I 
113TH CONGRESS 
1ST SESSION H. R. 2688 
To improve healthcare-related, tax-preferred savings accounts and to provide 
for cooperative governing of individual and group health insurance cov-
erage across State lines, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 15, 2013 
Mr. ROSS introduced the following bill; which was referred to the Committee 
on Ways and Means, and in addition to the Committee on Energy and 
Commerce, for a period to be subsequently determined by the Speaker, 
in each case for consideration of such provisions as fall within the juris-
diction of the committee concerned 
A BILL 
To improve healthcare-related, tax-preferred savings accounts 
and to provide for cooperative governing of individual 
and group health insurance coverage across State lines, 
and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Providing 
Accountability 
and 
Transparency 
to 
Incentivize Economically Necessary Transitions in Health 
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Care Act of 2013’’ or the ‘‘PATIENT’s Health Care Act 
of 2013’’. 
(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title; table of contents. 
TITLE I—HEALTHCARE-RELATED SAVINGS ACCOUNTS 
Sec. 101. Deduction of premiums for high deductible health plans. 
Sec. 102. Repeal of high deductible health plan requirement. 
Sec. 103. Increase in deductible HSA contribution limitations. 
Sec. 104. Medicare eligible individuals eligible to contribute to HSA. 
Sec. 105. HSA rollover to Medicare Advantage MSA. 
Sec. 106. One-time transfer of flexible spending arrangement balance to health 
savings account in case of separation from employment. 
Sec. 107. Payment of high deductible health plan premiums from HSA. 
Sec. 108. Repeal of disqualification of expenses for over-the-counter drugs 
under certain accounts and arrangements. 
Sec. 109. Payment of long-term care premiums from health flexible spending 
arrangement. 
Sec. 110. Allowing MSA and HSA rollover to adult child of account holder. 
Sec. 111. Disposition of unused health benefits in cafeteria plans and flexible 
spending arrangements. 
Sec. 112. Permitting beneficiary contributions to Medicare Advantage MSA. 
Sec. 113. Child health savings account. 
TITLE II—HEALTH INSURANCE PROVISIONS 
Sec. 201. Cooperative governing of individual and group health insurance cov-
erage. 
Sec. 202. Reauthorization of the Preexisting Condition Insurance Plan (PCIP) 
Program. 
TITLE I—HEALTHCARE-RELATED 
SAVINGS ACCOUNTS 
SEC. 101. DEDUCTION OF PREMIUMS FOR HIGH DEDUCT-
IBLE HEALTH PLANS. 
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended 
by redesignating section 224 as section 225 and by insert-
ing after section 223 the following new section: 
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‘‘SEC. 224. PREMIUMS FOR HIGH DEDUCTIBLE HEALTH 
PLANS. 
‘‘(a) DEDUCTION ALLOWED.—In the case of an indi-
vidual, there shall be allowed as a deduction for the tax-
able year the aggregate amount paid by such individual 
as premiums under a high deductible health plan with re-
spect to months during such year for which such indi-
vidual is an eligible individual with respect to such health 
plan. 
‘‘(b) DEFINITIONS.—For purposes of this section— 
‘‘(1) ELIGIBLE INDIVIDUAL.— 
‘‘(A) IN GENERAL.—The term ‘eligible in-
dividual’ means, with respect to any month, any 
individual if— 
‘‘(i) such individual is covered under a 
high deductible health plan as of the 1st 
day of such month, and 
‘‘(ii) such individual is not, while cov-
ered under a high deductible health plan, 
covered under any health plan— 
‘‘(I) which is not a high deduct-
ible health plan, and 
‘‘(II) which provides coverage for 
any benefit which is covered under the 
high deductible health plan. 
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‘‘(B) 
CERTAIN
COVERAGE
DIS-
REGARDED.—Subparagraph (A)(ii) shall be ap-
plied without regard to— 
‘‘(i) coverage for any benefit provided 
by permitted insurance, 
‘‘(ii) coverage (whether through insur-
ance or otherwise) for accidents, disability, 
dental care, vision care, or long-term care, 
and 
‘‘(iii) coverage under a health flexible 
spending arrangement during any period 
immediately following the end of a plan 
year of such arrangement during which un-
used benefits or contributions remaining at 
the end of such plan year may be paid or 
reimbursed to plan participants for quali-
fied benefit expenses incurred during such 
period if— 
‘‘(I) the balance in such arrange-
ment at the end of such plan year is 
zero, or 
‘‘(II) the individual is making a 
qualified HSA distribution (as defined 
in section 106(e)) in an amount equal 
to the remaining balance in such ar-
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rangement as of the end of such plan 
year, in accordance with rules pre-
scribed by the Secretary. 
‘‘(2) HIGH DEDUCTIBLE HEALTH PLAN.— 
‘‘(A) IN
GENERAL.—The term ‘high de-
ductible health plan’ means a health plan— 
‘‘(i) which has an annual deductible 
which is not less than— 
‘‘(I) $1,000 for self-only cov-
erage, and 
‘‘(II) twice the dollar amount in 
subclause (I) for family coverage, and 
‘‘(ii) the sum of the annual deductible 
and the other annual out-of-pocket ex-
penses required to be paid under the plan 
(other than for premiums) for covered ben-
efits does not exceed— 
‘‘(I) $5,000 for self-only cov-
erage, and 
‘‘(II) twice the dollar amount in 
subclause (I) for family coverage. 
‘‘(B) EXCLUSION
OF
CERTAIN
PLANS.— 
Such term does not include a health plan if 
substantially all of its coverage is described in 
paragraph (1)(B). 
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‘‘(C) SAFE HARBOR FOR ABSENCE OF PRE-
VENTIVE CARE DEDUCTIBLE.—A plan shall not 
fail to be treated as a high deductible health 
plan by reason of failing to have a deductible 
for preventive care (within the meaning of sec-
tion 1871 of the Social Security Act, except as 
otherwise provided by the Secretary). 
‘‘(D) SPECIAL RULE FOR ANNUAL OUT-OF- 
POCKET LIMITATION FOR NETWORK PLANS.—In 
the case of a plan using a network of providers, 
such plan shall not fail to be treated as a high 
deductible health plan by reason of having an 
out-of-pocket limitation for services provided 
outside of such network which exceeds the ap-
plicable limitation under subparagraph (A)(ii). 
‘‘(3) PERMITTED INSURANCE.—The term ‘per-
mitted insurance’ means— 
‘‘(A) insurance if substantially all of the 
coverage provided under such insurance relates 
to— 
‘‘(i) liabilities incurred under workers’ 
compensation laws, 
‘‘(ii) tort liabilities, 
‘‘(iii) liabilities relating to ownership 
or use of property, or 
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‘‘(iv) such other similar liabilities as 
the Secretary may specify by regulations, 
‘‘(B) insurance for a specified disease or 
illness, and 
‘‘(C) insurance paying a fixed amount per 
day (or other period) of hospitalization. 
‘‘(4) FAMILY
COVERAGE.—The term ‘family 
coverage’ means any coverage other than self-only 
coverage. 
‘‘(c) SPECIAL RULES.— 
‘‘(1) DEDUCTION
ALLOWABLE
FOR
ONLY
PLAN.—For purposes of this section, in the case of 
an individual covered by more than 1 high deductible 
health plan for any month, the individual may only 
take into account amounts paid for 1 of such plans 
for such month. 
‘‘(2) EMPLOYER PROVIDED COVERAGE.— 
‘‘(A) IN GENERAL.—No deduction shall be 
allowed to an individual under subsection (a) 
for any amount paid for coverage under a high 
deductible health plan for a month if that indi-
vidual participates in any coverage for such 
month that is excluded (in whole or in part) 
from the gross income of the individual or the 
individual’s spouse under section 106. 
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‘‘(B) CAFETERIA PLANS, ETC.—Employer 
contributions to a cafeteria plan or a flexible 
spending or similar arrangement which are ex-
cluded from gross income under section 106 
shall be treated for purposes of this section as 
paid by the employer. 
‘‘(3) CONTRIBUTIONS TO HEALTH SAVINGS AC-
COUNT
REQUIRED.—A deduction shall not be al-
lowed under subsection (a) for a taxable year with 
respect to such individual if such individual is not al-
lowed a deduction under section 223 for such tax-
able year. 
‘‘(4) MEDICAL
AND
HEALTH
SAVINGS
AC-
COUNTS.—Subsection (a) shall not apply with re-
spect to any amount which is paid or distributed out 
of an Archer MSA or a health savings account which 
is not included in gross income under section 220(f) 
or 223(f), as the case may be. 
‘‘(5) COORDINATION
WITH
DEDUCTION
FOR 
HEALTH INSURANCE OF SELF-EMPLOYED INDIVID-
UALS.—The amount taken into account by the tax-
payer in computing the deduction under section 
162(l) shall not be taken into account under this 
section. 
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‘‘(6) COORDINATION WITH MEDICAL EXPENSE 
DEDUCTION.—The amount taken into account by 
the taxpayer in computing the deduction under this 
section shall not be taken into account under section 
213.’’. 
(b) DEDUCTION ALLOWED WHETHER OR NOT INDI-
VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a) 
of section 62 of such Code is amended by inserting after 
paragraph (21) the following new paragraph: 
‘‘(22) PREMIUMS
FOR
HIGH
DEDUCTIBLE 
HEALTH PLANS.—The deduction allowed by section 
224.’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for part VII of subchapter B of chapter 1 of such Code 
is amended by striking the last item and inserting the fol-
lowing new items: 
‘‘Sec. 224. Premiums for high deductible health plans. 
‘‘Sec. 225. Cross reference.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
SEC. 102. REPEAL OF HIGH DEDUCTIBLE HEALTH PLAN RE-
QUIREMENT. 
(a) IN GENERAL.—Subsection (a) of section 223 of 
such Code is amended to read as follows: 
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‘‘(a) DEDUCTION ALLOWED.—In the case of an indi-
vidual, there shall be allowed as a deduction for a taxable 
year an amount equal to the aggregate amount paid in 
cash during such taxable year by or on behalf of such indi-
vidual to a health savings account of such individual.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 223 of such Code is amended by 
striking subsection (c) and redesignating subsections 
(d) through (h) as subsections (c) through (g), re-
spectively. 
(2) Section 223(b) of such Code is amended by 
striking paragraph (8). 
(3) Subparagraph (A) of section 223(c)(1) of 
such Code (as redesignated by paragraph (1)) is 
amended— 
(A) by striking ‘‘subsection (f)(5)’’ and in-
serting ‘‘subsection (e)(5)’’, and 
(B) in clause (ii)— 
(i) by striking ‘‘the sum of—’’ and all 
that follows and inserting ‘‘the dollar 
amount in effect under subsection (b)(1).’’. 
(4) Section 223(f)(1) of such Code (as redesig-
nated by paragraph (1)) is amended by striking 
‘‘Each dollar amount in subsections (b)(2) and 
(c)(2)(A)’’ and inserting ‘‘In the case of a taxable 
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year beginning after December 31, 2010, each dollar 
amount in subsection (b)(1)’’. 
(5) Section 26(b)(U) of such Code is amended 
by striking ‘‘section 223(f)(4)’’ and inserting ‘‘sec-
tion 223(e)(4)’’. 
(6) 
Sections 
35(g)(3), 
220(f)(5)(A), 
848(e)(1)(v), 4973(a)(5), and 6051(a)(12) of such 
Code are each amended by striking ‘‘section 223(d)’’ 
each place it appears and inserting ‘‘section 223(c)’’. 
(7) Section 106(d)(1) of such Code is amend-
ed— 
(A) by striking ‘‘who is an eligible indi-
vidual (as defined in section 223(c)(1))’’, and 
(B) by striking ‘‘section 223(d)’’ and in-
serting ‘‘section 223(c)’’. 
(8) Section 408(d)(9) of such Code is amend-
ed— 
(A) in subparagraph (A) by striking ‘‘who 
is an eligible individual (as defined in section 
223(c)) and’’, and 
(B) in subparagraph (C) by striking ‘‘com-
puted on the basis of the type of coverage under 
the high deductible health plan covering the in-
dividual at the time of the qualified HSA fund-
ing distribution’’. 
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(9) Section 877A(g)(6) of such Code is amend-
ed 
by 
striking 
‘‘223(f)(4)’’ 
and 
inserting 
‘‘223(e)(4)’’. 
(10) Section 4973(g) of such Code is amend-
ed— 
(A) by striking ‘‘section 223(d)’’ and in-
serting ‘‘section 223(c)’’, 
(B) in paragraph (2), by striking ‘‘section 
223(f)(2)’’ and inserting ‘‘section 223(e)(2)’’, 
and 
(C) by striking ‘‘section 223(f)(3)’’ and in-
serting ‘‘section 223(e)(3)’’. 
(11) Section 4975 of such Code is amended— 
(A) in subsection (c)(6)— 
(i) by striking ‘‘section 223(d)’’ and 
inserting ‘‘section 223(c)’’, and 
(ii) by striking ‘‘section 223(e)(2)’’ 
and inserting ‘‘section 223(d)(2)’’, and 
(B) in subsection (e)(1)(E), by striking 
‘‘section 
223(d)’’ 
and 
inserting 
‘‘section 
223(c)’’. 
(12) Section 6693(a)(2)(C) of such Code is 
amended by striking ‘‘section 223(h)’’ and inserting 
‘‘section 223(g)’’. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2011. 
SEC. 103. INCREASE IN DEDUCTIBLE HSA CONTRIBUTION 
LIMITATIONS. 
(a) IN GENERAL.—Paragraph (1) of section 223(b) 
of the Internal Revenue Code of 1986 is amended by strik-
ing ‘‘the sum of the monthly’’ and all that follows through 
‘‘eligible individual’’ and inserting ‘‘$10,000 ($20,000 in 
the case of a joint return)’’. 
(b) ADDITIONAL CONTRIBUTIONS.—Paragraph (3) of 
section 223(b) is amended to read as follows: 
‘‘(3) ADDITIONAL
CONTRIBUTIONS
FOR
INDI-
VIDUALS BETWEEN 55 AND 65.—In the case of an in-
dividual who has attained the age of 55, but has not 
attained the age of 66, before the close of the tax-
able year, the limitation under paragraph (1) shall 
be increased by $10,000.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 223(b) of such Code, as amended by 
this Act, is amended by striking paragraphs (2) and 
(5) and by redesignating paragraphs (3), (4), (6), 
and (7) as paragraphs (2), (3), (4), and (5), respec-
tively. 
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(2) Section 223(c)(1)(A)(ii) of such Code (as 
redesignated by this Act) is amended by striking 
‘‘the sum of—’’ and all that follows and inserting 
‘‘the dollar amount in effect under subsection 
(b)(1).’’. 
(3) Section 223(f)(1) of such Code (as redesig-
nated by this Act) is amended by striking ‘‘Each 
dollar amount in subsections (b)(2) and (c)(2)(A)’’ 
and inserting ‘‘In the case of a taxable year begin-
ning after December 31, 2013, each dollar amount 
in subsection (b)(1)’’. 
(4) Paragraph (3) of section 223(b) of such 
Code (as redesignated by paragraph (1)) is amended 
by striking the last sentence. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
SEC. 104. MEDICARE ELIGIBLE INDIVIDUALS ELIGIBLE TO 
CONTRIBUTE TO HSA. 
(a) Subsection (b) of section 223 of the Internal Rev-
enue Code of 1986, as amended by this Act, is amended 
by striking paragraph (4). 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
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SEC. 105. HSA ROLLOVER TO MEDICARE ADVANTAGE MSA. 
(a) IN GENERAL.—Paragraph (2) of section 138(b) 
of the Internal Revenue Code of 1986 is amended by strik-
ing ‘‘or’’ at the end of subparagraph (A), by adding ‘‘or’’ 
at the end of subparagraph (C), and by adding at the end 
the following new subparagraph: 
‘‘(C) a HSA rollover contribution described 
in subsection (c)(5),’’. 
(b) HSA ROLLOVER CONTRIBUTION.—Subsection (c) 
of section 138 of such Code is amended by adding at the 
end the following new paragraph: 
‘‘(5) ROLLOVER CONTRIBUTION.—An amount is 
described in this paragraph as a rollover contribu-
tion if it meets the requirements of subparagraphs 
(A) and (B). 
‘‘(A) IN GENERAL.—The requirements of 
this subparagraph are met in the case of an 
amount paid or distributed from a health sav-
ings account to the account beneficiary to the 
extent the amount received is paid into a Medi-
care Advantage MSA of such beneficiary not 
later than the 60th day after the day on which 
the beneficiary receives the payment or distribu-
tion. 
‘‘(B) LIMITATION.—This paragraph shall 
not apply to any amount described in subpara-
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graph (A) received by an individual from a 
health savings account if, at any time during 
the 1-year period ending on the day of such re-
ceipt, such individual received any other amount 
described in subparagraph (A) from a health 
savings account which was not includible in the 
individual’s gross income because of the appli-
cation of section 223(e)(5)(A).’’. 
(c) CONFORMING AMENDMENT.—Subparagraph (A) 
of section 223(e)(5) of such Code, as amended by this Act, 
is amended by inserting ‘‘or Medicare Advantage MSA’’ 
after ‘‘into a health savings account’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
SEC. 106. ONE-TIME TRANSFER OF FLEXIBLE SPENDING AR-
RANGEMENT BALANCE TO HEALTH SAVINGS 
ACCOUNT IN CASE OF SEPARATION FROM 
EMPLOYMENT. 
(a) IN GENERAL.—Section 125 of the Internal Rev-
enue Code of 1986 is amended by redesignating subsection 
(j) as subsection (k) and by inserting after subsection (i) 
the following new subsection: 
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‘‘(j) ONE-TIME TRANSFER OF REMAINING BALANCE 
IN HEALTH FLEXIBLE SPENDING ARRANGEMENT AFTER 
SEPARATION FROM EMPLOYMENT.— 
‘‘(1) IN GENERAL.—For purposes of this title, 
a plan shall not fail to be treated as a health flexible 
spending arrangement solely because a participant 
may, in connection with separation from employment 
with the employer, direct amounts in the partici-
pant’s account under such arrangement to be con-
tributed on behalf of the participant to a health sav-
ings account (as defined in section 223(c)) main-
tained for the benefit of the participant.’’. 
(b) 
CONFORMING
AMENDMENT.—Section 
223(c)(1)(A) of such Code, as amended by this Act, is 
amended by striking ‘‘or section 220(f)(5)’’ and inserting 
‘‘, section 125(j), or section 220(f)(5)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
SEC. 107. PAYMENT OF HIGH DEDUCTIBLE HEALTH PLAN 
PREMIUMS FROM HSA. 
(a) IN GENERAL.—Subparagraph (B) of section 
223(c)(2) of such Code, as amended by this Act, is amend-
ed by inserting ‘‘other than a high deductible plan (as de-
fined in section 224(b)(2))’’ before the period at the end. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
SEC. 108. REPEAL OF DISQUALIFICATION OF EXPENSES 
FOR 
OVER-THE-COUNTER 
DRUGS 
UNDER 
CERTAIN ACCOUNTS AND ARRANGEMENTS. 
(a) HSAS.—Subparagraph (A) of section 223(c)(2) 
of the Internal Revenue Code of 1986, as amended by this 
Act, is amended by striking the last sentence. 
(b) ARCHER MSAS.—Subparagraph (A) of section 
220(d)(2) of such Code is amended by striking the last 
sentence. 
(c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS 
AND HEALTH REIMBURSEMENT ARRANGEMENTS.—Sec-
tion 106 of such Code is amended by striking subsection 
(f). 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to expenses incurred after Decem-
ber 31, 2013. 
SEC. 109. PAYMENT OF LONG-TERM CARE PREMIUMS FROM 
HEALTH 
FLEXIBLE 
SPENDING 
ARRANGE-
MENT. 
(a) IN GENERAL.—Section 125 of the Internal Rev-
enue Code of 1986, as amended by this Act, is amended 
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by inserting after subsection (h) the following new sub-
section: 
‘‘(i) PAYMENT
OF LONG-TERM CARE PREMIUMS 
FROM HEALTH FLEXIBLE SPENDING ARRANGEMENT.— 
‘‘(1) IN GENERAL.—No payment for insurance 
may be made from a health flexible spending ar-
rangement. 
‘‘(2) LONG-TERM
CARE
INSURANCE.—Para-
graph (1) shall not apply to any expense for cov-
erage under a qualified long-term care insurance 
contract (as defined in section 7702B(b)).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
SEC. 110. ALLOWING MSA AND HSA ROLLOVER TO ADULT 
CHILD OF ACCOUNT HOLDER. 
(a) MSAS.— 
(1) IN GENERAL.—Subparagraph (A) of section 
220(f)(8) of the Internal Revenue Code of 1986 (re-
lating to treatment after death of account holder) is 
amended— 
(A) by inserting ‘‘or adult child’’ after 
‘‘surviving spouse’’, 
(B) by inserting ‘‘or adult child, as the 
case may be,’’ after ‘‘the spouse’’, and 
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(C) by inserting ‘‘or adult child’’ after 
‘‘spouse’’ in the heading thereof. 
(2) ADULT CHILD DEFINED.—Paragraph (8) of 
section 220(f) of such Code is amended by adding 
at the end the following new subparagraph: 
‘‘(C) ADULT CHILD.—For purposes of this 
paragraph, the term ‘adult child’ means an in-
dividual— 
‘‘(i) who is a child of the deceased in-
dividual, and 
‘‘(ii) with respect to whom a deduc-
tion under section 151 would not be allow-
able to another taxpayer for a taxable year 
beginning in the calendar year in which 
such individual’s taxable year begins.’’. 
(b) HSAS.— 
(1) IN GENERAL.—Subparagraph (A) of section 
223(e)(8) of such Code, as amended by this Act, is 
amended— 
(A) by inserting ‘‘or adult child’’ after 
‘‘surviving spouse’’, 
(B) by inserting ‘‘or adult child, as the 
case may be,’’ after ‘‘the spouse’’, and 
(C) by inserting ‘‘or adult child’’ after 
‘‘spouse’’ in the heading thereof. 
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(2) ADULT CHILD DEFINED.—Paragraph (8) of 
section 223(e) of such Code, as amended by this 
Act, is amended by adding at the end the following 
new subparagraph: 
‘‘(C) ADULT CHILD.—For purposes of this 
paragraph, the term ‘adult child’ has the mean-
ing given such term by section 220(f)(8)(C).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
SEC. 111. DISPOSITION OF UNUSED HEALTH BENEFITS IN 
CAFETERIA PLANS AND FLEXIBLE SPENDING 
ARRANGEMENTS. 
(a) IN GENERAL.—Section 125 of the Internal Rev-
enue Code of 1986 is amended by redesignating sub-
sections (k) and (l) as subsections (l) and (m), respec-
tively, and by inserting after subsection (j) the following: 
‘‘(k) CARRYFORWARDS OR PAYMENTS OF CERTAIN 
UNUSED HEALTH BENEFITS.— 
‘‘(1) IN GENERAL.—For purposes of this title, 
a plan or other arrangement shall not fail to be 
treated as a cafeteria plan solely because qualified 
benefits under such plan include a health flexible 
spending arrangement under which not more than 
$500 of unused health benefits may be— 
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‘‘(A) carried forward to the succeeding 
plan year of such health flexible spending ar-
rangement, or 
‘‘(B) paid to or on behalf of an employee 
as compensation as of the end of such plan year 
or upon the termination of, or failure to re-en-
roll in, such plan or arrangement. 
‘‘(2) DISTRIBUTION OF UNUSED HEALTH BENE-
FITS ON BEHALF OF EMPLOYEE.—For purposes of 
paragraph (1)(B), unused health benefits paid as 
compensation on behalf of an employee by the em-
ployer shall be— 
‘‘(A) includible in gross income and wages 
of the employee, whether or not a deduction for 
such payment is allowable under this title to the 
employee, and 
‘‘(B) excludable from— 
‘‘(i) gross income to the extent pro-
vided under section 402(e), 457(a) (with 
respect to contributions to an eligible de-
ferred compensation plan (as defined in 
section 457(b)) of an eligible employer de-
scribed in section 457(e)(1)(A)), or 220, 
and 
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‘‘(ii) wages to the extent otherwise 
provided for amounts so excludable. 
‘‘(3) UNUSED
HEALTH
BENEFITS.—For pur-
poses of this subsection, the term ‘unused health 
benefits’ means the excess of— 
‘‘(A) the maximum amount of reimburse-
ment allowable during a plan year under a 
health flexible spending arrangement, over 
‘‘(B) the actual amount of reimbursement 
during such year under such arrangement.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
December 31, 2013. 
SEC. 112. PERMITTING BENEFICIARY CONTRIBUTIONS TO 
MEDICARE ADVANTAGE MSA. 
(a) IN GENERAL.—Subsection (b) of section 138 of 
such Code is amended by striking paragraph (2) and by 
redesignating paragraphs (3) and (4) as paragraphs (2) 
and (3), respectively. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
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SEC. 113. CHILD HEALTH SAVINGS ACCOUNT. 
(a) IN GENERAL.—Section 223 of the Internal Rev-
enue Code of 1986, as amended by this Act, is amended 
by adding at the end the following new subsection: 
‘‘(h) CHILD HEALTH SAVINGS ACCOUNTS.— 
‘‘(1) IN
GENERAL.—In the case of an indi-
vidual, in addition to any deduction allowed under 
subsection (a) for any taxable year, there shall be al-
lowed as a deduction under this section an amount 
equal to the aggregate amount paid in cash by the 
taxpayer during the taxable year to a child health 
savings account of a child of the taxpayer. 
‘‘(2) LIMITATION.—The amount taken into ac-
count under paragraph (1) with respect to each child 
of the taxpayer for the taxable year shall not exceed 
an amount equal to $3,000. 
‘‘(3) CHILD HEALTH SAVINGS ACCOUNT.—For 
purposes of this subsection, the term ‘child health 
savings account’ means a health savings account 
designated as a child health savings account and es-
tablished for the benefit of a child of a taxpayer, but 
only if— 
‘‘(A) such account was established for the 
benefit of the child before the child attains the 
age of 5, and 
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tional tax on distributions not used for 
qualified medical expenses). 
‘‘(ii) 
AGE
AND
OLDER.—Any 
amount paid or distributed out of such ac-
count after the child has attained the age 
of 18 may only be treated as used to pay 
qualified medical expenses to the extent 
such child is not covered as a dependent 
under insurance (other than permitted in-
surance) of a parent. 
‘‘(B) EXCEPTIONS
FOR
DISABILITY
OR 
DEATH OF CHILD.—If the child becomes dis-
abled within the meaning of section 72(m)(7) or 
dies— 
‘‘(i) subparagraph (A) shall not apply 
to any subsequent payment or distribution, 
and 
‘‘(ii) the taxpayer may rollover the 
amount in such account to an individual 
retirement plan of the taxpayer, to any 
health savings account of the taxpayer, or 
to any child health savings account of any 
other child of the taxpayer. 
‘‘(C) HEALTH INSURANCE MAY BE PUR-
CHASED
FROM
ACCOUNT.—Subparagraph (B) 
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of subsection (d)(2) shall not apply to any 
health savings account originally established as 
a child health savings account. 
‘‘(6) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry 
out the purposes of this subsection, including rules 
for determining application of this subsection in the 
case of legal guardians and in the case of parents 
of a child who file separately, are separated, or are 
not married.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
TITLE II—HEALTH INSURANCE 
PROVISIONS 
SEC. 201. COOPERATIVE GOVERNING OF INDIVIDUAL AND 
GROUP HEALTH INSURANCE COVERAGE. 
(a) IN GENERAL.—Title XXVII of the Public Health 
Service Act (42 U.S.C. 300gg et seq.) is amended by add-
ing at the end the following new part: 
‘‘PART D—COOPERATIVE GOVERNING OF INDI-
VIDUAL AND GROUP HEALTH INSURANCE 
COVERAGE 
‘‘SEC. 2795. DEFINITIONS. 
‘‘In this part: 
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‘‘(1) PRIMARY
STATE.—The term ‘primary 
State’ means, with respect to individual or group 
health insurance coverage offered by a health insur-
ance issuer, the State designated by the issuer as 
the State whose covered laws shall govern the health 
insurance issuer in the sale of such coverage under 
this part. An issuer, with respect to a particular pol-
icy, may only designate one such State as its pri-
mary State with respect to all such coverage it of-
fers. Such an issuer may not change the designated 
primary State with respect to individual or group 
health insurance coverage once the policy is issued, 
except that such a change may be made upon re-
newal of the policy. With respect to such designated 
State, the issuer is deemed to be doing business in 
that State. 
‘‘(2) SECONDARY STATE.—The term ‘secondary 
State’ means, with respect to individual or group 
health insurance coverage offered by a health insur-
ance issuer, any State that is not the primary State. 
In the case of a health insurance issuer that is sell-
ing a policy in, or to a resident of, a secondary 
State, the issuer is deemed to be doing business in 
that secondary State. 
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‘‘(3) HEALTH INSURANCE ISSUER.—The term 
‘health insurance issuer’ has the meaning given such 
term in section 2791(b)(2), except that such an 
issuer must be licensed in the primary State and be 
qualified to sell individual health insurance coverage 
in that State. 
‘‘(4) INDIVIDUAL
HEALTH
INSURANCE
COV-
ERAGE.—The term ‘individual health insurance cov-
erage’ means health insurance coverage offered in 
the individual market, as defined in section 
2791(e)(1). 
‘‘(5) GROUP HEALTH INSURANCE COVERAGE.— 
The term ‘group health insurance coverage’ has the 
meaning given such term in 2791(b)(4). 
‘‘(6) APPLICABLE
STATE
AUTHORITY.—The 
term ‘applicable State authority’ means, with respect 
to a health insurance issuer in a State, the State in-
surance commissioner or official or officials des-
ignated by the State to enforce the requirements of 
this title for the State with respect to the issuer. 
‘‘(7) HAZARDOUS FINANCIAL CONDITION.—The 
term ‘hazardous financial condition’ means that, 
based on its present or reasonably anticipated finan-
cial condition, a health insurance issuer is unlikely 
to be able— 
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‘‘(A) to meet obligations to policyholders 
with respect to known claims and reasonably 
anticipated claims; or 
‘‘(B) to pay other obligations in the normal 
course of business. 
‘‘(8) COVERED LAWS.— 
‘‘(A) IN
GENERAL.—The term ‘covered 
laws’ means the laws, rules, regulations, agree-
ments, and orders governing the insurance busi-
ness pertaining to— 
‘‘(i) individual or group health insur-
ance coverage issued by a health insurance 
issuer; 
‘‘(ii) the offer, sale, rating (including 
medical 
underwriting), 
renewal, 
and 
issuance of individual or group health in-
surance coverage to an individual; 
‘‘(iii) the provision to an individual in 
relation to individual or group health in-
surance coverage of health care and insur-
ance related services; 
‘‘(iv) the provision to an individual in 
relation to individual or group health in-
surance coverage of management, oper-
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ations, and investment activities of a 
health insurance issuer; and 
‘‘(v) the provision to an individual in 
relation to individual or group health in-
surance coverage of loss control and claims 
administration for a health insurance 
issuer with respect to liability for which 
the issuer provides insurance. 
‘‘(B) EXCEPTION.—Such term does not in-
clude any law, rule, regulation, agreement, or 
order governing the use of care or cost manage-
ment techniques, including any requirement re-
lated to provider contracting, network access or 
adequacy, health care data collection, or quality 
assurance. 
‘‘(9) STATE.—The term ‘State’ means the 50 
States and includes the District of Columbia, Puerto 
Rico, the Virgin Islands, Guam, American Samoa, 
and the Northern Mariana Islands. 
‘‘(10) UNFAIR
CLAIMS
SETTLEMENT
PRAC-
TICES.—The term ‘unfair claims settlement prac-
tices’ means only the following practices: 
‘‘(A) Knowingly misrepresenting to claim-
ants and insured individuals relevant facts or 
policy provisions relating to coverage at issue. 
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‘‘(B) Failing to acknowledge with reason-
able promptness pertinent communications with 
respect to claims arising under policies. 
‘‘(C) Failing to adopt and implement rea-
sonable standards for the prompt investigation 
and settlement of claims arising under policies. 
‘‘(D) Failing to effectuate prompt, fair, 
and equitable settlement of claims submitted in 
which liability has become reasonably clear. 
‘‘(E) Refusing to pay claims without con-
ducting a reasonable investigation. 
‘‘(F) Failing to affirm or deny coverage of 
claims within a reasonable period of time after 
having completed an investigation related to 
those claims. 
‘‘(G) A pattern or practice of compelling 
insured individuals or their beneficiaries to in-
stitute suits to recover amounts due under its 
policies by offering substantially less than the 
amounts ultimately recovered in suits brought 
by them. 
‘‘(H) A pattern or practice of attempting 
to settle or settling claims for less than the 
amount that a reasonable person would believe 
the insured individual or his or her beneficiary 
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was entitled by reference to written or printed 
advertising material accompanying or made 
part of an application. 
‘‘(I) Attempting to settle or settling claims 
on the basis of an application that was materi-
ally altered without notice to, or knowledge or 
consent of, the insured. 
‘‘(J) Failing to provide forms necessary to 
present claims within 15 calendar days of a re-
quest with reasonable explanations regarding 
their use. 
‘‘(K) Attempting to cancel a policy in less 
time than that prescribed in the policy or by the 
law of the primary State. 
‘‘(11) FRAUD AND ABUSE.—The term ‘fraud 
and abuse’ means an act or omission committed by 
a person who, knowingly and with intent to defraud, 
commits, or conceals any material information con-
cerning, one or more of the following: 
‘‘(A) Presenting, causing to be presented 
or preparing with knowledge or belief that it 
will be presented to or by an insurer, a rein-
surer, broker or its agent, false information as 
part of, in support of or concerning a fact ma-
terial to one or more of the following: 
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‘‘(i) An application for the issuance or 
renewal of an insurance policy or reinsur-
ance contract. 
‘‘(ii) The rating of an insurance policy 
or reinsurance contract. 
‘‘(iii) A claim for payment or benefit 
pursuant to an insurance policy or reinsur-
ance contract. 
‘‘(iv) Premiums paid on an insurance 
policy or reinsurance contract. 
‘‘(v) Payments made in accordance 
with the terms of an insurance policy or 
reinsurance contract. 
‘‘(vi) A document filed with the com-
missioner or the chief insurance regulatory 
official of another jurisdiction. 
‘‘(vii) The financial condition of an in-
surer or reinsurer. 
‘‘(viii) The formation, acquisition, 
merger, 
reconsolidation, 
dissolution 
or 
withdrawal from one or more lines of in-
surance or reinsurance in all or part of a 
State by an insurer or reinsurer. 
‘‘(ix) The issuance of written evidence 
of insurance. 
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‘‘(x) The reinstatement of an insur-
ance policy. 
‘‘(B) Solicitation or acceptance of new or 
renewal insurance risks on behalf of an insurer 
reinsurer or other person engaged in the busi-
ness of insurance by a person who knows or 
should know that the insurer or other person 
responsible for the risk is insolvent at the time 
of the transaction. 
‘‘(C) Transaction of the business of insur-
ance in violation of laws requiring a license, cer-
tificate of authority or other legal authority for 
the transaction of the business of insurance. 
‘‘(D) Attempt to commit, aiding or abet-
ting in the commission of, or conspiracy to com-
mit the acts or omissions specified in this para-
graph. 
‘‘SEC. 2796. APPLICATION OF LAW. 
‘‘(a) IN GENERAL.—The covered laws of the primary 
State shall apply to individual and group health insurance 
coverage offered by a health insurance issuer in the pri-
mary State and in any secondary State, but only if the 
coverage and issuer comply with the conditions of this sec-
tion with respect to the offering of coverage in any sec-
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ondary State and only if the covered laws of the primary 
State— 
‘‘(1) do not apply any age limitations with re-
spect to who may purchase such coverage that is a 
high deductible health plan; and 
‘‘(2) do not require such coverage that is a high 
deductible health plan to provide for any specific 
type of coverage. 
‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC-
ONDARY STATE.—Except as provided in this section, a 
health insurance issuer with respect to its offer, sale, rat-
ing (including medical underwriting), renewal, and 
issuance of individual or group health insurance coverage 
in any secondary State is exempt from any covered laws 
of the secondary State (and any rules, regulations, agree-
ments, or orders sought or issued by such State under or 
related to such covered laws) to the extent that such laws 
would— 
‘‘(1) make unlawful, or regulate, directly or in-
directly, the operation of the health insurance issuer 
operating in the secondary State, except that any 
secondary State may require such an issuer— 
‘‘(A) to pay, on a nondiscriminatory basis, 
applicable premium and other taxes (including 
high risk pool assessments) which are levied on 
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insurers and surplus lines insurers, brokers, or 
policyholders under the laws of the State; 
‘‘(B) to register with and designate the 
State insurance commissioner as its agent solely 
for the purpose of receiving service of legal doc-
uments or process; 
‘‘(C) to submit to an examination of its fi-
nancial condition by the State insurance com-
missioner in any State in which the issuer is 
doing business to determine the issuer’s finan-
cial condition, if— 
‘‘(i) the State insurance commissioner 
of the primary State has not done an ex-
amination within the period recommended 
by the National Association of Insurance 
Commissioners; and 
‘‘(ii) any such examination is con-
ducted in accordance with the examiners’ 
handbook of the National Association of 
Insurance Commissioners and is coordi-
nated to avoid unjustified duplication and 
unjustified repetition; 
‘‘(D) to comply with a lawful order 
issued— 
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‘‘(i) in a delinquency proceeding com-
menced by the State insurance commis-
sioner if there has been a finding of finan-
cial impairment under subparagraph (C); 
or 
‘‘(ii) in a voluntary dissolution pro-
ceeding; 
‘‘(E) to comply with an injunction issued 
by a court of competent jurisdiction, upon a pe-
tition by the State insurance commissioner al-
leging that the issuer is in hazardous financial 
condition; 
‘‘(F) to participate, on a nondiscriminatory 
basis, in any insurance insolvency guaranty as-
sociation or similar association to which a 
health insurance issuer in the State is required 
to belong; 
‘‘(G) to comply with any State law regard-
ing fraud and abuse (as defined in section 
2795(10)), except that if the State seeks an in-
junction regarding the conduct described in this 
subparagraph, such injunction must be obtained 
from a court of competent jurisdiction; 
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