 

Reinsurance Program for Catastrophic Health Care Costs. 

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 ‘‘Healthy Businesses, 

5 Healthy Workers Reinsurance Act of 2007’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 

8 (1) The cost of health insurance premiums for 

9 families has risen 87 percent since 2000, nearly 4 


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1 times the growth in overall inflation and workers 

2 earnings. 

3 (2) Health insurance premium increases have 

4 resulted in a nearly 10 percentage point drop in the 

5 number of firms choosing to offer coverage to their 

6 workers over that time period. 

7 (3) Today, just 48 percent of firms with be8 tween 3 and 9 employees offer health insurance ben9 efits, down from 58 percent in 2001. 

10 (4) The decline in employer-sponsored coverage 

11 has added to the growing problem of the uninsured. 

12 An additional 4 million Americans have been added 

13 to the ranks of the uninsured since 2001. 

14 (5) Health care costs are highly concentrated. 

15 Twenty percent of the population that is catastroph16 ically or chronically ill accounts for 80 percent of the 

17 health care spending, with just 1 percent driving a 

18 full 22 percent of health care costs. 

19 SEC. 3. FEDERAL REINSURANCE PROGRAM FOR CATA20 STROPHIC HEALTH CARE COSTS. 

21 (a) PROGRAM.—The Social Security Act (42 U.S.C. 

22 301 et seq.) is amended by adding at the end the following 

23 new title: 


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1 ‘‘TITLE XXII—FEDERAL REIN2 SURANCE PROGRAM FOR 

3 CATASTROPHIC HEALTH 

4 CARE COSTS 

5 ‘‘SEC. 2201. OFFICE OF FEDERAL REINSURANCE. 

6 ‘‘(a) IN GENERAL.—There is established within the 

7 Department of Health and Human Services an office to 

8 be known as the ‘Office of Federal Reinsurance’. 

9 ‘‘(b) DUTY.—The Office of Federal Reinsurance shall 

10 establish and administer the Federal Reinsurance Pro11 gram for Catastrophic Health Care Costs in accordance 

12 with the provisions of this title. 

13 ‘‘SEC. 2202. PROGRAM. 

14 ‘‘(a) ESTABLISHMENT.— 

15 ‘‘(1) IN GENERAL.—The Office shall establish 

16 and administer a Federal Reinsurance Program for 

17 Catastrophic Health Care Costs under which rein18 surance payments are provided to eligible health 

19 plans that experience catastrophic health care costs 

20 during a year with respect to an individual covered 

21 under the plan. For purposes of this title, the term 

22 ‘individual covered under the plan’ includes employ23 ees, retirees, spouses, and dependants. 

24 ‘‘(2) PROGRAM TO BEGIN IN 2009.—The Office 

25 shall establish the Program in a manner so that reVerDate Aug 31 2005 22:42 May 04, 2007 Jkt 059200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1298.IS S1298

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1 insurance payments are made with respect to cata2 strophic health care costs occurring on or after Jan3 uary 1, 2009. 

4 ‘‘(3) ELIGIBLE HEALTH PLAN.— 

5 ‘‘(A) IN GENERAL.—In this title, the term 

6 ‘eligible health plan’ means any of the following: 

7 ‘‘(i) A group health plan that meets 

8 the requirements described in subpara9 graph (B). 

10 ‘‘(ii) A governmental plan (as defined 

11 in section 3(32) of the Employee Retire12 ment Income Security Act of 1974) that 

13 meets the requirements described in sub14 paragraph (B). 

15 ‘‘(iii) A multiemployer plan (as de16 fined in section 3(37) of the Employee Re17 tirement Income Security Act of 1974) 

18 that meets the requirements described in 

19 subparagraph (B). 

20 ‘‘(iv) A plan that offers coverage 

21 through health purchasing cooperatives in 

22 conjunction with a State health program 

23 that makes available health insurance cov24 erage to the small group market and the 

25 individual market on the same terms and 


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1 that meets the requirements described in 

2 subparagraph (B). 

3 ‘‘(B) REQUIREMENTS.—The requirements 

4 described in this subparagraph are that— 

5 ‘‘(i) the plan involved— 

6 ‘‘(I) provides eligibility for health 

7 insurance coverage (after any waiting 

8 period (as defined in section 

9 9801(b)(4))) to all full-time employees 

10 of the employer maintaining or con11 tributing to the plan; 

12 ‘‘(II) ensures that if there is a 

13 deductible under the plan, such de14 ductible does not exceed $1,000 for an 

15 individual and $2,000 for a family; 

16 ‘‘(III) ensures that the plan of17 fers preventative benefits; and 

18 ‘‘(IV) ensures that the plan em19 ploys effective high-cost case manage20 ment tools (in accordance with the 

21 definition of disease management by 

22 the Disease Management Association 

23 of America) in order to reduce costs 

24 over time; and 


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1 ‘‘(ii) the employer maintaining or con2 tributing to the plan involved pays at least 

3 50 percent of the costs of health insurance 

4 coverage for each employee covered under 

5 the plan (regardless of whether the em6 ployee is a full-time or part-time em7 ployee). 

8 ‘‘(C) COST-OF-LIVING ADJUSTMENT.— 

9 ‘‘(i) IN GENERAL.—In the case of any 

10 calendar year after 2009. each dollar 

11 amount in subparagraph (B)(ii) shall be 

12 increased by an amount equal to— 

13 ‘‘(I) such dollar amount, multi14 plied by 

15 ‘‘(II) the cost-of-living adjust16 ment determined under section 1(f)(3) 

17 of the Internal Revenue Code of 1986 

18 for such calendar year determined by 

19 substituting ‘calendar year 2008’ for 

20 ‘calendar year 1992’ in subparagraph 

21 (B) thereof. 

22 ‘‘(ii) DATE FOR DETERMINATION.— 

23 For purposes of clause (i), section 1(f)(4) 

24 of such Code shall be applied by sub25 stituting ‘March 31’ for ‘August 31’, and 


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1 the Secretary of the Treasury shall publish 

2 the adjusted amounts under subparagraph 

3 (B)(ii) for the calendar year not later than 

4 June 1 of the preceding calendar year. 

5 ‘‘(iii) ROUNDING.—If any increase 

6 under clause (i) is not a multiple of $50, 

7 such increase shall be rounded to the near8 est multiple of $50. 

9 ‘‘(D) EMPLOYER.—For purposes of this 

10 title, the term ‘employer’ includes the Federal 

11 government and any other governmental entity 

12 (within the meaning of section 5000(d) of In13 ternal Revenue Code of 1986). 

14 ‘‘(b) ENROLLMENT.— 

15 ‘‘(1) PROCEDURES.—The Office shall establish 

16 procedures for the enrollment of eligible health plans 

17 in the Program. 

18 ‘‘(2) APPLICATION AND ANNUAL RECERTIFI19 CATION.— 

20 ‘‘(A) IN GENERAL.—The procedures estab21 lished under paragraph (1) shall include a proc22 ess for an eligible health plan— 

23 ‘‘(i) to submit an application to the 

24 Office for enrollment in the Program; and 


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1 ‘‘(ii) to be annually recertified for en2 rollment in the Program. 

3 ‘‘(B) REQUIREMENT.—The application and 

4 recertification process under subparagraph (A) 

5 shall require that an eligible health plan submit 

6 to the Office— 

7 ‘‘(i) a detailed description of the pro8 jected and actual reduction in total costs 

9 under the plan that are a result of the 

10 Program, including both individual and 

11 employer portions; and 

12 ‘‘(ii) such other information deter13 mined appropriate by the Office. 

14 ‘‘(3) APPROVAL.— 

15 ‘‘(A) IN GENERAL.—The procedures estab16 lished under paragraph (1) shall provide for the 

17 approval or disapproval of applications and re18 quests for recertification submitted by eligible 

19 health plans under paragraph (2). 

20 ‘‘(B) SPECIFIC REQUIREMENT.—The Of21 fice shall not approve an application or a re22 quest for recertification unless the Office finds 

23 that the eligible health plan is reducing total 

24 costs under the plan, based on the information 


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1 submitted under paragraph (2)(B) and audits 

2 conducted under paragraph (4). 

3 ‘‘(4) AUDITS.—The Office shall conduct audits 

4 of claims data of eligible health plans in order to en5 sure that the eligible health plan is in compliance 

6 with the requirements under the Program, including 

7 the requirement under paragraph (3)(B). An eligible 

8 health plan shall not be eligible for reinsurance pay9 ments unless it provides the Office with access to 

10 such data. 

11 ‘‘(c) COST-SHARING IN COSTS OF PROGRAM.— 

12 ‘‘(1) IN GENERAL.—An eligible health plan that 

13 participates in the Program shall pay the fee estab14 lished by the Office under paragraph (2). 

15 ‘‘(2) AUTHORIZATION.—The Office is author16 ized to charge a fee to each eligible health plan that 

17 participates in the Program. Any amounts collected 

18 shall be deposited into the Trust Fund. 

19 ‘‘(3) REQUIREMENTS.—In establishing the fee 

20 under paragraph (2)— 

21 ‘‘(A) the Office shall consult with inter22 ested parties; and 

23 ‘‘(B) shall ensure that the amount of such 

24 fee is not excessive so as to unduly discourage 


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1 eligible health plans from enrolling in the Pro2 gram. 

3 ‘‘(d) APPEALS PROCESS.—The Office shall establish 

4 an appeals process under the Program. 

5 ‘‘(e) PROCEDURES TO PROTECT AGAINST FRAUD, 

6 WASTE, AND ABUSE.—The Office shall establish proce7 dures to protect against fraud, waste, and abuse under 

8 the Program. 

9 ‘‘SEC. 2203. REINSURANCE PAYMENTS. 

10 ‘‘(a) AMOUNT.— 

11 ‘‘(1) IN GENERAL.—The amount of a reinsur12 ance payment under the Program to an eligible 

13 health plan that experiences catastrophic health care 

14 costs in a year with respect to an individual covered 

15 under the plan shall be an amount equal to 75 per16 cent of such costs. 

17 ‘‘(2) CATASTROPHIC HEALTH CARE COSTS.— 

18 ‘‘(A) IN GENERAL.—In this title, the term 

19 ‘catastrophic health care costs’ means, with re20 spect to a year, costs for medical care (as de21 fined in section 9832(d)(3) of the Internal Rev22 enue Code of 1986) provided under an eligible 

23 health plan to an individual covered under the 

24 plan, but only with respect to such costs which 

25 exceed $50,000. 


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1 ‘‘(B) NEGOTIATED PRICES.—In deter2 mining the amount of catastrophic health care 

3 costs under the Program, the eligible health 

4 care plan shall take into account any negotiated 

5 price concessions, such as discounts, direct or 

6 indirect subsidies, rebates, and direct or indi7 rect remunerations, obtained by the plan. 

8 ‘‘(C) INFLATION ADJUSTMENT.— 

9 ‘‘(i) IN GENERAL.—In the case of a 

10 calendar year after 2009, the $50,000 

11 amount in subparagraph (A) shall be in12 creased by an amount equal to— 

13 ‘‘(I) such dollar amount; multi14 plied by 

15 ‘‘(II) the percentage (if any) by 

16 which the average of the medical care 

17 component of the Consumer Price 

18 Index for all urban consumers (United 

19 States city average) for the 12-month 

20 period ending with August of the pre21 ceding calendar year exceeds such av22 erage for the 12-month period ending 

23 with August 2008. 

24 ‘‘(ii) ROUNDING.—If any dollar 

25 amount after being increased under clause 


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1 (i) is not a multiple of $1,000, such dollar 

2 amount shall be rounded to the nearest 

3 multiple of $1,000. 

4 ‘‘(b) REQUESTS FOR PAYMENT.—To be eligible for 

5 a reinsurance payment with respect to an individual for 

6 a year, an eligible health plan shall submit to the Office, 

7 at a time and in a manner determined appropriate by the 

8 Office, a request for payment that contains— 

9 ‘‘(1) a certification— 

10 ‘‘(A) that the plan paid or incurred cata11 strophic health care costs during the year with 

12 respect to the individual; and 

13 ‘‘(B) of the amount of such costs; and 

14 ‘‘(2) such other information determined appro15 priate by the Office. 

16 ‘‘(c) PAYMENTS FROM TRUST FUND.— 

17 ‘‘(1) IN GENERAL.—Payments to eligible health 

18 plans under the Program shall be made from the 

19 Trust Fund. 

20 ‘‘(2) TAX TREATMENT.—For purposes of the 

21 Internal Revenue Code of 1986— 

22 ‘‘(A) payments from the Trust Fund to the 

23 eligible health plan shall not be included in 

24 gross income; and 


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1 ‘‘(B) no deduction shall be allowed to the 

2 eligible health plan with respect to the payment 

3 of any catastrophic health care costs for the 

4 portion of such costs which was reimbursed 

5 from the Trust Fund. 

6 ‘‘SEC. 2204. FEDERAL REINSURANCE FOR CATASTROPHIC 

7 HEALTH CARE COSTS TRUST FUND. 

8 ‘‘(a) CREATION OF TRUST FUND.—There is estab9 lished in the Treasury of the United States a trust fund 

10 to be known as the ‘Federal Reinsurance for Catastrophic 

11 Health Care Costs Trust Fund’, consisting of such 

12 amounts as may be appropriated or credited to the Trust 

13 Fund (including any fees deposited under section 

14 2202(c)). 

15 ‘‘(b) MANDATORY APPROPRIATIONS.—There are ap16 propriated to the Trust Fund such sums as may be nec17 essary in order to make the reinsurance payments re18 quired under section 2203. 

19 ‘‘(c) RULES REGARDING TRANSFERS TO AND MAN20 AGEMENT OF TRUST FUND.—For purposes of this sec21 tion, rules similar to the rules of sections 9601 and 9602 

22 of the Internal Revenue Code of 1986 shall apply. 

23 ‘‘(d) DISTRIBUTION OF AMOUNTS IN TRUST

24 FUND.—Amounts in the Trust Fund shall be available for 

25 making payments under section 2203. 


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1 ‘‘SEC. 2205. REPORTS. 

2 ‘‘(a) SECRETARY.— 

3 ‘‘(1) IN GENERAL.—Not later than March 1, 

4 2011, and biennially thereafter, the Secretary shall 

5 submit to Congress a report on the Program. 

6 ‘‘(2) REQUIREMENTS.— 

7 ‘‘(A) IN GENERAL.—Each report submitted 

8 under paragraph (1) shall contain— 

9 ‘‘(i) a detailed description of the Pro10 gram, including a detailed description of 

11 the impact the Program has had on reduc12 ing premiums for health insurance cov13 erage and increasing the number of indi14 viduals with health insurance coverage; and 

15 ‘‘(ii) any other information or rec16 ommendations determined appropriate by 

17 the Secretary. 

18 ‘‘(B) INDIVIDUAL MARKET.—The first re19 port submitted under paragraph (1) shall also 

20 contain recommendations regarding expanding 

21 the Program to the individual market. 

22 ‘‘(C) CONSULTATION.—The Secretary shall 

23 consult with the National Association of Insur24 ance Commissioners in preparing each report 

25 under paragraph (1). 

26 ‘‘(b) GAO.— 


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1 ‘‘(1) IN GENERAL.—Not later than March 1, 

2 2011, and biennially thereafter, the Comptroller 

3 General of the United States shall submit to Con4 gress and the Secretary a report on the Program. 

5 ‘‘(2) REQUIREMENTS.— 

6 ‘‘(A) IN GENERAL.—Each report submitted 

7 under paragraph (1) shall contain— 

8 ‘‘(i) a detailed description of the Pro9 gram, including a detailed description of 

10 the impact the Program has had on reduc11 ing premiums for health insurance cov12 erage and increasing the number of indi13 viduals with health insurance coverage; and 

14 ‘‘(ii) any other information or rec15 ommendations determined appropriate by 

16 the Comptroller General. 

17 ‘‘(B) INDIVIDUAL MARKET.—The first re18 port submitted under paragraph (1) shall also 

19 contain recommendations regarding expanding 

20 the Program to the individual market. 

21 ‘‘SEC. 2206. DEFINITIONS. 

22 ‘‘In this title: 

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

24 health plan’ has the meaning given such term by 


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1 section 5000(b)(1) of the Internal Revenue Code of 

2 1986. 

3 ‘‘(2) INDIVIDUAL MARKET; SMALL GROUP MAR4 KET.—The terms ‘individual market’ and ‘small 

5 group market’ have the meanings given such terms 

6 by section 2791 of the Public Health Service Act. 

7 ‘‘(3) OFFICE.—The term ‘Office’ means the Of8 fice of Federal Reinsurance established under sec9 tion 2201. 

10 ‘‘(4) PROGRAM.—The term ‘Program’ means 

11 the Federal Reinsurance Program for Catastrophic 

12 Health Care Costs under this title. 

13 ‘‘(5) TRUST FUND.—The term ‘Trust Fund’ 

14 means the Federal Reinsurance for Catastrophic 

15 Health Care Costs Trust Fund established under 

16 section 2204.’’. 

17 (b) FUNDING START-UP ADMINISTRATIVE COSTS

18 FOR PROGRAM.— 

19 (1) IN GENERAL.—There are appropriated to 

20 the Secretary of Health and Human Services 

21 $200,000,000 to carry out the provisions of, and 

22 amendments made by, this Act. 


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1 (2) AVAILABILITY.—Amounts appropriated 

2 under paragraph (1) shall remain available until 

3 September 30, 2009. 

Æ 


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