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103D CONGRESS

1ST SESSION H. R. 2789

To amend title XIX of the Social Security Act to establish a health allowance

program under which payment may be made under the medicaid program

to participating States for health allowances used for enrolling individuals

in approved health plans, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JULY 28, 1993

Mr. HOBSON (for himself, Mr. BLILEY, Mr. CASTLE, Mr. CLINGER, Mr.

GILLMOR, Mr. GINGRICH, Mr. GOSS, Mr. GRANDY, Mr. GUNDERSON,

Mrs. JOHNSON of Connecticut, Mr. KASICH, Mr. KINGSTON, Mr. KOLBE,

Mr. MCCRERY, Mr. MCKEON, Mr. PORTMAN, Mr. REGULA, Mr. ROBERTS, Ms. SNOWE, Mr. THOMAS of California, Mr. THOMAS of Wyoming,

Mr. MOORHEAD, Mr. SUNDQUIST, Mr. HASTERT, and Mr. MCMILLAN)

introduced the following bill; which was referred to the Committee on Energy and Commerce

A BILL

To amend title XIX of the Social Security Act to establish

a health allowance program under which payment may

be made under the medicaid program to participating

States for health allowances used for enrolling individuals

in approved health plans, and for other purposes.

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

2 This Act may be cited as the ‘‘Medicaid Health Allow3 ance Act of 1993’’.

4 SEC. 2. ESTABLISHMENT OF PROGRAM.

5 (a) IN GENERAL.—Title XIX of the Social Security

6 Act (42 U.S.C. 1396 et seq.) is amended by adding at

7 the end the following new section:

8 ‘‘STATE HEALTH ALLOWANCE PROGRAMS

9 ‘‘SEC. 1931. (a) TREATMENT OF EXPENDITURES

10 UNDER HEALTH ALLOWANCE PROGRAMS AS MEDICAL

11 ASSISTANCE UNDER STATE PLAN.—

12 ‘‘(1) IN GENERAL.—Notwithstanding any other

13 provision of this title, for purposes of determining

14 the amount to be paid to a State under section

15 1903(a)(1) for quarters in any fiscal year, amounts

16 expended by an eligible State (as described in sub17 section (b)) during the fiscal year under a State

18 health allowance program (as described in subsection

19 (c)) shall be included in the total amount expended

20 during the fiscal year as medical assistance under

21 the State plan (except as provided under paragraph

22 (2) or under subsection (d)(1)(C)).

23 ‘‘(2) FEDERAL PAYMENT RESTRICTED TO

24 ACUTE CARE SERVICES.—No amounts expended

25 under a State health allowance program that are at26 tributable to medical assistance described in para-
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1 graphs (4), (14), (15), (23), or (24) of section

2 1905(a) shall be included in the total amount ex3 pended as medical assistance under the State plan.

4 ‘‘(b) ELIGIBILITY OF STATE.—

5 ‘‘(1) IN GENERAL.—A State is eligible for pur6 poses of subsection (a) if the State submits (at such

7 time and in such form as the Secretary may require)

8 an application to the Secretary containing the fol9 lowing information and assurances:

10 ‘‘(A) Assurances that the State laws gov11 erning the sale and marketing of health plans

12 reflect standards established by the National

13 Association of Insurance Commissioners (or by

14 the Secretary in accordance with paragraph

15 (3)) relating to community rating of premiums

16 that meet the requirements of paragraph (2).

17 ‘‘(B) Assurances that the State laws gov18 erning the sale and marketing of health insur19 ance plans reflect standards established by the

20 National Association of Insurance Commis21 sioners (or by the Secretary in accordance with

22 paragraph (3)) relating to pre-existing condi23 tions and guaranteed renewability.

24 ‘‘(C) Assurances that the State has adopt25 ed and is enforced standards regarding quality
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1 assurance for health benefit plans participating

2 in the State health allowance program, includ3 ing standards regarding—

4 ‘‘(i) uniform reporting requirements

5 for such plans relating to a minimum set

6 of clinical data, patient satisfaction data,

7 and other information that may be used by

8 individuals to compare the quality of var9 ious plans; and

10 ‘‘(ii) the establishment or designation

11 of an entity of the State government to

12 collect the data described in clause (i) and

13 to regularly report such data to the Sec14 retary.

15 ‘‘(D) Such other information and assur16 ances as the Secretary may require.

17 ‘‘(2) REQUIREMENTS FOR RATING BANDS FOR

18 PREMIUMS.—

19 ‘‘(A) IN GENERAL.—Under the standards

20 relating to community rating of premiums es21 tablished by the National Association of Insur22 ance Commissioners or by the Secretary, for a

23 class of business of a carrier, the premium rates

24 charged during a rating period to employers

25 with similar demographic or other objective
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1 characteristics (not relating to claims experi2 ence, health status, or duration of coverage) for

3 the same or similar coverage, or the rates which

4 could be charged to such employers under the

5 rating system for that class of business, shall

6 not vary from the index rate by more than 15

7 percent of the index rate.

8 ‘‘(B) DEFINITIONS.—In this paragraph:

9 ‘‘(i) BASE PREMIUM RATE.—The term

10 ‘base premium rate’ means, for each class

11 of business for each rating period, the low12 est premium rate charged or which could

13 have charged under a rating system for

14 that class of business by the carrier to em15 ployers with similar demographic or other

16 objective characteristics (not relating to

17 claims experience, health status, or dura18 tion of coverage) for health benefit plans

19 with the same or similar coverage.

20 ‘‘(ii) CARRIER.—The term ‘carrier’

21 means any entity which provides health in22 surance or health benefits in a State, and

23 includes a licensed insurance company, a

24 prepaid hospital or medical service plan, a

25 health maintenance organization, the plan
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1 sponsor of a multiple employer welfare ar2 rangement or an employee benefit plan (as

3 defined under the Employee Retirement

4 Income Security Act of 1974), or any other

5 entity providing a plan of health insurance

6 subject to State insurance regulation.

7 ‘‘(iii) CLASS OF BUSINESS.—The term

8 ‘class of business’ means, with respect to a

9 carrier, all (or a distinct group of) small

10 employers as shown on the records of the

11 carrier. For purposes of the preceding sen12 tence—

13 ‘‘(I) a carrier may establish, sub14 ject to subclause (II), a distinct group

15 of employers on the basis that the ap16 plicable health benefit plans either—

17 ‘‘(aa) are marketed and sold

18 through individuals and organiza19 tions which are not participating

20 in the marketing or sale of other

21 distinct groups of employers for

22 the carrier,

23 ‘‘(bb) have been acquired

24 from another carrier as a distinct

25 group, or
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1 ‘‘(cc) are provided through

2 an association that has a mem3 bership of not less than 100 em4 ployers and that has been formed

5 for purposes other than obtaining

6 health coverage;

7 ‘‘(II) a carrier may not establish

8 more than 2 groupings under each

9 class of business based on the car10 rier’s use of managed-care techniques

11 if the techniques are expected to

12 produce substantial variation in health

13 care costs; and

14 ‘‘(III) notwithstanding subclauses

15 (I) and (II), a State commissioner of

16 Insurance of a State, upon application

17 and if authorized under State law,

18 may approve additional distinct

19 groups upon a finding that such ap20 proval would enhance the efficiency

21 and fairness of the employer market22 place.

23 ‘‘(iv) DEMOGRAPHIC CHARACTERIS24 TICS.—The term ‘demographic characteris25 tics’ means age, gender, industry, geo-
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1 graphic area, family composition, and

2 group size.

3 ‘‘(v) INDEX RATE.—The term ‘‘index

4 rate’’ means, with respect to a class of

5 business, the arithmetic average of the ap6 plicable base premium rate and the cor7 responding highest premium rate for the

8 class.

9 ‘‘(3) ESTABLISHMENT OF STANDARDS BY SEC10 RETARY.—If, after the expiration of the 9-month pe11 riod that begins on the date of the enactment of this

12 Act, the National Association of Insurance Commis13 sioners has not established the standards described

14 in paragraph (1), the Secretary shall establish such

15 standards not later than 1 year after the date of the

16 enactment of this Act.

17 ‘‘(c) STATE HEALTH ALLOWANCE PROGRAM DE18 SCRIBED.—

19 ‘‘(1) ENROLLMENT OF PARTICIPATING INDIVID20 UALS IN APPROVED HEALTH BENEFIT PLANS.—In

21 this section, a State health allowance program is a

22 program in effect in all the political subdivisions of

23 the State (except as provided in (c)) under which the

24 State makes payments to the individual’s insurer as

25 an allowance towards the costs of providing the indi-
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1 vidual with benefits under an approved health bene2 fit plan.

3 ‘‘(2) APPROVED PLANS DESCRIBED.—For pur4 poses of paragraph (1), a State shall approve health

5 benefit plans in accordance with such standards as

6 the State may establish, except that—

7 ‘‘(A) the State may not approve a plan for

8 a year unless the actuarial value of the benefits

9 provided by and the cost-sharing associated

10 with the plan for the year—

11 ‘‘(i) with respect to the first year for

12 which the plan is approved for purposes of

13 this subsection, is not less than the actuar14 ial value of the medical assistance provided

15 under the State plan under this title for

16 the year (as determined by the Secretary

17 without regard to medical assistance de18 scribed in paragraphs (4), (14), (15), (23),

19 or (24) of section 1905(a)); and

20 ‘‘(ii) with respect to any subsequent

21 year, is not greater than the amount deter22 mined under this subparagraph for the

23 preceding year, increased by the amount

24 (expressed as a percentage) by which the

25 actuarial value of the medical assistance
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1 described in clause (i) for the year exceeds

2 or is less than the actuarial value of such

3 medical assistance for the preceding year;

4 ‘‘(B) at least one of the plans approved by

5 the State shall be a health maintenance organi6 zation or other plan under which payments are

7 otherwise made on a capitated basis for provid8 ing medical assistance to individuals enrolled in

9 the State plan under this title; and

10 ‘‘(C) in the case of an individual who is en11 titled to benefits under the State plan under

12 this title as of the first month during which the

13 State health allowance program is in effect, an

14 approved plan may not require the individual to

15 contribute a greater amount of cost-sharing

16 than the individual would have been required to

17 contribute under the State plan (except as may

18 be imposed on an individual described in sub19 paragraph (B) or subparagraph (C) of sub20 section (d)(1)).

21 ‘‘(3) WAIVER OF STATEWIDENESS REQUIRE22 MENT.—At the request of a State, the Secretary

23 may waive for a period not to exceed 3 years (sub24 ject to one 3-year extension) the requirement under

25 paragraph (1) that the State health allowance pro-
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1 gram be in effect in all political subdivisions of the

2 State.

3 ‘‘(d) ELIGIBILITY OF INDIVIDUALS TO PARTICIPATE

4 IN ALLOWANCE PROGRAM.—

5 ‘‘(1) IN GENERAL.—An individual is eligible to

6 participate in a State health allowance program de7 scribed in subsection (c) if the individual meets such

8 criteria as the State may impose, except that—

9 ‘‘(A) the State shall enroll the individual in

10 the program if the individual’s income is equal

11 to or less than 100 percent of the official pov12 erty line (as defined by the Office of Manage13 ment and Budget, and revised annually in ac14 cordance with section 673(2) of the Omnibus

15 Budget Reconciliation Act of 1991) applicable

16 to a family of the size involved;

17 ‘‘(B) the State may enroll the individual in

18 the program if the individual’s income is great19 er than 100 percent of such official poverty

20 line, except that the State may require such an

21 individual to contribute additional cost-sharing

22 towards the health benefit plan if such cost23 sharing is determined in accordance with a slid24 ing scale based on the individual’s income;
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1 ‘‘(C) the State may enroll an individual

2 who is described in subparagraph (B) and

3 whose income is equal to or greater than 200

4 percent of such official poverty line in the pro5 gram, except that no amounts expended by the

6 State during a fiscal year on behalf of such an

7 individual may be included in the total amount

8 expended during the fiscal year as medical as9 sistance under the State plan; and

10 ‘‘(D) no individual shall be eligible to par11 ticipate in the program if the individual is enti12 tled to benefits under title XVIII of the Social

13 Security Act pursuant to section 226 of such

14 Act.

15 ‘‘(2) AUTOMATIC ELIGIBILITY OF MEDICAID

16 CATEGORICALLY ELIGIBLE INDIVIDUALS.—Under

17 the criteria imposed by a State under paragraph (1),

18 any individual to whom the State makes medical as19 sistance available under the State plan under this

20 title pursuant to clause (i) of section 1902(a)(10)(A)

21 shall be eligible to participate in the State health al22 lowance program.

23 ‘‘(3) USE OF RESOURCE STANDARD.—Under

24 the criteria imposed by a State under paragraph (1),

25 a State may not require an individual to meet any
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1 resource standard unless the Secretary approves the

2 State’s use of such a standard.

3 ‘‘(e) EVALUATIONS AND REPORTS.—

4 ‘‘(1) EVALUATIONS.—Not later than 3 years

5 after the date of the enactment of this section (and

6 at such subsequent intervals as the Secretary consid7 ers appropriate), the Secretary shall evaluate the ef8 fectiveness of the State health allowance programs

9 for which Federal financial participation is provided

10 under this section, and the impact of such programs

11 on increasing the number of individuals with health

12 insurance coverage in participating States and in

13 controlling the costs of health care in such States.

14 ‘‘(2) REPORTS.—Not later than 3 years after

15 the date of the enactment of this section (and at

16 such subsequent intervals as the Secretary considers

17 appropriate), the Secretary shall submit a report on

18 the program to Congress.’’.

19 (b) ENSURING BUDGET NEUTRALITY THROUGH RE20 DUCTION IN DISPROPORTIONATE SHARE HOSPITAL PAY21 MENTS FOR PARTICIPATING STATES.—Section 1923 of

22 the Social Security Act (42 U.S.C. 1396r–4) is amended

23 by adding at the end the following new subsection:

24 ‘‘(g) REDUCTION IN PAYMENT ADJUSTMENTS FOR

25 STATES WITH HEALTH ALLOWANCE PROGRAMS.—In the
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1 case of a State operating a State health allowance pro2 gram under section 1931 in a fiscal year, the Secretary

3 shall reduce the total payment adjustments made under

4 this section for hospitals in the State for quarters in the

5 year by such amount as the Secretary determines to be

6 necessary to ensure that the total amount paid to the

7 State under section 1903(a)(1) for the year does not ex8 ceed the amount that would have been paid to the State

9 under such section for the year if the State did not operate

10 such a program.

11 SEC. 3. EFFECTIVE DATE.

12 The amendments made by section 2 shall apply to

13 calendar quarters beginning on or after January 1, 1994.

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