157
Title I, Subtitle F
(15) OPTIONS.—Each of the following is a
‘‘type of coverage option’’ in relation to standard
coverage:
(A) FEE-FOR-SERVICE OPTION.—Standard
coverage is considered to provide a ‘‘fee-for-
service option’’ if, regardless of whether covered
individuals may receive benefits through a pro-
vider network, benefits with respect to the cov-
ered items and services in the coverage are
made available for such items and services pro-
vided through any lawful provider of such cov-
ered items and services and payment is made to
such a provider whether or not there is a con-
tractual arrangement between the provider and
the carrier or plan.
(B) MANAGED
CARE
OPTION.—Standard
coverage is considered to provide a ‘‘managed
care option’’ if benefits with respect to the cov-
ered items and services in the coverage are
made available exclusively through a provider
network, except in the case of emergency serv-
ices and as otherwise required under law.
(C) POINT-OF-SERVICE OPTION.—Standard
coverage is considered to provide a ‘‘point-of-
service option’’ if the benefits with respect to
158
Title I, Subtitle F
covered items and services in the coverage are
made available principally through a managed
care arrangement, with the choice of the en-
rollee to obtain such benefits for items and
services provided through any lawful provider of
such covered items and services. The coverage
may provide for different cost sharing schedules
based on whether the items and services are
provided through such an arrangement or out-
side such an arrangement.
(16) QUALIFIED
HEALTH
COVERAGE.—The
term ‘‘qualified health coverage’’ has the meaning
given such term in section 1101.
(17) STANDARD COVERAGE.—The term ‘‘stand-
ard coverage’’ means coverage provided consistent
with section 1102(a).
(18) STATE COMMISSIONER OF INSURANCE.—
The term ‘‘State commissioner of insurance’’ in-
cludes a State superintendent of insurance.
SEC. 1904. DEFINITIONS RELATING TO RESIDENCE AND IM-
MIGRATION STATUS.
Except as otherwise provided, for purposes of this
Act:
(1) ALIEN
PERMANENTLY
RESIDING
IN
THE
UNITED STATES UNDER COLOR OF LAW.—The term
159
Title I, Subtitle F
‘‘alien permanently residing in the United States
under color of law’’ means an alien lawfully admitted
for permanent residence (within the meaning of sec-
tion 101(a)(20) of the Immigration and Nationality
Act), and includes any of the following (such status
not having changed):
(A) An alien who is admitted as a refugee
under section 207 of the Immigration and Na-
tionality Act.
(B) An alien who is granted asylum under
section 208 of such Act.
(C) An alien whose deportation is withheld
under section 243(h) of such Act.
(D) An alien whose deportation is sus-
pended pursuant to section 244 of such Act.
(E) An alien who is granted conditional
entry pursuant to section 203(a)(7) of such Act
as in effect before April 1, 1980.
(F) An alien who is admitted for tem-
porary residence under section 210, 210A, or
245A of such Act.
(G) An alien who is within a class of aliens
lawfully present in the United States pursuant
to any other provision of such Act, if (i) the At-
torney General determines that the continued
160
Title I, Subtitle F
presence of such class of aliens serves a human-
itarian or other compelling public interest, and
(ii) the Secretary determines that such interest
would be further served by treating each such
alien within such class as a ‘‘legal permanent
resident’’ for purposes of this Act or who has
been granted extended voluntary departure as a
member of a nationality group.
(H) An alien who is the spouse or unmar-
ried child under 21 years of age of a citizen of
the United States, or the parent of such a citi-
zen if the citizen is over 21 years of age, and
with respect to whom an application for adjust-
ment to lawful permanent residence is pending.
(I) An alien within such other classification
of permanent resident aliens as the Secretary
may establish by regulation.
(2) LONG-TERM
NONIMMIGRANT.—The term
‘‘long-term nonimmigrant’’ means a nonimmigrant
described in subparagraph (E), (H), (I), (K), (L),
(N), (O), (Q), or (R) of section 101(a)(15) of the
Immigration and Nationality Act.
(3) 
QUALIFYING
INDIVIDUAL.—The 
term
‘‘qualifying individual’’ means, an individual who is
161
Title I, Subtitle F
a resident of the United States, who is not a pris-
oner, and is—
(A) a citizen or national of the United
States;
(B) an alien permanently residing in the
United States under color of law (as defined in
paragraph (1)); or
(C) a long-term nonimmigrant (as defined
in paragraph (2)).
SEC. 1905. EFFECTIVE DATES.
The requirements of this title shall apply with respect
to—
(1) group health plans for plan years beginning
on or after January 1, 1997, and
(2) carriers (with respect to coverage other than
under a group health plan) as of January 1, 1997.
PART 2—REPORT AND RECOMMENDATIONS ON
HEALTH COVERAGE AND ACCESS
SEC. 1911. OBJECTIVE OF FULL ACCESS AND COVERAGE.
It is an objective of this Act to assure by 2002 that—
(1) all eligible individuals in the United States
have access to private or public health coverage, and
(2) at least 95 percent of such individuals have
such coverage.
162
Title II
SEC. 1912. REPORT AND RECOMMENDATIONS ON ACHIEVE-
MENT OF OBJECTIVE FOR HEALTH COV-
ERAGE AND ACCESS.
(a) STUDY.—The Secretary shall monitor and evalu-
ate the extent to which eligible individuals in the United
States have access to health coverage and have health cov-
erage.
(b) REPORT.—Not later than January 31, 2002, the
Secretary shall submit to Congress a report on the evalua-
tion conducted under subsection (a). The Secretary shall
include in the report a determination of whether the objec-
tive described in section 1911 has been met.
(c) RECOMMENDATIONS.—If the Secretary deter-
mines that such objective has not been met, the Secretary
shall include in the report such recommendations as may
be appropriate to achieve the objective at the earliest pos-
sible date.
TITLE II—REMOVAL OF FINAN-
CIAL BARRIERS TO ACCESS
TABLE OF CONTENTS OF TITLE
Subtitle A—Tax Deductibility for Individuals and Self-
Employed
Sec. 2001. Deduction for health insurance costs of self-employed individuals in-
creased and made permanent.
Sec. 2002. Deduction for health insurance costs of individuals who are not self-
employed.
Sec. 2003. Restrictions on health benefits provided through cafeteria plans and
flexible spending arrangements.
Subtitle B—Premium and Cost-Sharing Subsidy Program for
Low-Income Individuals
163
Title II, Subtitle A
Sec. 2100. Description of transition from current medicaid system to new acute
care low-income subsidy program for AFDC recipients and
non-cash medicaid beneficiaries.
Sec. 2101. State premium and cost-sharing subsidy programs.
‘‘TITLE XXI—STATE ACUTE CARE BENEFITS PROGRAMS FOR
LOW-INCOME INDIVIDUALS; FINANCING FAILSAFE MECHANISM
‘‘PART A—STATE PREMIUM AND COST-SHARING SUBSIDY PROGRAMS
‘‘Sec. 2101. Establishment of State programs.
‘‘Sec. 2102. Eligibility.
‘‘Sec. 2103. Premium and cost-sharing assistance.
‘‘Sec. 2104. Eligibility determinations.
‘‘Sec. 2105. End-of-year reconciliation for premium assistance.
‘‘Sec. 2106. Payments to States.
‘‘Sec. 2107. Requirement of State maintenance-of-effort payments.
‘‘PART C—FINANCING FAILSAFE MECHANISM AND GENERAL PROVISIONS
‘‘Sec. 2141. Ensuring deficit neutral spending on premium and cost-shar-
ing assistance and supplemental acute care benefits.
‘‘Sec. 2142. Payments for administrative expenses under title.
‘‘Sec. 2143. Health care assurance trust fund.
‘‘Sec. 2144. Limitation on use of funds for abortions.
‘‘Sec. 2145. Audits.
‘‘Sec. 2146. Demonstration project authority.
‘‘Sec. 2147. Definitions and determinations of income.’’
Sec. 2102. Operation of program as State plan requirement under medicaid.
Sec. 2103. Application of miscellaneous provisions.
Subtitle A—Tax Deductibility for
Individuals and Self-Employed
SEC. 2001. DEDUCTION FOR HEALTH INSURANCE COSTS OF
SELF-EMPLOYED 
INDIVIDUALS 
INCREASED
AND MADE PERMANENT.
(a) IN GENERAL.—Paragraph (1) of section 162(l)
of the Internal Revenue Code of 1986 (relating to special
rules for health insurance costs of self-employed individ-
uals) is amended by striking ‘‘25 percent’’ and inserting
‘‘the applicable percentage’’.
164
Title II, Subtitle A
(b) DEDUCTION MADE PERMANENT; APPLICABLE
PERCENTAGE.—Paragraph (6) of section 162(l) of such
Code is amended to read as follows:
‘‘(6) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1)—
‘‘In 
the 
case 
of 
taxable 
years
beginning in calendar year:
The applicable
percentage is:
1994, 1995, 1996, 1997, or 1998 ..........
25 percent
1999 ........................................................
50 percent
2000 or thereafter ...................................
100 percent.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
SEC. 2002. DEDUCTION FOR HEALTH INSURANCE COSTS OF
INDIVIDUALS 
WHO 
ARE 
NOT 
SELF-EM-
PLOYED.
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
additional itemized deductions) is amended by redesignat-
ing section 220 as section 221 and by inserting after sec-
tion 219 the following new section:
‘‘SEC. 220. HEALTH INSURANCE COSTS OF INDIVIDUALS
WHO ARE NOT SELF-EMPLOYED.
‘‘(a) IN GENERAL.—In the case of an individual who
is not a self-employed individual (as defined in section
401(c)(1)), there shall be allowed as a deduction an
amount equal to 25 percent of the amount paid during
165
Title II, Subtitle A
the taxable year for insurance which constitutes medical
care for the taxpayer, his spouse, and dependents.
‘‘(b) COORDINATION WITH DEDUCTION FOR SELF-
EMPLOYED INDIVIDUALS.—The amount which would (but
for this paragraph) be allowed as a deduction under sub-
section (a) for the taxable year shall be reduced (but not
below zero) by the amount (if any) allowed as a deduction
under section 162(l) for such taxable year.
‘‘(c) OTHER COVERAGE.—Subsection (a) shall not
apply to any taxpayer for any calendar month for which
the taxpayer is eligible to participate in any subsidized
health plan maintained by any employer of the taxpayer
or of the spouse of the taxpayer.
‘‘(d) COORDINATION WITH MEDICAL DEDUCTION,
ETC.—Any amount paid by a taxpayer for insurance to
which subsection (a) applies shall not be taken into ac-
count in computing the amount allowable to the taxpayer
as a deduction under section 213(a).’’
(b) DEDUCTION ALLOWED WHETHER OR NOT TAX-
PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a)
of section 62 of such Code is amended by adding at the
end the following new paragraph:
‘‘(16) HEALTH INSURANCE COSTS.—The deduc-
tion allowed by section 220.’’
166
Title II, Subtitle A
(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. 220. Health insurance costs of individuals who are not self-
employed.
‘‘Sec. 221. Cross reference.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 2003. RESTRICTIONS ON HEALTH BENEFITS PRO-
VIDED THROUGH CAFETERIA PLANS AND
FLEXIBLE SPENDING ARRANGEMENTS.
(a) FLEXIBLE SPENDING ARRANGEMENTS.—Section
106 of the Internal Revenue Code of 1986 (relating to
contributions by employer to accident and health plans)
is amended to read as follows:
‘‘SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT
AND HEALTH PLANS.
‘‘(a) GENERAL RULE.—Except as otherwise provided
in this section, gross income of an employee does not in-
clude employer-provided coverage under an accident or
health plan.
‘‘(b) INCLUSION OF CERTAIN BENEFITS PROVIDED
THROUGH
FLEXIBLE
SPENDING
ARRANGEMENTS.—
Gross income of an employee shall include such employer-
provided coverage which is provided through a flexible
167
Title II, Subtitle A
spending or similar arrangement if any amount of deduct-
ible, copayment, coinsurance, or similar cost-sharing may
be paid for or reimbursed under such arrangement.’’
(b) CAFETERIA PLANS.—Subsection (f) of section
125 of such Code (defining qualified benefits) is amended
by adding at the end thereof the following new sentence:
‘‘Such term shall not include any benefits or coverage
under an accident or health plan if any amount of deduct-
ible, copayment, coinsurance, or similar cost-sharing
under such a plan, or more than 20 percent of any pre-
mium (or comparable amount in the case of a plan not
provided through insurance) for such a plan, may be paid
for or reimbursed under the cafeteria plan.’’
(c) EMPLOYMENT TAX TREATMENT.—
(1) SOCIAL SECURITY TAX.—
(A) Subsection (a) of section 3121 of such
Code is amended by inserting after paragraph
(21) the following new sentence:
‘‘Nothing in paragraph (2) shall exclude from the term
‘wages’ any amount which is required to be included in
gross income under section 106(b).’’
(B) Subsection (a) of section 209 of the
Social Security Act is amended by inserting
after paragraph (21) the following new sen-
tence:
168
Title II, Subtitle A
‘‘Nothing in paragraph (2) shall exclude from the term
‘wages’ any amount which is required to be included in
gross income under section 106(b) of the Internal Revenue
Code of 1986.’’
(2) RAILROAD RETIREMENT TAX.—Paragraph
(1) of section 3231(e) of such Code is amended by
adding at the end thereof the following new sen-
tence: ‘‘Nothing in clause (i) of the second sentence
of this paragraph shall exclude from the term ‘com-
pensation’ any amount which is required to be in-
cluded in gross income under section 106(b).’’
(3) UNEMPLOYMENT TAX.—Subsection (b) of
section 3306 of such Code is amended by inserting
after paragraph (16) the following new sentence:
‘‘Nothing in paragraph (2) shall exclude from the term
‘wages’ any amount which is required to be included in
gross income under section 106(b).’’
(4) WAGE
WITHHOLDING.—Subsection (a) of
section 3401 of such Code is amended by adding at
the end thereof the following new sentence:
‘‘Nothing in the preceding provisions of this subsection
shall exclude from the term ‘wages’ any amount which is
required to be included in gross income under section
106(b).’’
169
Title II, Subtitle B
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1996.
Subtitle 
B—Premium 
and 
Cost-
Sharing Subsidy Program for
Low-Income Individuals
SEC. 2100. DESCRIPTION OF TRANSITION FROM CURRENT
MEDICAID SYSTEM TO NEW ACUTE CARE
LOW-INCOME SUBSIDY PROGRAMS FOR AFDC
RECIPIENTS AND NON-CASH MEDICAID BENE-
FICIARIES.
The amendments made by this subtitle and title III
provide for a transition from the current medicaid system
to a new system of acute care low-income assistance
through the following:
(1) IMMEDIATE MEDICAID REFORMS.—During
1995, 1996, and 1997, States are permitted—
(A) to enroll medicaid recipients under co-
ordinated care arrangements, but are restricted
from eliminating eligibility categories currently
in effect; and
(B) to provide certain classes of acute care
services to such recipients through a State sup-
plemental benefits program,
under the amendments made by section 3101.
170
Title II, Subtitle B
(2) ESTABLISHMENT
OF
NEW
PREMIUM
AND
COST-SHARING
SUBSIDY
PROGRAM
AND
SUPPLE-
MENTAL BENEFITS PROGRAM AND INTEGRATION OF
AFDC
AND
NON-CASH
BENEFICIARIES.—Beginning
January 1, 1998—
(A) States are required to establish a new
premium and cost-sharing subsidy program
under part A of title XXI of the Social Security
Act (as added by section 2101); and
(B) with respect to AFDC and non-cash
medicaid beneficiaries and other low-income in-
dividuals—
(i) States are required to provide for
premium and cost-sharing assistance for
core benefits for premium and cost-sharing
assistance eligible individuals through that
program and additional benefits through a
supplemental benefits grant program under
part B of title XXI of the Social Security
Act (as added by section 3101), and
(ii) States will no longer provide such
individuals with medicaid coverage for
acute care services.
171
Title II, Subtitle B
SEC. 2101. STATE PREMIUM AND COST-SHARING SUBSIDY
PROGRAMS.
(a) REQUIREMENTS FOR PROGRAMS.—The Social Se-
curity Act is amended by adding at the end the following
new title:
‘‘TITLE XXI—STATE ACUTE CARE BENEFITS
PROGRAMS 
FOR 
LOW-INCOME 
INDIVID-
UALS; FINANCING FAILSAFE MECHANISM
‘‘PART A—STATE PREMIUM AND COST-SHARING
SUBSIDY PROGRAMS
‘‘SEC. 2101. ESTABLISHMENT OF STATE PROGRAMS.
‘‘(a) IN GENERAL.—As a requirement under section
1902(a)(65), effective January 1, 1998, each State shall
establish and maintain a premium and cost-sharing sub-
sidy program (in this title referred to as a ‘State subsidy
program’) that provides for—
‘‘(1) premium assistance described in section
2103 to premium assistance eligible individuals de-
scribed in section 2102(a) in accordance with this
part,
‘‘(2) cost-sharing assistance described in section
2103 to cost-sharing assistance eligible individuals
described in section 2102(b) in accordance with this
part, and
‘‘(3) State maintenance-of-effort payments in
accordance with section 2107.
172
Title II, Subtitle B
‘‘(b) AVAILABILITY OF FUNDS.—Each State with a
State subsidy program approved under this part is enti-
tled, for calendar quarters beginning on or after January
1, 1998, to payment under section 2106.
‘‘(c) APPROVAL OF STATE PROGRAMS.—The Sec-
retary may not approve a State subsidy program unless
the State has submitted a detailed description that speci-
fies the form and manner in which it will carry out the
program and the Secretary finds that the program meets
the requirements of this part.
‘‘(d) DESIGNATION OF STATE AGENCY.—A State shall
designate an appropriate State agency to administer the
State subsidy program. Such agency shall be the same
agency as the agency designated to administer the State
supplemental medical benefits program under part B.
‘‘SEC. 2102. ELIGIBILITY.
‘‘(a) ASSISTANCE.—
‘‘(1) PREMIUM
ASSISTANCE.—Each premium
assistance eligible individual (as defined in sub-
section (b)) is entitled to premium assistance under
section 2103(a)(1).
‘‘(2) COST-SHARING
ASSISTANCE.—Each cost-
sharing assistance eligible individual (as defined in
subsection (c)) is entitled to cost-sharing assistance
described in section 2103(a)(2).
173
Title II, Subtitle B
‘‘(b) PREMIUM ASSISTANCE ELIGIBLE INDIVIDUAL
DEFINED.—
‘‘(1) IN GENERAL.—In this title, subject to the
succeeding provisions of this section and part C, the
term ‘premium assistance eligible individual’ means
an individual who has been determined under section
2104 to have family modified adjusted income below
the following applicable percentage of the applicable
poverty line (as defined in section 2147(2)):
Applicable
‘‘Calendar year:
percentage:
1998 ..................................................................................
100
1999 ..................................................................................
115
2000 ..................................................................................
130
2001 ..................................................................................
145
2002 ..................................................................................
160
2003 ..................................................................................
175
2004 ..................................................................................
200
‘‘(2) SPECIAL RULE FOR CHILDREN AND PREG-
NANT WOMEN.—In this title, subject to the succeed-
ing provisions of this section and part C, the term
‘premium assistance eligible individual’ includes an
individual who is a child under 19 years of age or
a pregnant woman and who has been determined
under section 2104 to have family modified adjusted
income below the following applicable percentage of
the applicable poverty line:
Applicable
‘‘Calendar year:
percentage:
1998 ..................................................................................
185
1999 ..................................................................................
185
2000 ..................................................................................
185
2001 ..................................................................................
185
174
Title II, Subtitle B
2002 ..................................................................................
185
2003 ..................................................................................
200
2004 ..................................................................................
240
‘‘(c) COST-SHARING ASSISTANCE ELIGIBLE INDIVID-
UAL DEFINED.—In this title, subject to the succeeding
provisions of this section and part C, the term ‘cost-shar-
ing assistance eligible individual’ means an individual who
has been determined under section 2104 to have family
modified adjusted income below 100 percent of the appli-
cable poverty line.
‘‘(d) EXCLUSION OF CERTAIN INDIVIDUALS.—In this
title—
‘‘(1) IN GENERAL.—The terms ‘premium assist-
ance eligible individual’ and ‘cost-sharing assistance
eligible individual’ do not include, with respect to a
month, any of the following individuals:
‘‘(A) MEDICARE BENEFICIARY.—An indi-
vidual who is entitled to benefits under part A
or B of title XVIII for the month.
‘‘(B) SSI RECIPIENT.—An individual who
is an SSI recipient (as defined in paragraph
(2)) for the month.
‘‘(C) INMATES.—An individual who as of
the first day of the month is an inmate of a
public institution (except as a patient of a med-
ical institution).