I
105TH CONGRESS
1ST SESSION
H. R. 1698
To amend the Internal Revenue Code of 1986 to assist families in the
purchase of coverage for children under school-based health insurance
programs, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 21, 1997
Mr. STARK introduced the following bill; which was referred to the Committee
on Ways and Means, and in addition to the Committees on Education
and the Workforce, and Commerce, for a period to be subsequently deter-
mined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
A BILL
To amend the Internal Revenue Code of 1986 to assist
families in the purchase of coverage for children under
school-based health insurance programs, 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; FINDINGS; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘School-Based Children Health Insurance Act of 1997’’.
(b) FINDINGS.—Congress finds that—
(1) it is in the national interest to ensure that
every American child has access to affordable health
care;
(2) no family should be forced to choose be-
tween health care for its children and other essential
needs;
(3) 10,500,000 children in the United States
under the age of 19 have no health insurance cov-
erage, and 90 percent of these children have parents
who work, and too many of these children go with-
out needed health care;
(4) families have an obligation to contribute to
the cost of health insurance coverage for their chil-
dren, consistent with their ability to pay; and
(5) the Federal Government has an obligation
to help families provide health insurance coverage
for children; and
(6) local public and private schools can provide
a means for providing efficient and effective access
to health insurance for the nation’s children.
(c) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; findings; table of contents.
Sec. 2. Refundable credit for purchase of school-based health insurance coverage
for children.
Sec. 3. Employer may not discriminate against subsidy eligible individuals.
Sec. 4. Grants to States for health insurance outreach and information pro-
grams.
SEC. 2. REFUNDABLE CREDIT FOR PURCHASE OF SCHOOL-
BASED HEALTH INSURANCE COVERAGE FOR
CHILDREN.
(a) GENERAL RULE.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by redesignating section 35 as section
36 and by inserting after section 34 the following new sec-
tion:
‘‘SEC. 35. PURCHASE OF SCHOOL-BASED HEALTH INSUR-
ANCE COVERAGE FOR CHILDREN.
‘‘(a) GENERAL RULE.—In the case of an individual,
there shall be allowed as a credit against the tax imposed
by this subtitle for the taxable year an amount equal to
the amount (if any) by which—
‘‘(1) the amount owed by the taxpayer during
the taxable year for qualified school-based health in-
surance coverage for a qualifying child of the tax-
payer; exceeds
‘‘(2) the sum of—
‘‘(A) the required contribution amount for
such child,
‘‘(B) the amount (if any) of an employer
contribution that is made (or offered to be
made) on behalf of the individual toward the
premium for the insurance coverage for periods
during such year, and
‘‘(C) the amount of any credit under sec-
tion 30B sought by the entity offering the
qualified school-based program with respect to
the qualifying child.
‘‘(b) LIMITATIONS BASED ON ADJUSTED GROSS IN-
COME; REQUIRED CONTRIBUTION LEVEL.—
‘‘(1) LIMITATION BASED ON AGI.—
‘‘(A) IN GENERAL.—No credit shall be al-
lowed under subsection (a) for any taxable year
for which the taxpayer’s adjusted gross income
exceeds the applicable dollar amount by
$10,000 or more.
‘‘(B) PHASEOUT.—If the taxpayer’s ad-
justed gross income for the taxable year exceeds
the applicable dollar amount by less than
$10,000, the credit which would (but for this
paragraph) be allowed under subsection (a)
shall be reduced (but not below zero) by an
amount which bears the same ratio to such
credit as such excess bears to $10,000. Any re-
duction under the preceding sentence which is
not a multiple of $10 shall be rounded to the
next lowest $10.
‘‘(C) APPLICABLE DOLLAR AMOUNT.—The
term ‘applicable dollar amount’ means the sum
of—
‘‘(i) $15,000, plus
‘‘(ii) $5,000 for each qualifying child
of the taxpayer who is covered by the in-
surance referred to in subsection (a).
‘‘(2) REQUIRED CONTRIBUTION AMOUNT.—For
purposes of subsection (a), the required contribution
amount for a child of a taxpayer who has obtained
qualified school-based health insurance coverage is
equal to the minimum contribution amount estab-
lished with respect to such coverage under sub-
section (d)(4)(A)(i) plus the same proportion of the
excess by which the reference premium amount ex-
ceeds such minimum contribution amount as the
proportion that (A) the excess of the taxpayer’s ad-
justed gross income over the phaseout amount de-
scribed in paragraph (1)(B), bears to (B) such
phaseout amount.
‘‘(c) QUALIFYING CHILD.—
‘‘(1) IN GENERAL.—Subject to paragraph (2),
for the purposes of this section, the term ‘qualifying
child’ has the meaning given such term by section
32(c)(3).
‘‘(2) EXCEPTIONS.—Such term does not in-
clude—
‘‘(A) an individual who has applied and
been determined eligible for medical assistance
under title XIX of the Social Security Act, until
such time as the individual is no longer eligible
for such assistance; and
‘‘(B) an individual who is residing in a
State (as defined for purposes of such title)
that the Secretary of Health and Human Serv-
ices determines has reduced eligibility require-
ments for children under a State plan under
such title below that in effect as of January 1,
1997, until such time as such Secretary deter-
mines the State no longer has reduced such re-
quirements.
‘‘(d) QUALIFIED SCHOOL-BASED HEALTH INSUR-
ANCE COVERAGE.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified school-
based health insurance coverage’ means health in-
surance coverage (as defined in section 9805(b)(1))
that the Secretary of Health and Human Services
certifies to the Secretary meets the following re-
quirements:
‘‘(A) The coverage is offered by a qualified
school-based program.
‘‘(B) The coverage is made available to all
children under 19 years of age who reside in
the area served by the program.
‘‘(C) The coverage provides the approxi-
mate comprehensive benefits described in para-
graph (3).
‘‘(D) The coverage does not impose any
lifetime maximum benefit limit with respect to
a child that is less than $1,000,000.
‘‘(E) The coverage does not impose any
cost sharing for covered preventive care.
‘‘(F) The program offering the coverage
does not impose any pre-existing condition ex-
clusion (as defined in section 9801(b)(1)) and
does not vary the coverage, benefits under the
coverage, or premiums charged for such cov-
erage based on the presence of a pre-existing
condition or based upon any health-status relat-
ed factor described in section 9802(a)(1).
‘‘(G) The premiums charged for such cov-
erage are established consistent with paragraph
(4).
‘‘(H) The program offering the coverage
does not engage in any activity in relation to
the coverage that directly or indirectly would
have the effect of discriminating against an in-
dividual on the basis of race, national origin, re-
ligion, gender, sexual orientation, language,
health status, anticipated need for health serv-
ices, age (with respect to qualified children), or,
except as provided with respect to premiums
under paragraph (4), socio-economic status.
‘‘(2) QUALIFIED SCHOOL-BASED PROGRAM.—
‘‘(A) IN
GENERAL.—The term ‘qualified
school-based program’ means a program that is
operated directly by, or under the control of one
or more of the following (or any combination
thereof, whether or not in the same State):
‘‘(i) A local educational agency (as de-
fined in section 14101 of the Elementary
and Secondary Education Act of 1965).
‘‘(ii) A State educational agency (as
defined in such section).
‘‘(iii) Another public or private non-
profit organization that operates one or
more private elementary or secondary
schools (as such term is used in such Act).
‘‘(B) CONSTRUCTION.—Nothing in this
section shall be construed as preventing a State
agency from providing support and assistance
in the operation of a qualified school-based pro-
gram, including assistance in the filing of re-
ports required under section 6050S.
‘‘(3) COMPREHENSIVE
BENEFITS.—The com-
prehensive benefits described in this paragraph in-
clude the following (as defined by Secretary of
Health and Human Services):
‘‘(A) Well-baby and well-child care, includ-
ing immunizations.
‘‘(B) Physicians services, including pri-
mary and specialty services and medical and
surgical procedures.
‘‘(C) Laboratory tests.
‘‘(D) Inpatient and outpatient hospital
services.
‘‘(E) Emergency services and emergency
medical transportation.
‘‘(F) Prescription drugs and biologicals, in-
cluding immunizations.
‘‘(G) Vision screening and glasses.
‘‘(H) Hearing screening and hearing aids.
‘‘(I) Dental screening and basic dental
care.
‘‘(J) Physical therapy.
‘‘(K) Mental health services.
‘‘(L) Pre-natal care and delivery.
Nothing in this section shall be construed as requir-
ing coverage of benefits for items and services that
are not medically necessary or reasonable. Nothing
in this section shall be construed to compel any child
to undergo any medical screening, examination, di-
agnosis, or treatment or to accept any other health
care or services provided under a school-based pro-
gram for any purpose if the parent or guardian of
the child objects thereto on the basis of religious be-
lief or moral convictions or to require a school-based
program that is operated by a religious organization
to cover benefits for items or services to which the
organization objects thereto on the basis of religious
belief or moral convictions.
‘‘(4) ESTABLISHMENT OF PREMIUMS.—
‘‘(A) 
IN
GENERAL.—The 
premiums
charged by a school-based program with respect
to coverage of a child who is a dependent of a
taxpayer are established consistent with this
paragraph if the following conditions are met:
‘‘(i) ESTABLISHMENT
OF
MINIMUM
CONTRIBUTION
AMOUNT.—The program
sets a minimum contribution amount
which is not less than 10 percent, and not
more than 20 percent, of the reference pre-
mium amount.
‘‘(ii) 
FULLY-SUBSIDIZED
CHIL-
DREN.—In the case of a child of a tax-
payer whose adjusted gross income does
not exceed the applicable dollar amount (as
defined in subsection (b)(1)(C)), the pre-
mium charged may not exceed 80 percent
of the reference premium amount.
‘‘(iii) PARTIALLY-SUBSIDIZED
CHIL-
DREN.—In the case of a child of a tax-
payer whose adjusted gross income exceeds
such applicable dollar amount by less than
the phaseout amount specified in sub-
section (b)(1)(B), the premium may not
exceed 80 percent of the reference pre-
mium amount, plus 20 percent of such ref-
erence premium amount multiplied by the
phaseout ratio.
‘‘(iv) PHASEOUT
RATIO.—For pur-
poses of clause (iii), the phaseout ratio for
a taxpayer is the ratio of (I) the amount
by which the taxpayer’s adjusted gross in-
come exceeds the phaseout amount speci-
fied in subsection (b)(1)(B)), to (II) such
phaseout amount.
‘‘(B) REFERENCE
PREMIUM
AMOUNT.—
For purposes of this paragraph, the term ‘ref-
erence premium amount’ means the premium
charged with respect to a child with respect to
whom no credit is allowed under subsection (a).
‘‘(e) SPECIAL RULES.—
‘‘(1) ONLY
QUALIFYING
CHILDREN
MAY
BE
COVERED
BY
INSURANCE.—No amount shall be
treated as paid for insurance under subsection (a) if
any individual other than a qualifying child of the
taxpayer is covered under such insurance. The prin-
ciples of section 213(d)(6) shall apply for purposes
of the preceding sentence.
‘‘(2) CERTAIN RULES TO APPLY.—Rules similar
to the rules of subsections (d), (e), and (h) of section
32, and section 213(d)(6), shall apply for purposes
of this section.
‘‘(3) DISQUALIFICATION
OF
CERTAIN
INSUR-
ANCE.—If the Secretary of Health and Human Serv-
ices determines, based on information provided by a
State or otherwise, that an issuer of insurance under
this section has engaged in a pattern of abuse or
misrepresentation of such insurance, this section
shall not apply to insurance issued by such issuer
until such Secretary is satisfied that such pattern
has been remedied and will not recur.
‘‘(f) COORDINATION WITH OTHER PROVISIONS.—
‘‘(1) DEDUCTION FOR MEDICAL EXPENSES.—
The amount taken into account in computing the
credit under subsection (a) shall not be taken into
account in computing the amount allowable to the
taxpayer as a deduction under section 213(a).
‘‘(2) DEDUCTION
FOR
HEALTH
INSURANCE
COSTS
OF
SELF-EMPLOYED
INDIVIDUALS.—No
amount taken into account under section 162(l) may
be taken into account under this section.
‘‘(g) CONSTRUCTION.—Nothing in title XIX of the
Social Security Act shall be construed to prevent a State
plan under such title from providing medical assistance,
in part, through the purchase of qualified school-based
health insurance coverage.’’
(b) APPLICATION
THROUGH
TAX
CREDIT
FOR
QUALIFIED SCHOOL-BASED PROGRAMS.—Subpart B of
part IV of subchapter A of chapter 1 of the Internal Reve-
nue Code of 1986 (relating to other credits) is amended
by adding at the end the following:
‘‘SEC. 30B. CHILDREN’S HEALTH COVERAGE SUBSIDY CRED-
IT 
FOR 
QUALIFIED 
SCHOOL-BASED 
PRO-
GRAMS.
‘‘(a) DETERMINATION OF AMOUNT.—There shall be
allowed as a credit against the applicable tax for the tax-
able year an amount equal to the eligible premium sub-
sidies provided by an entity that operates a qualified
school-based program for qualified school-based health in-
surance coverage during the taxable year.
‘‘(b) APPLICABLE TAX.—For purposes of this sec-
tion, the term ‘applicable tax’ means the excess (if any)
of—
‘‘(1) the sum of—
‘‘(A) the tax imposed under this chapter
(other than the taxes imposed under the provi-
sions described in subparagraphs (C) through
(O) of section 26(b)(1)), plus
‘‘(B) the tax imposed under chapter 21,
over
‘‘(2) the credits allowable under subparts B and
D of this part.
‘‘(c) ELIGIBLE PREMIUM SUBSIDIES.—For purposes
of this section, the term ‘eligible premium subsidies’
means, with respect to the entity operating a qualified
school-based program, the amount of the excess described
in section 35(a) (determined without regard to this sec-
tion) for qualifying children (as defined in section 35(c))
enrolled in the program.
‘‘(d) OTHER DEFINITIONS.—For purposes of this
section, the terms ‘qualifying child’, ‘qualified school-based
health insurance coverage’, and ‘qualified school-based
program’ have the meanings given such terms in section
35.’’.
(c) REPORTING.—
(1) IN GENERAL.—Subpart B of part III of
subchapter A of chapter 61 of such Code is amended
by adding at the end the following new section:
‘‘SEC. 6050S. RETURNS RELATING TO PREMIUMS OWED FOR
HEALTH INSURANCE COVERAGE FOR CHIL-
DREN.
‘‘(a) REQUIREMENT
OF REPORTING.—Any entity
that operates a qualified school-based program (as defined
in section 35(d)(2)) who is owed by any individual any
premium for coverage to which section 35 applies shall
make a return, according to the forms or regulations pre-
scribed by the Secretary, setting forth—
‘‘(1) the aggregate amount of such premiums
owed from such individual during any calendar year,
‘‘(2) the name, address, and TIN of such indi-
vidual, and
‘‘(3) such other information as the Secretary
may prescribe.
‘‘(b) STATEMENTS TO BE FURNISHED TO INDIVID-
UALS WITH RESPECT TO WHOM INFORMATION IS RE-
QUIRED.—Every person required to make a return under
subsection (a) shall furnish to each individual whose name
is required to be set forth in such return a written state-
ment showing—
‘‘(1) the name, address, and phone number of
the information contact of the person required to
make such return, and
‘‘(2) the aggregate amount of premiums de-
scribed in subsection (a) owed to such person by
such individual.
The written statement required under the preceding sen-
tence shall be furnished to the individual on or before Jan-
uary 31 of the year following the calendar year for which
the return under subsection (a) was required to be made.’’
(2) PENALTIES.—
(A) 
Subparagraph 
(B) 
of 
section
6724(d)(1) of such Code is amended by redesig-
nating clauses (x) through (xv) as clauses (xi)
through (xvi), respectively, and by inserting
after clause (ix) the following new clause:
‘‘(x) section 6050S (relating to report-
ing of premiums owed for health insurance
coverage for children),’’.
(B) Paragraph (2) of section 6724(d) of
such Code is amended by redesignating sub-
paragraph (R) and the succeeding subpara-
graphs as subparagraphs (S) and following, re-
spectively, and by inserting after subparagraph
(Q) the following new subparagraph:
‘‘(R) section 6050S(b) (relating to report-
ing of premiums owed for health insurance cov-
erage for children),’’.
(d) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 1324(b) of title
31, United States Code, is amended by inserting be-
fore the period ‘‘or from section 35 of such Code’’.
(2) The table of sections for subpart C of part
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by striking the item
relating to section 35 and inserting the following
new items:
‘‘Sec. 35. Purchase of school-based health insurance coverage for
children.
‘‘Sec. 36. Overpayments of tax.’’
(3) The table of sections for subpart B of part
IV of subchapter A of chapter 1 of such Code is
amended by adding at the end the following new
item:
‘‘Sec. 30B. Children’s health coverage subsidy credit for qualified
school-based programs.’’
(4) The table of sections for subpart B of part
III of subchapter A of chapter 61 of such Code is
amended by adding at the end the following new
item:
‘‘Sec. 6050S. Returns relating to premiums owed for health insur-
ance coverage for children.’’
(e) EFFECTIVE DATE.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by
this section shall apply to taxable years beginning
after December 31, 1997, for amounts owed for cov-
erage periods beginning after such date.
(2) PROGRAM CREDIT.—The amendment made
by subsection (b) shall apply to amounts owed for
coverage periods beginning after December 31,
1997.
(3) REPORTING.—The amendment made by
subsection (c) shall apply to amounts owed after De-
cember 31, 1997.
SEC. 3. EMPLOYER MAY NOT DISCRIMINATE AGAINST SUB-
SIDY ELIGIBLE INDIVIDUALS.
(a) GENERAL RULE.—Any employer which elects to
make employer contributions on behalf of an individual
who is an employee of such employer, or who is a depend-
ent of such employee, for health insurance coverage shall
not condition, or vary, such contributions with respect to
any such individual by reason of such individual’s status
as an individual eligible for a tax credit under section 35
of the Internal Revenue Code of 1986 (as added by section
3 of this Act).
(b) ELIMINATION OF CONTRIBUTIONS.—An employer
shall not be treated as failing to meet the requirements
of subsection (a) if the employer ceases to make employer
contributions for health insurance coverage for all its em-
ployees.
SEC. 4. GRANTS TO STATES FOR HEALTH INSURANCE OUT-
REACH AND INFORMATION PROGRAMS.
(a) IN GENERAL.—The Secretary of Health and
Human Services (in this section referred to as the ‘‘Sec-
retary’’) shall provide financial assistance to States in
order to operate outreach and information programs that
meet the requirements specified in subsection (b).
(b) REQUIREMENTS FOR OUTREACH AND INFORMA-
TION PROGRAMS.—Each outreach and information pro-
gram shall—
(1) target individuals eligible for access to
school-based health insurance coverage described in
section 35 of the Internal Revenue Code of 1986;
(2) provide comparative information on the poli-
cies offered by issuers in the State under such sec-
tion;
(3) assist individuals in purchasing policies
under such section; and
(4) forward to the Secretary any findings by
the State of a pattern of abuse or misrepresentation
by the issuer of insurance for which a tax credit is
available under section 35 of such Code.
The Secretary shall consider findings forwarded under
paragraph (4) in determining whether a insurance contin-
ues to qualify for purposes of obtaining a tax credit under
section 35 of such Code.
(c) AMOUNT OF ASSISTANCE.—The Secretary shall
determine the amount of financial assistance provided to
a State under this section. In determining such amount,
the Secretary shall take into account the number of quali-
fying children (as defined in section 35(c) of such Code)
in the State.
(d) APPLICATION REQUIRED.—No State is eligible
for assistance under this section unless the State submits
to the Secretary an application that is in such form, is
made in such manner, and contains such agreements, as-
surances, and information as the Secretary determines to
be necessary to carry out this section.
(e) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated for each fiscal year (be-
ginning with fiscal year 1998) such sums as may be nec-
essary to carry out this section.
Æ