1159
Title VII, Subtitle E
(2) by striking ‘‘OR MEDICARE ENTITLEMENT’’
in the heading and inserting ‘‘, MEDICARE ENTITLE-
MENT, OR HEALTH SECURITY ACT ELIGIBILITY’’.
(b) QUALIFIED BENEFICIARY.—Section 4980B(g)(1)
(defining qualified beneficiary) is amended by adding at
the end the following new subparagraph:
‘‘(E) SPECIAL
RULE
FOR
INDIVIDUALS
COVERED
BY
HEALTH
SECURITY
ACT.—The
term ‘qualified beneficiary’ shall not include any
individual who, upon termination of coverage
under a group health plan, is eligible for com-
prehensive health coverage described in section
1101 of the Health Security Act.’’
(c) REPEAL UPON IMPLEMENTATION OF HEALTH
SECURITY ACT.—
(1) IN GENERAL.—Section 4980B (relating to
failure to satisfy continuation coverage requirements
of group health care plans) is hereby repealed.
(2) CONFORMING AMENDMENTS.—
(A) Section 414(n)(3)(C) is amended by
striking ‘‘505, and 4980B’’ and inserting ‘‘and
505’’.
(B) Section 414(t)(2) is amended by strik-
ing ‘‘505, or 4980B’’ and inserting ‘‘or 505’’.
1160
Title VII, Subtitle F
(C) The table of sections for chapter 43 is
amended by striking the item relating to section
4980B.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall take effect on the earlier
of—
(A) January 1, 1998, or
(B) the first day of the first calendar year
following the calendar year in which all States
have in effect plans under which individuals are
eligible for comprehensive health coverage de-
scribed in section 1101 of this Act.
Such amendments shall not apply in determining the
amount of any tax under section 4980B of the Inter-
nal Revenue Code of 1986 with respect to any fail-
ure occurring before the date determined under the
preceding sentence.
Subtitle F—Tax Treatment of Orga-
nizations Providing Health Care
Services and Related Organiza-
tions
SEC. 7601. TREATMENT OF NONPROFIT HEALTH CARE OR-
GANIZATIONS.
(a) TREATMENT OF HOSPITALS AND OTHER ENTI-
TIES PROVIDING HEALTH CARE SERVICES.—Section 501
1161
Title VII, Subtitle F
(relating to exemption from tax on corporations, certain
trusts, etc.) is amended by redesignating subsection (n)
as subsection (o) and by inserting after subsection (m) the
following new subsection:
‘‘(n) QUALIFICATION OF ORGANIZATIONS PROVIDING
HEALTH CARE SERVICES
AS CHARITABLE ORGANIZA-
TIONS.—For purposes of subsection (c)(3), the provision
of health care services shall not be treated as an activity
that accomplishes a charitable purpose unless the organi-
zation providing such services, on a periodic basis (no less
frequently than annually), and with the participation of
community representatives—
‘‘(1) assesses the health care needs of its com-
munity, and
‘‘(2) develops a plan to meet those needs.
In the case of a health maintenance organization, the pro-
vision of health care services shall not be treated as an
activity that accomplishes a charitable purpose for pur-
poses of subsection (c)(3) unless, in addition to meeting
the requirement of the preceding sentence, such services
are provided as described in subsection (m)(6)(B)(i).’’
(b) TREATMENT OF HEALTH MAINTENANCE ORGA-
NIZATIONS.—Section 501(m) is amended by adding at the
end thereof the following new paragraph:
1162
Title VII, Subtitle F
‘‘(6) INSURANCE PROVIDED BY HEALTH MAIN-
TENANCE ORGANIZATIONS.—
‘‘(A) CERTAIN
INSURANCE
TREATED
AS
COMMERCIAL-TYPE INSURANCE.—Health insur-
ance provided by a health maintenance organi-
zation shall be treated as commercial-type in-
surance if such insurance relates to care pro-
vided other than pursuant to a pre-existing ar-
rangement with such organization. In applying
the preceding sentence, care described in sub-
paragraph (B)(iv) shall not be taken into ac-
count.
‘‘(B) CERTAIN INSURANCE NOT TREATED
AS COMMERCIAL-TYPE INSURANCE.—Health in-
surance provided by a health maintenance orga-
nization shall not be treated as commercial-type
insurance if it relates to—
‘‘(i) care provided by such organiza-
tion to its members at its own facilities
through health care professionals who do
not provide substantial health care services
other than on behalf of such organization,
‘‘(ii) primary care provided by a
health care professional to a member of
such organization on a basis under which
1163
Title VII, Subtitle F
the amount paid to such professional does
not vary with the amount of care provided
to such member,
‘‘(iii) services other than primary care
provided pursuant to a pre-existing ar-
rangement with such organization, or
‘‘(iv) emergency care provided to a
member of such organization at a location
outside such member’s area of residence.’’
(c) TREATMENT
OF PARENT ORGANIZATIONS
OF
HEALTH CARE PROVIDERS.—Section 509(a) (defining
private foundation) is amended by striking ‘‘and’’ at the
end of paragraph (3), by redesignating paragraph (4) as
paragraph (5), and by inserting after paragraph (3) the
following new paragraph:
‘‘(4) an organization which is organized and op-
erated for the benefit of, and which directly or indi-
rectly controls, an organization described in section
170(b)(1)(A)(iii), and’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall take effect on January 1, 1995.
1164
Title VII, Subtitle F
(2) SUBSECTIONS (b) AND (c).—The amend-
ments made by subsections (b) and (c) shall take ef-
fect on the date of the enactment of this Act.
SEC. 7602. TAX TREATMENT OF TAXABLE ORGANIZATIONS
PROVIDING HEALTH INSURANCE AND OTHER
PREPAID HEALTH CARE SERVICES.
(a) GENERAL RULE.—Section 833 is amended to
read as follows:
‘‘SEC. 833. TREATMENT OF ORGANIZATIONS PROVIDING
HEALTH INSURANCE AND OTHER PREPAID
HEALTH CARE SERVICES.
‘‘(a) GENERAL RULE.—Any organization to which
this section applies shall be taxable under this part in the
same manner as if it were an insurance company other
than a life insurance company.
‘‘(b) ORGANIZATIONS
TO
WHICH
SECTION
AP-
PLIES.—This section shall apply to any organization—
‘‘(1) which is not exempt from taxation under
this subtitle,
‘‘(2) which is not taxable as a life insurance
company under part I of this subchapter, and
‘‘(3) the primary and predominant business ac-
tivity of which during the taxable year consists of 1
or more of the following:
1165
Title VII, Subtitle F
‘‘(A) Issuing accident and health insurance
contracts or the reinsuring of risks undertaken
by other insurance companies under such con-
tracts.
‘‘(B) Operating as a health maintenance
organization.
‘‘(C) Entering into arrangements under
which—
‘‘(i) fixed payments or premiums are
received as consideration for the organiza-
tion’s agreement to provide or arrange for
the provision of health care services, re-
gardless of how the health care services are
provided or arranged to be provided, and
‘‘(ii) such fixed payments or pre-
miums do not vary depending on the
amount of health care services provided.
In the case of an organization which has as a material
business activity the issuing of accident and health insur-
ance contracts or the reinsuring of risks undertaken by
other insurance companies under such contracts, the ad-
ministering of accident and health insurance contracts by
such organization shall be treated as part of such business
activity for purposes of paragraph (3)(A).’’
(b) CONFORMING AMENDMENTS.—
1166
Title VII, Subtitle F
(1) Subsection (c) of section 56 is amended by
striking paragraph (3).
(2) The table of sections for part II of sub-
chapter L of chapter 1 is amended by striking the
item relating to section 833 and inserting the fol-
lowing:
‘‘Sec. 833. Treatment of organizations providing health insurance
and other prepaid health care services.’’
(c) EFFECTIVE DATES.—
(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, 1996.
(2) TRANSITION RULES FOR BLUE CROSS AND
BLUE SHIELD ORGANIZATIONS.—
(A) PRIOR
FRESH
START
PRESERVED.—
The adjusted basis of any asset determined
under section 1012(c)(3)(A)(ii) of the Tax Re-
form Act of 1986 shall not be affected by the
amendments made by this section nor by reason
of any failure to qualify in taxable years begin-
ning after December 31, 1996, as an existing
Blue Cross or Blue Shield organization (as de-
fined in section 833(c)(2) of the Internal Rev-
enue Code of 1986, as in effect on the day be-
fore the date of the enactment of this Act).
1167
Title VII, Subtitle F
(B) RECOUPMENT
OF
PRIOR
RESERVE
BENEFIT.—In the case of any organization enti-
tled to the benefits of section 833(a)(3) of the
Internal Revenue Code of 1986 (as in effect on
the day before the date of the enactment of this
Act) for such organization’s last taxable year
beginning before January 1, 1997, the amount
determined under paragraph (4) of section
832(b) of such Code for each of such organiza-
tion’s first 6 taxable years beginning after De-
cember 31, 1996, shall be increased by an
amount equal to 31⁄3 percent of its unearned
premiums on outstanding business as of the
close of such organization’s last taxable year be-
ginning before January 1, 1997.
(C) PHASE-OUT OF SPECIAL DEDUCTION
FOR CERTAIN ORGANIZATIONS.—
(i) IN GENERAL.—In the case of an
organization which meets the requirements
of clause (ii)—
(I) such organization shall con-
tinue to be entitled to the deduction
provided under section 833(b) of the
Internal Revenue Code of 1986 (as in
effect on the day before the date of
1168
Title VII, Subtitle F
the enactment of this Act) for its first
2 taxable years beginning after De-
cember 31, 1996, except that
(II) the amount of such deduc-
tion for such organization’s taxable
year beginning in 1997 shall be 67
percent of the amount which would
have been determined under such sec-
tion 833(b) as so in effect, and the
amount of such deduction for organi-
zation’s taxable year beginning in
1998 shall be 33 percent of the
amount which would have been so de-
termined.
Notwithstanding the amendment made by
subsection (b)(1), any deduction under the
preceding sentence shall not be allowable
in computing alternative minimum taxable
income.
(ii) REQUIREMENTS.—An organiza-
tion meets the requirements of this clause
if, for each of its taxable years beginning
in 1995 and 1996, such organization—
1169
Title VII, Subtitle F
(I) was an organization to which
section 833 of such Code (as so in ef-
fect) applied, and
(II) met the requirements of sub-
paragraph (A) of section 833(c)(3) of
such Code (as so in effect).
(3) TRANSITIONAL RULES FOR OTHER COMPA-
NIES.—
(A) ORGANIZATIONS
TO
WHICH
PARA-
GRAPH APPLIES.—This paragraph shall apply
to any organization to which section 833 of the
Internal Revenue Code of 1986 (as amended by
subsection (a)) applies for such organization’s
first taxable year beginning after December 31,
1996; except that this paragraph shall not
apply if such organization treated itself as an
insurance company taxable under part II of
subchapter L of chapter 1 of such Code on its
original Federal income tax return for its tax-
able year beginning in 1992 and for all of its
taxable years thereafter beginning before Janu-
ary 1, 1997.
(B) TREATMENT OF CURRENTLY TAXABLE
COMPANIES.—Except as provided in subpara-
1170
Title VII, Subtitle F
graph (C), in the case of any organization to
which this paragraph applies—
(i) the amendments made by this sec-
tion shall be treated as a change in the
method of accounting, and
(ii) all adjustments required to be
taken into account under section 481 of
the Internal Revenue Code of 1986, shall
be taken into account for such company’s
first taxable year beginning after Decem-
ber 31, 1996.
(C) TREATMENT OF CURRENTLY TAX EX-
EMPT COMPANIES.—In the case of any organi-
zation to which this paragraph applies and
which was exempt from tax under chapter 1 of
the Internal Revenue Code of 1986 for such or-
ganization’s last taxable year beginning before
January 1, 1997—
(i) no adjustment shall be made under
section 481 (or any other provision) of
such Code on account of a change in its
method of accounting required by this sec-
tion for its first taxable year beginning
after December 31, 1996, and
1171
Title VII, Subtitle F
(ii) for purposes of determining gain
or loss, the adjusted basis of any asset
held by such organization on the first day
of such taxable year shall be treated as
equal to its fair market value as of such
day.
SEC. 7603. EXEMPTION FROM INCOME TAX FOR REGIONAL
ALLIANCES.
(a) IN GENERAL.—Subsection (c) of section 501 (re-
lating to exemption from tax on corporations, certain
trusts, etc.) is amended by adding at the end thereof the
following new paragraph:
‘‘(26) Any regional alliance described in section
1301 of the Health Security Act. Such an alliance
shall be treated as not described in any other para-
graph of this subsection.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
the date of the enactment of this Act.
1172
Title VII, Subtitle G
Subtitle 
G—Tax 
Treatment 
of
Long-term Care Insurance and
Services
SEC. 7701. QUALIFIED LONG-TERM CARE SERVICES TREAT-
ED AS MEDICAL CARE.
(a) GENERAL RULE.—Paragraph (1) of section
213(d) (defining medical care) is amended by striking
‘‘or’’ at the end of subparagraph (B), by redesignating
subparagraph (C) as subparagraph (D), and by inserting
after subparagraph (B) the following new subparagraph:
‘‘(C) for qualified long-term care services
(as defined in subsection (g)), or’’.
(b) QUALIFIED LONG-TERM CARE SERVICES DE-
FINED.—Section 213 (relating to the deduction for med-
ical, dental, etc., expenses) is amended by adding at the
end thereof the following new subsection:
‘‘(g) QUALIFIED LONG-TERM CARE SERVICES.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified long-
term care services’ means necessary diagnostic, cur-
ing, mitigating, treating, preventive, therapeutic, and
rehabilitative services, and maintenance and per-
sonal care services (whether performed in a residen-
tial or nonresidential setting) which—
1173
Title VII, Subtitle G
‘‘(A) are required by an individual during
any period the individual is an incapacitated in-
dividual (as defined in paragraph (2)),
‘‘(B) have as their primary purpose—
‘‘(i) the provision of needed assistance
with 1 or more activities of daily living (as
defined in paragraph (3)), or
‘‘(ii) protection from threats to health
and safety due to severe cognitive impair-
ment, and
‘‘(C) are provided pursuant to a continuing
plan of care prescribed by a licensed profes-
sional (as defined in paragraph (4)).
‘‘(2) INCAPACITATED
INDIVIDUAL.—The term
‘incapacitated individual’ means any individual
who—
‘‘(A) is unable to perform, without sub-
stantial assistance from another individual (in-
cluding assistance involving cueing or substan-
tial supervision), at least 2 activities of daily
living as defined in paragraph (3), or
‘‘(B) has severe cognitive impairment as
defined by the Secretary in consultation with
the Secretary of Health and Human Services.
1174
Title VII, Subtitle G
Such term shall not include any individual otherwise
meeting the requirements of the preceding sentence
unless a licensed professional within the preceding
12-month period has certified that such individual
meets such requirements.
‘‘(3) ACTIVITIES OF DAILY LIVING.—Each of
the following is an activity of daily living:
‘‘(A) Eating.
‘‘(B) Toileting.
‘‘(C) Transferring.
‘‘(D) Bathing.
‘‘(E) Dressing.
‘‘(4) LICENSED PROFESSIONAL.—The term ‘li-
censed professional’ means—
‘‘(A) a physician or registered professional
nurse, or
‘‘(B) any other individual who meets such
requirements as may be prescribed by the Sec-
retary after consultation with the Secretary of
Health and Human Services.
‘‘(5) CERTAIN SERVICES NOT INCLUDED.—The
term ‘qualified long-term care services’ shall not in-
clude any services provided to an individual—
‘‘(A) by a relative (directly or through a
partnership, corporation, or other entity) unless
1175
Title VII, Subtitle G
the relative is a licensed professional with re-
spect to such services, or
‘‘(B) by a corporation or partnership which
is related (within the meaning of section 267(b)
or 707(b)) to the individual.
For purposes of this paragraph, the term ‘relative’
means an individual bearing a relationship to the in-
dividual which is described in paragraphs (1)
through (8) of section 152(a).’’
(c) TECHNICAL AMENDMENTS.—
(1) Subparagraph (D) of section 213(d)(1) (as
redesignated by subsection (a)) is amended to read
as follows:
‘‘(D) for insurance (including amounts
paid as premiums under part B of title XVIII
of the Social Security Act, relating to supple-
mentary medical insurance for the aged) cov-
ering medical care referred to in—
‘‘(i) subparagraphs (A) and (B), or
‘‘(ii) subparagraph (C), but only if
such insurance is provided under a quali-
fied long-term care insurance policy (as de-
fined in section 7702B(b)) and the amount
paid for such insurance is not disallowed
under section 7702B(d)(4).’’
1176
Title VII, Subtitle G
(2) Paragraph (6) of section 213(d) is
amended—
(A) by striking ‘‘subparagraphs (A) and
(B)’’ and inserting ‘‘subparagraph (A), (B),
and (C)’’, and
(B) by striking ‘‘paragraph (1)(C)’’ in sub-
paragraph 
(A) 
and 
inserting 
‘‘paragraph
(1)(D)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 7702. TREATMENT OF LONG-TERM CARE INSURANCE.
(a) GENERAL RULE.—Chapter 79 (relating to defini-
tions) is amended by inserting after section 7702A the fol-
lowing new section:
‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSUR-
ANCE.
‘‘(a) IN GENERAL.—For purposes of this title—
‘‘(1) a qualified long-term care insurance policy
(as defined in subsection (b)) shall be treated as an
accident and health insurance contract,
‘‘(2) amounts (other than policyholder dividends
(as defined in section 808) or premium refunds) re-
ceived under a qualified long-term care insurance
policy shall be treated as amounts received for per-
1177
Title VII, Subtitle G
sonal injuries and sickness and shall be treated as
reimbursement for expenses actually incurred for
medical care (as defined in section 213(d)),
‘‘(3) any plan of an employer providing cov-
erage under a qualified long-term care insurance pol-
icy shall be treated as an accident and health plan
with respect to such coverage,
‘‘(4) amounts paid for a qualified long-term
care insurance policy providing the benefits de-
scribed in subsection (b)(6)(B) shall be treated as
payments made for insurance for purposes of section
213(d)(1)(D), and
‘‘(5) a qualified long-term care insurance policy
shall be treated as a guaranteed renewable contract
subject to the rules of section 816(e).
‘‘(b) QUALIFIED LONG-TERM CARE INSURANCE POL-
ICY.—For purposes of this title—
‘‘(1) IN GENERAL.—The term ‘qualified long-
term care insurance policy’ means any long-term
care insurance policy (as defined in section 2304 of
the Health Security Act) that—
‘‘(A) satisfies the requirements of subpart
B of part 3 of subtitle B of title II of the
Health Security Act,
1178
Title VII, Subtitle G
‘‘(B) limits benefits under such policy to
individuals who are certified by a licensed pro-
fessional (as defined in section 213(g)(4)) with-
in the preceding 12-month period as being un-
able to perform, without substantial assistance
from another individual (including assistance
involving cueing or substantial supervision), 2
or more activities of daily living (as defined in
section 213(g)(3)), or who have a severe cog-
nitive impairment (as defined in section
213(g)(2)(B)), and
‘‘(C) satisfies the requirements of para-
graphs (2), (3), (4), (5), and (6).
‘‘(2) PREMIUM REQUIREMENTS.—The require-
ments of this paragraph are met with respect to a
policy if such policy provides that premium pay-
ments may not be made earlier than the date such
payments would have been made if the contract pro-
vided for level annual payments over the life expect-
ancy of the insured or 20 years, whichever is short-
er. A policy shall not be treated as failing to meet
the requirements of the preceding sentence solely by
reason of a provision in the policy providing for a
waiver of premiums if the insured becomes an indi-
vidual certified in accordance with paragraph (1)(B).
1179
Title VII, Subtitle G
‘‘(3) PROHIBITION OF CASH VALUE.—The re-
quirements of this paragraph are met if the policy
does not provide for a cash value or other money
that can be paid, assigned, pledged as collateral for
a loan, or borrowed, other than as provided in para-
graph (4).
‘‘(4) REFUNDS
OF
PREMIUMS
AND
DIVI-
DENDS.—The requirements of this paragraph are
met with respect to a policy if such policy provides
that—
‘‘(A) policyholder dividends are required to
be applied as a reduction in future premiums
or, to the extent permitted under paragraph
(6), to increase benefits described in subsection
(a)(2), and
‘‘(B) refunds of premiums upon a partial
surrender or a partial cancellation are required
to be applied as a reduction in future pre-
miums, and
‘‘(C) any refund on the death of the in-
sured, or on a complete surrender or cancella-
tion of the policy, cannot exceed the aggregate
premiums paid under the contract.
Any refund on a complete surrender or cancellation
of the policy shall be includible in gross income to
1180
Title VII, Subtitle G
the extent that any deduction or exclusion was allow-
able with respect to the premiums.
‘‘(5) COORDINATION
WITH
OTHER
ENTITLE-
MENTS.—The requirements of this paragraph are
met with respect to a policy if such policy does not
cover expenses incurred to the extent that such ex-
penses are also covered under title XVIII of the So-
cial Security Act or are covered under comprehensive
health coverage described in section 1101 of the
Health Security Act.
‘‘(6) MAXIMUM BENEFIT.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met if the benefits payable
under the policy for any period (whether on a
periodic basis or otherwise) shall not exceed the
dollar amount in effect for such period.
‘‘(B) 
NONREIMBURSEMENT
PAYMENTS
PERMITTED.—Benefits shall include all pay-
ments described in subsection (a)(2) to or on
behalf of an insured individual without regard
to the expenses incurred during the period to
which the payments relate. For purposes of sec-
tion 213(a), such payments shall be treated as
compensation for expenses paid for medical
care.
1181
Title VII, Subtitle G
‘‘(C) 
DOLLAR
AMOUNT.—The 
dollar
amount in effect under this paragraph shall be
$150 per day (or the equivalent amount within
the calendar year in the case of payments on
other than a per diem basis).
‘‘(D) 
ADJUSTMENTS
FOR
INCREASED
COSTS.—
‘‘(i) IN GENERAL.—In the case of any
calendar year after 1996, the dollar
amount in effect under subparagraph (C)
for any period or portion thereof occurring
during such calendar year shall be equal to
the sum of—
‘‘(I) the amount in effect under
subparagraph (C) for the preceding
calendar year (after application of this
subparagraph), plus
‘‘(II) the product of the amount
referred to in subclause (I) multiplied
by the cost-of-living adjustment for
the calendar year of the amount
under subclause (I).
‘‘(ii) COST-OF-LIVING ADJUSTMENT.—
For purposes of clause (i), the cost-of-liv-
ing adjustment for any calendar year is the
1182
Title VII, Subtitle G
percentage (if any) by which the cost index
under clause (iii) for the preceding cal-
endar year exceeds such index for the sec-
ond preceding calendar year.
‘‘(iii) COST INDEX.—The Secretary, in
consultation with the Secretary of Health
and Human Services, shall before January
1, 1997, establish a cost index to measure
increases in costs of nursing home and
similar facilities. The Secretary may from
time to time revise such index to the extent
necessary to accurately measure increases
or decreases in such costs.
‘‘(iv) SPECIAL RULE FOR CALENDAR
YEAR
1997.—Notwithstanding clause (ii),
for purposes of clause (i), the cost-of-living
adjustment for calendar year 1997 is the
sum of 1 1⁄2 percent plus the percentage by
which the CPI for calendar year 1996 (as
defined in section 1(f)(4)) exceeds the CPI
for calendar year 1995 (as so defined).
‘‘(E) PERIOD.—For purposes of this para-
graph, a period begins on the date that an indi-
vidual has a condition which would qualify for
1183
Title VII, Subtitle G
certification under subsection (b)(1)(B) and
ends on the earlier of the date upon which—
‘‘(i) such individual has not been so
certified within the preceding 12-months,
or
‘‘(ii) the individual’s condition ceases
to be such as to qualify for certification
under subsection (b)(1)(B).
‘‘(F) AGGREGATION RULE.—For purposes
of this paragraph, all policies issued with re-
spect to the same insured shall be treated as
one policy.
‘‘(c) TREATMENT OF LONG-TERM CARE INSURANCE
POLICIES.—For purposes of this title, any amount re-
ceived or coverage provided under a long-term care insur-
ance policy that is not a qualified long-term care insurance
policy shall not be treated as an amount received for per-
sonal injuries or sickness or provided under an accident
and health plan and shall not be treated as excludible from
gross income under any provision of this title.
‘‘(d) TREATMENT OF COVERAGE PROVIDED AS PART
OF A LIFE INSURANCE CONTRACT.—Except as otherwise
provided in regulations prescribed by the Secretary, in the
case of any long-term care insurance coverage (whether
1184
Title VII, Subtitle G
or not qualified) provided by rider on a life insurance
contract—
‘‘(1) IN GENERAL.—This section shall apply as
if the portion of the contract providing such cov-
erage is a separate contract or policy.
‘‘(2) PREMIUMS AND CHARGES FOR LONG-TERM
CARE COVERAGE.—Premium payments for coverage
under a long-term care insurance policy and charges
against the life insurance contract’s cash surrender
value (within the meaning of section 7702(f)(2)(A))
for such coverage shall be treated as premiums for
purposes of subsection (b)(2).
‘‘(3) 
APPLICATION
OF
7702.—Section
7702(c)(2) (relating to the guideline premium limi-
tation) shall be applied by increasing the guideline
premium limitation with respect to a life insurance
contract, as of any date—
‘‘(A) by the sum of any charges (but not
premium payments) described in paragraph (2)
made to that date under the contract, less
‘‘(B) any such charges the imposition of
which reduces the premiums paid for the con-
tract 
(within 
the 
meaning 
of 
section
7702(f)(1)).
1185
Title VII, Subtitle G
‘‘(4) APPLICATION OF SECTION 213.—No deduc-
tion shall be allowed under section 213(a) for
charges against the life insurance contract’s cash
surrender value described in paragraph (2), unless
such charges are includible in income as a result of
the application of section 72(e)(10) and the coverage
provided by the rider is a qualified long-term care
insurance policy under subsection (b).
For purposes of this subsection, the term ‘portion’ means
only the terms and benefits under a life insurance contract
that are in addition to the terms and benefits under the
contract without regard to the coverage under a long-term
care insurance policy.
‘‘(e) PROHIBITION OF DISCRIMINATION.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(a)(3), any plan of an employer providing coverage
under a qualified long-term care insurance policy
shall qualify as an accident and health plan with re-
spect to such coverage only if—
‘‘(A) the plan allows all employees, except
as provided in paragraph (2), to participate,
and
‘‘(B) the benefits provided under the plan
are identical for all employees that choose to
participate.
1186
Title VII, Subtitle G
‘‘(2) EXCLUSION
OF
CERTAIN
EMPLOYEES.—
For purposes of paragraph (1), there may be ex-
cluded from consideration—
‘‘(A) employees who have not completed 3
years of service;
‘‘(B) employees who have not attained age
25;
‘‘(C) part-time or seasonal employees; and
‘‘(D) employees who are nonresident aliens
and who receive no earned income (within the
meaning of section 911(d)(2)) from the em-
ployer which constitutes income from sources
within the United States (within the meaning of
section 861(a)(3)).
‘‘(f) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary to carry out the re-
quirements of this section, including regulations to prevent
the avoidance of this section by providing long-term care
insurance coverage under a life insurance contract and to
provide for the proper allocation of amounts between the
long-term care and life insurance portions of a contract.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 79 is amended by inserting after the item re-
lating to section 7702A the following new item:
‘‘Sec. 7702B. Treatment of long-term care insurance.’’.
(c) EFFECTIVE DATE.—
1187
Title VII, Subtitle G
(1) IN GENERAL.—The amendments made by
this section shall apply to policies issued after De-
cember 31, 1995. Solely for purposes of the pre-
ceding sentence, a policy issued prior to January 1,
1996, that satisfies the requirements of a qualified
long-term care insurance policy as set forth in sec-
tion 7702B(b) shall, on and after January 1, 1996,
be treated as being issued after December 31, 1995.
(2) TRANSITION RULE.—If, after the date of
enactment of this Act and before January 1, 1996,
a policy providing for long-term care insurance cov-
erage is exchanged solely for a qualified long-term
care insurance policy (as defined in section
7702B(b)), no gain or loss shall be recognized on
the exchange. If, in addition to a qualified long-term
care insurance policy, money or other property is re-
ceived in the exchange, then any gain shall be recog-
nized to the extent of the sum of the money and the
fair market value of the other property received. For
purposes of this paragraph, the cancellation of a pol-
icy providing for long-term care insurance coverage
and reinvestment of the cancellation proceeds in a
qualified long-term care insurance policy within 60
days thereafter shall be treated as an exchange.
1188
Title VII, Subtitle G
(3) ISSUANCE
OF
CERTAIN
RIDERS
PER-
MITTED.—For purposes of determining whether sec-
tion 7702 or 7702A of the Internal Revenue Code
of 1986 applies to any contract, the issuance, wheth-
er before, on, or after December 31, 1995, of a rider
on a life insurance contract providing long-term care
insurance coverage shall not be treated as a modi-
fication or material change of such contract.
SEC. 7703. TAX TREATMENT OF ACCELERATED DEATH BEN-
EFITS UNDER LIFE INSURANCE CONTRACTS.
(a) GENERAL RULE.—Section 101 (relating to cer-
tain death benefits) is amended by adding at the end
thereof the following new subsection:
‘‘(g) TREATMENT
OF
CERTAIN
ACCELERATED
DEATH BENEFITS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, any amount distributed to an individual under
a life insurance contract on the life of an insured
who is a terminally ill individual (as defined in para-
graph (3)) shall be treated as an amount paid by
reason of the death of such insured.
‘‘(2) NECESSARY CONDITIONS.—
‘‘(A) Paragraph (1) shall not apply to any
distribution unless—
1189
Title VII, Subtitle G
‘‘(i) the distribution is not less than
the present value (determined under sub-
paragraph (B)) of the reduction in the
death benefit otherwise payable in the
event of the death of the insured, and
‘‘(ii) the percentage derived from di-
viding the cash surrender value of the con-
tract, if any, immediately after the dis-
tribution by the cash surrender value of
the contract immediately before the dis-
tribution is equal to or greater than the
percentage derived by dividing the death
benefit immediately after the distribution
by the death benefit immediately before the
distribution.
‘‘(B) The present value of the reduction in
the death benefit occurring on the distribution
must be determined by—
‘‘(i) using as the discount rate a rate
not to exceed the highest rate set forth in
subparagraph (C), and
‘‘(ii) assuming that the death benefit
(or the portion thereof) would have been
paid at the end of a period that is no more
than the insured’s life expectancy from the
1190
Title VII, Subtitle G
date of the distribution or 12 months,
whichever is shorter.
‘‘(C) RATES.—The rates set forth in this
subparagraph are the following:
‘‘(i) the 90-day Treasury bill yield,
‘‘(ii) the rate described as Moody’s
Corporate Bond Yield Average-Monthly
Average 
Corporates 
as 
published 
by
Moody’s Investors Service, Inc., or any
successor thereto for the calendar month
ending 2 months before the date on which
the rate is determined,
‘‘(iii) the rate used to compute the
cash surrender values under the contract
during the applicable period plus 1 percent
per annum, and
‘‘(iv) the maximum permissible inter-
est rate applicable to policy loans under
the contract.
‘‘(3) TERMINALLY ILL INDIVIDUAL.—For pur-
poses of this subsection, the term ‘terminally ill indi-
vidual’ means an individual who the insurer has de-
termined, after receipt of an acceptable certification
by a licensed physician, has an illness or physical
condition which can reasonably be expected to result
1191
Title VII, Subtitle G
in death within 12 months of the date of certifi-
cation.
‘‘(4) APPLICATION OF SECTION 72(E)(10).—For
purposes of section 72(e)(10) (relating to the treat-
ment of modified endowment contracts), section
72(e)(4)(A)(i) shall not apply to distributions de-
scribed in paragraph (1).’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1993.
SEC. 7704. TAX TREATMENT OF COMPANIES ISSUING
QUALIFIED ACCELERATED DEATH BENEFIT
RIDERS.
(a) QUALIFIED ACCELERATED DEATH BENEFIT RID-
ERS TREATED AS LIFE INSURANCE.—Section 818 (relat-
ing to other definitions and special rules) is amended by
adding at the end thereof the following new subsection:
‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT
RIDERS TREATED AS LIFE INSURANCE.—For purposes of
this part—
‘‘(1) IN GENERAL.—Any reference to a life in-
surance contract shall be treated as including a ref-
erence to a qualified accelerated death benefit rider
on such contract.
1192
Title VII, Subtitle G
‘‘(2) QUALIFIED
ACCELERATED
DEATH
BEN-
EFIT RIDERS.—For purposes of this subsection, the
term ‘qualified accelerated death benefit rider’
means any rider on a life insurance contract which
provides for a distribution to an individual upon the
insured becoming a terminally ill individual (as de-
fined in section 101(g)(3)).
(b) DEFINITIONS OF LIFE INSURANCE AND MODI-
FIED ENDOWMENT CONTRACTS.—Paragraph (5)(A) of
section 7702(f) is amended by striking ‘‘or’’ at the end
of clause (iv), by redesignating clause (v) as clause (vi),
and by inserting after clause (iv) the following new clause:
‘‘(v) any qualified accelerated death
benefit rider (as defined in section 818(g)),
or’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to contracts issued after De-
cember 31, 1993.
(2) TRANSITIONAL RULE.—For purposes of de-
termining whether section 7702 or 7702A of the In-
ternal Revenue Code of 1986 applies to any con-
tract, the issuance, whether before, on, or after De-
cember 31, 1993, of a rider on a life insurance con-
tract permitting the acceleration of death benefits
1193
Title VII, Subtitle H
(as described in section 101(g) of such Code) shall
not be treated as a modification or material change
of such contract.
Subtitle H—Tax Incentives for
Health Services Providers
SEC. 7801. NONREFUNDABLE CREDIT FOR CERTAIN PRI-
MARY HEALTH SERVICES PROVIDERS.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 (relating to nonrefundable personal
credits) is amended by inserting after section 22 the fol-
lowing new section:
‘‘SEC. 23. PRIMARY HEALTH SERVICES PROVIDERS.
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to the product of—
‘‘(1) the number of months during such taxable
year—
‘‘(A) during which the taxpayer is a quali-
fied primary health services provider, and
‘‘(B) which are within the taxpayer’s man-
datory service period, and
‘‘(2) $1,000 ($500 in the case of a qualified
practitioner who is not a physician).
‘‘(b) QUALIFIED PRIMARY HEALTH SERVICES PRO-
VIDER.—For purposes of this section, the term ‘qualified
1194
Title VII, Subtitle H
primary health services provider’ means, with respect to
any month, any qualified practitioner who—
‘‘(1) has in effect a certification by the Bureau
as a provider of primary health services and such
certification is, when issued, for a health profes-
sional shortage area in which the qualified practi-
tioner is commencing the providing of primary
health services,
‘‘(2) is providing primary health services full
time in the health professional shortage area identi-
fied in such certification, and
‘‘(3) has not received a scholarship under the
National Health Service Corps Scholarship Program
or any loan repayments under the National Health
Service Corps Loan Repayment Program.
For purposes of paragraph (2), a provider shall be treated
as providing services in a health professional shortage area
when such area ceases to be such an area if it was such
an area when the provider commenced providing services
in the area.
‘‘(c) MANDATORY SERVICE PERIOD.—For purposes
of this section, the term ‘mandatory service period’ means
the period of 60 consecutive calendar months beginning
with the first month the taxpayer is a qualified primary
1195
Title VII, Subtitle H
health services provider. A taxpayer shall not have more
than 1 mandatory service period.
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) BUREAU.—The term ‘Bureau’ means the
Bureau of Primary Health Care, Health Resources
and Services Administration of the United States
Public Health Service.
‘‘(2) QUALIFIED
PRACTITIONER.—The term
‘qualified practitioner’ means a physician, a physi-
cian assistant, a nurse practitioner, or a certified
nurse-midwife.
‘‘(3) PHYSICIAN.—The term ‘physician’ has the
meaning given to such term by section 1861(r) of
the Social Security Act.
‘‘(4) PHYSICIAN
ASSISTANT; NURSE
PRACTI-
TIONER.—The terms ‘physician assistant’ and ‘nurse
practitioner’ have the meanings given to such terms
by section 1861(aa)(5) of the Social Security Act.
‘‘(5) CERTIFIED
NURSE-MIDWIFE.—The term
‘certified nurse-midwife’ has the meaning given to
such term by section 1861(gg)(2) of the Social Secu-
rity Act.
‘‘(6) PRIMARY HEALTH SERVICES.—The term
‘primary health services’ has the meaning given such
1196
Title VII, Subtitle H
term by section 330(b)(1) of the Public Health Serv-
ice Act.
‘‘(7) 
HEALTH
PROFESSIONAL
SHORTAGE
AREA.—The term ‘health professional shortage area’
has the meaning given such term by section
332(a)(1)(A) of the Public Health Service Act.
‘‘(e) RECAPTURE OF CREDIT.—
‘‘(1) IN
GENERAL.—If there is a recapture
event during any taxable year, then—
‘‘(A) no credit shall be allowed under sub-
section (a) for such taxable year and any suc-
ceeding taxable year, and
‘‘(B) the tax of the taxpayer under this
chapter for such taxable year shall be increased
by an amount equal to the product of—
‘‘(i) the applicable percentage, and
‘‘(ii) the aggregate unrecaptured cred-
its allowed to such taxpayer under this sec-
tion for all prior taxable years.
‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the applicable recapture percentage
shall be determined from the following table:
‘‘If the recapture
The applicable recap-
event occurs during:
ture percentage is:
Months 1–24 ..............................................
100
Months 25–36 ............................................
Months 37–48 ............................................
1197
Title VII, Subtitle H
Months 49–60 ............................................
Months 61 and thereafter ..........................
0.
‘‘(B) TIMING.—For purposes of subpara-
graph (A), month 1 shall begin on the first day
of the mandatory service period.
‘‘(3) RECAPTURE EVENT DEFINED.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the term ‘recapture event’ means
the failure of the taxpayer to be a qualified pri-
mary health services provider for any month
during the taxpayer’s mandatory service period.
‘‘(B) CESSATION OF DESIGNATION.—The
cessation of the designation of any area as a
health professional shortage area after the be-
ginning of the mandatory service period for any
taxpayer shall not constitute a recapture event.
‘‘(C) SECRETARIAL
WAIVER.—The Sec-
retary, in consultation with the Secretary of
Health and Human Services, may waive any re-
capture event caused by extraordinary cir-
cumstances.
‘‘(4) NO
CREDITS
AGAINST
TAX; MINIMUM
TAX.—Any increase in tax under this subsection
shall not be treated as a tax imposed by this chapter
for purposes of determining the amount of any cred-
1198
Title VII, Subtitle H
it under subpart A, B, or D of this part or for pur-
poses of section 55.’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart A of part IV of subchapter A of chapter 1
is amended by inserting after the item relating to section
22 the following new item:
‘‘Sec. 23. Primary health services providers.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
SEC. 7802. EXPENSING OF MEDICAL EQUIPMENT.
(a) IN GENERAL.—Paragraph (1) of section 179(b)
(relating to dollar limitation on expensing of certain depre-
ciable business assets) is amended to read as follows:
‘‘(1) DOLLAR LIMITATION.—
‘‘(A) GENERAL RULE.—The aggregate cost
which may be taken into account under sub-
section (a) for any taxable year shall not exceed
$17,500.
‘‘(B) HEALTH CARE PROPERTY.—The ag-
gregate cost which may be taken into account
under subsection (a) shall be increased by the
lesser of—
‘‘(i) the cost of section 179 property
which is health care property placed in
service during the taxable year, or
1199
Title VII, Subtitle H
‘‘(ii) $10,000.’’
(b) DEFINITION.—Section 179(d) (relating to defini-
tions) is amended by adding at the end the following new
paragraph:
‘‘(11) HEALTH CARE PROPERTY.—For purposes
of this section, the term ‘health care property’
means section 179 property—
‘‘(A) which is medical equipment used in
the screening, monitoring, observation, diag-
nosis, or treatment of patients in a laboratory,
medical, or hospital environment,
‘‘(B) which is owned (directly or indirectly)
and used by a physician (as defined in section
1861(r) of the Social Security Act) in the active
conduct of such physician’s full-time trade or
business of providing primary health services
(as defined in section 330(b)(1) of the Public
Health Service Act) in a health professional
shortage 
area 
(as 
defined 
in 
section
332(a)(1)(A) of the Public Health Service Act),
and
‘‘(C) substantially all the use of which is in
such area.’’
1200
Title VII, Subtitle I
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
December 31, 1994.
Subtitle I—Miscellaneous
Provisions
SEC. 7901. CREDIT FOR COST OF PERSONAL ASSISTANCE
SERVICES REQUIRED BY EMPLOYED INDIVID-
UALS.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 (relating to nonrefundable personal
credits) is amended by inserting after section 23 the fol-
lowing new section:
‘‘SEC. 24. COST OF PERSONAL ASSISTANCE SERVICES RE-
QUIRED BY EMPLOYED INDIVIDUALS.
‘‘(a) ALLOWANCE OF CREDIT.—
‘‘(1) IN GENERAL.—In the case of an eligible
individual, there shall be allowed as a credit against
the tax imposed by this chapter for the taxable year
an amount equal to the applicable percentage of the
personal assistance expenses paid or incurred by the
taxpayer during such taxable year.
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the term ‘applicable percentage’
means 50 percent reduced (but not below zero) by
10 percentage points for each $5,000 by which the
1201
Title VII, Subtitle I
modified adjusted gross income (as defined in sec-
tion 59B(d)(2)) of the taxpayer for the taxable year
exceeds $45,000. In the case of a married individual
filing a separate return, the preceding sentence shall
be applied by substituting ‘$2,500’ for ‘$5,000’ and
‘$22,500’ for ‘$45,000’.
‘‘(b) LIMITATION.—The amount of personal assist-
ance expenses incurred for the benefit of an individual
which may be taken into account under subsection (a) for
the taxable year shall not exceed the lesser of—
‘‘(1) $15,000, or
‘‘(2) such individual’s earned income (as de-
fined in section 32(c)(2)) for the taxable year.
In the case of a joint return, the amount under the pre-
ceding sentence shall be determined separately for each
spouse.
‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this
section, the term ‘eligible individual’ means any individual
(other than a nonresident alien) who, by reason of any
medically determinable physical impairment which can be
expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than
12 months, is unable to engage in any substantial gainful
activity without personal assistance services appropriate to
carry out activities of daily living. An individual shall not
1202
Title VII, Subtitle I
be treated as an eligible individual unless such individual
furnishes such proof thereof (in such form and manner,
and at such times) as the Secretary may require.
‘‘(d) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) PERSONAL ASSISTANCE EXPENSES.—The
term ‘personal assistance expenses’ means expenses
for—
‘‘(A) personal assistance services appro-
priate to carry out activities of daily living in or
outside the home,
‘‘(B) homemaker/chore services incidental
to the provision of such personal assistance
services,
‘‘(C) in the case of an individual with a
cognitive impairment, assistance with life skills,
‘‘(D) communication services,
‘‘(E) work-related support services,
‘‘(F) coordination of services described in
this paragraph,
‘‘(G) assistive technology and devises, in-
cluding assessment of the need for particular
technology and devices and training of family
members, and
1203
Title VII, Subtitle I
‘‘(H) modifications to the principal place of
abode of the individual to the extent the ex-
penses for such modifications would (but for
subsection (e)(2)) be expenses for medical care
(as defined by section 213) of such individual.
‘‘(2) ACTIVITIES OF DAILY LIVING.—The term
‘activities of daily living’ means the activities re-
ferred to in section 213(g)(3).
‘‘(e) SPECIAL RULES.—
‘‘(1) PAYMENTS
TO
RELATED
PERSONS.—No
credit shall be allowed under this section for any
amount paid by the taxpayer to any person who is
related (within the meaning of section 267 or
707(b)) to the taxpayer.
‘‘(2) COORDINATION WITH MEDICAL EXPENSE
DEDUCTION.—Any amount taken into account in de-
termining the credit under this section shall not be
taken into account in determining the amount of the
deduction under section 213.
‘‘(3) BASIS REDUCTION.—For purposes of this
subtitle, if a credit is allowed under this section for
any expense with respect to any property, the in-
crease in the basis of such property which would
(but for this paragraph) result from such expense
1204
Title VII, Subtitle I
shall be reduced by the amount of the credit so al-
lowed.
‘‘(f) COST-OF-LIVING ADJUSTMENT.—In the case of
any taxable year beginning after 1996, the $45,000 and
$22,500 amounts in subsection (a)(2) and the $15,000
amount in subsection (b) shall be increased by an amount
equal to—
‘‘(1) such dollar amount, multiplied by
‘‘(2) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins by substituting ‘calendar
year 1995’ for ‘calendar year 1992’ in subparagraph
(B) thereof.
If any increase determined under the preceding sentence
is not a multiple of $1,000, such increase shall be rounded
to the nearest multiple of $1,000.’’
(b) TECHNICAL AMENDMENT.—Subsection (a) of
section 1016 is amended by striking ‘‘and’’ at the end of
paragraph (24), by striking the period at the end of para-
graph (25) and inserting ‘‘, and’’, and by adding at the
end thereof the following new paragraph:
‘‘(26) in the case of any property with respect
to which a credit has been allowed under section 23,
to the extent provided in section 23(e)(3).’’
1205
Title VII, Subtitle I
(c) CLERICAL AMENDMENT.—The table of sections
for subpart A of part IV of subchapter A of chapter 1
is amended by inserting after the item relating to section
22 the following new item:
‘‘Sec. 23. Cost of personal assistance services required by em-
ployed individuals.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 7902. DENIAL OF TAX-EXEMPT STATUS FOR BOR-
ROWINGS OF HEALTH CARE-RELATED ENTI-
TIES.
(a) IN GENERAL.—Paragraph (6) of section 141(b)
(relating to private business use) is amended by adding
at the end thereof the following new subparagraph:
‘‘(C) CERTAIN
HEALTH
CARE-RELATED
ENTITIES.—Use by—
‘‘(i) any regional alliance described in
section 1301 of the Health Security Act,
‘‘(ii) any corporate alliance described
in section 1311 of such Act, and
‘‘(iii) any guaranty fund described in
section 1204 of such Act,
shall be treated as private business use by an
organization that is not a 501(c)(3) organiza-
tion.’’
1206
Title VII, Subtitle I
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to obligations issued after the
date of the enactment of this Act.
SEC. 7903. DISCLOSURE OF RETURN INFORMATION FOR AD-
MINISTRATION 
OF 
CERTAIN 
PROGRAMS
UNDER THE HEALTH SECURITY ACT.
(a) IN GENERAL.—Subparagraph (D) of section
6103(l)(7) (relating to disclosure of return information to
Federal, State, and local agencies administering certain
programs) is amended by striking ‘‘and’’ at the end of
clause (viii), by striking the period at the end of clause
(ix) and inserting ‘‘; and’’, and by inserting after clause
(ix) the following new clause:
‘‘(x) assistance provided under the
Health Security Act.’’
(b) INFORMATION NOT AVAILABLE TO LOCAL AGEN-
CIES.—Subparagraph (D) of section 6103(l)(7) is amend-
ed by adding at the end thereof the following new sen-
tence: ‘‘Subparagraphs (A) and (B) shall be applied with-
out regard to any reference to any local agency with re-
spect to the program referred to in clause (x).’’
1207
Title VIII, Subtitle A
TITLE 
VIII—HEALTH 
AND
HEALTH-RELATED 
PRO-
GRAMS 
OF 
THE 
FEDERAL
GOVERNMENT
TABLE OF CONTENTS OF TITLE
Page
Subtitle A—Military Health Care Reform
Sec. 8001. Uniformed services health plans ............................................
1207
Subtitle B—Department of Veterans Affairs
Sec. 8101. Benefits and eligibility through Department of Veterans Af-
fairs Medical System .....................................................
1218
Sec. 8102. Organization of Department of Veterans Affairs facilities as
health plans ...................................................................
1227
Subtitle C—Federal Employees Health Benefits Program
Sec. 8201. Definitions .............................................................................
1233
Sec. 8202. FEHBP termination .............................................................
1234
Sec. 8203. Treatment of Federal employees, annuitants, and other in-
dividuals (who would otherwise have been eligible for
FEHBP) under health plans ........................................
1235
Sec. 8204. Treatment of individuals residing abroad .............................
1245
Sec. 8205. Transition and savings provisions .........................................
1246
Sec. 8206. Regulations ............................................................................
1248
Sec. 8207. Technical and conforming amendments ................................
1248
Subtitle D—Indian Health Service
Sec. 8301. Definitions .............................................................................
1249
Sec. 8302. Eligibility and health service coverage of Indians .................
1250
Sec. 8303. Supplemental Indian health care benefits .............................
1252
Sec. 8304. Health plan and health alliance requirements ......................
1252
Sec. 8305. Exemption of tribal governments and tribal organizations
from employer payments ...............................................
1253
Sec. 8306. Provision of health services to non-enrollees and non-Indi-
ans .................................................................................
1253
Sec. 8307. Payment by other payers .......................................................
1258
Sec. 8308. Contracting authority ............................................................
1258
Sec. 8309. Consultation ..........................................................................
1258
Sec. 8310. Infrastructure ........................................................................
1259
Sec. 8311. Financing ...............................................................................
1259
Sec. 8312. Rule of construction ..............................................................
1261
Sec. 8313. Authorizations of appropriations ...........................................
1261
Sec. 8314. Payment of premium discount equivalent amounts for un-
employed Indians ..........................................................
1261
1208
Title VIII, Subtitle A
Subtitle E—Amendments to the Employee Retirement Income
Security Act of 1974
Sec. 8401. Group health plan defined .....................................................
1262
Sec. 8402. Limitation on coverage of group health plans under title I
of ERISA ......................................................................
1263
Sec. 8403. Amendments relating to continuation coverage ....................
1269
Sec. 8404. Additional amendments relating to group health plans ........
1271
Sec. 8405. Plan claims procedures ..........................................................
1272
Sec. 8406. Effective dates .......................................................................
1273
Subtitle F—Special Fund for WIC Program
Sec. 8501. Additional funding for special supplemental food program
for women, infants, and children (WIC) .......................
1274
Subtitle A—Military Health Care
Reform
SEC. 8001. UNIFORMED SERVICES HEALTH PLANS.
(a) ESTABLISHMENT OF PLANS.—(1) Chapter 55 of
title 10, United States Code, is amended by inserting after
section 1073 the following new section:
‘‘§ 1073a. Uniformed Services Health Plans: establish-
ment and coordination with national
health care reform
‘‘(a) ESTABLISHMENT AUTHORIZED.—(1) The Sec-
retary of Defense, in consultation with the other admin-
istering Secretaries, may establish one or more Uniformed
Services Health Plans pursuant to this section in order
to provide health care services to members of the uni-
formed services on active duty for a period of more than
30 days and persons described in subsection (e)(2).
‘‘(2) The establishment and operation of a Uniformed
Services Health Plan shall be carried out in accordance
1209
Title VIII, Subtitle A
with regulations prescribed by the Secretary of Defense,
in consultation with the other administering Secretaries.
The Secretary shall assure that such regulations conform,
to the maximum extent practicable, to the requirements
for health plans set forth in the Health Security Act.
‘‘(b) USE OF UNIFORMED SERVICES FACILITIES AND
OTHER HEALTH CARE PROVIDERS.—(1) A Uniformed
Services Health Plan may rely upon the use of facilities
of the uniformed services for the provision of health care
services to persons enrolled in the plan, supplemented by
the use of civilian health care providers or health plans
under agreements entered into by the Secretary of De-
fense.
‘‘(2) An agreement with a civilian health care pro-
vider or a health plan under paragraph (1) may be entered
into without regard to provisions of law requiring the use
of competitive procedures. An agreement with a health
plan may provide for the sharing of resources with the
health plan that is a party to the agreement.
‘‘(c) HEALTH CARE SERVICES UNDER A PLAN.—(1)
Subject to paragraph (2), a Uniformed Services Health
Plan shall provide to persons enrolled in the plan at least
the items and services in the comprehensive benefit pack-
age under the Health Security Act.
1210
Title VIII, Subtitle A
‘‘(2)(A) In addition, a Uniformed Services Health
Plan shall guarantee to each person described in subpara-
graph (B) who is enrolled in the plan those health care
services that the person would be entitled to receive under
this chapter in the absence of this section. In the case
of a person described in subparagraph (B) who is a cov-
ered beneficiary, such health care services shall consist of
the types of health care services described in section
1079(a) of this title.
‘‘(B) A person referred to in subparagraph (A) is a
member of the uniformed services on active duty for a pe-
riod of more than 30 days as of December 31, 1994, or
any person who is a covered beneficiary as of that date,
who is (or afterwards becomes) enrolled in a Uniformed
Services Health Plan.
‘‘(d) PREEMPTION
OF CONFLICTING STATE RE-
QUIREMENTS.—In carrying out responsibilities under the
Health Security Act, a State (or State-established enti-
ty)—
‘‘(1) may not impose any standard or require-
ment on a Uniformed Services Health Plan that is
inconsistent with this section or any regulation pre-
scribed under this section or other Federal law re-
garding the operation of this section; and
1211
Title VIII, Subtitle A
‘‘(2) may not deny certification of a Uniformed
Services Health Plan as a health plan under the
Health Security Act on the basis of a conflict be-
tween a rule of a State or health alliance and this
section or any regulation prescribed under this sec-
tion or other Federal law regarding the operation of
this section.
‘‘(e) ENROLLMENT.—(1) Except as authorized by the
administering Secretary concerned, each member of a uni-
formed service on active duty for a period of more than
30 days shall be required to enroll in a Uniformed Services
Health Plan available to the member.
‘‘(2) After enrolling members described in paragraph
(1), opportunities for further enrollment in a Uniformed
Services Health Plan shall be offered by the administering
Secretaries to covered beneficiaries in the following order
of priority:
‘‘(A) Spouses and children of members of the
uniformed services who are on active duty for a pe-
riod of more than 30 days.
‘‘(B) Persons described in subsection (c) of sec-
tion 1086 of this title. The administering Secretary
concerned may disregard the exclusion set forth in
subsection (d)(1) of such section in the case of a
person described in subsection (c) of such section
1212
Title VIII, Subtitle A
who is enrolled in the supplementary medical insur-
ance program under part B of title XVIII of the So-
cial Security Act (42 U.S.C. 1395j et seq.).
‘‘(3) With respect to a member described in para-
graph (1) or a covered beneficiary described in paragraph
(2) who enrolls in a Uniformed Services Health Plan, par-
ticipation in such a plan shall be the exclusive source of
health care services available to the member or person
under this chapter.
‘‘(f) EFFECT OF FAILURE TO ENROLL.—(1) Except
as provided in paragraph (2), if a person described in sub-
section (e)(2) declines the opportunity offered by the ad-
ministering Secretaries to enroll in a Uniformed Services
Health Plan, the person shall not be entitled or eligible
for health care services in facilities of the uniformed serv-
ices or pursuant to a contract entered into under this
chapter. However, nothing in this paragraph shall be con-
strued to effect the right of a person to a premium pay-
ment by the Secretary of Defense if the person is enrolled
in another health plan under the Health Security Act and
is otherwise entitled to such a payment under subsection
(h).
‘‘(2) A person described in subsection (e)(2) who is
enrolled with a health plan that is not a Uniformed Serv-
ices Health Plan may receive the items and services in
1213
Title VIII, Subtitle A
the comprehensive benefit package in a facility of the uni-
formed services only if—
‘‘(A) the Secretary of Defense authorizes the
provision of a particular item or service in the pack-
age to the person;
‘‘(B) the Secretary determines that the provi-
sion of the item or service involved will not interfere
with the provision of health care services to members
of the uniformed services or persons enrolled in a
Uniformed Services Health Plan; and
‘‘(C) the health plan in which the person is en-
rolled agrees to pay the actual and full cost of the
items and services in the package actually provided
to the person.
‘‘(3) The administering Secretaries shall assure that
all rights and entitlements under this chapter of any per-
son described in subsection (e)(2) are fully preserved if
the person—
‘‘(A) is not offered the opportunity to enroll in
a Uniformed Services Health Plan; and
‘‘(B) is not otherwise enrolled in a health plan
provided through a health alliance under the Health
Security Act.
‘‘(g) SPECIAL RULE FOR OTHER PAYERS.—(1)(A) In
the case of a person who is enrolled in the supplementary
1214
Title VIII, Subtitle A
medical insurance program under part B of title XVIII
of the Social Security Act (42 U.S.C. 1395j et seq.) and
who is also enrolled in a Uniformed Services Health Plan,
Medicare shall be responsible for making a premium pay-
ment on behalf of the person. The payment responsibilities
of Medicare under this paragraph shall be in the same
amounts and under the same terms and conditions under
which the Secretary of Health and Human Services makes
payments to eligible organizations with a risk-sharing con-
tract under section 1876 of the Social Security Act. A pre-
mium payment by Medicare under this paragraph shall be
the person’s exclusive benefit under Medicare.
‘‘(B) In this paragraph, the term ‘Medicare’ means
any program administered under title XVIII of the Social
Security Act (42 U.S.C. 1395c et seq.).
‘‘(2) Nothing in this section shall affect the payment
of the retiree discount under the Health Security Act on
behalf of a person who is enrolled in a Uniformed Services
Health Plan if the person is otherwise eligible for the re-
tiree discount.
‘‘(h) PAYMENT RESPONSIBILITIES
OF
THE SEC-
RETARY.—(1) In the case of a person described in sub-
section (e)(2) who is not enrolled in a Uniformed Services
Health Plan, the Secretary may make a premium payment
for the person’s enrollment through a health alliance in
1215
Title VIII, Subtitle A
another health plan. In determining the amount of the
payment, the Secretary shall consider the amount of any
retiree discount payable under the Health Security Act on
behalf of the person and the amount of any premium cred-
its attributable to employer payments with respect to em-
ployment of the person.
‘‘(2) The Secretary shall not make a payment pursu-
ant to this subsection in connection with any person en-
rolled in a health plan of the Department of Veterans Af-
fairs or a health program of the Indian Health Service.
‘‘(i) PAYMENT RESPONSIBILITIES OF PERSONS EN-
ROLLED IN A UNIFORMED SERVICES HEALTH PLAN.—(1)
In the case of an active duty member who is enrolled in
a Uniformed Services Health Plan, the administering Sec-
retaries may not impose or collect from the member a cost-
share charge of any kind (whether a premium, copayment,
deductible, coinsurance charge, or other charge) other
than subsistence charges authorized under section 1075
of this title.
‘‘(2) Subject to paragraph (3), persons described in
subsection (e)(2) who are enrolled in a Uniformed Services
Health Plan shall have such payment responsibilities as
the Secretary establishes, but not to exceed payment of
a family share under section 1343 of a premium and cost
sharing. Payment obligations established under this para-
1216
Title VIII, Subtitle A
graph may not exceed those obligations otherwise required
under the national standards for health plans established
pursuant to the Health Security Act.
‘‘(3)(A) Persons described in subsection (e)(2) who
enroll in a Uniformed Services Health Plan and who (in
the absence of this section) would be covered beneficiaries
under section 1079 or 1086 of this title continuously since
December 31, 1994, shall have, as a group, out-of-pocket
costs in 1995 no greater than the lesser of—
‘‘(i) the out-of-pocket costs in effect for such
beneficiaries under section 1075, 1078, 1079(b), or
1086(b) of this title (whichever applies) on Decem-
ber 31, 1994; and
‘‘(ii) those obligations otherwise required under
the national standards for health plans established
pursuant to the Health Security Act.
‘‘(B) Members of the uniformed services on active
duty as of December 31, 1994, who afterward become cov-
ered beneficiaries under section 1079 or 1086 of this title
(or would become covered beneficiaries in the absence of
this section) without a break in eligibility for health care
services under this chapter shall have, as a group, out-
of-pocket costs as covered beneficiaries no higher than the
out-of-pocket costs in effect for similarly situated covered
beneficiaries described in subparagraph (A).
1217
Title VIII, Subtitle A
‘‘(C) The limitation on out-of-pocket costs established
pursuant to subparagraph (A) may be adjusted for years
after 1995 by an appropriate economic index, as deter-
mined by the Secretary of Defense.
‘‘(4) The Secretary of Defense shall establish the pay-
ment requirements under paragraph (2), and enforce the
limitations on such requirements specified in paragraph
(3), in regulations prescribed pursuant to subsection (a).
‘‘(j) FINANCIAL ACCOUNT.—There is hereby estab-
lished in the Department of Defense a financial account
to which shall be credited all premium payments and other
receipts from other payers and beneficiaries made in con-
nection with any person enrolled in a Uniformed Services
Health Plan. The account shall be administered by the
Secretary of Defense, and funds in the account may be
used by the Secretary for any purpose directly related to
the delivery and financing of health care services under
this chapter, including operations, maintenance, per-
sonnel, procurement, contributions toward construction
projects, and related costs. Funds in the account shall re-
main available until expended.’’.
(2) The table of sections at the beginning of such
chapter is amended by inserting after the item relating
to section 1073 the following new item:
‘‘1073a. Uniformed Services Health Plans: establishment and coordination with
national health care reform.’’.
1218
Title VIII, Subtitle A
(b) DEFINITION.—Section 1072 of such title is
amended by adding at the end the following new para-
graph:
‘‘(6) The term ‘Uniformed Services Health
Plan’ means a plan established by the Secretary of
Defense under section 1073a(a) of this title in order
to provide health care services to members of the
uniformed services on active duty and other covered
beneficiaries under this chapter.’’.
(c) REPORT ON ESTABLISHMENT.—If the Secretary
of Defense determines to establish any Uniformed Services
Health Plan under section 1073a of title 10, United States
Code, as added by subsection (a), the Secretary shall sub-
mit to Congress a report describing the Plans proposed
to be initially offered under such section. The report re-
quired by this subsection shall be submitted not later than
30 days before the date on which the Secretary first issues
proposed rules under subsection (a) of such section to es-
tablish any such Plan.
1219
Title VIII, Subtitle B
Subtitle B—Department of
Veterans Affairs
SEC. 8101. BENEFITS AND ELIGIBILITY THROUGH DEPART-
MENT OF VETERANS AFFAIRS MEDICAL SYS-
TEM.
(a) DVA AS A PARTICIPANT IN HEALTH CARE RE-
FORM.—
(1) IN
GENERAL.—Title 38, United States
Code, is amended by inserting after chapter 17 the
following new chapter:
‘‘CHAPTER 18—ELIGIBILITY AND BENEFITS
UNDER HEALTH SECURITY ACT
‘‘SUBCHAPTER I—GENERAL
‘‘1801. Definitions.
‘‘SUBCHAPTER II—ENROLLMENT
‘‘1811. Enrollment: veterans.
‘‘1812. Enrollment: CHAMPVA eligibles.
‘‘1813. Enrollment: family members.
‘‘SUBCHAPTER III—BENEFITS
‘‘1821. Benefits for VA enrollees.
‘‘1822. Chapter 17 benefits.
‘‘1823. Supplemental benefits packages and policies.
‘‘1824. Limitation regarding veterans enrolled with health plans outside Depart-
ment.
‘‘SUBCHAPTER IV—FINANCIAL MATTERS
‘‘1831. Premiums, copayments, etc.
‘‘1832. Medicare coverage and reimbursement.
‘‘1833. Recovery of cost of certain care and services.
‘‘1834. Health Plan Funds.
1220
Title VIII, Subtitle B
‘‘SUBCHAPTER I—GENERAL
‘‘§ 1801. Definitions
‘‘For purposes of this chapter:
‘‘(1) The term ‘health plan’ means an entity
that has been certified under the Health Security
Act as a health plan.
‘‘(2) The term ‘VA health plan’ means a health
plan that is operated by the Secretary under section
7341 of this title.
‘‘(3) The term ‘VA enrollee’ means an indi-
vidual enrolled under the Health Security Act in a
VA health plan.
‘‘SUBCHAPTER II—ENROLLMENT
‘‘§ 1811. Enrollment: veterans
‘‘Each veteran who is an eligible individual within the
meaning of section 1001 of the Health Security Act may
enroll with a VA health plan. A veteran who wants to re-
ceive the comprehensive benefit package through the De-
partment shall enroll with a VA health plan.
‘‘§ 1812. Enrollment: CHAMPVA eligibles
‘‘An individual who is eligible for benefits under sec-
tion 1713 of this title and who is eligible to enroll in a
health plan pursuant to section 1001 of the Health Secu-
rity Act may enroll under that Act with a VA health plan
in the same manner as a veteran.
1221
Title VIII, Subtitle B
‘‘§ 1813. Enrollment: family members
‘‘(a) The Secretary may authorize a VA health plan
to enroll members of the family of an enrollee under sec-
tion 1811 or 1812 of this title, subject to payment of pre-
miums, deductibles, copayments, and coinsurance as re-
quired under the Health Security Act.
‘‘(b) For purposes of subsection (a), an enrollee’s
family is those individuals (other than the enrollee) in-
cluded within the term ‘family’ as defined in section
1011(b) of the Health Security Act.
‘‘SUBCHAPTER III—BENEFITS
‘‘§ 1821. Benefits for VA enrollees
‘‘The Secretary shall ensure that each VA health plan
provides to each individual enrolled with it the items and
services in the comprehensive benefit package under the
Health Security Act.
‘‘§ 1822. Chapter 17 benefits
‘‘The Secretary shall provide to veterans the care and
services that are authorized to be provided under chapter
17 of this title in accordance with the terms and conditions
applicable to that veteran and that care under such chap-
ter, notwithstanding that such care and services are not
included in the comprehensive benefit package.
‘‘§ 1823. Supplemental benefits packages and policies
‘‘A VA health plan may offer supplemental health
benefits policies for health care services not provided
1222
Title VIII, Subtitle B
under chapter 17 of this title and cost sharing policies con-
sistent with the requirements of part 2 of subtitle E of
title I of the Health Security Act.
‘‘§ 1824. Limitation regarding veterans enrolled with
health plans outside Department
‘‘A veteran who is residing in a regional alliance area
in which the Department operates a health plan and who
is enrolled in a health plan that is not operated by the
Department may be provided the items and services in the
comprehensive benefit package by a VA health plan only
if the plan is reimbursed for the actual and full cost of
the care provided.
‘‘SUBCHAPTER IV—FINANCIAL MATTERS
‘‘§ 1831. Premiums, copayments, etc.
‘‘(a) In the case of a veteran described in subsection
(b) who is a VA enrollee, the Secretary may not impose
or collect from the veteran a cost-share charge of any kind
(whether a premium, copayment, deductible, coinsurance
charge, or other charge). The Secretary shall make such
arrangements as necessary with health alliances in order
to carry out this subsection.
‘‘(b) The veterans referred to in subsection (a) are
the following:
‘‘(1) Any veteran with a service-connected dis-
ability.
1223
Title VIII, Subtitle B
‘‘(2) Any veteran whose discharge or release
from the active military, naval or air service was for
a disability incurred or aggravated in the line of
duty.
‘‘(3) Any veteran who is in receipt of, or who,
but for a suspension pursuant to section 1151 of
this title (or both such a suspension and the receipt
of retired pay), would be entitled to disability com-
pensation, but only to the extent that such a vet-
eran’s continuing eligibility for such care is provided
for in the judgment or settlement provided for in
such section.
‘‘(4) Any veteran who is a former prisoner of
war.
‘‘(5) Any veteran of the Mexican border period
or World War I.
‘‘(6) Any veteran who is unable to defray the
expenses of necessary care as determined under sec-
tion 1722(a) of this title.
‘‘(c) In the case of a VA enrollee who is not described
in subsection (b), the Secretary shall charge premiums
and establish copayments, deductibles, and coinsurance
amounts. The premium rate, and the rates for deductibles
and copayments, for each VA health plan shall be estab-
1224
Title VIII, Subtitle B
lished by that health plan based on rules established by
the health alliance under which it is operating.
‘‘(d) In the case of a veteran with a service-connected
disability who is enrolled in a VA health plan and who
has net earnings from self-employment, the Secretary
shall, under regulations prescribed by the Secretary, pro-
vide for a reduction in any premium payment (or alliance
credit repayment) owed by the veteran under section 6126
or 6111 of the Health Security Act by virtue of the vet-
eran’s net earnings from self-employment.
‘‘§ 1832. Medicare coverage and reimbursement
‘‘(a) For purposes of any program administered by
the Secretary of Health and Human Services under title
XVIII of the Social Security Act, a Department facility
shall be deemed to be a Medicare provider.
‘‘(b)(1) A VA health plan shall be considered to be
a Medicare HMO.
‘‘(2) For purposes of this section, the term ‘Medicare
HMO’ means an eligible organization under section 1876
of the Social Security Act.
‘‘(c) In the case of care provided to a veteran other
than a veteran described in section 1831(b) of this title
who is eligible for benefits under the Medicare program
under title XVIII of the Social Security Act, the Secretary
of Health and Human Services shall reimburse a VA
1225
Title VIII, Subtitle B
health plan or Department health-care facility providing
services as a Medicare provider or Medicare HMO in the
same amounts and under the same terms and conditions
as that Secretary reimburses other Medicare providers or
Medicare HMOs, respectively. The Secretary of Health
and Human Services shall include with each such reim-
bursement a Medicare explanation of benefits.
‘‘(d) When the Secretary provides care to a veteran
for which the Secretary receives reimbursement under this
section, the Secretary shall require the veteran to pay to
the Department any applicable deductible or copayment
that is not covered by Medicare.
‘‘§ 1833. Recovery of cost of certain care and services
‘‘(a) In the case of an individual provided care or
services through a VA health plan who has coverage under
a supplemental health insurance policy pursuant to part
2 of subtitle E of title I of the Health Security Act or
under any other provision of law, or who has coverage
under a Medicare supplemental health insurance plan (as
defined in the Health Security Act) or under any other
provision of law, the Secretary has the right to recover
or collect charges for care or services (as determined by
the Secretary, but not including care or services for a serv-
ice-connected disability) from the party providing that cov-
erage to the extent that the individual (or the provider
1226
Title VIII, Subtitle B
of the care or services) would be eligible to receive pay-
ment for such care or services from such party if the care
or services had not been furnished by a department or
agency of the United States.
‘‘(b) The provisions of subsections (b) through (f) of
section 1729 of this title shall apply with respect to claims
by the United States under subsection (a) in the same
manner as they apply to claims under subsection (a) of
that section.
‘‘§ 1834. Health Plan Fund
‘‘(a) There is hereby established in the Treasury a
revolving fund to be known as the ‘Department of Vet-
erans Affairs Health Plan Fund’.
‘‘(b) Any amount received by the Department by rea-
son of the furnishing of health care by a VA health plan
or the enrollment of an individual with a VA health plan
(including amounts received as premiums, premium dis-
count 
payments, 
copayments 
or 
coinsurance, 
and
deductibles, amounts received as third-party reimburse-
ments, and amounts received as reimbursements from an-
other health plan for care furnished to one of its enrollees)
shall be credited to the revolving fund.
‘‘(c) Notwithstanding subsection (b), the Department
may not retain amounts received for care furnished to a
VA enrollee in a case in which the costs of such care have
1227
Title VIII, Subtitle B
been covered by appropriations. Such amounts shall be de-
posited in the General Fund of the Treasury.
‘‘(d) Amounts in the revolving fund are hereby made
available for the expenses of the delivery by a VA health
plan of the items and services in the comprehensive benefit
package and any supplemental benefits package or policy
offered by that health plan.’’.
(2) The table of chapters at the beginning of
part II of title 38, United States Code, is amended
by inserting after the item relating to chapter 17 the
following new item:
‘‘18. Benefits and Eligibility Under Health Security Act ........................ 1801.’’.
(b) PRESERVATION OF EXISTING BENEFITS FOR FA-
CILITIES
NOT
OPERATING
AS
HEALTH
PLANS.—(1)
Chapter 17 of title 38, United States Code, is amended
by inserting after section 1704 the following new section:
‘‘§ 1705. Facilities not operating within health plans;
veterans not eligible to enroll in health
plans
‘‘The provisions of this chapter shall apply with re-
spect to the furnishing of care and services—
‘‘(1) by any facility of the Department that is
not operating as or within a health plan certified as
a health plan under the Health Security Act; and
‘‘(2) by any facility of the Department (whether
or not operating as or within a health plan certified
1228
Title VIII, Subtitle B
as a health plan under the Health Security Act) in
the case of a veteran who is not an eligible indi-
vidual with the meaning of section 1001 of the
Health Security Act.’’.
(2) The table of sections at the beginning of such
chapter is amended by inserting after the item relating
to section 1704 the following new item:
‘‘1705. Facilities not operating within health plans; veterans not eligible to en-
roll in health plans.’’.
SEC. 8102. ORGANIZATION OF DEPARTMENT OF VETERANS
AFFAIRS FACILITIES AS HEALTH PLANS.
(a) IN GENERAL.—Chapter 73 of title 38, United
States Code, is amended—
(1) by redesignating subchapter IV as sub-
chapter V; and
(2) by inserting after subchapter III the fol-
lowing new subchapter:
‘‘SUBCHAPTER IV—PARTICIPATION AS PART OF
NATIONAL HEALTH CARE REFORM
‘‘§ 7341. Organization of health care facilities as
health plans
‘‘(a) The Secretary shall organize health plans and
operate Department facilities as or within health plans
under the Health Security Act. The Secretary shall pre-
scribe regulations establishing standards for the operation
of Department health care facilities as or within health
1229
Title VIII, Subtitle B
plans under that Act. In prescribing those standards, the
Secretary shall assure that they conform, to the maximum
extent practicable, to the requirements for health plans
generally set forth in part 1 of subtitle E of title I of the
Health Security Act.
‘‘(b) Within a geographic area or region, health care
facilities of the Department located within that area or
region may be organized to operate as a single health plan
encompassing all Department facilities within that area or
region or may be organized to operate as several health
plans.
‘‘(c) In carrying out responsibilities under the Health
Security Act, a State (or a State-established entity)—
‘‘(1) may not impose any standard or require-
ment on a VA health plan that is inconsistent with
this section or any regulation prescribed under this
section or other Federal laws regarding the oper-
ation of this section; and
‘‘(2) may not deny certification of a VA health
plan under the Health Security Act on the basis of
a conflict between a rule of a State or health alliance
and this section or regulations prescribed under this
section or other Federal laws regarding the oper-
ation of this section.
1230
Title VIII, Subtitle B
‘‘§ 7342. Contract authority for facilities operating as
or within health plans
‘‘The Secretary may enter into a contract (without
regard to provisions of law requiring the use of competitive
procedures) for the provision of services by a VA health
plan in any case in which the Secretary determines that
such contracting is more cost-effective than providing such
services directly through Department facilities or when
such contracting is necessary because of geographic inac-
cessibility.
‘‘§ 7343. Resource sharing authority: facilities oper-
ating as or within health plans
‘‘The Secretary may enter into agreements under sec-
tion 8153 of this title with other health care plans, with
health care providers, and with other health industry orga-
nizations, and with individuals, for the sharing of re-
sources of the Department through facilities of the De-
partment operating as or within health plans.
‘‘§ 7344. Administrative and personnel flexibility
‘‘(a) In order to carry out this subchapter, the Sec-
retary may—
‘‘(1) carry out administrative reorganizations of
the Department without regard to those provisions
of section 510 of this title following subsection (a)
of that section; and
1231
Title VIII, Subtitle B
‘‘(2) enter into contracts for the performance of
services previously performed by employees of the
Department without regard to section 8110(c) of
this title.
‘‘(b) The Secretary may establish alternative per-
sonnel systems or procedures for personnel at facilities op-
erating as or with health plans under the Health Security
Act whenever the Secretary considers such action nec-
essary in order to carry out the terms of that Act, except
that the Secretary shall provide for preference eligibles (as
defined in section 2108 of title 5, United States Code)
in a manner comparable to the preference for such eligi-
bles under subchapter I of chapter 33, and subchapter I
of chapter 35, of such title.
‘‘(c) Subject to the provisions of section 1404 of the
Health Security Act, the Secretary may carry out appro-
priate promotional, advertising, and marketing activities
to inform individuals of the availability of facilities of the
Department operating as or within health plans. Such ac-
tivities may only be carried out using nonappropriated
funds.
‘‘§ 7345. Veterans Health Care Investment Fund
‘‘(a) There is hereby authorized to be appropriated
to the Department, in addition to amounts otherwise au-
thorized to be appropriated to the Department for VA
1232
Title VIII, Subtitle B
health plans, such amounts as are necessary for the Sec-
retary of the Treasury to fulfill the requirement of sub-
section (b).
‘‘(b) For each of fiscal years 1995, 1996, and 1997,
the Secretary of the Treasury shall, subject to subsection
(a), credit to a special fund (in this section referred to
as the ‘Fund’) of the Treasury an amount equal to—
‘‘(1) $1,000,000,000 for fiscal year 1995;
‘‘(2) $600,000,000 for fiscal year 1996; and
‘‘(3) $1,700,000,000 for fiscal year 1997.
‘‘(c)(1) Subject to paragraph (2), amounts in the
Fund shall be available to the Secretary only for the VA
health plans authorized under this chapter.
‘‘(2) For fiscal year 1995, 1996, or 1997, the amount
credited to the Fund for the fiscal year shall be available
for use by the Secretary under paragraph (1) only if ap-
propriations Acts for that fiscal year, without addition of
amounts provided under subsection (a) for the Fund, pro-
vide new budget authority for the Department of Veterans
Affairs Medical Care account, for that fiscal year, of no
less than the amount for that account proposed in the
budget of the President for that fiscal year under section
1105 of title 31.
‘‘(d) The Secretary shall submit to Congress, no later
than March 1, 1997, a report concerning the operation
1233
Title VIII, Subtitle B
of the Department of Veterans Affairs health care system
in preparing for, and operating under, national health care
reform under the Health Security Act during fiscal years
1995 and 1996. The report shall include a discussion of—
‘‘(1) the adequacy of amounts in the Fund for
the operation of VA health plans;
‘‘(2) the quality of care provided by such plans;
‘‘(3) the ability of such plans to attract pa-
tients; and
‘‘(4) the need (if any) for additional funds for
the Fund in fiscal years after fiscal year 1997.
‘‘§ 7346. Funding provisions: grants and other sources
of assistance
‘‘The Secretary may apply for and accept, if awarded,
any grant or other source of funding that is intended to
meet the needs of special populations and that but for this
section is unavailable to facilities of the Department or
to health plans operated by the Government if funds ob-
tained through the grant or other source of funding will
be used through a facility of the Department operating
as or within a health plan.’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 73 is amended by striking out
the item relating to the heading for subchapter IV and
inserting in lieu thereof the following:
1234
Title VIII, Subtitle C
‘‘SUBCHAPTER IV—PARTICIPATION AS PART OF NATIONAL HEALTH CARE
REFORM
‘‘7341. Organization of health care facilities as health plans.
‘‘7342. Contract authority for facilities operating as or within health plans.
‘‘7343. Resource sharing authority: facilities operating as or within health
plans.
‘‘7344. Administrative and personnel flexibility.
‘‘7345. Veterans Health Care Investment Fund.
‘‘7346. Funding provisions: grants and other sources of assistance.
‘‘SUBCHAPTER V—RESEARCH CORPORATIONS’’.
(c) TRANSITION PROVISION.—The limitation in the
second sentence of section 7344(c) of title 38, United
States Code, as added by subsection (a), shall not apply
during fiscal year 1994.
Subtitle C—Federal Employees
Health Benefits Program
SEC. 8201. DEFINITIONS.
Except as otherwise specifically provided, in this sub-
title:
(1) ABROAD.—The term ‘‘abroad’’ means out-
side the United States.
(2) ANNUITANT, ETC.—The terms ‘‘annuitant’’,
‘‘employee’’, and ‘‘Government’’, have the same re-
spective meanings as are given such terms by section
8901 of title 5, United States Code (as last in ef-
fect).
(3) EMPLOYEES
HEALTH
BENEFITS
FUND.—
The term ‘‘Employees Health Benefits Fund’’ means
1235
Title VIII, Subtitle C
the fund under section 8909 of title 5, United States
Code (as last in effect).
(4) FEHBP.—The term ‘‘FEHBP’’ means the
health insurance program under chapter 89 of title
5, United States Code (as last in effect).
(5) FEHBP PLAN.—The term ‘‘FEHBP plan’’
has the same meaning as is given the term ‘‘health
benefits plan’’ by section 8901(6) of title 5, United
States Code (as last in effect).
(6) FEHBP TERMINATION
DATE.—The term
‘‘FEHBP termination date’’ means the date (speci-
fied in section 8202) after which FEHBP ceases to
be in effect.
(7) RETIRED
EMPLOYEES
HEALTH
BENEFITS
FUND.—The term ‘‘Retired Employees Health Bene-
fits Fund’’ means the fund under section 8 of the
Retired Federal Employees Health Benefits Act
(Public Law 86-724; 74 Stat. 851), as last in effect.
(8) RFEHBP.—The term ‘‘RFEHBP’’ means
the health insurance program under the Retired
Federal Employees Health Benefits Act.
SEC. 8202. FEHBP TERMINATION.
Chapter 89 of title 5, United States Code, is repealed
effective as of December 31, 1997, and all contracts under
such chapter shall terminate not later than such date.
1236
Title VIII, Subtitle C
SEC. 8203. TREATMENT OF FEDERAL EMPLOYEES, ANNU-
ITANTS, 
AND 
OTHER 
INDIVIDUALS 
(WHO
WOULD OTHERWISE HAVE BEEN ELIGIBLE
FOR FEHBP) UNDER HEALTH PLANS.
(a) APPLICABILITY.—This section sets forth rules ap-
plicable, after the FEHBP termination date, with respect
to individuals who—
(1) are eligible individuals under section 1001;
and
(2) but for this subtitle, would be eligible to en-
roll in an FEHBP plan.
(b) FEDERAL EMPLOYEES.—
(1) SAME TREATMENT AS NON–FEDERAL EM-
PLOYEES.—A Federal employee shall be treated in
the same way, for purposes of provisions of this Act
outside of this subtitle, as if that individual were a
non-Federal employee, including for purposes of any
requirements relating to enrollment, family premium
payments, and employer premium payments.
(2) EMPLOYER PREMIUM PAYMENTS.—Any em-
ployer premium payment required with respect to
the employment of a Federal employee shall be pay-
able from the appropriation or fund from which any
Government contribution on behalf of such employee
would have been payable under FEHBP.
1237
Title VIII, Subtitle C
(3) 
OFFER
OF
FEHBP
SUPPLEMENTAL
PLANS.—The Federal Government shall offer to
Federal employees one or more FEHBP supple-
mental plans developed under subsection (f)(1).
(4) DEFINITIONS.—In this subsection:
(A) 
FEDERAL
EMPLOYEE.—The 
term
‘‘Federal employee’’ means an ‘‘employee’’ as
defined by section 8201.
(B) NON-FEDERAL EMPLOYEE.—The term
‘‘non–Federal employee’’ means an ‘‘employee’’
as defined by section 1901.
(c) ANNUITANTS.—
(1) HEALTH PLAN.—
(A) 
AUTHORITY
TO
MAKE
CERTAIN
WITHHOLDINGS FROM ANNUITIES.—
(i) IN GENERAL.—The Office of Per-
sonnel Management may, on the request of
an annuitant enrolled in a health plan,
withhold from the annuity of such annu-
itant any premiums required for such en-
rollment. The Office shall forward any
amounts so withheld to the appropriate
fund or as otherwise indicated in the re-
quest. A request under this subparagraph
shall contain such information, and other-
1238
Title VIII, Subtitle C
wise be made in such form and manner, as
the Office shall by regulation prescribe.
(ii) REFERENCES.—Any reference in
clause (i) to the Office of Personnel Man-
agement shall, for purposes of any annuity
(including monthly compensation under
subchapter I of chapter 81 of title 5,
United States Code) payable under provi-
sions of law which are administered by a
Government entity other than the Office,
be considered to be a reference to such
other Government entity.
(B) PAYMENT
OF
ALLIANCE
CREDIT
LI-
ABILITY FOR ANNUITANTS BELOW AGE 55.—In
the case of an annuitant who does not satisfy
the eligibility requirements under section 6114,
a Government contribution shall be made equal
to such amount as is necessary to reduce the
employee’s liability under section 6111 to zero.
(2) FEHBP SUPPLEMENTAL PLAN.—
(A) CURRENT ANNUITANTS.—
(i) 
IN
GENERAL.—Each 
current
annuitant—
1239
Title VIII, Subtitle C
(I) shall be eligible to enroll in
FEHBP supplemental plans developed
under subsection (f)(1); and
(II) shall be eligible for the Gov-
ernment 
contribution 
amount 
de-
scribed in clause (ii) toward the pre-
mium for such a plan.
(ii) 
GOVERNMENT
CONTRIBUTION
AMOUNT.—The Office of Personnel Man-
agement shall specify a level of Govern-
ment contribution under this subparagraph
for an FEHBP supplemental plan. Such
level—
(I) shall reasonably reflect the
portion of the Government contribu-
tions (last provided under FEHBP)
attributable to the portion of FEHBP
benefits which the plan is designed to
replace; and
(II) shall be applied toward pre-
miums for such a plan.
(B) FUTURE ANNUITANTS.—In the case of
a future annuitant, the Federal Government
shall offer to such an annuitant one or more
1240
Title VIII, Subtitle C
FEHBP supplemental plans developed under
subsection (f)(1).
(C) DEFINITIONS.—In this paragraph:
(i) CURRENT ANNUITANT.—The term
‘‘current annuitant’’ means an individual
who is residing in a State on January 1,
1998, and, on the day before such date,
was—
(I) enrolled in an FEHBP plan
as an annuitant; or
(II) covered under an FEHBP
plan as a family member (but only if
such individual would otherwise have
been eligible to enroll in an FEHBP
plan as an annuitant).
(ii) FUTURE ANNUITANT.—The term
‘‘future annuitant’’ means an annuitant
who is not a current annuitant.
(d) INDIVIDUALS WHO WOULD NOT BE ELIGIBLE
FOR A GOVERNMENT CONTRIBUTION UNDER FEHBP.—
(1) IN GENERAL.—In the case of an individual
described in paragraph (2)—
(A) the Federal Government may, but is
not required to, offer one or more FEHBP sup-
1241
Title VIII, Subtitle C
plemental plans developed under subsection
(f)(1); and
(B) no Government contribution shall be
payable with respect to the premium for such a
plan.
(2) 
APPLICABILITY.—This 
subsection 
shall
apply with respect to any individual who (but for
this subtitle) would be eligible to enroll in an
FEHBP plan, but would not be eligible for a Gov-
ernment contribution toward any such plan.
(e) MEDICARE-ELIGIBLE INDIVIDUALS.—
(1) CURRENT
MEDICARE-ELIGIBLE
INDIVID-
UALS.—
(A) IN GENERAL.—Each current medicare-
eligible individual—
(i) shall be eligible to enroll in medi-
care supplemental plans developed under
subsection (f)(2); and
(ii) if such individual would (but for
this subtitle) have been eligible for a Gov-
ernment contribution under FEHBP (as-
suming such individual were then enrolled
thereunder), shall be eligible for the Gov-
ernment medicare contribution amount de-
scribed in subparagraph (B) toward the
1242
Title VIII, Subtitle C
premium for such a plan or toward the
premium for enrollment with an eligible or-
ganization under a risk-sharing contract
under section 1876 of the Social Security
Act).
(B) MEDICARE CONTRIBUTION AMOUNT.—
The Office of Personnel Management shall
specify a level of Government contribution
under this paragraph for an FEHBP medicare
supplemental plan. Such level—
(i) shall reasonably reflect the portion
of the Government contributions (last pro-
vided under FEHBP) attributable to the
portion of FEHBP benefits which the plan
is designed to replace; and
(ii) except as otherwise provided in
paragraph (3), shall be applied toward pre-
miums for such a plan.
(2) 
FUTURE
MEDICARE-ELIGIBLE
INDIVID-
UALS.—In the case of a future medicare-eligible in-
dividual, the Federal Government may, but is not re-
quired to—
(A) offer to such a medicare-eligible indi-
vidual one or more FEHBP medicare supple-
1243
Title VIII, Subtitle C
mental plans developed under subsection (f)(2);
and
(B) make a Government contribution with
respect to the premium for such a plan.
(3) APPLICATION OF CONTRIBUTION TOWARD
MEDICARE HMO OPTION.—
(A) ELECTION.—A medicare-eligible indi-
vidual may elect to have the amount of the Gov-
ernment contribution described in paragraph
(1)(B) or referred to in paragraph (2)(B) ap-
plied toward premiums for enrollment with an
eligible organization under a risk-sharing con-
tract under section 1876 of the Social Security
Act.
(B) LEVEL
CONTRIBUTION
RULE.—The
level of such Government contribution on behalf
of an individual shall be determined without
taking into account any election under subpara-
graph (A).
(4) DEFINITIONS.—In this subsection:
(A) CURRENT
MEDICARE-ELIGIBLE
INDI-
VIDUAL.—The term ‘‘current medicare-eligible
individual’’ means an individual who is residing
in a State on January 1, 1998, and, on the day
1244
Title VIII, Subtitle C
before such date, was a medicare-eligible indi-
vidual.
(B) FUTURE
MEDICARE-ELIGIBLE
INDI-
VIDUAL.—The term ‘‘future medicare-eligible
individual’’ means a medicare-eligible individual
who is not a current medicare-eligible indi-
vidual.
(5) INAPPLICABILITY.—Subsections (b) through
(d) shall not apply with respect to a medicare-eligi-
ble individual.
(f) DEVELOPMENT OF SUPPLEMENTAL PLANS.—
(1) FEHBP SUPPLEMENTAL PLANS.—The Of-
fice of Personnel Management shall develop one or
more FEHBP supplemental plans which are supple-
mental health benefit policies or cost sharing policies
(as defined in section 1421(b)). Each such plan
shall—
(A) be consistent with the applicable re-
quirements of part 2 of subtitle E of title I (in-
cluding 
the 
requirements 
under 
section
1423(f)); and
(B) reflect (taking into consideration the
benefits in the comprehensive benefit package)
the overall level of benefits last generally af-
forded under FEHBP.
1245
Title VIII, Subtitle C
(2) 
FEHBP 
MEDICARE
SUPPLEMENTAL
PLANS.—The Office of Personnel Management shall
develop one or more medicare supplemental plans.
Each such plan shall—
(A) offer benefits which shall include the
core group of basic benefits identified under
section 1882(p)(2) of the Social Security Act;
and
(B) reflect (taking into consideration the
benefits provided under the medicare program)
the overall level of benefits last generally af-
forded under FEHBP.
(g) AUTHORIZATION OF APPROPRIATIONS.—The Gov-
ernment contributions authorized by this section on behalf
of an annuitant (including an annuitant who is a medi-
care-eligible individual) shall be paid from annual appro-
priations which are authorized to be made for that purpose
and which may be made available until expended.
(h) FUND.—
(1) ESTABLISHMENT.—There shall be estab-
lished in the Treasury of the United States a fund
into which shall be paid all contributions relating to
any—
(A) FEHBP supplemental plan developed
under subsection (f)(1);
1246
Title VIII, Subtitle C
(B) FEHBP medicare supplemental plan
developed under subsection (f)(2); or
(C) health insurance program established
under section 8204.
(2) ADMINISTRATION
AND
USE.—The fund
shall be administered by the Office of Personnel
Management, and any monies in the fund shall be
available for purposes of the plan or program (re-
ferred to in paragraph (1)) to which they are attrib-
utable.
SEC. 
8204. 
TREATMENT 
OF 
INDIVIDUALS 
RESIDING
ABROAD.
(a) IN GENERAL.—After the FEHBP termination
date, individuals residing abroad who (but for this sub-
title) would be eligible to enroll in an FEHBP plan shall
be eligible for health insurance under a program which
the Office of Personnel Management shall by regulation
establish.
(b) REQUIREMENT.—To the extent practicable, cov-
erage and benefits provided to individuals under such pro-
gram shall be equal to the coverage and benefits which
would be available to them if they were residing in the
United States.
(c) GOVERNMENT CONTRIBUTIONS.—Any Govern-
ment contribution payable under such program shall be
1247
Title VIII, Subtitle C
made from the appropriation or fund from which any Gov-
ernment contribution would have been payable under
FEHBP (if any) on behalf of the individual involved, ex-
cept that, in the case of an annuitant, any such contribu-
tion shall be payable from amounts appropriated pursuant
to section 8203(g).
SEC. 8205. TRANSITION AND SAVINGS PROVISIONS.
(a) EMPLOYEES HEALTH BENEFITS FUND.—
(1) TEMPORARY
CONTINUED
AVAILABILITY.—
Notwithstanding 
section 
8202, 
the 
Employees
Health Benefits Fund shall be maintained, and
amounts in such Fund shall remain available, after
the FEHBP termination date, for such period of
time as the Office of Personnel Management con-
siders necessary in order to satisfy any outstanding
claims.
(2) FINAL DISBURSEMENT.—After the end of
the period referred to in paragraph (1), any
amounts remaining in the Fund shall be disbursed
(between the Government and former participants in
FEHBP) in accordance with a plan which the Office
shall prepare, consistent with the cost-sharing ratio
between the Government and plan enrollees during
the final contract term. The details of any such plan
shall be submitted to the President and the Con-
1248
Title VIII, Subtitle C
gress at least 1 year before the date of its proposed
implementation.
(b) PROCEEDINGS.—After the FEHBP termination
date, chapter 89 of title 5, United States Code (as last
in effect) shall be considered to have remained in effect
for purposes of any suit, action, or other proceeding with
respect to any liability incurred or violation which oc-
curred on or before such date.
(c) RFEHBA.—
(1) REPEAL.—The Retired Federal Employees
Health Benefits Act (Public Law 86–724; 74 Stat.
849) is repealed effective as of the FEHBP termi-
nation date.
(2) RELATED PROVISIONS.—After the FEHBP
termination date—
(A) the Retired Employees Health Benefits
Fund shall temporarily remain available, and
amounts in that fund shall subsequently be dis-
bursed, in a manner comparable to that pro-
vided for under subsection (a); and
(B) retired employees who (but for this
subtitle) would be eligible for coverage under
the Retired Federal Employees Health Benefits
Act shall be treated, for purposes of this sub-
title, as if they were annuitants (subject to any
1249
Title VIII, Subtitle C
differences in the overall level of coverage or
benefits last generally afforded to annuitants
under FEHBP and to retired employees under
RFEHBP, respectively).
(3) 
REGULATIONS.—Regulations 
prescribed
under section 8206 to carry out this subsection shall
include any necessary provisions relating to individ-
uals residing abroad.
SEC. 8206. REGULATIONS.
The Office of Personnel Management shall prescribe
any regulations which may be necessary to carry out this
subtitle.
SEC. 8207. TECHNICAL AND CONFORMING AMENDMENTS.
(a) OPM’S ANNUAL REPORT
ON FEHBP.—Sub-
section (c) of section 1308 of title 5, United States Code,
is repealed.
(b) OTHER REFERENCES
TO FEHBP.—Any ref-
erence in any provision of law to the health insurance pro-
gram under chapter 89 of title 5, United States Code (or
any aspect of such program) shall be considered to be a
reference to the health insurance program under this sub-
title (or corresponding aspect), subject to such clarifica-
tion as may be provided, or except as may otherwise be
provided, in regulations prescribed by the agency or other
1250
Title VIII, Subtitle D
authority responsible for the administration of such provi-
sion.
(c) OMNIBUS BUDGET RECONCILIATION ACT
OF
1993.—Effective as of the date of the enactment of this
Act, section 11101(b)(3) of the Omnibus Budget Rec-
onciliation Act of 1993 (Public Law 103–66; 107 Stat.
413) is amended by striking ‘‘September 30, 1998’’ and
inserting ‘‘December 31, 1997’’.
(d) EFFECTIVE DATE.—Except as provided in sub-
section (c), this section and the amendments made by this
section shall take effect on the day after the FEHBP ter-
mination date.
Subtitle D—Indian Health Service
SEC. 8301. DEFINITIONS.
For the purposes of this subtitle—
(1) the term ‘‘health program of the Indian
Health Service’’ means a program which provides
health services under this Act through a facility of
the Indian Health Service, a tribal organization
under the authority of the Indian Self-Determination
Act or a self-governance compact, or an urban In-
dian program;
(2) the term ‘‘reservation’’ means the reserva-
tion of any federally recognized Indian tribe, former
Indian reservations in Oklahoma, and lands held by
1251
Title VIII, Subtitle D
incorporated Native groups, regional corporations,
and village corporations under the provisions of the
Alaska Native Claims Settlement Act (43 U.S.C.
1601 et seq.);
(3) the term ‘‘urban Indian program’’ means
any program operated pursuant to title V of the In-
dian Health Care Improvement Act; and
(4) the terms ‘‘Indian’’, ‘‘Indian tribe’’, ‘‘tribal
organization’’, ‘‘urban Indian’’, ‘‘urban Indian orga-
nization’’, and ‘‘service unit’’ have the same meaning
as when used in the Indian Health Care Improve-
ment Act (25 U.S.C. 1601 et seq.).
SEC. 8302. ELIGIBILITY AND HEALTH SERVICE COVERAGE
OF INDIANS.
(a) ELIGIBILITY.—An eligible individual, as defined
in section 1001(c), is eligible to enroll in a health program
of the Indian Health Service if the individual is—
(1) an Indian, or a descendent of a member of
an Indian tribe who belongs to and is regarded as
an Indian by the Indian community in which the in-
dividual lives, who resides on or near an Indian res-
ervation or in a geographical area designated by
statute as meeting the requirements of being on or
near an Indian reservation notwithstanding the lack
of an Indian reservation;
1252
Title VIII, Subtitle D
(2) an urban Indian; or
(3) an Indian described in section 809(b) of the
Indian Health Care Improvement Act (25 U.S.C.
1679(b)).
(b) ELECTION.—An individual described in sub-
section (a) may elect a health program of the Indian
Health Service instead of a health plan.
(c) ENROLLMENT
FOR BENEFITS.—An individual
who elects a health program of the Indian Health Service
under subsection (b) shall enroll in such program through
a service unit, tribal organization, or urban Indian pro-
gram. An individual who enrolls in such program is not
subject to any charge for health insurance premiums,
deductibles, copayments, coinsurance, or any other cost
for health services provided under such program.
(d) PAYMENTS BY INDIVIDUALS WHO DO NOT EN-
ROLL.—If an individual described in subsection (a) does
not enroll in a health program of the Indian Health Serv-
ice, no payment shall be made by the Indian Health Serv-
ice to the individual (or on behalf of the individual) with
respect to premiums charged for enrollment in an applica-
ble health plan or any other cost of health services under
the applicable health plan which the individual is required
to pay.
1253
Title VIII, Subtitle D
SEC. 8303. SUPPLEMENTAL INDIAN HEALTH CARE BENE-
FITS.
(a) IN GENERAL.—All individuals described in sec-
tions 8302(a) remain eligible for such benefits under the
laws administered by the Indian Health Service as supple-
ment the comprehensive benefit package. The individual
shall not be subject to any charge or any other cost for
such benefits.
(b) AUTHORIZATION OF APPROPRIATIONS.—In addi-
tion to amounts otherwise authorized to be appropriated,
there is authorized to be appropriated to carry out this
section $180,000,000 for fiscal year 1995, $200,000,000
for each of the fiscal years 1996 through 1999, and such
sums as may be necessary for fiscal year 2000 and each
fiscal year thereafter.
SEC. 8304. HEALTH PLAN AND HEALTH ALLIANCE RE-
QUIREMENTS.
(a) COMPREHENSIVE BENEFIT PACKAGE.—The Sec-
retary shall ensure that the comprehensive benefit package
is provided by all health programs of the Indian Health
Service effective January 1, 1999, notwithstanding section
1001(a).
(b) 
APPLICABLE
REQUIREMENTS
OF
HEALTH
PLANS.—In addition to subsection (a), the Secretary shall
determine which other requirements relating to health
1254
Title VIII, Subtitle D
plans apply to health programs of the Indian Health Serv-
ice.
(c) CERTIFICATION.—Effective January 1, 1999, all
health programs of the Indian Health Service must meet
the certification requirements for health plans, as required
by the Secretary under this section, as certified from time
to time by the Secretary. Before January 1, 1999, all such
health programs shall, to the extent practicable, meet such
certification requirements.
(d) HEALTH ALLIANCE REQUIREMENTS.—The Sec-
retary shall determine which requirements relating to
health alliances apply to the Indian Health Service.
SEC. 8305. EXEMPTION OF TRIBAL GOVERNMENTS AND
TRIBAL ORGANIZATIONS FROM EMPLOYER
PAYMENTS.
A tribal government and a tribal organization under
the Indian Self-Determination and Educational Assistance
Act or a self-governance compact shall be exempt from
making employer premium payments as an employer
under section 6121.
SEC. 8306. PROVISION OF HEALTH SERVICES TO NON-EN-
ROLLEES AND NON-INDIANS.
(a) CONTRACTS WITH HEALTH PLANS.—
(1) IN GENERAL.—A health program of the In-
dian Health Service, a service unit, a tribal organi-
1255
Title VIII, Subtitle D
zation, or an urban Indian organization operating
within a health program may enter into a contract
with a health plan for the provision of health care
services to individuals enrolled in such health plan if
the program, unit, or organization determines that
the provision of such health services will not result
in a denial or diminution of health services to any
individual described in section 8302(a) who is en-
rolled for health services provided by such program,
unit, or organization.
(2) REIMBURSEMENT.—Any contract entered
into pursuant to paragraph (1) shall provide for re-
imbursement to such program, unit, or organization
in accordance with the essential community provider
provisions of section 1431(c), as determined by the
Secretary.
(b) FAMILY TREATMENT.—
(1) DETERMINATION TO OPEN ENROLLMENT.—
A health program of the Indian Health Service may
open enrollment to family members of individuals
described in section 8302(a).
(2) ELECTION.—If a health program of the In-
dian Health Service opens enrollment to family
members of individuals described in section 8302(a),
an individual described in that section may elect
1256
Title VIII, Subtitle D
family enrollment in the health program instead of
in a health plan.
(3) ENROLLMENT.—
(A) IN
GENERAL.—An individual who
elects family enrollment under paragraph (2) in
a health program of the Indian Health Service
shall enroll in such program.
(B) APPLICABLE INDIVIDUAL CHARGES.—
The individual who enrolls in such program
under subparagraph (A) is not subject to any
charge 
for 
health 
insurance 
premiums,
deductibles, copayments, coinsurance, or any
other cost for health services provided under
such program attributable to the individual, but
the family members who are not eligible for a
health program of the Indian Health Service
under section 8302(a) are subject to all such
charges.
(C) APPLICABLE
EMPLOYER
CHARGES.—
Employers, other than tribal governments and
tribal organizations exempt under section 8305,
are liable for making employer premium pay-
ments as an employer under section 6121 in the
case of any family member enrolled under this
subsection who is not eligible for a health pro-
1257
Title VIII, Subtitle D
gram of the Indian Health Service under sec-
tion 8302(a).
(4) PREMIUM.—
(A) ESTABLISHMENT AND COLLECTION.—
The Secretary shall establish premiums for all
family members enrolled in a health program of
the Indian Health Service under this paragraph
who are not eligible for a health program of the
Indian Health Service under section 8302(a).
The Secretary shall collect each premium pay-
ment owed under this paragraph.
(B) REDUCTION.—The Secretary shall pro-
vide for a process for premium reduction which
is the same as the process, and uses the same
standards, used by regional alliances for the
areas in which individuals described in subpara-
graph (A) reside, except that in computing the
family share of the premiums the Secretary
shall use the lower of the premium quoted or
the reduced weighted average accepted bid for
the reference regional alliance.
(C) PAYMENT BY SECRETARY.—The Sec-
retary shall provide for payment to each health
program of the Indian Health Service, in the
same manner as payments under section 6201,
1258
Title VIII, Subtitle D
amounts equivalent to the amount of payments
that would have been made to a regional alli-
ance if the individuals described in subpara-
graph (A) were enrolled in a regional alliance
health plan (with a final accepted bid equal to
the reduced weighted average accepted bid pre-
mium for the regional alliance).
(c) ESSENTIAL COMMUNITY PROVIDER.—
(1) HEALTH SERVICES.—If a health program of
the Indian Health Service, a service unit, a tribal or-
ganization, or an urban Indian organization oper-
ating within a health program elects to be an essen-
tial community provider under section 1431, an indi-
vidual described in paragraph (2) enrolled in a
health plan other than a health program of the In-
dian Health Service may receive health services from
that essential community provider.
(2) INDIVIDUAL COVERED.—An individual re-
ferred to in paragraph (1) is an individual who—
(A) is described in section 8302(a); or
(B) is a family member described in sub-
section (b) who does not enroll in a health pro-
gram of the Indian Health Service.
1259
Title VIII, Subtitle D
SEC. 8307. PAYMENT BY OTHER PAYERS.
(a) PAYMENT FOR SERVICES PROVIDED BY INDIAN
HEALTH SERVICE PROGRAMS.—Nothing in this subtitle
shall be construed as amending section 206, 401, or 402
of the Indian Health Care Improvement Act (relating to
payments on behalf of Indians for health services from
other Federal programs or from other third party payers).
(b) PAYMENT FOR SERVICES PROVIDED BY CON-
TRACTORS.—Nothing in this subtitle shall be construed as
affecting any other provision of law, regulation, or judicial
or administrative interpretation of law or policy con-
cerning the status of the Indian Health Service as the
payer of last resort for Indians eligible for contract health
services under a health program of the Indian Health
Service.
SEC. 8308. CONTRACTING AUTHORITY.
Section 601(d)(1)(B) of the Indian Health Care Im-
provement Act (25 U.S.C. 1661(d)(1)(B)) is amended by
inserting ‘‘(including personal services for the provision of
direct health care services)’’ after ‘‘goods and services’’.
SEC. 8309. CONSULTATION.
The Secretary shall consult with representatives of
Indian tribes, tribal organizations, and urban Indian orga-
nizations annually concerning health care reform initia-
tives that affect Indian communities.
1260
Title VIII, Subtitle D
SEC. 8310. INFRASTRUCTURE.
(a) FACILITIES.—The Secretary, acting through the
Indian Health Service, may expend amounts appropriated
pursuant to section 8313 for the construction and renova-
tion of hospitals, health centers, health stations, and other
facilities for the purpose of improving and expanding such
facilities to enable the delivery of the full array of items
and services guaranteed in the comprehensive benefit
package.
(b) CAPITAL FINANCING.—There is established in the
Indian Health Service a revolving loan program. Under
the program, the Secretary, acting through the Indian
Health Service, shall provide guaranteed loans under such
terms and conditions as the Secretary may prescribe to
providers within the Indian Health Service system to im-
prove and expand health care facilities to enable the deliv-
ery of the full array of items and services guaranteed in
the comprehensive benefit package.
SEC. 8311. FINANCING.
(a) ESTABLISHMENT OF FUND.—Each health pro-
gram of the Indian Health Service shall establish a com-
prehensive benefit package fund (hereafter in this section
referred to as the ‘‘fund’’).
(b) DEPOSITS.—There shall be deposited into the
fund the following:
1261
Title VIII, Subtitle D
(1) All amounts received as employer premium
payments pursuant to section 1351(e)(3).
(2) All amounts received as family premium
payments and premium discount payments pursuant
to section 8306(b)(4).
(3) All amounts appropriated for the fund for
the purpose of providing the comprehensive benefit
package to individuals enrolled in a health program
of the Indian Health Service.
(4) Any other amount received with respect to
health services for the comprehensive benefit pack-
age.
(c) ADMINISTRATION AND EXPENDITURES.—
(1) MANAGEMENT.—The fund shall be man-
aged by the health program of the Indian Health
Service.
(2) EXPENDITURES.—Expenditures may be
made from the fund to provide for the delivery of
the items and services of the comprehensive benefit
package under the health program of the Indian
Health Service.
(3) AVAILABILITY OF FUNDS.—Amounts in the
fund established by a service unit of the Indian
Health Service under this section shall be available
without further appropriation and shall remain
1262
Title VIII, Subtitle D
available until expended for payments for the deliv-
ery of the items and services in the comprehensive
benefit package.
SEC. 8312. RULE OF CONSTRUCTION.
Unless otherwise provided by this Act, no part of this
Act shall be construed to rescind or otherwise modify any
obligations, findings, or purposes contained in the Indian
Health Care Improvement Act (25 U.S.C. 1601 et seq.)
and in the Indian Self-Determination and Education As-
sistance Act.
SEC. 8313. AUTHORIZATIONS OF APPROPRIATIONS.
(a) AUTHORIZATION OF APPROPRIATIONS.—For the
purpose of carrying out this subtitle, there are authorized
to be appropriated $40,000,000 for fiscal year 1995,
$180,000,000 for fiscal year 1996, and $200,000,000 for
each of the fiscal years 1997 through 2000.
(b) RELATION TO OTHER FUNDS.—The authoriza-
tions of appropriations established in subsection (a) are
in addition to any other authorizations of appropriations
that are available for the purposes of carrying out this
subtitle.
SEC. 8314. PAYMENT OF PREMIUM DISCOUNT EQUIVALENT
AMOUNTS FOR UNEMPLOYED INDIANS.
(a) DETERMINATION.—The Secretary shall deter-
mine (and certify to the Secretary of the Treasury) for
1263
Title VIII, Subtitle E
each fiscal year (beginning with fiscal year 1998) an
amount equivalent to the aggregate amount of the pre-
mium discounts (established in section 6104) that would
have been paid to individuals described in subsection (c)
if such individuals had been enrolled in regional alliance
health plans.
(b) PAYMENT.—For each fiscal year for which an
amount is certified to the Secretary of the Treasury under
subsection (a), from the funds available under section
9102, such Secretary shall pay the amount so certified to
the Indian Health Service for the purpose of providing the
comprehensive benefit package.
(c) INDIVIDUAL DESCRIBED.—For purposes of this
section, an individual described in this subsection is an
individual described in section 8302(a) who is not a quali-
fying employee or a family member of such an employee.
Subtitle E—Amendments to the
Employee 
Retirement 
Income
Security Act of 1974
SEC. 8401. GROUP HEALTH PLAN DEFINED.
Section 3 of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1002) is amended by adding
at the end the following new paragraph:
‘‘(42) The term ‘group health plan’ means an em-
ployee welfare benefit plan which provides medical care (as
1264
Title VIII, Subtitle E
defined in section 213(d) of the Internal Revenue Code
of 1986) to participants or beneficiaries directly or
through insurance, reimbursement, or otherwise.’’.
SEC. 8402. LIMITATION ON COVERAGE OF GROUP HEALTH
PLANS UNDER TITLE I OF ERISA.
(a) IN GENERAL.—Section 4 of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1003) is
amended—
(1) in subsection (a), by striking ‘‘subsection
(b)’’ and inserting ‘‘subsections (b) and (c)’’;
(2) in subsection (b), by striking ‘‘The provi-
sions’’ and inserting ‘‘Except as provided in sub-
section (c), the provisions’’; and
(3) by adding at the end the following new sub-
section:
‘‘(c) COVERAGE OF GROUP HEALTH PLANS.—
‘‘(1) LIMITED
INCLUSION.—This title shall
apply to a group health plan only to the extent pro-
vided in this subsection.
‘‘(2) COVERAGE UNDER CERTAIN PROVISIONS
WITH RESPECT TO CERTAIN PLANS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), parts 1, 4, and 6 of subtitle
B shall apply to—
1265
Title VIII, Subtitle E
‘‘(i) a group health plan which is
maintained by—
‘‘(I) a corporate alliance (as de-
fined in section 1311(a) of the Health
Security Act), or
‘‘(II) a member of a corporate al-
liance (as so defined) whose eligible
sponsor 
is 
described 
in 
section
1311(b)(1)(C) (relating to rural elec-
tric cooperatives and rural telephone
cooperative associations), and
‘‘(ii) a group health plan not de-
scribed in clause (i) which provides bene-
fits which are permitted under paragraph
(4) of section 1003 of the Health Security
Act.
‘‘(B) INAPPLICABILITY WITH RESPECT TO
STATE-CERTIFIED
HEALTH
PLANS.—Subpara-
graph (A) shall not apply with respect to any
plan or portion thereof which consists of a
State-certified health plan (as defined in section
1400(c) of the Health Security Act). The Sec-
retary shall provide by regulation for treatment
as a separate group health plan of any arrange-
ment which would otherwise be treated under
1266
Title VIII, Subtitle E
this title as part of a group health plan to the
extent necessary to carry out the purposes of
this title.
‘‘(3) CIVIL ACTIONS BY CORPORATE ALLIANCE
PARTICIPANTS, BENEFICIARIES, AND
FIDUCIARIES
AND BY THE SECRETARY.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), in the case of a group health
plan to which parts 1, 4, and 6 of subtitle B
apply under paragraph (2), section 502 shall
apply with respect to a civil action described in
such section brought—
‘‘(i) by a participant, beneficiary, or
fiduciary under such plan, or
‘‘(ii) by the Secretary.
‘‘(B) EXCEPTION WHERE REVIEW IS OTH-
ERWISE AVAILABLE UNDER HEALTH SECURITY
ACT.—Subparagraph (A) shall not apply with
respect to any cause of action for which, under
section 5202(d) of the Health Security Act,
proceedings under sections 5203 and 5204 of
such Act pursuant to complaints filed under
section 5202(b) of such Act, and review under
section 5205 of such Act of determinations
1267
Title VIII, Subtitle E
made under such section 5204, are the exclu-
sive means of review.
‘‘(4) DEFINITIONS AND ENFORCEMENT PROVI-
SIONS.—Sections 3, 501, 502, 503, 504, 505, 506,
507, 508, 509, 510, and 511 and the preceding sub-
sections of this section shall apply to a group health
plan to the extent necessary to effectively carry out,
and enforce the requirements under, the provisions
of this title as they apply pursuant to this sub-
section.
‘‘(5) APPLICABILITY OF PREEMPTION RULES.—
Section 514 shall apply in the case of any group
health plan to which parts 1, 4, and 6 of subtitle B
apply under paragraph (2).’’.
(b) REPORTING AND DISCLOSURE REQUIREMENTS
APPLICABLE TO GROUP HEALTH PLANS.—
(1) IN GENERAL.—Part 1 of subtitle B of title
I of such Act is amended—
(A) in the heading for section 110 (29
U.S.C. 1030), by adding ‘‘BY PENSION PLANS’’
at the end;
(B) by redesignating section 111 (29
U.S.C. 1031) as section 112; and
(C) by inserting after section 110 the fol-
lowing new section:
1268
Title VIII, Subtitle E
‘‘SPECIAL RULES FOR GROUP HEALTH PLANS
‘‘SEC. 111. (a) IN GENERAL.—The Secretary may by
regulation provide special rules for the application of this
part to group health plans which are consistent with the
purposes of this title and the Health Security Act and
which take into account the special needs of participants,
beneficiaries, and health care providers under such plans.
‘‘(b) EXPEDITIOUS REPORTING AND DISCLOSURE.—
Such special rules may include rules providing for—
‘‘(1) reductions in the periods of time referred
to in this part,
‘‘(2) increases in the frequency of reports and
disclosures required under this part, and
‘‘(3) such other changes in the provisions of
this part as may result in more expeditious reporting
and disclosure of plan terms and changes in such
terms to the Secretary and to plan participants and
beneficiaries,
to the extent that the Secretary determines that the rules
described in this subsection are necessary to ensure timely
reporting and disclosure of information consistent with the
purposes of this part and the Health Security Act as they
relate to group health plans.
‘‘(c) ADDITIONAL
REQUIREMENTS.—Such special
rules may include rules providing for reporting and disclo-
1269
Title VIII, Subtitle E
sure to the Secretary and to participants and beneficiaries
of additional information or at additional times with re-
spect to group health plans to which this part applies
under section 4(c)(2), if such reporting and disclosure
would be comparable to and consistent with similar re-
quirements applicable under the Health Security Act with
respect to plans maintained by regional alliances (as de-
fined in such section 1301 of such Act) and applicable reg-
ulations of the Secretary of Health and Human Services
prescribed thereunder.’’.
(2) CLERICAL AMENDMENT.—The table of con-
tents in section 1 of such Act is amended by striking
the items relating to sections 110 and 111 and in-
serting the following new items:
‘‘Sec. 110. Alternative methods of compliance by pension plans.
‘‘Sec. 111. Special rules for group health plans.
‘‘Sec. 112. Repeal and effective date.’’.
(d) EXCLUSION
OF PLANS MAINTAINED
BY RE-
GIONAL ALLIANCES FROM TREATMENT AS MULTIPLE EM-
PLOYER WELFARE ARRANGEMENTS.—Section 3(40)(A) of
such Act (29 U.S.C. 1002(40)(A)) is amended—
(1) in clause (ii), by striking ‘‘or’’;
(2) in clause (iii), by striking the period and in-
serting ‘‘, or’’; and
(3) by adding after clause (iii) the following
new clause:
1270
Title VIII, Subtitle E
‘‘(iv) by a regional alliance (as defined in sec-
tion 1301 of the Health Security Act).’’.
SEC. 8403. AMENDMENTS RELATING TO CONTINUATION
COVERAGE.
(a) PERIOD OF COVERAGE.—Subparagraph (D) of
section 602(2) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1162(1)) is amended—
(1) by striking ‘‘or’’ at the end of clause (i), by
striking the period at the end of clause (ii) and in-
serting ‘‘, or’’, and by adding at the end the fol-
lowing new clause:
‘‘(iii) eligible for coverage under a
comprehensive benefit package described in
section 1101 of the Health Security Act.’’,
and
(2) by striking ‘‘OR MEDICARE ENTITLEMENT’’
in the heading and inserting ‘‘, MEDICARE ENTITLE-
MENT, OR HEALTH SECURITY ACT ELIGIBILITY’’.
(b) QUALIFIED BENEFICIARY.—Section 607(3) of
such Act (29 U.S.C. 1167(3)) is amended by adding at
the end the following new subparagraph:
‘‘(D) SPECIAL
RULE
FOR
INDIVIDUALS
COVERED
BY
HEALTH
SECURITY
ACT.—The
term ‘qualified beneficiary’ shall not include any
individual who, upon termination of coverage
1271
Title VIII, Subtitle E
under a group health plan, is eligible for cov-
erage under a comprehensive benefit package
described in section 1101 of the Health Secu-
rity Act.’’
(c) REPEAL UPON IMPLEMENTATION OF HEALTH
SECURITY ACT.—
(1) IN GENERAL.—Part 6 of subtitle B of title
I of such Act (29 U.S.C. 601 et seq.) is amended
by striking sections 601 through 608 and by redesig-
nating section 609 as section 601.
(2) CONFORMING AMENDMENTS.—
(A) Section 502(a)(7) of such Act (29
U.S.C. 1132(a)(7)) is amended by striking
‘‘609(a)(2)(A)’’ and inserting ‘‘601(a)(2)(A)’’.
(B) Section 502(c)(1) is amended by strik-
ing ‘‘paragraph (1) or (4) of section 606 or’’.
(C) Section 514 of such Act (29 U.S.C.
1144) is amended by striking ‘‘609’’ each place
it appears in subsections (b)(7) and (b)(8) and
inserting ‘‘601’’.
(D) The table of contents in section 1 of
such Act is amended by striking the items relat-
ing to sections 601 through 609 and inserting
the following new item:
‘‘Sec. 601. Additional standards for group health plans.’’
(d) EFFECTIVE DATE.—
1272
Title VIII, Subtitle E
(1) SUBSECTIONS
(a)
AND
(b).—The amend-
ments made by subsections (a) and (b) shall take ef-
fect on the date of the enactment of this Act.
(2) SUBSECTION (c).—The amendments made
by subsection (c) shall take effect on the earlier of—
(A) January 1, 1998, or
(B) the first day of the first calendar year
following the calendar year in which all States
have in effect plans under which individuals are
eligible for coverage under a comprehensive
benefit package described in section 1101 of
this Act.
SEC. 
8404. 
ADDITIONAL 
AMENDMENTS 
RELATING 
TO
GROUP HEALTH PLANS.
(a) REGULATIONS
OF
THE
NATIONAL
HEALTH
BOARD
REGARDING
CASES
OF
ADOPTION.—Section
601(c) of the Employee Retirement Income Security Act
of 1974 (as redesignated by section 8403) is amended by
adding at the end the following new paragraph:
‘‘(4) REGULATIONS
BY
NATIONAL
HEALTH
BOARD.—The preceding provisions of this subsection
shall apply except to the extent otherwise provided
in regulations of the National Health Board under
the Health Security Act.’’.
1273
Title VIII, Subtitle E
(b) COVERAGE OF PEDIATRIC VACCINES.—Section
601(d) of such Act (as redesignated by section 8403) is
amended by adding at the end the following new sentence:
‘‘The preceding sentence shall cease to apply to a group
health plan upon becoming a corporate alliance health
plan pursuant to an effective election of the plan sponsor
to be a corporate alliance under section 1311 of the Health
Security Act.’’.
(c) TECHNICAL CORRECTIONS.—Effective as if in-
cluded in the enactment of the Omnibus Budget Reconcili-
ation Act of 1993—
(1) Subsection (a)(2)(B)(ii) of section 609 of
the Employee Retirement Income Security Act of
1974 is amended by striking ‘‘section 13822’’ and
inserting ‘‘section 13623’’.
(2) Subsection (a)(4) of such section 609 is
amended by striking ‘‘section 13822’’ and inserting
‘‘section 13623’’.
(3) Subsection (d) of such section 609 is
amended by striking ‘‘section 13830’’ and inserting
‘‘section 13631’’.
SEC. 8405. PLAN CLAIMS PROCEDURES.
Section 503 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1133) is amended—
1274
Title VIII, Subtitle E
(1) by inserting ‘‘(a) IN GENERAL.—’’ after
‘‘SEC. 503.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(b) GROUP HEALTH PLANS.—In addition to the re-
quirements of subsection (a), a group health plan to which
parts 1 and 4 apply under section 4(c)(2) shall comply
with the requirements of section 5201 of the Health Secu-
rity Act (relating to health plan claims procedure).’’.
SEC. 8406. EFFECTIVE DATES.
Except as otherwise provided in this subtitle, the
amendments made by this subtitle shall take effect on the
earlier of—
(1) January 1, 1998, or
(2) such date or dates as may be prescribed in
regulations of the National Health Board in connec-
tion with plans whose participants or beneficiaries
reside in any State which becomes a participating
State under section 1200 of this Act before January
1, 1998.
1275
Title VIII, Subtitle F
Subtitle F—Special Fund for WIC
Program
SEC. 8501. ADDITIONAL FUNDING FOR SPECIAL SUPPLE-
MENTAL FOOD PROGRAM FOR WOMEN, IN-
FANTS, AND CHILDREN (WIC).
(a) AUTHORIZATION
OF ADDITIONAL APPROPRIA-
TIONS.—There is hereby authorized to be appropriated for
the special supplemental food program for women, infants,
and children (WIC) under section 17 of the Child Nutri-
tion Act of 1966, in addition to amounts otherwise author-
ized to be appropriated for such program, such amounts
as are necessary for the Secretary of the Treasury to fulfill
the requirements of subsection (b).
(b) WIC FUND.—
(1) CREDIT.—For each of fiscal years 1996
through 2000, the Secretary of the Treasury shall
credit to a special fund of the Treasury an amount
equal to—
(A) $254,000,000 for fiscal year 1996,
(B) $407,000,000 for fiscal year 1997,
(C) $384,000,000 for fiscal year 1998,
(D) $398,000,000 for fiscal year 1999,
and
(E) $411,000,000 for fiscal year 2000.
1276
Title IX
(2) AVAILABILITY.—Subject to paragraph (3),
amounts in such fund—
(A) shall be available only for the program
authorized under section 17 of the Child Nutri-
tion Act of 1966, exclusive of activities author-
ized under section 17(m) of such Act, and
(B) shall be paid to the Secretary of Agri-
culture for such purposes.
(3) LIMITATION.—For a fiscal year specified in
paragraph (1), the amount credited to such fund for
the fiscal year shall be available for use in such pro-
gram only if appropriations Acts for the fiscal year,
without the addition of amounts provided under sub-
section (a) for the fund, provide new budget author-
ity for the program of no less than—
(A) $3,660,000,000 for fiscal year 1996,
(B) $3,759,000,000 for fiscal year 1997,
(C) $3,861,000,000 for fiscal year 1998,
(D) $3,996,000,000 for fiscal year 1999,
and
(E) $4,136,000,000 for fiscal year 2000.
TITLE IX—AGGREGATE
GOVERNMENT PAYMENTS
TABLE OF CONTENTS OF TITLE
1277
Title IX
Page
TITLE IX—AGGREGATE GOVERNMENT PAYMENTS
Subtitle A—Aggregate State Payments
PART 1—STATE MAINTENANCE OF EFFORT PAYMENT
Sec. 9001. State maintenance-of-effort payment relating to non-cash
assistance recipients ......................................................
1277
Sec. 9002. Non-cash baseline amounts ...................................................
1278
Sec. 9003. Updating of baseline amounts ...............................................
1282
Sec. 9004. Non-cash assistance child and adult defined .........................
1284
PART 2—STATE PREMIUM PAYMENTS
Sec. 9011. State premium payment relating to cash assistance recipi-
ents ................................................................................
1285
Sec. 9012. Determination of AFDC per capita premium amount for re-
gional alliances ..............................................................
1286
Sec. 9013. Determination of SSI per capita premium amount for re-
gional alliances ..............................................................
1291
Sec. 9014. Determination of number of AFDC and SSI recipients .......
1292
Sec. 9015. Regional alliance adjustment factors ....................................
1293
PART 3—GENERAL AND MISCELLANEOUS PROVISIONS
Sec. 9021. Timing and manner of payments ..........................................
1294
Sec. 9022. Review of payment level ........................................................
1294
Sec. 9023. Special rules for Puerto Rico and other territories ...............
1295
Subtitle B—Aggregate Federal Alliance Payments
Sec. 9101. Federal premium payments for cash assistance recipients ...
1296
Sec. 9102. Capped Federal alliance payments ........................................
1298
Subtitle C—Borrowing Authority to Cover Cash-Flow
Shortfalls
Sec. 9201. Borrowing authority to cover cash-flow shortfalls ................
1308
1278
Title IX, Subtitle A
Subtitle A—Aggregate State
Payments
PART 1—STATE MAINTENANCE OF EFFORT
PAYMENT
SEC. 9001. STATE MAINTENANCE-OF-EFFORT PAYMENT RE-
LATING TO NON-CASH ASSISTANCE RECIPI-
ENTS.
(a) PAYMENT.—Each participating State shall pro-
vide for each year (beginning with State’s first year) for
payment to regional alliances in the State in the amounts
specified in subsection (b).
(b) AMOUNT.—Subject to sections 6005, 9023, and
9201(c)(2), the total amount of such payment for a year
shall be equal to the following:
(1) FIRST YEAR.—In the case of the first year
for a State, the sum of—
(A) the State non-cash, non-DSH baseline
amount for the State, determined under section
9002(a)(1) 
and 
updated 
under 
section
9003(a)(1), and
(B) the State non-cash, DSH baseline
amount for the State, determined under section
9002(a)(2) 
and 
updated 
under 
section
9003(a)(2).
1279
Title IX, Subtitle A
(2) SUBSEQUENT YEAR.—In the case of any
succeeding year, the sum computed under paragraph
(1) for the first year updated to the year involved
under section 9003(b) .
(c) DIVISION AMONG REGIONAL ALLIANCES.—In the
case of a State with more than one regional alliance, the
payment required to be made under this section shall be
distributed among the regional alliances in an equitable
manner (determined by the State) that takes into account,
for each regional alliance, the proportion of the non-cash
baseline amount (described in section 9002) that is attrib-
utable to individuals who resided in the alliance area of
the regional alliance.
SEC. 9002. NON-CASH BASELINE AMOUNTS.
(a) BASELINE AMOUNTS.—
(1) NON-DSH
AMOUNT.—The Secretary shall
determine for each State a non-cash, non-DSH base-
line amount which is equal to the sum of the fol-
lowing:
(A) EXPENDITURES FOR COMPREHENSIVE
BENEFIT PACKAGE FOR NON-CASH ASSISTANCE
CHILDREN.—The aggregate State medicaid ex-
penditures in fiscal year 1993 (as defined in
subsection (b)(1)) for the comprehensive benefit
1280
Title IX, Subtitle A
package for non-cash assistance children (as de-
fined in section 9004(a)).
(B) EXPENDITURES FOR COMPREHENSIVE
BENEFIT PACKAGE FOR NON-CASH ASSISTANCE
ADULTS.—The aggregate State medicaid ex-
penditures in fiscal year 1993 for the com-
prehensive benefit package for non-cash assist-
ance adults (as defined in section 9004(b)).
(C) EXPENDITURES FOR ADDITIONAL BEN-
EFITS
FOR
CERTAIN
CHILDREN
RECEIVING
AFDC OR SSI.—The aggregate medicaid expend-
itures in fiscal year 1993 for all medically nec-
essary items and services described in section
1905(a) of the Social Security Act (including
items and services described in section 1905(r)
of such Act but excluding long-term care serv-
ices described in section 1933(c) of such Act)
for qualified children described in section
1934(b)(1) of such Act who are AFDC or SSI
recipients.
(2) DSH AMOUNT.—The Secretary shall deter-
mine for each State a non-cash, DSH baseline
amount which is equal to the DSH expenditures in
fiscal year 1993 (as defined in subsection (b)(2)).
1281
Title IX, Subtitle A
(b) STATE MEDICAID EXPENDITURES AND DSH EX-
PENDITURES DEFINED.—
(1) AGGREGATE
STATE
MEDICAID
EXPENDI-
TURES.—
(A) IN
GENERAL.—In this section, the
term ‘‘aggregate State medicaid expenditures’’
means, with respect to specified individuals and
a State in fiscal year 1993, the amount of pay-
ments under the State medicaid plan with re-
spect to medical assistance furnished for such
individuals for calendar quarters in fiscal year
1993, less the amount of Federal financial par-
ticipation paid to the State with respect to such
assistance, and not including any DSH expendi-
tures.
(B) LIMITED
TO
PAYMENTS
FOR
SERV-
ICES.—In applying subparagraph (A), payments
under the State medicaid plan shall not be in-
cluded unless Federal financial participation is
provided with respect to such payments under
section 1903(a)(1) of the Social Security Act
and such payments shall not include payments
for medicare cost-sharing (as defined in section
1905(p)(3) of the Social Security Act).
1282
Title IX, Subtitle A
(2) DSH EXPENDITURES.—In this section, the
term ‘‘DSH expenditures’’ means, with respect to
fiscal year 1993, payments made under section 1923
of the Social Security Act in fiscal year 1993 multi-
plied by proportion of payments for medical assist-
ance for hospital services (including psychiatric hos-
pital services) under the State medicaid plan in fis-
cal year 1993 that is attributable to non-cash assist-
ance adults and non-cash assistance children.
(3) ADJUSTMENT AUTHORIZED TO TAKE INTO
ACCOUNT CASH FLOW VARIATIONS.—If the Secretary
finds that a State took an action that had the effect
of shifting the timing of medical assistance pay-
ments under the State medicaid plan between quar-
ters or fiscal years in a manner so that the pay-
ments made in fiscal year 1993 do not accurately re-
flect the value of the medical assistance provided
with respect to items and services furnished in that
fiscal year, the Secretary may provide for such ad-
justment in the amounts computed under this sub-
section as may be necessary so that the non-cash
baseline amounts determined under this section ac-
curately reflects such value.
(4) TREATMENT
OF
DISALLOWANCES.—The
amounts determined under this subsection shall take
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Title IX, Subtitle A
into account amounts (or an estimate of amounts)
disallowed.
(c) APPLICATION TO PARTICULAR ITEMS AND SERV-
ICES IN COMPREHENSIVE BENEFIT PACKAGE.—For pur-
poses of subsection (a)(1), in determining the aggregate
State medicaid expenditures for a category of items and
services (within the comprehensive benefit package) fur-
nished in a State, there shall be counted only that propor-
tion of such expenditures that were attributable to items
and services included in the comprehensive benefit pack-
age (taking into account any limitation on amount, dura-
tion, or scope of items and services included in such pack-
age).
SEC. 9003. UPDATING OF BASELINE AMOUNTS.
(a) INITIAL UPDATE THROUGH THE FIRST YEAR.—
(1) NON-CASH, NON-DSH BASELINE AMOUNT.—
The Secretary shall update the non-cash, non-DSH
baseline 
amount 
determined 
under 
section
9002(a)(1) for each State from fiscal year 1993
through the first year, by the following percentage:
(A) If such first year is 1996, the applica-
ble percentage is 56.6 percent.
(B) If such first year is 1997, the applica-
ble percentage is 78.1 percent.
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Title IX, Subtitle A
(C) If such first year is 1998, the applica-
ble percentage is 102.2 percent.
(2) NON-CASH, DSH BASELINE AMOUNT.—The
Secretary shall update the non-cash, DSH baseline
amount determined under section 9002(a)(2) for
each State from fiscal year 1993 through the first
year, by the following percentage:
(A) If such first year is 1996, the applica-
ble percentage is 45.9 percent.
(B) If such first year is 1997, the applica-
ble percentage is 61.8 percent.
(C) If such first year is 1998, the applica-
ble percentage is 79.0 percent.
(3) ADJUSTMENT AUTHORIZED TO TAKE INTO
ACCOUNT CASH FLOW VARIATIONS.—In determining
the updates under paragraphs (1) and (2), the Sec-
retary may provide for an adjustment in a manner
similar to the adjustment permitted under section
9002(b)(3).
(b) UPDATE FOR SUBSEQUENT YEARS.—For each
State for each year after the first year, the Board shall
update the non-cash baseline amount (as previously up-
dated under this subsection) by the product of—
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Title IX, Subtitle A
(1) 1 plus the general health care inflation fac-
tor (as defined in section 6001(a)(3)) for the year,
and
(2) 1 plus the annual percentage increase in the
population of the United States of individuals who
are under 65 years of age (as estimated by the
Board based on projections made by the Bureau of
Labor Statistics of the Department of Labor) for
the year.
SEC. 9004. NON-CASH ASSISTANCE CHILD AND ADULT DE-
FINED.
(a) NON-CASH ASSISTANCE CHILD.—In this part,
the term ‘‘non-cash assistance child’’ means a child de-
scribed in section 1934(b)(1) of the Social Security Act
(as inserted by section 4222(a)) who is not a medicare-
eligible individual.
(b) NON-CASH ASSISTANCE ADULT.—In this part,
the term ‘‘non-cash assistance adult’’ means an individual
who is—
(1) over 21 years,
(2) is a citizen or national of the United States
or an alien who is lawfully admitted for permanent
residence or otherwise permanently residing in the
United States under color of law, and
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Title IX, Subtitle A
(3) is not an AFDC or SSI recipient or a medi-
care-eligible individual.
PART 2—STATE PREMIUM PAYMENTS
SEC. 9011. STATE PREMIUM PAYMENT RELATING TO CASH
ASSISTANCE RECIPIENTS.
(a) IN GENERAL.—Subject to subsection (c), each
participating State shall provide in each year (beginning
with the State’s first year) for payment to each regional
alliance in the State of an amount equal to the State med-
ical assistance percentage (as defined in subsection (b))
of 95 percent of the sum of the following products:
(1) AFDC PORTION.—The product of—
(A) the AFDC per capita premium amount
for the regional alliance for the year (deter-
mined under section 9012(a)), and
(B) the number of AFDC recipients resid-
ing in the alliance area in the year (as deter-
mined under section 9014(b)(1)).
(2) SSI PORTION.—The product of—
(A) the SSI per capita premium amount
for the regional alliance for the year (deter-
mined under section 9013), and
(B) the number of SSI recipients residing
in the alliance area in the year (as determined
under section 9014(b)(1)).
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Title IX, Subtitle A
(b) STATE MEDICAL ASSISTANCE PERCENTAGE DE-
FINED.—In subsection (a), the term ‘‘State medical assist-
ance percentage’’ means, for a State for a quarter in a
fiscal year, 100 percent minus the Federal medical assist-
ance percentage (as defined in section 1905(b) of the So-
cial Security Act) for the State for the fiscal year.
(c) ADDITIONAL AMOUNT.—The amount of payment
under subsection (a) for a State for a year shall be in-
creased by the State medical assistance percentage multi-
plied by the sum of the following:
(1) AMOUNT
OF
SPECIAL
INCREASE
IN
PRE-
MIUM
DISCOUNT.—The aggregate increase in the
premium discounts under section 6104 for AFDC
and SSI families enrolled in regional alliance health
plans in the State that is attributable to subsection
(b)(2) of such section, and
(2) AMOUNT OF BASIC COST SHARING REDUC-
TION.—The amount of any cost sharing reduction
under section 1371(c)(1) for such families.
SEC. 9012. DETERMINATION OF AFDC PER CAPITA PRE-
MIUM AMOUNT FOR REGIONAL ALLIANCES.
(a) IN GENERAL.—For each regional alliance in a
State for each year, the Secretary shall determine an
AFDC per capita premium amount in accordance with
this section. Such amount is equal to—
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Title IX, Subtitle A
(1) the per capita State medicaid expenditures
for the comprehensive benefit package for AFDC re-
cipients for the State for the year (as determined
under subsection (b)), multiplied by
(2) the regional alliance adjustment factor (de-
termined under section 9015) for the year for the
regional alliance.
(b) PER CAPITA STATE MEDICAID EXPENDITURES
DEFINED.—The ‘‘per capita State medicaid expenditures
for the comprehensive benefit package for AFDC recipi-
ents’’ for a State for a year is equal to the base per capita
expenditures (described in subsection (c)), updated to the
year involved under subsection (d)).
(c) BASE PER CAPITA EXPENDITURES.—The ‘‘base
per capita expenditures’’ described in this subsection, for
a State for a year, is—
(1) the baseline medicaid expenditures (as de-
fined in subsection (e)) for the State, divided by
(2) the number of AFDC recipients enrolled in
the State medicaid plan in fiscal year 1993, as de-
termined under section 9014(a).
(d) UPDATING.—
(1) INITIAL UPDATE THROUGH YEAR BEFORE
FIRST YEAR.—
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Title IX, Subtitle A
(A) IN GENERAL.—The Secretary shall up-
date the base per capita expenditures described
in subsection (c) for each State from fiscal year
1993 through the year before first year, by the
applicable percentage specified in subparagraph
(B), or, if less, the increase percentage specified
in subparagraph (C).
(B) APPLICABLE PERCENTAGE.—For pur-
poses of subparagraph (A), the applicable per-
centage specified in this subparagraph, in the
case of a State in which the first year is—
(i) 1996 is 32.2 percent,
(ii) 1997 is 46.6 percent, or
(iii) 1998 is 62.1 percent.
(C) INCREASE PERCENTAGE.—
(i) IN GENERAL.—The increase per-
centage for a State specified in this sub-
paragraph is the Secretary’s estimate of
the percentage increase in the per capita
expenditures specified in clause (ii) from
fiscal year 1993 through the year before
the first year, adjusted so as to eliminate
any change in medicaid expenditures that
is attributable to a reduction in the scope
of services, an arbitrary reduction in pay-
1316
Title X, Subtitle A
laws of a State, the comprehensive medical benefits
for work-related injuries and illnesses provided for
under such laws with respect to such an employee.
(4) WORKERS COMPENSATION CARRIER.—The
term ‘‘workers compensation carrier’’ means an in-
surance company that underwrites workers com-
pensation medical benefits with respect to one or
more employers and includes an employer or fund
that is financially at risk for the provision of work-
ers compensation medical benefits.
(5) WORKERS COMPENSATION SERVICES.—The
term ‘‘workers compensation services’’ means items
and services included in workers compensation med-
ical benefits and includes items and services (includ-
ing rehabilitation services and long-term care serv-
ices) commonly used for treatment of work-related
injuries and illnesses.
PART 1—HEALTH PLAN REQUIREMENTS
RELATING TO WORKERS COMPENSATION
SEC. 10001. PROVISION OF WORKERS COMPENSATION
SERVICES.
(a) PROVISION OF BENEFITS.—Subject to subsection
(b)—
(1) REQUIREMENT
FOR
CERTAIN
HEALTH
PLANS.—
1329
Title X, Subtitle B
through the provision (or arrangement for the provision)
of such services by the health plan.
(b) REFERRAL FOR SPECIALIZED SERVICES.—Each
health plan shall provide for such referral for automobile
insurance medical services as may be necessary to assure
appropriate treatment of injured individuals.
(c) EXCEPTIONS.—Subsections (a) and (b) shall not
apply in the case of an individual described in section
1004(b) and making an election described in such section.
(d) ALTERNATIVE PERMITTED.—Subsection (a) shall
not be construed as preventing an injured individual and
an automobile insurance carrier from agreeing that auto-
mobile insurance medical services shall be provided other
than by or through the health plan in which the individual
is enrolled.
SEC. 10102. PAYMENT BY AUTOMOBILE INSURANCE CAR-
RIER.
(a) PAYMENT.—
(1) IN GENERAL.—Except as provided in sub-
section (b), each automobile insurance carrier that is
liable for payment for automobile insurance medical
services furnished by or through a health plan, re-
gardless of whether or not the services are included
in the comprehensive benefit package, shall make
payment for such services.