118
‘‘(4) FEDERAL HEALTH PLAN.—The term ‘Fed-
eral health plan’ means a health plan of, or contrib-
uted to by, the Federal Government on behalf of its
employees, retirees, and their family members, and
includes—
‘‘(A) the Federal employees health insur-
ance program under chapter 89 of title 5, Unit-
ed States Code,
‘‘(B) the program for the provision of med-
ical and dental benefits under chapter 55 of
title 10, United States Code, and
‘‘(C) the program for the provision of hos-
pital care and medical services by the Depart-
ment of Veterans Affairs under chapter 17 of
title 38, United States Code.
‘‘(5) OFFICIAL POVERTY LINE.—The term ‘offi-
cial poverty line’ means, for an individual in a fam-
ily, the official poverty line (as defined by the Office
of Management and Budget, and revised annually in
accordance with section 673(2) of the Omnibus
Budget Reconciliation Act of 1981) applicable to a
family of the size involved.
‘‘(6) PREGNANT WOMAN.—The term ‘pregnant
woman’ means a woman—
119
‘‘(A) beginning on the date of verification
of pregnancy (as determined in a manner speci-
fied by the Secretary), and
‘‘(B) ending on the last day of the month
in which the 60-day period (beginning on the
date of the termination of the pregnancy) ends.
‘‘(7) SPOUSE.—The term ‘spouse’ means, with
respect to an individual, the individual to which the
individual is married. Marital status shall be deter-
mined in accordance with section 7703 of the Inter-
nal Revenue Code of 1986.
‘‘SEC. 2283. NONAPPLICATION TO RESIDENTS OF PUERTO
RICO AND TERRITORIES.
‘‘The provisions of this title shall not apply to an indi-
vidual who is not a resident of one of the 50 States or
the District of Columbia.’’.
SEC. 202. COORDINATION BETWEEN STATE CHILDREN AND
PREGNANT 
WOMEN 
HEALTH 
PLANS 
AND
MEDICAID PLANS.
(a) IN GENERAL.—
(1) LIMITING FEDERAL FINANCIAL PARTICIPA-
TION FOR SERVICES COVERED UNDER STATE CHIL-
DREN
AND
PREGNANT
WOMEN
HEALTH
PLANS.—
Section 1903(i) of the Social Security Act (42
U.S.C. 1396b(i)) is amended—
120
(A) in the paragraph (10) inserted by sec-
tion 4401(a)(1)(B) of Omnibus Budget Rec-
onciliation Act of 1990, by striking all that fol-
lows ‘‘1927(g)’’ and inserting a semicolon;
(B) by redesignating the paragraph (10)
added by section 4701(b)(2) as paragraph (11),
by transferring and inserting it after the para-
graph (10) inserted by section 4401(a)(1)(B) of
Omnibus Budget Reconciliation Act of 1990,
and by striking all that follows ‘‘with respect to
hospitals or facilities’’ and inserting a semi-
colon;
(C) by transferring and inserting the para-
graph (12) inserted by section 4752(a)(2) of
Omnibus Budget Reconciliation Act of 1990
after paragraph (11), as redesignated by sub-
paragraph (B), and by striking the period at
the end and inserting a semicolon;
(D) by redesignating the paragraph (14)
inserted by section 4752(e) of Omnibus Budget
Reconciliation Act of 1990 as paragraph (13),
by transferring and inserting it after paragraph
(12), and by striking the period at the end and
inserting a semicolon;
121
(E) by redesignating the paragraph (11)
inserted by section 4801(e)(16)(A) of Omnibus
Budget Reconciliation Act of 1990 as para-
graph (14), by transferring and inserting it
after paragraph (13), and by striking the period
at the end and inserting ‘‘; or’’; and
(F) by inserting after paragraph (14), as
so redesignated, the following new paragraph:
‘‘(15) with respect to items and services for
which payment is made under State children and
pregnant women health plans under title XXII.’’.
(2) CLARIFICATION
OF
NONDUPLICATION
OF
MEDICAL
ASSISTANCE
WITH
BENEFITS
UNDER
STATE CHILDREN AND PREGNANT WOMEN HEALTH
PLANS.—Title XIX of such Act is amended by add-
ing at the end the following new section:
‘‘NONDUPLICATION OF BENEFITS WITH STATE CHILDREN
AND PREGNANT WOMEN HEALTH PLANS
‘‘SEC. 1931. Notwithstanding any other provision of
this title, a State is not required under its plan under sec-
tion 1902(a) to provide medical assistance for items and
services for which payment is made under its state chil-
dren and pregnant women health plan under title XXII.’’.
(3) CLARIFICATION OF APPLICATION OF THIRD-
PARTY
PAYOR
RULES
TO
QUALIFIED
HEALTH
PLANS.—Section 1902(a)(25)(A) of such Act (42
122
U.S.C. 1396a(a)(25)(A)) is amended by inserting
‘‘and qualified health plans certified under part C of
title XXI’’ after ‘‘health insurers’’.
(b) CONTINUATION OF MEDICAID BENEFITS NOT
COVERED UNDER STATE CHILDREN
AND PREGNANT
WOMEN HEALTH PLANS.—Nothing in this Act shall be
construed as—
(1) changing the eligibility of individuals for
medical assistance under title XIX of the Social Se-
curity Act, or
(2) subject to the amendments made by sub-
section (a), changing the amount, duration, or scope
of medical assistance required (or permitted) to be
provided under such title.
TITLE III—HEALTH INSURANCE
REFORM 
FOR 
SMALL 
EM-
PLOYERS
SEC. 301. EXCISE TAX ON PREMIUMS RECEIVED ON
HEALTH INSURANCE POLICIES WHICH DO
NOT MEET CERTAIN REQUIREMENTS.
(a) IN GENERAL.—Chapter 47 of the Internal Reve-
nue Code of 1986 (relating to taxes on group health
plans), as amended by section 101(b) of this Act, is fur-
ther amended by adding at the end thereof the following
new section:
123
‘‘SEC. 5000B. FAILURE TO SATISFY CERTAIN STANDARDS
FOR HEALTH INSURANCE.
‘‘(a) GENERAL RULE.—In the case of any person is-
suing applicable accident and health insurance contracts,
there is hereby imposed a tax on the failure of such person
to meet at any time during any taxable year the applicable
requirements of title XXIII of the Social Security Act. The
Secretary of Health and Human Services shall determine
whether any contract meets the requirements of such title.
‘‘(b) AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The amount of tax imposed
by subsection (a) by reason of 1 or more failures
during a taxable year shall be equal to 50 percent
of the gross premiums received during such taxable
year with respect to all accident and health insur-
ance contracts issued by the person on whom such
tax is imposed.
‘‘(2) GROSS PREMIUMS.—For purposes of para-
graph (1), gross premiums shall include any consid-
eration received with respect to any accident and
health insurance contract.
‘‘(c) LIMITATION ON TAX.—
‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT
DISCOVERED
EXERCISING
REASONABLE
DILI-
GENCE.—No tax shall be imposed by subsection (a)
with respect to any failure for which it is established
124
to the satisfaction of the Secretary that the person
on whom the tax is imposed did not know, and exer-
cising reasonable diligence would not have known,
that such failure existed.
‘‘(2) TAX
NOT
TO
APPLY
WHERE
FAILURES
CORRECTED WITHIN 30 DAYS.—No tax shall be im-
posed by subsection (a) with respect to any failure
if—
‘‘(A) such failure was due to reasonable
cause and not to willful neglect, and
‘‘(B) such failure is corrected during the
30-day period beginning on the 1st date any of
the persons on whom the tax is imposed knew,
or exercising reasonable diligence would have
known, that such failure existed.
‘‘(3) WAIVER BY SECRETARY.—In the case of a
failure which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all
of the tax imposed by subsection (a).
‘‘(d) LIABILITY FOR TAX.—The person issuing the
applicable accident and health contract with respect to
which a failure occurs shall be liable for the tax imposed
by subsection (a).
‘‘(e) DEFINITIONS.—For purposes of this section—
125
‘‘(1) IN GENERAL.—The term ‘applicable acci-
dent and health insurance contract’ means a con-
tract under which a person authorized under appli-
cable State insurance law provides a health insur-
ance plan or arrangement to any group consisting of
more than 2 individuals. Such term does not include
any self-insured plan of an employer and does not
include a qualified health maintenance organization
(as defined in section 1310(d) of the Public Health
Service Act).
‘‘(2) CERTAIN CONTRACTS NOT COVERED.—The
term ‘applicable accident and health insurance con-
tract’ does not include any contract—
‘‘(A) which provides for accident only, den-
tal only, or disability only coverage,
‘‘(B) which provides coverage as a supple-
ment to liability insurance,
‘‘(C) which provides insurance arising out
of a workmens’ compensation or similar law, or
automobile medical-payment insurance, or
‘‘(D) which provides insurance which is re-
quired by law to be contained under any self-
insured plan of an employer.’’
126
(b) CLERICAL AMENDMENT.—The table of sections
for such chapter 47 is amended by adding at the end
thereof the following new item:
‘‘Sec. 5000B. Failure to satisfy certain standards for health in-
surance.’’
SEC. 302. GROUP HEALTH INSURANCE STANDARDS.
The Social Security Act is amended by adding at the
end the following new title:
‘‘TITLE XXIII—INSURANCE REFORM FOR
SMALL EMPLOYERS
‘‘SEC. 2301. APPLICATION OF REQUIREMENTS TO INSURED
SMALL EMPLOYER HEALTH PLANS.
‘‘(a) PLAN UNDER STATE REGULATORY PROGRAM
OR CERTIFIED BY THE SECRETARY.—No insured small
employer health plan may be issued in a State on or after
the effective date specified in subsection (c) (and no new
contract may be offered under such plan with respect to
any small employer beginning on or after such effective
date) unless—
‘‘(1) the Secretary determines that the State
has established a regulatory program that—
‘‘(A) provides for the application and en-
forcement of the applicable standards estab-
lished under section 2302 (to carry out the re-
quirements of this title), and
127
‘‘(B) meets the requirements of section
2302(b),
by such effective date, or
‘‘(2) if the State has not established such a pro-
gram, the plan has been certified by the Secretary
(in accordance with such procedures as the Sec-
retary establishes) as meeting the applicable stand-
ards established under section 2302 by such effective
date.
‘‘(b) PLAN DISAPPROVED UNDER LOOK-BEHIND AU-
THORITY.—If the Secretary determines, under section
2302(c)(2), that small employer health plan does not meet
the applicable requirements of this title on or after such
effective date, regardless of whether or not the State has
taken any action with respect to such noncompliance, no
new contracts may be offered to small employers under
the plan on or after the date of the determination.
‘‘(c) SANCTIONS.—
‘‘(1) TAX.—For application of excise tax in the
case of a nonconforming plan, see section 5000B of
the Internal Revenue Code of 1986.
‘‘(2) NOTICE TO EMPLOYER IN THE CASE OF
INSURED PLANS.—If tax is imposed under section
5000B of the Internal Revenue Code of 1986, the
Secretary of the Treasury shall provide for notice to
128
be provided to each employer which meets the re-
quirement of part A of title XXI through coverage
under the plan of the imposition of the tax.
‘‘(3) LOSS
OF
STATUS
AS
QUALIFIED
EM-
PLOYER HEALTH PLAN.—
‘‘(A) IN GENERAL.—If an employment-re-
lated health plan is determined to be in viola-
tion of subsection (a) and is not determined to
have come into compliance with the applicable
standards within 6 months after the date of the
initial determination of such a violation, the
plan shall no longer be treated as a qualified
employer health plan under title XXI as of the
end of such 6-month period.
‘‘(B) NO
ENFORCEMENT
OF
INSURANCE
CONTRACTS.—In the case of an employer that
is required, under part A of title XXI, to pro-
vide enrollment under a qualified employer
health plan and that meets such requirement
through an insured plan that is determined to
be in violation of subsection (a)—
‘‘(i) if such plan is not brought into
compliance within 30 days after the date of
the violation, the employer may terminate
by notice the contract with the plan and is