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be increased by not less than 3 times and not 
more than 6 times the amount of damages which 
the Government sustains because of the act of 
that person. 
(b) GAO OVERSIGHT.—Not later than 5 years after 
the first date on which Exchanges are required to be oper-
ational under this title, the Comptroller General shall con-
duct an ongoing study of Exchange activities and the enroll-
ees in qualified health plans offered through Exchanges. 
Such study shall review— 
(1) the operations and administration of Ex-
changes, including surveys and reports of qualified 
health plans offered through Exchanges and on the ex-
perience of such plans (including data on enrollees in 
Exchanges and individuals purchasing health insur-
ance coverage outside of Exchanges), the expenses of 
Exchanges, claims statistics relating to qualified 
health plans, complaints data relating to such plans, 
and the manner in which Exchanges meet their goals; 
(2) any significant observations regarding the 
utilization and adoption of Exchanges; 
(3) where appropriate, recommendations for im-
provements in the operations or policies of Exchanges; 
and 
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(4) how many physicians, by area and specialty, 
are not taking or accepting new patients enrolled in 
Federal Government health care programs, and the 
adequacy of provider networks of Federal Government 
health care programs. 
PART III—STATE FLEXIBILITY RELATING TO 
EXCHANGES 
SEC. 1321. STATE FLEXIBILITY IN OPERATION AND EN-
FORCEMENT OF EXCHANGES AND RELATED 
REQUIREMENTS. 
(a) ESTABLISHMENT OF STANDARDS.— 
(1) IN GENERAL.—The Secretary shall, as soon 
as practicable after the date of enactment of this Act, 
issue regulations setting standards for meeting the re-
quirements under this title, and the amendments 
made by this title, with respect to— 
(A) the establishment and operation of Ex-
changes (including SHOP Exchanges); 
(B) the offering of qualified health plans 
through such Exchanges; 
(C) the establishment of the reinsurance and 
risk adjustment programs under part V; and 
(D) such other requirements as the Sec-
retary determines appropriate. 
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The preceding sentence shall not apply to standards 
for requirements under subtitles A and C (and the 
amendments made by such subtitles) for which the 
Secretary issues regulations under the Public Health 
Service Act. 
(2) CONSULTATION.—In issuing the regulations 
under paragraph (1), the Secretary shall consult with 
the National Association of Insurance Commissioners 
and its members and with health insurance issuers, 
consumer organizations, and such other individuals 
as the Secretary selects in a manner designed to en-
sure balanced representation among interested par-
ties. 
(b) STATE ACTION.—Each State that elects, at such 
time and in such manner as the Secretary may prescribe, 
to apply the requirements described in subsection (a) shall, 
not later than January 1, 2014, adopt and have in effect— 
(1) the Federal standards established under sub-
section (a); or 
(2) a State law or regulation that the Secretary 
determines implements the standards within the 
State. 
(c) FAILURE TO ESTABLISH EXCHANGE OR IMPLE-
MENT REQUIREMENTS.— 
(1) IN GENERAL.—If— 
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(A) a State is not an electing State under 
subsection (b); or 
(B) the Secretary determines, on or before 
January 1, 2013, that an electing State— 
(i) will not have any required Ex-
change operational by January 1, 2014; or 
(ii) has not taken the actions the Sec-
retary determines necessary to implement— 
(I) the other requirements set forth 
in the standards under subsection (a); 
or 
(II) the requirements set forth in 
subtitles A and C and the amendments 
made by such subtitles; 
the Secretary shall (directly or through agreement 
with a not-for-profit entity) establish and operate 
such Exchange within the State and the Secretary 
shall take such actions as are necessary to implement 
such other requirements. 
(2) ENFORCEMENT AUTHORITY.—The provisions 
of section 2736(b) of the Public Health Services Act 
shall apply to the enforcement under paragraph (1) 
of requirements of subsection (a)(1) (without regard to 
any limitation on the application of those provisions 
to group health plans). 
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(d) NO INTERFERENCE WITH STATE REGULATORY 
AUTHORITY.—Nothing in this title shall be construed to 
preempt any State law that does not prevent the applica-
tion of the provisions of this title. 
(e) PRESUMPTION
FOR CERTAIN STATE-OPERATED 
EXCHANGES.— 
(1) IN GENERAL.—In the case of a State oper-
ating an Exchange before January 1, 2010, and 
which has insured a percentage of its population not 
less than the percentage of the population projected to 
be covered nationally after the implementation of this 
Act, that seeks to operate an Exchange under this sec-
tion, the Secretary shall presume that such Exchange 
meets the standards under this section unless the Sec-
retary determines, after completion of the process es-
tablished under paragraph (2), that the Exchange 
does not comply with such standards. 
(2) PROCESS.—The Secretary shall establish a 
process to work with a State described in paragraph 
(1) to provide assistance necessary to assist the 
State’s Exchange in coming into compliance with the 
standards for approval under this section. 
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SEC. 1322. FEDERAL PROGRAM TO ASSIST ESTABLISHMENT 
AND OPERATION OF NONPROFIT, MEMBER- 
RUN HEALTH INSURANCE ISSUERS. 
(a) ESTABLISHMENT OF PROGRAM.— 
(1) IN GENERAL.—The Secretary shall establish 
a program to carry out the purposes of this section 
to be known as the Consumer Operated and Oriented 
Plan (CO–OP) program. 
(2) PURPOSE.—It is the purpose of the CO–OP 
program to foster the creation of qualified nonprofit 
health insurance issuers to offer qualified health plans 
in the individual and small group markets in the 
States in which the issuers are licensed to offer such 
plans. 
(b) LOANS AND GRANTS UNDER THE CO–OP PRO-
GRAM.— 
(1) IN GENERAL.—The Secretary shall provide 
through the CO–OP program for the awarding to per-
sons applying to become qualified nonprofit health in-
surance issuers of— 
(A) loans to provide assistance to such per-
son in meeting its start-up costs; and 
(B) grants to provide assistance to such per-
son in meeting any solvency requirements of 
States in which the person seeks to be licensed to 
issue qualified health plans. 
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(2) REQUIREMENTS FOR AWARDING LOANS AND 
GRANTS.— 
(A) IN GENERAL.—In awarding loans and 
grants under the CO–OP program, the Secretary 
shall— 
(i) take into account the recommenda-
tions of the advisory board established 
under paragraph (3); 
(ii) give priority to applicants that 
will offer qualified health plans on a State-
wide basis, will utilize integrated care mod-
els, and have significant private support; 
and 
(iii) ensure that there is sufficient 
funding to establish at least 1 qualified 
nonprofit health insurance issuer in each 
State, except that nothing in this clause 
shall prohibit the Secretary from funding 
the establishment of multiple qualified non-
profit health insurance issuers in any State 
if the funding is sufficient to do so. 
(B) STATES
WITHOUT
ISSUERS
IN
PRO-
GRAM.—If no health insurance issuer applies to 
be a qualified nonprofit health insurance issuer 
within a State, the Secretary may use amounts 
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appropriated under this section for the awarding 
of grants to encourage the establishment of a 
qualified nonprofit health insurance issuer with-
in the State or the expansion of a qualified non-
profit health insurance issuer from another State 
to the State. 
(C) AGREEMENT.— 
(i) IN GENERAL.—The Secretary shall 
require any person receiving a loan or 
grant under the CO–OP program to enter 
into an agreement with the Secretary which 
requires such person to meet (and to con-
tinue to meet)— 
(I) any requirement under this 
section for such person to be treated as 
a qualified nonprofit health insurance 
issuer; and 
(II) any requirements contained 
in the agreement for such person to re-
ceive such loan or grant. 
(ii) RESTRICTIONS
ON
USE
OF
FED-
ERAL FUNDS.—The agreement shall include 
a requirement that no portion of the funds 
made available by any loan or grant under 
this section may be used— 
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(I) for carrying on propaganda, 
or otherwise attempting, to influence 
legislation; or 
(II) for marketing. 
Nothing in this clause shall be construed to 
allow a person to take any action prohib-
ited by section 501(c)(29) of the Internal 
Revenue Code of 1986. 
(iii) FAILURE
TO
MEET
REQUIRE-
MENTS.—If the Secretary determines that a 
person has failed to meet any requirement 
described in clause (i) or (ii) and has failed 
to correct such failure within a reasonable 
period of time of when the person first 
knows (or reasonably should have known) of 
such failure, such person shall repay to the 
Secretary an amount equal to the sum of— 
(I) 110 percent of the aggregate 
amount of loans and grants received 
under this section; plus 
(II) interest on the aggregate 
amount of loans and grants received 
under this section for the period the 
loans or grants were outstanding. 
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The Secretary shall notify the Secretary of 
the Treasury of any determination under 
this section of a failure that results in the 
termination of an issuer’s tax-exempt status 
under section 501(c)(29) of such Code. 
(D) TIME
FOR
AWARDING
LOANS
AND 
GRANTS.—The Secretary shall not later than 
July 1, 2013, award the loans and grants under 
the CO–OP program and begin the distribution 
of amounts awarded under such loans and 
grants. 
(3) ADVISORY BOARD.— 
(A) IN
GENERAL.—The advisory board 
under this paragraph shall consist of 15 mem-
bers appointed by the Comptroller General of the 
United States from among individuals with 
qualifications described in section 1805(c)(2) of 
the Social Security Act. 
(B) RULES RELATING TO APPOINTMENTS.— 
(i) STANDARDS.—Any individual ap-
pointed under subparagraph (A) shall meet 
ethics and conflict of interest standards pro-
tecting against insurance industry involve-
ment and interference. 
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(ii) ORIGINAL
APPOINTMENTS.—The 
original appointment of board members 
under subparagraph (A)(ii) shall be made 
no later than 3 months after the date of en-
actment of this Act. 
(C) VACANCY.—Any vacancy on the advi-
sory board shall be filled in the same manner as 
the original appointment. 
(D) PAY AND REIMBURSEMENT.— 
(i) NO COMPENSATION FOR MEMBERS 
OF ADVISORY BOARD.—Except as provided 
in clause (ii), a member of the advisory 
board may not receive pay, allowances, or 
benefits by reason of their service on the 
board. 
(ii) TRAVEL EXPENSES.—Each mem-
ber shall receive travel expenses, including 
per diem in lieu of subsistence under sub-
chapter I of chapter 57 of title 5, United 
States Code. 
(E) APPLICATION
OF
FACA.—The Federal 
Advisory Committee Act (5 U.S.C. App.) shall 
apply to the advisory board, except that section 
14 of such Act shall not apply. 
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(B) the organization is sponsored by a State 
or local government, any political subdivision 
thereof, or any instrumentality of such govern-
ment or political subdivision. 
(3) GOVERNANCE REQUIREMENTS.—An organi-
zation shall not be treated as a qualified nonprofit 
health insurance issuer unless— 
(A) the governance of the organization is 
subject to a majority vote of its members; 
(B) its governing documents incorporate 
ethics and conflict of interest standards pro-
tecting against insurance industry involvement 
and interference; and 
(C) as provided in regulations promulgated 
by the Secretary, the organization is required to 
operate with a strong consumer focus, including 
timeliness, responsiveness, and accountability to 
members. 
(4) PROFITS INURE TO BENEFIT OF MEMBERS.— 
An organization shall not be treated as a qualified 
nonprofit health insurance issuer unless any profits 
made by the organization are required to be used to 
lower premiums, to improve benefits, or for other pro-
grams intended to improve the quality of health care 
delivered to its members. 
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(5) 
COMPLIANCE
WITH
STATE
INSURANCE 
LAWS.—An organization shall not be treated as a 
qualified nonprofit health insurance issuer unless the 
organization meets all the requirements that other 
issuers of qualified health plans are required to meet 
in any State where the issuer offers a qualified health 
plan, including solvency and licensure requirements, 
rules on payments to providers, and compliance with 
network adequacy rules, rate and form filing rules, 
any applicable State premium assessments and any 
other State law described in section 1324(b). 
(6) COORDINATION WITH STATE INSURANCE RE-
FORMS.—An organization shall not be treated as a 
qualified nonprofit health insurance issuer unless the 
organization does not offer a health plan in a State 
until that State has in effect (or the Secretary has 
implemented for the State) the market reforms re-
quired by part A of title XXVII of the Public Health 
Service Act (as amended by subtitles A and C of this 
Act). 
(d) ESTABLISHMENT OF PRIVATE PURCHASING COUN-
CIL.— 
(1) IN GENERAL.—Qualified nonprofit health in-
surance issuers participating in the CO–OP program 
under this section may establish a private purchasing 
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council to enter into collective purchasing arrange-
ments for items and services that increase adminis-
trative and other cost efficiencies, including claims 
administration, administrative services, health infor-
mation technology, and actuarial services. 
(2) COUNCIL MAY NOT SET PAYMENT RATES.— 
The private purchasing council established under 
paragraph (1) shall not set payment rates for health 
care facilities or providers participating in health in-
surance coverage provided by qualified nonprofit 
health insurance issuers. 
(3) CONTINUED
APPLICATION
OF
ANTITRUST 
LAWS.— 
(A) IN GENERAL.—Nothing in this section 
shall be construed to limit the application of the 
antitrust laws to any private purchasing council 
(whether or not established under this subsection) 
or to any qualified nonprofit health insurance 
issuer participating in such a council. 
(B) ANTITRUST
LAWS.—For purposes of 
this subparagraph, the term ‘‘antitrust laws’’ has 
the meaning given the term in subsection (a) of 
the first section of the Clayton Act (15 U.S.C. 
12(a)). Such term also includes section 5 of the 
Federal Trade Commission Act (15 U.S.C. 45) to 
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the extent that such section 5 applies to unfair 
methods of competition. 
(e) LIMITATION ON PARTICIPATION.—No representa-
tive of any Federal, State, or local government (or of any 
political subdivision or instrumentality thereof), and no 
representative of a person described in subsection (c)(2)(A), 
may serve on the board of directors of a qualified nonprofit 
health insurance issuer or with a private purchasing coun-
cil established under subsection (d). 
(f) LIMITATIONS ON SECRETARY.— 
(1) IN GENERAL.—The Secretary shall not— 
(A) participate in any negotiations between 
1 or more qualified nonprofit health insurance 
issuers (or a private purchasing council estab-
lished under subsection (d)) and any health care 
facilities or providers, including any drug man-
ufacturer, pharmacy, or hospital; and 
(B) establish or maintain a price structure 
for reimbursement of any health benefits covered 
by such issuers. 
(2) COMPETITION.—Nothing in this section shall 
be construed as authorizing the Secretary to interfere 
with the competitive nature of providing health bene-
fits through qualified nonprofit health insurance 
issuers. 
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(g) APPROPRIATIONS.—There are hereby appropriated, 
out of any funds in the Treasury not otherwise appro-
priated, $6,000,000,000 to carry out this section. 
(h) TAX EXEMPTION
FOR QUALIFIED NONPROFIT 
HEALTH INSURANCE ISSUER.— 
(1) IN GENERAL.—Section 501(c) of the Internal 
Revenue Code of 1986 (relating to list of exempt orga-
nizations) is amended by adding at the end the fol-
lowing: 
‘‘(29) CO–OP HEALTH INSURANCE ISSUERS.— 
‘‘(A) IN GENERAL.—A qualified nonprofit 
health insurance issuer (within the meaning of 
section 1322 of the Patient Protection and Af-
fordable Care Act) which has received a loan or 
grant under the CO–OP program under such sec-
tion, but only with respect to periods for which 
the issuer is in compliance with the requirements 
of such section and any agreement with respect 
to the loan or grant. 
‘‘(B) CONDITIONS
FOR
EXEMPTION.—Sub-
paragraph (A) shall apply to an organization 
only if— 
‘‘(i) the organization has given notice 
to the Secretary, in such manner as the Sec-
retary may by regulations prescribe, that it 
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is applying for recognition of its status 
under this paragraph, 
‘‘(ii) except as provided in section 
1322(c)(4) of the Patient Protection and Af-
fordable Care Act, no part of the net earn-
ings of which inures to the benefit of any 
private shareholder or individual, 
‘‘(iii) no substantial part of the activi-
ties of which is carrying on propaganda, or 
otherwise attempting, to influence legisla-
tion, and 
‘‘(iv) the organization does not partici-
pate in, or intervene in (including the pub-
lishing or distributing of statements), any 
political campaign on behalf of (or in oppo-
sition to) any candidate for public office.’’. 
(2) ADDITIONAL
REPORTING
REQUIREMENT.— 
Section 6033 of such Code (relating to returns by ex-
empt organizations) is amended by redesignating sub-
section (m) as subsection (n) and by inserting after 
subsection (l) the following: 
‘‘(m) ADDITIONAL INFORMATION REQUIRED FROM 
CO–OP INSURERS.—An organization described in section 
501(c)(29) shall include on the return required under sub-
section (a) the following information: 
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‘‘(1) The amount of the reserves required by each 
State in which the organization is licensed to issue 
qualified health plans. 
‘‘(2) The amount of reserves on hand.’’. 
(3) APPLICATION OF TAX ON EXCESS BENEFIT 
TRANSACTIONS.—Section 4958(e)(1) of such Code (de-
fining applicable tax-exempt organization) is amend-
ed by striking ‘‘paragraph (3) or (4)’’ and inserting 
‘‘paragraph (3), (4), or (29)’’. 
(i) GAO STUDY AND REPORT.— 
(1) STUDY.—The Comptroller General of the 
General Accountability Office shall conduct an ongo-
ing study on competition and market concentration 
in the health insurance market in the United States 
after the implementation of the reforms in such mar-
ket under the provisions of, and the amendments 
made by, this Act. Such study shall include an anal-
ysis of new issuers of health insurance in such mar-
ket. 
(2) REPORT.—The Comptroller General shall, 
not later than December 31 of each even-numbered 
year (beginning with 2014), report to the appropriate 
committees of the Congress the results of the study 
conducted under paragraph (1), including any rec-
ommendations 
for 
administrative 
or 
legislative 
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changes the Comptroller General determines necessary 
or appropriate to increase competition in the health 
insurance market. 
SEC. 1323. COMMUNITY HEALTH INSURANCE OPTION. 
(a) VOLUNTARY NATURE.— 
(1) NO REQUIREMENT FOR HEALTH CARE PRO-
VIDERS
TO
PARTICIPATE.—Nothing in this section 
shall be construed to require a health care provider to 
participate in a community health insurance option, 
or to impose any penalty for non-participation. 
(2) NO
REQUIREMENT
FOR
INDIVIDUALS
TO 
JOIN.—Nothing in this section shall be construed to 
require an individual to participate in a community 
health insurance option, or to impose any penalty for 
non-participation. 
(3) STATE OPT OUT.— 
(A) IN
GENERAL.—A State may elect to 
prohibit Exchanges in such State from offering a 
community health insurance option if such State 
enacts a law to provide for such prohibition. 
(B) TERMINATION OF OPT OUT.—A State 
may repeal a law described in subparagraph (A) 
and provide for the offering of such an option 
through the Exchange. 
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(b) ESTABLISHMENT OF COMMUNITY HEALTH INSUR-
ANCE OPTION.— 
(1) ESTABLISHMENT.—The Secretary shall estab-
lish a community health insurance option to offer, 
through the Exchanges established under this title 
(other than Exchanges in States that elect to opt out 
as provided for in subsection (a)(3)), health care cov-
erage that provides value, choice, competition, and 
stability of affordable, high quality coverage through-
out the United States. 
(2) COMMUNITY HEALTH INSURANCE OPTION.— 
In this section, the term ‘‘community health insur-
ance option’’ means health insurance coverage that— 
(A) except as specifically provided for in 
this section, complies with the requirements for 
being a qualified health plan; 
(B) provides high value for the premium 
charged; 
(C) reduces administrative costs and pro-
motes administrative simplification for bene-
ficiaries; 
(D) promotes high quality clinical care; 
(E) provides high quality customer service 
to beneficiaries; 
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(F) offers a sufficient choice of providers; 
and 
(G) complies with State laws (if any), ex-
cept as otherwise provided for in this title, relat-
ing to the laws described in section 1324(b). 
(3) ESSENTIAL HEALTH BENEFITS.— 
(A) GENERAL RULE.—Except as provided 
in subparagraph (B), a community health insur-
ance option offered under this section shall pro-
vide coverage only for the essential health bene-
fits described in section 1302(b). 
(B) STATES MAY OFFER ADDITIONAL BENE-
FITS.—Nothing in this section shall preclude a 
State from requiring that benefits in addition to 
the essential health benefits required under sub-
paragraph (A) be provided to enrollees of a com-
munity health insurance option offered in such 
State. 
(C) CREDITS.— 
(i) IN GENERAL.—An individual en-
rolled in a community health insurance op-
tion under this section shall be eligible for 
credits under section 36B of the Internal 
Revenue Code of 1986 in the same manner 
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as an individual who is enrolled in a quali-
fied health plan. 
(ii) NO ADDITIONAL FEDERAL COST.— 
A requirement by a State under subpara-
graph (B) that benefits in addition to the 
essential health benefits required under sub-
paragraph (A) be provided to enrollees of a 
community health insurance option shall 
not affect the amount of a premium tax 
credit provided under section 36B of the In-
ternal Revenue Code of 1986 with respect to 
such plan. 
(D) STATE MUST ASSUME COST.—A State 
shall make payments to or on behalf of an eligi-
ble individual to defray the cost of any addi-
tional benefits described in subparagraph (B). 
(E) ENSURING ACCESS TO ALL SERVICES.— 
Nothing in this Act shall prohibit an individual 
enrolled in a community health insurance option 
from paying out-of-pocket the full cost of any 
item or service not included as an essential 
health benefit or otherwise covered as a benefit by 
a health plan. Nothing in subparagraph (B) 
shall prohibit any type of medical provider from 
accepting an out-of-pocket payment from an in-
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dividual enrolled in a community health insur-
ance option for a service otherwise not included 
as an essential health benefit. 
(F) PROTECTING ACCESS TO END OF LIFE 
CARE.—A community health insurance option 
offered under this section shall be prohibited 
from limiting access to end of life care. 
(4) COST SHARING.—A community health insur-
ance option shall offer coverage at each of the levels 
of coverage described in section 1302(d). 
(5) PREMIUMS.— 
(A) PREMIUMS
SUFFICIENT
TO
COVER 
COSTS.—The Secretary shall establish geographi-
cally adjusted premium rates in an amount suf-
ficient to cover expected costs (including claims 
and administrative costs) using methods in gen-
eral use by qualified health plans. 
(B) APPLICABLE RULES.—The provisions of 
title XXVII of the Public Health Service Act re-
lating to premiums shall apply to community 
health insurance options under this section, in-
cluding modified community rating provisions 
under section 2701 of such Act. 
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(C) COLLECTION OF DATA.—The Secretary 
shall collect data as necessary to set premium 
rates under subparagraph (A). 
(D) NATIONAL POOLING.—Notwithstanding 
any other provision of law, the Secretary may 
treat all enrollees in community health insur-
ance options as members of a single pool. 
(E) CONTINGENCY MARGIN.—In establishing 
premium rates under subparagraph (A), the Sec-
retary shall include an appropriate amount for 
a contingency margin. 
(6) REIMBURSEMENT RATES.— 
(A) NEGOTIATED
RATES.—The Secretary 
shall negotiate rates for the reimbursement of 
health care providers for benefits covered under 
a community health insurance option. 
(B) LIMITATION.—The rates described in 
subparagraph (A) shall not be higher, in aggre-
gate, than the average reimbursement rates paid 
by health insurance issuers offering qualified 
health plans through the Exchange. 
(C) INNOVATION.—Subject to the limits con-
tained in subparagraph (A), a State Advisory 
Council established or designated under sub-
section (d) may develop or encourage the use of 
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innovative payment policies that promote qual-
ity, efficiency and savings to consumers. 
(7) SOLVENCY AND CONSUMER PROTECTION.— 
(A) SOLVENCY.—The Secretary shall estab-
lish a Federal solvency standard to be applied 
with respect to a community health insurance 
option. A community health insurance option 
shall also be subject to the solvency standard of 
each State in which such community health in-
surance option is offered. 
(B) MINIMUM REQUIRED.—In establishing 
the standard described under subparagraph (A), 
the Secretary shall require a reserve fund that 
shall be equal to at least the dollar value of the 
incurred but not reported claims of a community 
health insurance option. 
(C) CONSUMER
PROTECTIONS.—The con-
sumer protection laws of a State shall apply to 
a community health insurance option. 
(8) REQUIREMENTS ESTABLISHED IN PARTNER-
SHIP WITH INSURANCE COMMISSIONERS.— 
(A) IN GENERAL.—The Secretary, in col-
laboration with the National Association of In-
surance Commissioners (in this paragraph re-
ferred to as the ‘‘NAIC’’), may promulgate regu-
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lations to establish additional requirements for a 
community health insurance option. 
(B) APPLICABILITY.—Any requirement pro-
mulgated under subparagraph (A) shall be appli-
cable to such option beginning 90 days after the 
date on which the regulation involved becomes 
final. 
(c) START-UP FUND.— 
(1) ESTABLISHMENT OF FUND.— 
(A) IN GENERAL.—There is established in 
the Treasury of the United States a trust fund 
to be known as the ‘‘Health Benefit Plan Start- 
Up Fund’’ (referred to in this section as the 
‘‘Start-Up Fund’’), that shall consist of such 
amounts as may be appropriated or credited to 
the Start-Up Fund as provided for in this sub-
section to provide loans for the initial operations 
of a community health insurance option. Such 
amounts shall remain available until expended. 
(B) FUNDING.—There is hereby appro-
priated to the Start-Up Fund, out of any mon-
eys in the Treasury not otherwise appropriated 
an amount requested by the Secretary of Health 
and Human Services as necessary to— 
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(i) pay the start-up costs associated 
with the initial operations of a community 
health insurance option; and 
(ii) pay the costs of making payments 
on claims submitted during the period that 
is not more than 90 days from the date on 
which such option is offered. 
(2) USE
OF
START-UP
FUND.—The Secretary 
shall use amounts contained in the Start-Up Fund to 
make payments (subject to the repayment require-
ments in paragraph (4)) for the purposes described in 
paragraph (1)(B). 
(3) PASS
THROUGH
OF
REBATES.—The Sec-
retary may establish procedures for reducing the 
amount of payments to a contracting administrator 
to take into account any rebates or price concessions. 
(4) REPAYMENT.— 
(A) IN GENERAL.—A community health in-
surance option shall be required to repay the 
Secretary of the Treasury (on such terms as the 
Secretary may require) for any payments made 
under paragraph (1)(B) by the date that is not 
later than 9 years after the date on which the 
payment is made. The Secretary may require the 
payment of interest with respect to such repay-
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ments at rates that do not exceed the market in-
terest rate (as determined by the Secretary). 
(B) SANCTIONS
IN
CASE
OF
FOR-PROFIT 
CONVERSION.—In any case in which the Sec-
retary enters into a contract with a qualified en-
tity for the offering of a community health in-
surance option and such entity is determined to 
be a for-profit entity by the Secretary, such enti-
ty shall be— 
(i) immediately liable to the Secretary 
for any payments received by such entity 
from the Start-Up Fund; and 
(ii) permanently ineligible to offer a 
qualified health plan. 
(d) STATE ADVISORY COUNCIL.— 
(1) ESTABLISHMENT.—A State (other than a 
State that elects to opt out as provided for in sub-
section (a)(3)) shall establish or designate a public or 
non-profit private entity to serve as the State Advi-
sory Council to provide recommendations to the Sec-
retary on the operations and policies of a community 
health insurance option in the State. Such Council 
shall provide recommendations on at least the fol-
lowing: 
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(A) policies and procedures to integrate 
quality improvement and cost containment 
mechanisms into the health care delivery system; 
(B) mechanisms to facilitate public aware-
ness of the availability of a community health 
insurance option; and 
(C) alternative payment structures under a 
community health insurance option for health 
care providers that encourage quality improve-
ment and cost control. 
(2) MEMBERS.—The members of the State Advi-
sory Council shall be representatives of the public and 
shall include health care consumers and providers. 
(3) APPLICABILITY OF RECOMMENDATIONS.—The 
Secretary may apply the recommendations of a State 
Advisory Council to a community health insurance 
option in that State, in any other State, or in all 
States. 
(e) AUTHORITY TO CONTRACT; TERMS
OF CON-
TRACT.— 
(1) AUTHORITY.— 
(A) IN GENERAL.—The Secretary may enter 
into a contract or contracts with one or more 
qualified entities for the purpose of performing 
administrative functions (including functions de-
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scribed in subsection (a)(4) of section 1874A of 
the Social Security Act) with respect to a com-
munity health insurance option in the same 
manner as the Secretary may enter into con-
tracts under subsection (a)(1) of such section. 
The Secretary shall have the same authority with 
respect to a community health insurance option 
under this section as the Secretary has under 
subsections (a)(1) and (b) of section 1874A of the 
Social Security Act with respect to title XVIII of 
such Act. 
(B) REQUIREMENTS
APPLY.—If the Sec-
retary enters into a contract with a qualified en-
tity to offer a community health insurance op-
tion, under such contract such entity— 
(i) shall meet the criteria established 
under paragraph (2); and 
(ii) shall receive an administrative fee 
under paragraph (7). 
(C) LIMITATION.—Contracts under this sub-
section shall not involve the transfer of insurance 
risk to the contracting administrator. 
(D) REFERENCE.—An entity with which 
the Secretary has entered into a contract under 
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this paragraph shall be referred to as a ‘‘con-
tracting administrator’’. 
(2) QUALIFIED ENTITY.—To be qualified to be 
selected by the Secretary to offer a community health 
insurance option, an entity shall— 
(A) meet the criteria established under sec-
tion 1874A(a)(2) of the Social Security Act; 
(B) be a nonprofit entity for purposes of of-
fering such option; 
(C) meet the solvency standards applicable 
under subsection (b)(7); 
(D) be eligible to offer health insurance or 
health benefits coverage; 
(E) meet quality standards specified by the 
Secretary; 
(F) have in place effective procedures to 
control fraud, abuse, and waste; and 
(G) meet such other requirements as the 
Secretary may impose. 
Procedures described under subparagraph (F) shall 
include the implementation of procedures to use bene-
ficiary identifiers to identify individuals entitled to 
benefits so that such an individual’s social security 
account number is not used, and shall also include 
procedures for the use of technology (including front- 
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end, prepayment intelligent data-matching technology 
similar to that used by hedge funds, investment funds, 
and banks) to provide real-time data analysis of 
claims for payment under this title to identify and 
investigate unusual billing or order practices under 
this title that could indicate fraud or abuse. 
(3) TERM.—A contract provided for under para-
graph (1) shall be for a term of at least 5 years but 
not more than 10 years, as determined by the Sec-
retary. At the end of each such term, the Secretary 
shall conduct a competitive bidding process for the 
purposes of renewing existing contracts or selecting 
new qualified entities with which to enter into con-
tracts under such paragraph. 
(4) LIMITATION.—A contract may not be re-
newed under this subsection unless the Secretary de-
termines that the contracting administrator has met 
performance requirements established by the Secretary 
in the areas described in paragraph (7)(B). 
(5) AUDITS.—The Inspector General shall con-
duct periodic audits with respect to contracting ad-
ministrators under this subsection to ensure that the 
administrator involved is in compliance with this sec-
tion. 
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(6) REVOCATION.—A contract awarded under 
this subsection shall be revoked by the Secretary, upon 
the recommendation of the Inspector General, only 
after notice to the contracting administrator involved 
and an opportunity for a hearing. The Secretary may 
revoke such contract if the Secretary determines that 
such administrator has engaged in fraud, deception, 
waste, abuse of power, negligence, mismanagement of 
taxpayer dollars, or gross mismanagement. An entity 
that has had a contract revoked under this paragraph 
shall not be qualified to enter into a subsequent con-
tract under this subsection. 
(7) FEE FOR ADMINISTRATION.— 
(A) IN GENERAL.—The Secretary shall pay 
the contracting administrator a fee for the man-
agement, administration, and delivery of the 
benefits under this section. 
(B) REQUIREMENT FOR HIGH QUALITY AD-
MINISTRATION.—The Secretary may increase the 
fee described in subparagraph (A) by not more 
than 10 percent, or reduce the fee described in 
subparagraph (A) by not more than 50 percent, 
based on the extent to which the contracting ad-
ministrator, in the determination of the Sec-
retary, meets performance requirements estab-
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lished by the Secretary, in at least the following 
areas: 
(i) Maintaining low premium costs 
and low cost sharing requirements, provided 
that such requirements are consistent with 
section 1302. 
(ii) Reducing administrative costs and 
promoting administrative simplification for 
beneficiaries. 
(iii) Promoting high quality clinical 
care. 
(iv) Providing high quality customer 
service to beneficiaries. 
(C) NON-RENEWAL.—The Secretary may 
not renew a contract to offer a community health 
insurance option under this section with any 
contracting entity that has been assessed more 
than one reduction under subparagraph (B) dur-
ing the contract period. 
(8) LIMITATION.—Notwithstanding the terms of 
a contract under this subsection, the Secretary shall 
negotiate the reimbursement rates for purposes of sub-
section (b)(6). 
(f) REPORT BY HHS AND INSOLVENCY WARNINGS.— 
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(1) IN GENERAL.—On an annual basis, the Sec-
retary shall conduct a study on the solvency of a com-
munity health insurance option and submit to Con-
gress a report describing the results of such study. 
(2) RESULT.—If, in any year, the result of the 
study under paragraph (1) is that a community 
health insurance option is insolvent, such result shall 
be treated as a community health insurance option 
solvency warning. 
(3) SUBMISSION OF PLAN AND PROCEDURE.— 
(A) IN GENERAL.—If there is a community 
health insurance option solvency warning under 
paragraph (2) made in a year, the President 
shall submit to Congress, within the 15-day pe-
riod beginning on the date of the budget submis-
sion to Congress under section 1105(a) of title 
31, United States Code, for the succeeding year, 
proposed legislation to respond to such warning. 
(B) PROCEDURE.—In the case of a legisla-
tive proposal submitted by the President pursu-
ant to subparagraph (A), such proposal shall be 
considered by Congress using the same proce-
dures described under sections 803 and 804 of 
the Medicare Prescription Drug, Improvement, 
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and Modernization Act of 2003 that shall be used 
for a medicare funding warning. 
(g) MARKETING PARITY.—In a facility controlled by 
the Federal Government, or by a State, where marketing 
or promotional materials related to a community health in-
surance option are made available to the public, making 
available marketing or promotional materials relating to 
private health insurance plans shall not be prohibited. Such 
materials include informational pamphlets, guidebooks, en-
rollment forms, or other materials determined reasonable 
for display. 
(h) AUTHORIZATION OF APPROPRIATIONS.—There is 
authorized to be appropriated such sums as may be nec-
essary to carry out this section. 
SEC. 1324. LEVEL PLAYING FIELD. 
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, any health insurance coverage offered by a pri-
vate health insurance issuer shall not be subject to any Fed-
eral or State law described in subsection (b) if a qualified 
health plan offered under the Consumer Operated and Ori-
ented Plan program under section 1322, a community 
health insurance option under section 1323, or a nation-
wide qualified health plan under section 1333(b), is not sub-
ject to such law. 
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(b) LAWS DESCRIBED.—The Federal and State laws 
described in this subsection are those Federal and State 
laws relating to— 
(1) guaranteed renewal; 
(2) rating; 
(3) preexisting conditions; 
(4) non-discrimination; 
(5) quality improvement and reporting; 
(6) fraud and abuse; 
(7) solvency and financial requirements; 
(8) market conduct; 
(9) prompt payment; 
(10) appeals and grievances; 
(11) privacy and confidentiality; 
(12) licensure; and 
(13) benefit plan material or information. 
PART IV—STATE FLEXIBILITY TO ESTABLISH 
ALTERNATIVE PROGRAMS 
SEC. 
1331. 
STATE 
FLEXIBILITY 
TO 
ESTABLISH 
BASIC 
HEALTH PROGRAMS FOR LOW-INCOME INDI-
VIDUALS NOT ELIGIBLE FOR MEDICAID. 
(a) ESTABLISHMENT OF PROGRAM.— 
(1) IN GENERAL.—The Secretary shall establish 
a basic health program meeting the requirements of 
this section under which a State may enter into con-
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tracts to offer 1 or more standard health plans pro-
viding at least the essential health benefits described 
in section 1302(b) to eligible individuals in lieu of of-
fering such individuals coverage through an Ex-
change. 
(2) CERTIFICATIONS AS TO BENEFIT COVERAGE 
AND
COSTS.—Such program shall provide that a 
State may not establish a basic health program under 
this section unless the State establishes to the satisfac-
tion of the Secretary, and the Secretary certifies, 
that— 
(A) in the case of an eligible individual en-
rolled in a standard health plan offered through 
the program, the State provides— 
(i) that the amount of the monthly pre-
mium an eligible individual is required to 
pay for coverage under the standard health 
plan for the individual and the individual’s 
dependents does not exceed the amount of 
the monthly premium that the eligible indi-
vidual would have been required to pay (in 
the rating area in which the individual re-
sides) if the individual had enrolled in the 
applicable second lowest cost silver plan (as 
defined in section 36B(b)(3)(B) of the Inter-
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nal Revenue Code of 1986) offered to the in-
dividual through an Exchange; and 
(ii) that the cost-sharing an eligible in-
dividual is required to pay under the stand-
ard health plan does not exceed— 
(I) 
the 
cost-sharing 
required 
under a platinum plan in the case of 
an eligible individual with household 
income not in excess of 150 percent of 
the poverty line for the size of the fam-
ily involved; and 
(II) 
the 
cost-sharing 
required 
under a gold plan in the case of an eli-
gible individual not described in sub-
clause (I); and 
(B) the benefits provided under the stand-
ard health plans offered through the program 
cover at least the essential health benefits de-
scribed in section 1302(b). 
For purposes of subparagraph (A)(i), the amount of 
the monthly premium an individual is required to 
pay under either the standard health plan or the ap-
plicable second lowest cost silver plan shall be deter-
mined after reduction for any premium tax credits 
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and cost-sharing reductions allowable with respect to 
either plan. 
(b) STANDARD HEALTH PLAN.—In this section, the 
term ‘‘standard heath plan’’ means a health benefits plan 
that the State contracts with under this section— 
(1) under which the only individuals eligible to 
enroll are eligible individuals; 
(2) that provides at least the essential health ben-
efits described in section 1302(b); and 
(3) in the case of a plan that provides health in-
surance coverage offered by a health insurance issuer, 
that has a medical loss ratio of at least 85 percent. 
(c) CONTRACTING PROCESS.— 
(1) IN GENERAL.—A State basic health program 
shall establish a competitive process for entering into 
contracts with standard health plans under subsection 
(a), including negotiation of premiums and cost-shar-
ing and negotiation of benefits in addition to the es-
sential health benefits described in section 1302(b). 
(2) SPECIFIC
ITEMS
TO
BE
CONSIDERED.—A 
State shall, as part of its competitive process under 
paragraph (1), include at least the following: 
(A) INNOVATION.—Negotiation with offerors 
of a standard health plan for the inclusion of in-
novative features in the plan, including— 
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(i) care coordination and care manage-
ment for enrollees, especially for those with 
chronic health conditions; 
(ii) incentives for use of preventive 
services; and 
(iii) the establishment of relationships 
between providers and patients that maxi-
mize patient involvement in health care de-
cision-making, including providing incen-
tives for appropriate utilization under the 
plan. 
(B) 
HEALTH
AND
RESOURCE
DIF-
FERENCES.—Consideration of, and the making 
of suitable allowances for, differences in health 
care needs of enrollees and differences in local 
availability of, and access to, health care pro-
viders. Nothing in this subparagraph shall be 
construed as allowing discrimination on the 
basis of pre-existing conditions or other health 
status-related factors. 
(C) MANAGED
CARE.—Contracting with 
managed care systems, or with systems that offer 
as many of the attributes of managed care as are 
feasible in the local health care market. 
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(D) 
PERFORMANCE
MEASURES.—Estab-
lishing specific performance measures and stand-
ards for issuers of standard health plans that 
focus on quality of care and improved health 
outcomes, requiring such plans to report to the 
State with respect to the measures and stand-
ards, and making the performance and quality 
information available to enrollees in a useful 
form. 
(3) ENHANCED AVAILABILITY.— 
(A) MULTIPLE PLANS.—A State shall, to the 
maximum extent feasible, seek to make multiple 
standard health plans available to eligible indi-
viduals within a State to ensure individuals 
have a choice of such plans. 
(B) REGIONAL
COMPACTS.—A State may 
negotiate a regional compact with other States to 
include coverage of eligible individuals in all 
such States in agreements with issuers of stand-
ard health plans. 
(4) COORDINATION
WITH
OTHER
STATE
PRO-
GRAMS.—A State shall seek to coordinate the admin-
istration of, and provision of benefits under, its pro-
gram under this section with the State medicaid pro-
gram under title XIX of the Social Security Act, the 
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State child health plan under title XXI of such Act, 
and other State-administered health programs to 
maximize the efficiency of such programs and to im-
prove the continuity of care. 
(d) TRANSFER OF FUNDS TO STATES.— 
(1) IN GENERAL.—If the Secretary determines 
that a State electing the application of this section 
meets the requirements of the program established 
under subsection (a), the Secretary shall transfer to 
the State for each fiscal year for which 1 or more 
standard health plans are operating within the State 
the amount determined under paragraph (3). 
(2) USE OF FUNDS.—A State shall establish a 
trust for the deposit of the amounts received under 
paragraph (1) and amounts in the trust fund shall 
only be used to reduce the premiums and cost-sharing 
of, or to provide additional benefits for, eligible indi-
viduals enrolled in standard health plans within the 
State. Amounts in the trust fund, and expenditures of 
such amounts, shall not be included in determining 
the amount of any non-Federal funds for purposes of 
meeting any matching or expenditure requirement of 
any federally-funded program. 
(3) AMOUNT OF PAYMENT.— 
(A) SECRETARIAL DETERMINATION.— 
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(i) IN GENERAL.—The amount deter-
mined under this paragraph for any fiscal 
year is the amount the Secretary determines 
is equal to 85 percent of the premium tax 
credits under section 36B of the Internal 
Revenue Code of 1986, and the cost-sharing 
reductions under section 1402, that would 
have been provided for the fiscal year to eli-
gible individuals enrolled in standard 
health plans in the State if such eligible in-
dividuals were allowed to enroll in qualified 
health plans through an Exchange estab-
lished under this subtitle. 
(ii) SPECIFIC
REQUIREMENTS.—The 
Secretary shall make the determination 
under clause (i) on a per enrollee basis and 
shall take into account all relevant factors 
necessary to determine the value of the pre-
mium tax credits and cost-sharing reduc-
tions that would have been provided to eli-
gible individuals described in clause (i), in-
cluding the age and income of the enrollee, 
whether the enrollment is for self-only or 
family coverage, geographic differences in 
average spending for health care across rat-
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ing areas, the health status of the enrollee 
for purposes of determining risk adjustment 
payments and reinsurance payments that 
would have been made if the enrollee had 
enrolled in a qualified health plan through 
an Exchange, and whether any reconcili-
ation of the credit or cost-sharing reductions 
would have occurred if the enrollee had been 
so enrolled. This determination shall take 
into consideration the experience of other 
States with respect to participation in an 
Exchange and such credits and reductions 
provided to residents of the other States, 
with a special focus on enrollees with in-
come below 200 percent of poverty. 
(iii) CERTIFICATION.—The Chief Actu-
ary of the Centers for Medicare & Medicaid 
Services, in consultation with the Office of 
Tax Analysis of the Department of the 
Treasury, shall certify whether the method-
ology used to make determinations under 
this subparagraph, and such determina-
tions, meet the requirements of clause (ii). 
Such certifications shall be based on suffi-
cient data from the State and from com-
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HR 3590 EAS/PP 
parable States about their experience with 
programs created by this Act. 
(B) CORRECTIONS.—The Secretary shall ad-
just the payment for any fiscal year to reflect 
any error in the determinations under subpara-
graph (A) for any preceding fiscal year. 
(4) APPLICATION OF SPECIAL RULES.—The pro-
visions of section 1303 shall apply to a State basic 
health program, and to standard health plans offered 
through such program, in the same manner as such 
rules apply to qualified health plans. 
(e) ELIGIBLE INDIVIDUAL.— 
(1) IN GENERAL.—In this section, the term ‘‘eli-
gible individual’’ means, with respect to any State, 
an individual— 
(A) who a resident of the State who is not 
eligible to enroll in the State’s medicaid program 
under title XIX of the Social Security Act for 
benefits that at a minimum consist of the essen-
tial health benefits described in section 1302(b); 
(B) whose household income exceeds 133 
percent but does not exceed 200 percent of the 
poverty line for the size of the family involved; 
(C) who is not eligible for minimum essen-
tial coverage (as defined in section 5000A(f) of 
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HR 3590 EAS/PP 
the Internal Revenue Code of 1986) or is eligible 
for an employer-sponsored plan that is not af-
fordable coverage (as determined under section 
5000A(e)(2) of such Code); and 
(D) who has not attained age 65 as of the 
beginning of the plan year. 
Such term shall not include any individual who is 
not a qualified individual under section 1312 who is 
eligible to be covered by a qualified health plan of-
fered through an Exchange. 
(2) ELIGIBLE INDIVIDUALS MAY NOT USE EX-
CHANGE.—An eligible individual shall not be treated 
as a qualified individual under section 1312 eligible 
for enrollment in a qualified health plan offered 
through an Exchange established under section 1311. 
(f) SECRETARIAL OVERSIGHT.—The Secretary shall 
each year conduct a review of each State program to ensure 
compliance with the requirements of this section, including 
ensuring that the State program meets— 
(1) eligibility verification requirements for par-
ticipation in the program; 
(2) the requirements for use of Federal funds re-
ceived by the program; and 
(3) the quality and performance standards under 
this section. 
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(g) STANDARD HEALTH PLAN OFFERORS.—A State 
may provide that persons eligible to offer standard health 
plans under a basic health program established under this 
section may include a licensed health maintenance organi-
zation, a licensed health insurance insurer, or a network 
of health care providers established to offer services under 
the program. 
(h) DEFINITIONS.—Any term used in this section 
which is also used in section 36B of the Internal Revenue 
Code of 1986 shall have the meaning given such term by 
such section. 
SEC. 1332. WAIVER FOR STATE INNOVATION. 
(a) APPLICATION.— 
(1) IN GENERAL.—A State may apply to the 
Secretary for the waiver of all or any requirements 
described in paragraph (2) with respect to health in-
surance coverage within that State for plan years be-
ginning on or after January 1, 2017. Such applica-
tion shall— 
(A) be filed at such time and in such man-
ner as the Secretary may require; 
(B) contain such information as the Sec-
retary may require, including— 
(i) a comprehensive description of the 
State legislation and program to implement 
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HR 3590 EAS/PP 
a plan meeting the requirements for a waiv-
er under this section; and 
(ii) a 10-year budget plan for such 
plan that is budget neutral for the Federal 
Government; and 
(C) provide an assurance that the State has 
enacted the law described in subsection (b)(2). 
(2) 
REQUIREMENTS.—The 
requirements 
de-
scribed in this paragraph with respect to health in-
surance coverage within the State for plan years be-
ginning on or after January 1, 2014, are as follows: 
(A) Part I of subtitle D. 
(B) Part II of subtitle D. 
(C) Section 1402. 
(D) Sections 36B, 4980H, and 5000A of the 
Internal Revenue Code of 1986. 
(3) PASS THROUGH OF FUNDING.—With respect 
to a State waiver under paragraph (1), under which, 
due to the structure of the State plan, individuals and 
small employers in the State would not qualify for the 
premium tax credits, cost-sharing reductions, or small 
business credits under sections 36B of the Internal 
Revenue Code of 1986 or under part I of subtitle E 
for which they would otherwise be eligible, the Sec-
retary shall provide for an alternative means by 
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which the aggregate amount of such credits or reduc-
tions that would have been paid on behalf of partici-
pants in the Exchanges established under this title 
had the State not received such waiver, shall be paid 
to the State for purposes of implementing the State 
plan under the waiver. Such amount shall be deter-
mined annually by the Secretary, taking into consid-
eration the experience of other States with respect to 
participation in an Exchange and credits and reduc-
tions provided under such provisions to residents of 
the other States. 
(4) 
WAIVER
CONSIDERATION
AND
TRANS-
PARENCY.— 
(A) IN
GENERAL.—An application for a 
waiver under this section shall be considered by 
the Secretary in accordance with the regulations 
described in subparagraph (B). 
(B) REGULATIONS.—Not later than 180 
days after the date of enactment of this Act, the 
Secretary shall promulgate regulations relating 
to waivers under this section that provide— 
(i) a process for public notice and com-
ment at the State level, including public 
hearings, sufficient to ensure a meaningful 
level of public input; 
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(ii) a process for the submission of an 
application that ensures the disclosure of— 
(I) the provisions of law that the 
State involved seeks to waive; and 
(II) the specific plans of the State 
to ensure that the waiver will be in 
compliance with subsection (b); 
(iii) a process for providing public no-
tice and comment after the application is 
received by the Secretary, that is sufficient 
to ensure a meaningful level of public input 
and that does not impose requirements that 
are in addition to, or duplicative of, re-
quirements imposed under the Administra-
tive Procedures Act, or requirements that 
are unreasonable or unnecessarily burden-
some with respect to State compliance; 
(iv) a process for the submission to the 
Secretary of periodic reports by the State 
concerning the implementation of the pro-
gram under the waiver; and 
(v) a process for the periodic evalua-
tion by the Secretary of the program under 
the waiver. 
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(C) REPORT.—The Secretary shall annually 
report to Congress concerning actions taken by 
the Secretary with respect to applications for 
waivers under this section. 
(5) COORDINATED WAIVER PROCESS.—The Sec-
retary shall develop a process for coordinating and 
consolidating the State waiver processes applicable 
under the provisions of this section, and the existing 
waiver processes applicable under titles XVIII, XIX, 
and XXI of the Social Security Act, and any other 
Federal law relating to the provision of health care 
items or services. Such process shall permit a State 
to submit a single application for a waiver under any 
or all of such provisions. 
(6) DEFINITION.—In this section, the term ‘‘Sec-
retary’’ means— 
(A) the Secretary of Health and Human 
Services with respect to waivers relating to the 
provisions 
described 
in 
subparagraph 
(A) 
through (C) of paragraph (2); and 
(B) the Secretary of the Treasury with re-
spect to waivers relating to the provisions de-
scribed in paragraph (2)(D). 
(b) GRANTING OF WAIVERS.— 
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(1) IN GENERAL.—The Secretary may grant a 
request for a waiver under subsection (a)(1) only if 
the Secretary determines that the State plan— 
(A) will provide coverage that is at least as 
comprehensive as the coverage defined in section 
1302(b) and offered through Exchanges estab-
lished under this title as certified by Office of the 
Actuary of the Centers for Medicare & Medicaid 
Services based on sufficient data from the State 
and from comparable States about their experi-
ence with programs created by this Act and the 
provisions of this Act that would be waived; 
(B) will provide coverage and cost sharing 
protections against excessive out-of-pocket spend-
ing that are at least as affordable as the provi-
sions of this title would provide; 
(C) will provide coverage to at least a com-
parable number of its residents as the provisions 
of this title would provide; and 
(D) will not increase the Federal deficit. 
(2) REQUIREMENT TO ENACT A LAW.— 
(A) IN GENERAL.—A law described in this 
paragraph is a State law that provides for State 
actions under a waiver under this section, in-
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HR 3590 EAS/PP 
cluding the implementation of the State plan 
under subsection (a)(1)(B). 
(B) TERMINATION OF OPT OUT.—A State 
may repeal a law described in subparagraph (A) 
and terminate the authority provided under the 
waiver with respect to the State. 
(c) SCOPE OF WAIVER.— 
(1) IN GENERAL.—The Secretary shall determine 
the scope of a waiver of a requirement described in 
subsection (a)(2) granted to a State under subsection 
(a)(1). 
(2) LIMITATION.—The Secretary may not waive 
under this section any Federal law or requirement 
that is not within the authority of the Secretary. 
(d) DETERMINATIONS BY SECRETARY.— 
(1) TIME FOR DETERMINATION.—The Secretary 
shall make a determination under subsection (a)(1) 
not later than 180 days after the receipt of an appli-
cation from a State under such subsection. 
(2) EFFECT OF DETERMINATION.— 
(A) GRANTING
OF
WAIVERS.—If the Sec-
retary determines to grant a waiver under sub-
section (a)(1), the Secretary shall notify the 
State involved of such determination and the 
terms and effectiveness of such waiver. 
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(B) DENIAL OF WAIVER.—If the Secretary 
determines a waiver should not be granted under 
subsection (a)(1), the Secretary shall notify the 
State involved, and the appropriate committees 
of Congress of such determination and the rea-
sons therefore. 
(e) TERM OF WAIVER.—No waiver under this section 
may extend over a period of longer than 5 years unless the 
State requests continuation of such waiver, and such request 
shall be deemed granted unless the Secretary, within 90 
days after the date of its submission to the Secretary, either 
denies such request in writing or informs the State in writ-
ing with respect to any additional information which is 
needed in order to make a final determination with respect 
to the request. 
SEC. 1333. PROVISIONS RELATING TO OFFERING OF PLANS 
IN MORE THAN ONE STATE. 
(a) HEALTH CARE CHOICE COMPACTS.— 
(1) IN GENERAL.—Not later than July 1, 2013, 
the Secretary shall, in consultation with the National 
Association of Insurance Commissioners, issue regula-
tions for the creation of health care choice compacts 
under which 2 or more States may enter into an 
agreement under which— 
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(A) 1 or more qualified health plans could 
be offered in the individual markets in all such 
States but, except as provided in subparagraph 
(B), only be subject to the laws and regulations 
of the State in which the plan was written or 
issued; 
(B) the issuer of any qualified health plan 
to which the compact applies— 
(i) would continue to be subject to 
market conduct, unfair trade practices, net-
work adequacy, and consumer protection 
standards (including standards relating to 
rating), including addressing disputes as to 
the performance of the contract, of the State 
in which the purchaser resides; 
(ii) would be required to be licensed in 
each State in which it offers the plan under 
the compact or to submit to the jurisdiction 
of each such State with regard to the stand-
ards described in clause (i) (including al-
lowing access to records as if the insurer 
were licensed in the State); and 
(iii) must clearly notify consumers 
that the policy may not be subject to all the 
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HR 3590 EAS/PP 
laws and regulations of the State in which 
the purchaser resides. 
(2) STATE AUTHORITY.—A State may not enter 
into an agreement under this subsection unless the 
State enacts a law after the date of the enactment of 
this title that specifically authorizes the State to enter 
into such agreements. 
(3) APPROVAL
OF
COMPACTS.—The Secretary 
may approve interstate health care choice compacts 
under paragraph (1) only if the Secretary determines 
that such health care choice compact— 
(A) will provide coverage that is at least as 
comprehensive as the coverage defined in section 
1302(b) and offered through Exchanges estab-
lished under this title; 
(B) will provide coverage and cost sharing 
protections against excessive out-of-pocket spend-
ing that are at least as affordable as the provi-
sions of this title would provide; 
(C) will provide coverage to at least a com-
parable number of its residents as the provisions 
of this title would provide; 
(D) will not increase the Federal deficit; 
and 
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(E) will not weaken enforcement of laws 
and regulations described in paragraph (1)(B)(i) 
in any State that is included in such compact. 
(4) EFFECTIVE DATE.—A health care choice com-
pact described in paragraph (1) shall not take effect 
before January 1, 2016. 
(b) AUTHORITY FOR NATIONWIDE PLANS.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), if an issuer (including a group of health 
insurance issuers affiliated either by common owner-
ship and control or by the common use of a nation-
ally licensed service mark) of a qualified health plan 
in the individual or small group market meets the re-
quirements of this subsection (in this subsection a 
‘‘nationwide qualified health plan’’)— 
(A) the issuer of the plan may offer the na-
tionwide qualified health plan in the individual 
or small group market in more than 1 State; 
and 
(B) with respect to State laws mandating 
benefit coverage by a health plan, only the State 
laws of the State in which such plan is written 
or issued shall apply to the nationwide qualified 
health plan. 
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(2) STATE OPT-OUT.—A State may, by specific 
reference in a law enacted after the date of enactment 
of this title, provide that this subsection shall not 
apply to that State. Such opt-out shall be effective 
until such time as the State by law revokes it. 
(3) PLAN REQUIREMENTS.—An issuer meets the 
requirements of this subsection with respect to a na-
tionwide qualified health plan if, in the determina-
tion of the Secretary— 
(A) the plan offers a benefits package that 
is uniform in each State in which the plan is of-
fered and meets the requirements set forth in 
paragraphs (4) through (6); 
(B) the issuer is licensed in each State in 
which it offers the plan and is subject to all re-
quirements of State law not inconsistent with 
this section, including but not limited to, the 
standards and requirements that a State imposes 
that do not prevent the application of a require-
ment of part A of title XXVII of the Public 
Health Service Act or a requirement of this title; 
(C) the issuer meets all requirements of this 
title with respect to a qualified health plan, in-
cluding the requirement to offer the silver and 
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gold levels of the plan in each Exchange in the 
State for the market in which the plan is offered; 
(D) the issuer determines the premiums for 
the plan in any State on the basis of the rating 
rules in effect in that State for the rating areas 
in which it is offered; 
(E) the issuer offers the nationwide quali-
fied health plan in at least 60 percent of the par-
ticipating States in the first year in which the 
plan is offered, 65 percent of such States in the 
second year, 70 percent of such States in the 
third year, 75 percent of such States in the 
fourth year, and 80 percent of such States in the 
fifth and subsequent years; 
(F) the issuer shall offer the plan in partici-
pating States across the country, in all geo-
graphic regions, and in all States that have 
adopted adjusted community rating before the 
date of enactment of this Act; and 
(G) the issuer clearly notifies consumers 
that the policy may not contain some benefits 
otherwise mandated for plans in the State in 
which the purchaser resides and provides a de-
tailed statement of the benefits offered and the 
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HR 3590 EAS/PP 
benefit differences in that State, in accordance 
with rules promulgated by the Secretary. 
(4) FORM REVIEW FOR NATIONWIDE PLANS.— 
Notwithstanding any contrary provision of State law, 
at least 3 months before any nationwide qualified 
health plan is offered, the issuer shall file all nation-
wide qualified health plan forms with the regulator in 
each participating State in which the plan will be of-
fered. An issuer may appeal the disapproval of a na-
tionwide qualified health plan form to the Secretary. 
(5) APPLICABLE RULES.—The Secretary shall, in 
consultation with the National Association of Insur-
ance Commissioners, issue rules for the offering of na-
tionwide qualified health plans under this subsection. 
Nationwide qualified health plans may be offered only 
after such rules have taken effect. 
(6) COVERAGE.—The Secretary shall provide 
that the health benefits coverage provided to an indi-
vidual through a nationwide qualified health plan 
under this subsection shall include at least the essen-
tial benefits package described in section 1302. 
(7) STATE LAW MANDATING BENEFIT COVERAGE 
BY A HEALTH BENEFITS PLAN.—For the purposes of 
this subsection, a State law mandating benefit cov-
erage by a health plan is a law that mandates health 
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insurance coverage or the offer of health insurance 
coverage for specific health services or specific dis-
eases. A law that mandates health insurance coverage 
or reimbursement for services provided by certain 
classes of providers of health care services, or a law 
that mandates that certain classes of individuals must 
be covered as a group or as dependents, is not a State 
law mandating benefit coverage by a health benefits 
plan. 
PART V—REINSURANCE AND RISK ADJUSTMENT 
SEC. 1341. TRANSITIONAL REINSURANCE PROGRAM FOR IN-
DIVIDUAL AND SMALL GROUP MARKETS IN 
EACH STATE. 
(a) IN GENERAL.—Each State shall, not later than 
January 1, 2014— 
(1) include in the Federal standards or State 
law or regulation the State adopts and has in effect 
under section 1321(b) the provisions described in sub-
section (b); and 
(2) establish (or enter into a contract with) 1 or 
more applicable reinsurance entities to carry out the 
reinsurance program under this section. 
(b) MODEL REGULATION.— 
(1) IN GENERAL.—In establishing the Federal 
standards under section 1321(a), the Secretary, in 
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consultation with the National Association of Insur-
ance Commissioners (the ‘‘NAIC’’), shall include pro-
visions that enable States to establish and maintain 
a program under which— 
(A) health insurance issuers, and third 
party administrators on behalf of group health 
plans, are required to make payments to an ap-
plicable reinsurance entity for any plan year be-
ginning in the 3-year period beginning January 
1, 2014 (as specified in paragraph (3); and 
(B) the applicable reinsurance entity col-
lects payments under subparagraph (A) and uses 
amounts so collected to make reinsurance pay-
ments to health insurance issuers described in 
subparagraph (A) that cover high risk individ-
uals in the individual market (excluding grand-
fathered health plans) for any plan year begin-
ning in such 3-year period. 
(2) 
HIGH-RISK
INDIVIDUAL; 
PAYMENT 
AMOUNTS.—The Secretary shall include the following 
in the provisions under paragraph (1): 
(A) DETERMINATION
OF
HIGH-RISK
INDI-
VIDUALS.—The method by which individuals will 
be identified as high risk individuals for pur-
poses of the reinsurance program established 
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under this section. Such method shall provide for 
identification of individuals as high-risk indi-
viduals on the basis of— 
(i) a list of at least 50 but not more 
than 100 medical conditions that are iden-
tified as high-risk conditions and that may 
be based on the identification of diagnostic 
and procedure codes that are indicative of 
individuals with pre-existing, high-risk con-
ditions; or 
(ii) any other comparable objective 
method of identification recommended by 
the American Academy of Actuaries. 
(B) PAYMENT
AMOUNT.—The formula for 
determining the amount of payments that will be 
paid to health insurance issuers described in 
paragraph (1)(A) that insure high-risk individ-
uals. Such formula shall provide for the equitable 
allocation of available funds through reconcili-
ation and may be designed— 
(i) to provide a schedule of payments 
that specifies the amount that will be paid 
for each of the conditions identified under 
subparagraph (A); or 
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(ii) to use any other comparable meth-
od for determining payment amounts that 
is recommended by the American Academy 
of Actuaries and that encourages the use of 
care coordination and care management 
programs for high risk conditions. 
(3) DETERMINATION
OF
REQUIRED
CONTRIBU-
TIONS.— 
(A) IN GENERAL.—The Secretary shall in-
clude in the provisions under paragraph (1) the 
method for determining the amount each health 
insurance issuer and group health plan described 
in paragraph (1)(A) contributing to the reinsur-
ance program under this section is required to 
contribute under such paragraph for each plan 
year beginning in the 36-month period beginning 
January 1, 2014. The contribution amount for 
any plan year may be based on the percentage 
of revenue of each issuer and the total costs of 
providing benefits to enrollees in self-insured 
plans or on a specified amount per enrollee and 
may be required to be paid in advance or peri-
odically throughout the plan year. 
(B) SPECIFIC REQUIREMENTS.—The method 
under this paragraph shall be designed so that— 
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(i) the contribution amount for each 
issuer proportionally reflects each issuer’s 
fully insured commercial book of business 
for all major medical products and the total 
value of all fees charged by the issuer and 
the costs of coverage administered by the 
issuer as a third party administrator; 
(ii) the contribution amount can in-
clude an additional amount to fund the ad-
ministrative expenses of the applicable rein-
surance entity; 
(iii) 
the 
aggregate 
contribution 
amounts for all States shall, based on the 
best estimates of the NAIC and without re-
gard to amounts described in clause (ii), 
equal $10,000,000,000 for plan years begin-
ning in 2014, $6,000,000,000 for plan years 
beginning 2015, and $4,000,000,000 for 
plan years beginning in 2016; and 
(iv) in addition to the aggregate con-
tribution amounts under clause (iii), each 
issuer’s contribution amount for any cal-
endar year under clause (iii) reflects its 
proportionate 
share 
of 
an 
additional 
$2,000,000,000 for 2014, an additional 
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$2,000,000,000 for 2015, and an additional 
$1,000,000,000 for 2016. 
Nothing in this subparagraph shall be construed 
to preclude a State from collecting additional 
amounts from issuers on a voluntary basis. 
(4) EXPENDITURE
OF
FUNDS.—The provisions 
under paragraph (1) shall provide that— 
(A) the contribution amounts collected for 
any calendar year may be allocated and used in 
any of the three calendar years for which 
amounts are collected based on the reinsurance 
needs of a particular period or to reflect experi-
ence in a prior period; and 
(B) amounts remaining unexpended as of 
December, 2016, may be used to make payments 
under any reinsurance program of a State in the 
individual market in effect in the 2-year period 
beginning on January 1, 2017. 
Notwithstanding the preceding sentence, any con-
tribution amounts described in paragraph (3)(B)(iv) 
shall be deposited into the general fund of the Treas-
ury of the United States and may not be used for the 
program established under this section. 
(c) APPLICABLE REINSURANCE ENTITY.—For pur-
poses of this section— 
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(1) IN GENERAL.—The term ‘‘applicable reinsur-
ance entity’’ means a not-for-profit organization— 
(A) the purpose of which is to help stabilize 
premiums for coverage in the individual and 
small group markets in a State during the first 
3 years of operation of an Exchange for such 
markets within the State when the risk of ad-
verse selection related to new rating rules and 
market changes is greatest; and 
(B) the duties of which shall be to carry out 
the reinsurance program under this section by 
coordinating the funding and operation of the 
risk-spreading mechanisms designed to imple-
ment the reinsurance program. 
(2) STATE
DISCRETION.—A State may have 
more than 1 applicable reinsurance entity to carry 
out the reinsurance program under this section with-
in the State and 2 or more States may enter into 
agreements to provide for an applicable reinsurance 
entity to carry out such program in all such States. 
(3) ENTITIES ARE TAX-EXEMPT.—An applicable 
reinsurance entity established under this section shall 
be exempt from taxation under chapter 1 of the Inter-
nal Revenue Code of 1986. The preceding sentence 
shall not apply to the tax imposed by section 511 
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such Code (relating to tax on unrelated business tax-
able income of an exempt organization). 
(d) COORDINATION WITH STATE HIGH-RISK POOLS.— 
The State shall eliminate or modify any State high-risk 
pool to the extent necessary to carry out the reinsurance 
program established under this section. The State may co-
ordinate the State high-risk pool with such program to the 
extent not inconsistent with the provisions of this section. 
SEC. 1342. ESTABLISHMENT OF RISK CORRIDORS FOR 
PLANS IN INDIVIDUAL AND SMALL GROUP 
MARKETS. 
(a) IN GENERAL.—The Secretary shall establish and 
administer a program of risk corridors for calendar years 
2014, 2015, and 2016 under which a qualified health plan 
offered in the individual or small group market shall par-
ticipate in a payment adjustment system based on the ratio 
of the allowable costs of the plan to the plan’s aggregate 
premiums. Such program shall be based on the program 
for regional participating provider organizations under 
part D of title XVIII of the Social Security Act. 
(b) PAYMENT METHODOLOGY.— 
(1) PAYMENTS OUT.—The Secretary shall pro-
vide under the program established under subsection 
(a) that if— 
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(A) a participating plan’s allowable costs 
for any plan year are more than 103 percent but 
not more than 108 percent of the target amount, 
the Secretary shall pay to the plan an amount 
equal to 50 percent of the target amount in ex-
cess of 103 percent of the target amount; and 
(B) a participating plan’s allowable costs 
for any plan year are more than 108 percent of 
the target amount, the Secretary shall pay to the 
plan an amount equal to the sum of 2.5 percent 
of the target amount plus 80 percent of allowable 
costs in excess of 108 percent of the target 
amount. 
(2) PAYMENTS IN.—The Secretary shall provide 
under the program established under subsection (a) 
that if— 
(A) a participating plan’s allowable costs 
for any plan year are less than 97 percent but 
not less than 92 percent of the target amount, the 
plan shall pay to the Secretary an amount equal 
to 50 percent of the excess of 97 percent of the 
target amount over the allowable costs; and 
(B) a participating plan’s allowable costs 
for any plan year are less than 92 percent of the 
target amount, the plan shall pay to the Sec-
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retary an amount equal to the sum of 2.5 per-
cent of the target amount plus 80 percent of the 
excess of 92 percent of the target amount over the 
allowable costs. 
(c) DEFINITIONS.—In this section: 
(1) ALLOWABLE COSTS.— 
(A) IN GENERAL.—The amount of allowable 
costs of a plan for any year is an amount equal 
to the total costs (other than administrative 
costs) of the plan in providing benefits covered 
by the plan. 
(B) REDUCTION
FOR
RISK
ADJUSTMENT 
AND REINSURANCE PAYMENTS.—Allowable costs 
shall reduced by any risk adjustment and rein-
surance payments received under section 1341 
and 1343. 
(2) TARGET AMOUNT.—The target amount of a 
plan for any year is an amount equal to the total 
premiums (including any premium subsidies under 
any governmental program), reduced by the adminis-
trative costs of the plan. 
SEC. 1343. RISK ADJUSTMENT. 
(a) IN GENERAL.— 
(1) LOW ACTUARIAL RISK PLANS.—Using the cri-
teria and methods developed under subsection (b), 
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each State shall assess a charge on health plans and 
health insurance issuers (with respect to health insur-
ance coverage) described in subsection (c) if the actu-
arial risk of the enrollees of such plans or coverage for 
a year is less than the average actuarial risk of all 
enrollees in all plans or coverage in such State for 
such year that are not self-insured group health plans 
(which are subject to the provisions of the Employee 
Retirement Income Security Act of 1974). 
(2) HIGH ACTUARIAL RISK PLANS.—Using the 
criteria and methods developed under subsection (b), 
each State shall provide a payment to health plans 
and health insurance issuers (with respect to health 
insurance coverage) described in subsection (c) if the 
actuarial risk of the enrollees of such plans or cov-
erage for a year is greater than the average actuarial 
risk of all enrollees in all plans and coverage in such 
State for such year that are not self-insured group 
health plans (which are subject to the provisions of 
the Employee Retirement Income Security Act of 
1974). 
(b) CRITERIA AND METHODS.—The Secretary, in con-
sultation with States, shall establish criteria and methods 
to be used in carrying out the risk adjustment activities 
under this section. The Secretary may utilize criteria and 
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methods similar to the criteria and methods utilized under 
part C or D of title XVIII of the Social Security Act. Such 
criteria and methods shall be included in the standards and 
requirements the Secretary prescribes under section 1321. 
(c) SCOPE.—A health plan or a health insurance issuer 
is described in this subsection if such health plan or health 
insurance issuer provides coverage in the individual or 
small group market within the State. This subsection shall 
not apply to a grandfathered health plan or the issuer of 
a grandfathered health plan with respect to that plan. 
Subtitle E—Affordable Coverage 
Choices for All Americans 
PART I—PREMIUM TAX CREDITS AND COST- 
SHARING REDUCTIONS 
Subpart A—Premium Tax Credits and Cost-sharing 
Reductions 
SEC. 1401. REFUNDABLE TAX CREDIT PROVIDING PREMIUM 
ASSISTANCE FOR COVERAGE UNDER A QUALI-
FIED HEALTH PLAN. 
(a) IN GENERAL.—Subpart C of part IV of subchapter 
A of chapter 1 of the Internal Revenue Code of 1986 (relat-
ing to refundable credits) is amended by inserting after sec-
tion 36A the following new section: 
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‘‘SEC. 36B. REFUNDABLE CREDIT FOR COVERAGE UNDER A 
QUALIFIED HEALTH PLAN. 
‘‘(a) IN GENERAL.—In the case of an applicable tax-
payer, there shall be allowed as a credit against the tax 
imposed by this subtitle for any taxable year an amount 
equal to the premium assistance credit amount of the tax-
payer for the taxable year. 
‘‘(b) PREMIUM ASSISTANCE CREDIT AMOUNT.—For 
purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘premium assist-
ance credit amount’ means, with respect to any tax-
able year, the sum of the premium assistance amounts 
determined under paragraph (2) with respect to all 
coverage months of the taxpayer occurring during the 
taxable year. 
‘‘(2) PREMIUM ASSISTANCE AMOUNT.—The pre-
mium assistance amount determined under this sub-
section with respect to any coverage month is the 
amount equal to the lesser of— 
‘‘(A) the monthly premiums for such month 
for 1 or more qualified health plans offered in 
the individual market within a State which 
cover the taxpayer, the taxpayer’s spouse, or any 
dependent (as defined in section 152) of the tax-
payer and which were enrolled in through an 
Exchange established by the State under 1311 of 
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the Patient Protection and Affordable Care Act, 
or 
‘‘(B) the excess (if any) of— 
‘‘(i) the adjusted monthly premium for 
such month for the applicable second lowest 
cost silver plan with respect to the taxpayer, 
over 
‘‘(ii) an amount equal to 1/12 of the 
product of the applicable percentage and the 
taxpayer’s household income for the taxable 
year. 
‘‘(3) OTHER TERMS AND RULES RELATING TO 
PREMIUM
ASSISTANCE
AMOUNTS.—For purposes of 
paragraph (2)— 
‘‘(A) APPLICABLE PERCENTAGE.— 
‘‘(i) IN GENERAL.—Except as provided 
in clause (ii), the applicable percentage 
with respect to any taxpayer for any tax-
able year is equal to 2.8 percent, increased 
by the number of percentage points (not 
greater than 7) which bears the same ratio 
to 7 percentage points as— 
‘‘(I) the taxpayer’s household in-
come for the taxable year in excess of 
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100 percent of the poverty line for a 
family of the size involved, bears to 
‘‘(II) an amount equal to 200 per-
cent of the poverty line for a family of 
the size involved. 
‘‘(ii) SPECIAL RULE FOR TAXPAYERS 
UNDER 133 PERCENT OF POVERTY LINE.—If 
a taxpayer’s household income for the tax-
able year is in excess of 100 percent, but not 
more than 133 percent, of the poverty line 
for a family of the size involved, the tax-
payer’s applicable percentage shall be 2 per-
cent. 
‘‘(iii) INDEXING.—In the case of tax-
able years beginning in any calendar year 
after 2014, the Secretary shall adjust the 
initial and final applicable percentages 
under clause (i), and the 2 percent under 
clause (ii), for the calendar year to reflect 
the excess of the rate of premium growth be-
tween the preceding calendar year and 2013 
over the rate of income growth for such pe-
riod. 
‘‘(B) APPLICABLE
SECOND
LOWEST
COST 
SILVER PLAN.—The applicable second lowest cost 
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silver plan with respect to any applicable tax-
payer is the second lowest cost silver plan of the 
individual market in the rating area in which 
the taxpayer resides which— 
‘‘(i) is offered through the same Ex-
change through which the qualified health 
plans taken into account under paragraph 
(2)(A) were offered, and 
‘‘(ii) provides— 
‘‘(I) self-only coverage in the case 
of an applicable taxpayer— 
‘‘(aa) whose tax for the tax-
able year is determined under sec-
tion 1(c) (relating to unmarried 
individuals other than surviving 
spouses and heads of households) 
and who is not allowed a deduc-
tion under section 151 for the tax-
able year with respect to a de-
pendent, or 
‘‘(bb) who is not described in 
item (aa) but who purchases only 
self-only coverage, and 
‘‘(II) family coverage in the case 
of any other applicable taxpayer. 
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If a taxpayer files a joint return and no credit 
is allowed under this section with respect to 1 of 
the spouses by reason of subsection (e), the tax-
payer shall be treated as described in clause 
(ii)(I) unless a deduction is allowed under sec-
tion 151 for the taxable year with respect to a 
dependent other than either spouse and sub-
section (e) does not apply to the dependent. 
‘‘(C) ADJUSTED MONTHLY PREMIUM.—The 
adjusted monthly premium for an applicable sec-
ond lowest cost silver plan is the monthly pre-
mium which would have been charged (for the 
rating area with respect to which the premiums 
under paragraph (2)(A) were determined) for the 
plan if each individual covered under a qualified 
health plan taken into account under paragraph 
(2)(A) were covered by such silver plan and the 
premium was adjusted only for the age of each 
such individual in the manner allowed under 
section 2701 of the Public Health Service Act. In 
the case of a State participating in the wellness 
discount demonstration project under section 
2705(d) of the Public Health Service Act, the ad-
justed monthly premium shall be determined 
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without regard to any premium discount or re-
bate under such project. 
‘‘(D) ADDITIONAL BENEFITS.—If— 
‘‘(i) a qualified health plan under sec-
tion 1302(b)(5) of the Patient Protection 
and Affordable Care Act offers benefits in 
addition to the essential health benefits re-
quired to be provided by the plan, or 
‘‘(ii) a State requires a qualified health 
plan under section 1311(d)(3)(B) of such 
Act to cover benefits in addition to the es-
sential health benefits required to be pro-
vided by the plan, 
the portion of the premium for the plan properly 
allocable (under rules prescribed by the Secretary 
of Health and Human Services) to such addi-
tional benefits shall not be taken into account in 
determining either the monthly premium or the 
adjusted monthly premium under paragraph (2). 
‘‘(E) SPECIAL RULE FOR PEDIATRIC DEN-
TAL
COVERAGE.—For purposes of determining 
the amount of any monthly premium, if an indi-
vidual enrolls in both a qualified health plan 
and 
a 
plan 
described 
in 
section 
1311(d)(2)(B)(ii)(I) of the Patient Protection 
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and Affordable Care Act for any plan year, the 
portion of the premium for the plan described in 
such section that (under regulations prescribed 
by the Secretary) is properly allocable to pedi-
atric dental benefits which are included in the 
essential health benefits required to be provided 
by a qualified health plan under section 
1302(b)(1)(J) of such Act shall be treated as a 
premium payable for a qualified health plan. 
‘‘(c) DEFINITION AND RULES RELATING TO APPLICA-
BLE TAXPAYERS, COVERAGE MONTHS, AND QUALIFIED 
HEALTH PLAN.—For purposes of this section— 
‘‘(1) APPLICABLE TAXPAYER.— 
‘‘(A) IN
GENERAL.—The term ‘applicable 
taxpayer’ means, with respect to any taxable 
year, a taxpayer whose household income for the 
taxable year exceeds 100 percent but does not ex-
ceed 400 percent of an amount equal to the pov-
erty line for a family of the size involved. 
‘‘(B) SPECIAL RULE FOR CERTAIN INDIVID-
UALS
LAWFULLY
PRESENT
IN
THE
UNITED 
STATES.—If— 
‘‘(i) a taxpayer has a household income 
which is not greater than 100 percent of an 
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amount equal to the poverty line for a fam-
ily of the size involved, and 
‘‘(ii) the taxpayer is an alien lawfully 
present in the United States, but is not eli-
gible for the medicaid program under title 
XIX of the Social Security Act by reason of 
such alien status, 
the taxpayer shall, for purposes of the credit 
under this section, be treated as an applicable 
taxpayer with a household income which is equal 
to 100 percent of the poverty line for a family 
of the size involved. 
‘‘(C) MARRIED COUPLES MUST FILE JOINT 
RETURN.—If the taxpayer is married (within the 
meaning of section 7703) at the close of the tax-
able year, the taxpayer shall be treated as an ap-
plicable taxpayer only if the taxpayer and the 
taxpayer’s spouse file a joint return for the tax-
able year. 
‘‘(D) DENIAL
OF
CREDIT
TO
DEPEND-
ENTS.—No credit shall be allowed under this sec-
tion to any individual with respect to whom a 
deduction under section 151 is allowable to an-
other taxpayer for a taxable year beginning in 
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the calendar year in which such individual’s 
taxable year begins. 
‘‘(2) COVERAGE MONTH.—For purposes of this 
subsection— 
‘‘(A) IN
GENERAL.—The term ‘coverage 
month’ means, with respect to an applicable tax-
payer, any month if— 
‘‘(i) as of the first day of such month 
the taxpayer, the taxpayer’s spouse, or any 
dependent of the taxpayer is covered by a 
qualified health plan described in subsection 
(b)(2)(A) that was enrolled in through an 
Exchange established by the State under 
section 1311 of the Patient Protection and 
Affordable Care Act, and 
‘‘(ii) the premium for coverage under 
such plan for such month is paid by the 
taxpayer (or through advance payment of 
the credit under subsection (a) under section 
1412 of the Patient Protection and Afford-
able Care Act). 
‘‘(B) EXCEPTION FOR MINIMUM ESSENTIAL 
COVERAGE.— 
‘‘(i) IN GENERAL.—The term ‘coverage 
month’ shall not include any month with 
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respect to an individual if for such month 
the individual is eligible for minimum es-
sential coverage other than eligibility for 
coverage described in section 5000A(f)(1)(C) 
(relating to coverage in the individual mar-
ket). 
‘‘(ii) 
MINIMUM
ESSENTIAL
COV-
ERAGE.—The term ‘minimum essential cov-
erage’ has the meaning given such term by 
section 5000A(f). 
‘‘(C) SPECIAL RULE FOR EMPLOYER-SPON-
SORED
MINIMUM
ESSENTIAL
COVERAGE.—For 
purposes of subparagraph (B)— 
‘‘(i) COVERAGE
MUST
BE
AFFORD-
ABLE.—Except as provided in clause (iii), 
an employee shall not be treated as eligible 
for minimum essential coverage if such cov-
erage— 
‘‘(I) consists of an eligible em-
ployer-sponsored plan (as defined in 
section 5000A(f)(2)), and 
‘‘(II) the employee’s required con-
tribution (within the meaning of sec-
tion 5000A(e)(1)(B)) with respect to 
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the plan exceeds 9.8 percent of the ap-
plicable taxpayer’s household income. 
This clause shall also apply to an indi-
vidual who is eligible to enroll in the plan 
by reason of a relationship the individual 
bears to the employee. 
‘‘(ii) COVERAGE MUST PROVIDE MIN-
IMUM VALUE.—Except as provided in clause 
(iii), an employee shall not be treated as el-
igible for minimum essential coverage if 
such coverage consists of an eligible em-
ployer-sponsored plan (as defined in section 
5000A(f)(2)) and the plan’s share of the 
total allowed costs of benefits provided 
under the plan is less than 60 percent of 
such costs. 
‘‘(iii) EMPLOYEE OR FAMILY MUST NOT 
BE
COVERED
UNDER
EMPLOYER
PLAN.— 
Clauses (i) and (ii) shall not apply if the 
employee (or any individual described in 
the last sentence of clause (i)) is covered 
under the eligible employer-sponsored plan 
or the grandfathered health plan. 
‘‘(iv) INDEXING.—In the case of plan 
years beginning in any calendar year after 
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2014, the Secretary shall adjust the 9.8 per-
cent under clause (i)(II) in the same man-
ner as the percentages are adjusted under 
subsection (b)(3)(A)(ii). 
‘‘(3) DEFINITIONS AND OTHER RULES.— 
‘‘(A) QUALIFIED HEALTH PLAN.—The term 
‘qualified health plan’ has the meaning given 
such term by section 1301(a) of the Patient Pro-
tection and Affordable Care Act, except that such 
term shall not include a qualified health plan 
which is a catastrophic plan described in section 
1302(e) of such Act. 
‘‘(B) GRANDFATHERED
HEALTH
PLAN.— 
The term ‘grandfathered health plan’ has the 
meaning given such term by section 1251 of the 
Patient Protection and Affordable Care Act. 
‘‘(d) TERMS RELATING TO INCOME AND FAMILIES.— 
For purposes of this section— 
‘‘(1) FAMILY
SIZE.—The family size involved 
with respect to any taxpayer shall be equal to the 
number of individuals for whom the taxpayer is al-
lowed a deduction under section 151 (relating to al-
lowance of deduction for personal exemptions) for the 
taxable year. 
‘‘(2) HOUSEHOLD INCOME.— 
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‘‘(A) 
HOUSEHOLD
INCOME.—The 
term 
‘household income’ means, with respect to any 
taxpayer, an amount equal to the sum of— 
‘‘(i) the modified gross income of the 
taxpayer, plus 
‘‘(ii) the aggregate modified gross in-
comes of all other individuals who— 
‘‘(I) were taken into account in 
determining the taxpayer’s family size 
under paragraph (1), and 
‘‘(II) were required to file a re-
turn of tax imposed by section 1 for 
the taxable year. 
‘‘(B) MODIFIED GROSS INCOME.—The term 
‘modified gross income’ means gross income— 
‘‘(i) decreased by the amount of any 
deduction allowable under paragraph (1), 
(3), (4), or (10) of section 62(a), 
‘‘(ii) increased by the amount of inter-
est received or accrued during the taxable 
year which is exempt from tax imposed by 
this chapter, and 
‘‘(iii) determined without regard to 
sections 911, 931, and 933. 
‘‘(3) POVERTY LINE.— 
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‘‘(A) IN GENERAL.—The term ‘poverty line’ 
has the meaning given that term in section 
2110(c)(5) of the Social Security Act (42 U.S.C. 
1397jj(c)(5)). 
‘‘(B) POVERTY LINE USED.—In the case of 
any qualified health plan offered through an Ex-
change for coverage during a taxable year begin-
ning in a calendar year, the poverty line used 
shall be the most recently published poverty line 
as of the 1st day of the regular enrollment period 
for coverage during such calendar year. 
‘‘(e) RULES
FOR
INDIVIDUALS
NOT
LAWFULLY 
PRESENT.— 
‘‘(1) IN GENERAL.—If 1 or more individuals for 
whom a taxpayer is allowed a deduction under sec-
tion 151 (relating to allowance of deduction for per-
sonal exemptions) for the taxable year (including the 
taxpayer or his spouse) are individuals who are not 
lawfully present— 
‘‘(A) the aggregate amount of premiums 
otherwise taken into account under clauses (i) 
and (ii) of subsection (b)(2)(A) shall be reduced 
by the portion (if any) of such premiums which 
is attributable to such individuals, and 
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‘‘(B) for purposes of applying this section, 
the determination as to what percentage a tax-
payer’s household income bears to the poverty 
level for a family of the size involved shall be 
made under one of the following methods: 
‘‘(i) A method under which— 
‘‘(I) the taxpayer’s family size is 
determined by not taking such individ-
uals into account, and 
‘‘(II) the taxpayer’s household in-
come is equal to the product of the tax-
payer’s household income (determined 
without regard to this subsection) and 
a fraction— 
‘‘(aa) the numerator of which 
is the poverty line for the tax-
payer’s family size determined 
after application of subclause (I), 
and 
‘‘(bb) the denominator of 
which is the poverty line for the 
taxpayer’s family size determined 
without regard to subclause (I). 
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‘‘(ii) A comparable method reaching 
the same result as the method under clause 
(i). 
‘‘(2) LAWFULLY PRESENT.—For purposes of this 
section, an individual shall be treated as lawfully 
present only if the individual is, and is reasonably 
expected to be for the entire period of enrollment for 
which the credit under this section is being claimed, 
a citizen or national of the United States or an alien 
lawfully present in the United States. 
‘‘(3) SECRETARIAL AUTHORITY.—The Secretary 
of Health and Human Services, in consultation with 
the Secretary, shall prescribe rules setting forth the 
methods by which calculations of family size and 
household income are made for purposes of this sub-
section. Such rules shall be designed to ensure that the 
least burden is placed on individuals enrolling in 
qualified health plans through an Exchange and tax-
payers eligible for the credit allowable under this sec-
tion. 
‘‘(f) RECONCILIATION OF CREDIT AND ADVANCE CRED-
IT.— 
‘‘(1) IN GENERAL.—The amount of the credit al-
lowed under this section for any taxable year shall be 
reduced (but not below zero) by the amount of any 
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advance payment of such credit under section 1412 of 
the Patient Protection and Affordable Care Act. 
‘‘(2) EXCESS ADVANCE PAYMENTS.— 
‘‘(A) IN
GENERAL.—If the advance pay-
ments to a taxpayer under section 1412 of the 
Patient Protection and Affordable Care Act for a 
taxable year exceed the credit allowed by this sec-
tion (determined without regard to paragraph 
(1)), the tax imposed by this chapter for the tax-
able year shall be increased by the amount of 
such excess. 
‘‘(B) LIMITATION ON INCREASE WHERE IN-
COME
LESS
THAN
400
PERCENT
OF
POVERTY 
LINE.— 
‘‘(i) IN GENERAL.—In the case of an 
applicable taxpayer whose household income 
is less than 400 percent of the poverty line 
for the size of the family involved for the 
taxable year, the amount of the increase 
under subparagraph (A) shall in no event 
exceed $400 ($250 in the case of a taxpayer 
whose tax is determined under section 1(c) 
for the taxable year). 
‘‘(ii) INDEXING
OF
AMOUNT.—In the 
case of any calendar year beginning after 
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2014, each of the dollar amounts under 
clause (i) shall be increased by an amount 
equal to— 
‘‘(I) such dollar amount, multi-
plied by 
‘‘(II) the cost-of-living adjustment 
determined under section 1(f)(3) for 
the calendar year, determined by sub-
stituting ‘calendar year 2013’ for ‘cal-
endar year 1992’ in subparagraph (B) 
thereof. 
If the amount of any increase under clause 
(i) is not a multiple of $50, such increase 
shall be rounded to the next lowest multiple 
of $50. 
‘‘(g) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary to carry out the provi-
sions of this section, including regulations which provide 
for— 
‘‘(1) the coordination of the credit allowed under 
this section with the program for advance payment of 
the credit under section 1412 of the Patient Protec-
tion and Affordable Care Act, and 
‘‘(2) the application of subsection (f) where the 
filing status of the taxpayer for a taxable year is dif-
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ferent from such status used for determining the ad-
vance payment of the credit.’’. 
(b) DISALLOWANCE OF DEDUCTION.—Section 280C of 
the Internal Revenue Code of 1986 is amended by adding 
at the end the following new subsection: 
‘‘(g) CREDIT FOR HEALTH INSURANCE PREMIUMS.— 
No deduction shall be allowed for the portion of the pre-
miums paid by the taxpayer for coverage of 1 or more indi-
viduals under a qualified health plan which is equal to the 
amount of the credit determined for the taxable year under 
section 36B(a) with respect to such premiums.’’. 
(c) STUDY ON AFFORDABLE COVERAGE.— 
(1) STUDY AND REPORT.— 
(A) IN GENERAL.—Not later than 5 years 
after the date of the enactment of this Act, the 
Comptroller General shall conduct a study on the 
affordability of health insurance coverage, in-
cluding— 
(i) the impact of the tax credit for 
qualified health insurance coverage of indi-
viduals under section 36B of the Internal 
Revenue Code of 1986 and the tax credit for 
employee health insurance expenses of small 
employers under section 45R of such Code 
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on maintaining and expanding the health 
insurance coverage of individuals; 
(ii) the availability of affordable health 
benefits plans, including a study of whether 
the percentage of household income used for 
purposes of section 36B(c)(2)(C) of the In-
ternal Revenue Code of 1986 (as added by 
this section) is the appropriate level for de-
termining whether employer-provided cov-
erage is affordable for an employee and 
whether such level may be lowered without 
significantly increasing the costs to the Fed-
eral Government and reducing employer- 
provided coverage; and 
(iii) the ability of individuals to main-
tain essential health benefits coverage (as 
defined in section 5000A(f) of the Internal 
Revenue Code of 1986). 
(B) REPORT.—The Comptroller General 
shall submit to the appropriate committees of 
Congress a report on the study conducted under 
subparagraph (A), together with legislative rec-
ommendations relating to the matters studied 
under such subparagraph. 
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(2) APPROPRIATE COMMITTEES OF CONGRESS.— 
In this subsection, the term ‘‘appropriate committees 
of Congress’’ means the Committee on Ways and 
Means, the Committee on Education and Labor, and 
the Committee on Energy and Commerce of the House 
of Representatives and the Committee on Finance and 
the Committee on Health, Education, Labor and Pen-
sions of the Senate. 
(d) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 1324(b) of title 31, 
United States Code, is amended by inserting ‘‘36B,’’ 
after ‘‘36A,’’. 
(2) The table of sections for subpart C of part IV 
of subchapter A of chapter 1 of the Internal Revenue 
Code of 1986 is amended by inserting after the item 
relating to section 36A the following new item: 
‘‘Sec. 36B. Refundable credit for coverage under a qualified health plan.’’. 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years ending after December 
31, 2013. 
SEC. 1402. REDUCED COST-SHARING FOR INDIVIDUALS EN-
ROLLING IN QUALIFIED HEALTH PLANS. 
(a) IN GENERAL.—In the case of an eligible insured 
enrolled in a qualified health plan— 
(1) the Secretary shall notify the issuer of the 
plan of such eligibility; and 
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(2) the issuer shall reduce the cost-sharing under 
the plan at the level and in the manner specified in 
subsection (c). 
(b) ELIGIBLE INSURED.—In this section, the term ‘‘eli-
gible insured’’ means an individual— 
(1) who enrolls in a qualified health plan in the 
silver level of coverage in the individual market of-
fered through an Exchange; and 
(2) whose household income exceeds 100 percent 
but does not exceed 400 percent of the poverty line for 
a family of the size involved. 
In the case of an individual described in section 
36B(c)(1)(B) of the Internal Revenue Code of 1986, the in-
dividual shall be treated as having household income equal 
to 100 percent for purposes of applying this section. 
(c) DETERMINATION OF REDUCTION IN COST-SHAR-
ING.— 
(1) REDUCTION IN OUT-OF-POCKET LIMIT.— 
(A) IN GENERAL.—The reduction in cost- 
sharing under this subsection shall first be 
achieved by reducing the applicable out-of pocket 
limit under section 1302(c)(1) in the case of— 
(i) an eligible insured whose household 
income is more than 100 percent but not 
more than 200 percent of the poverty line 
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for a family of the size involved, by two- 
thirds; 
(ii) an eligible insured whose household 
income is more than 200 percent but not 
more than 300 percent of the poverty line 
for a family of the size involved, by one- 
half; and 
(iii) an eligible insured whose house-
hold income is more than 300 percent but 
not more than 400 percent of the poverty 
line for a family of the size involved, by 
one-third. 
(B) COORDINATION WITH ACTUARIAL VALUE 
LIMITS.— 
(i) IN GENERAL.—The Secretary shall 
ensure the reduction under this paragraph 
shall not result in an increase in the plan’s 
share of the total allowed costs of benefits 
provided under the plan above— 
(I) 90 percent in the case of an el-
igible insured described in paragraph 
(2)(A); 
(II) 80 percent in the case of an 
eligible insured described in paragraph 
(2)(B); and 
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(III) 70 percent in the case of an 
eligible insured described in clause (ii) 
or (iii) of subparagraph (A). 
(ii) 
ADJUSTMENT.—The 
Secretary 
shall adjust the out-of pocket limits under 
paragraph (1) if necessary to ensure that 
such limits do not cause the respective actu-
arial values to exceed the levels specified in 
clause (i). 
(2) ADDITIONAL REDUCTION FOR LOWER INCOME 
INSUREDS.—The Secretary shall establish procedures 
under which the issuer of a qualified health plan to 
which this section applies shall further reduce cost- 
sharing under the plan in a manner sufficient to— 
(A) in the case of an eligible insured whose 
household income is not less than 100 percent 
but not more than 150 percent of the poverty 
line for a family of the size involved, increase the 
plan’s share of the total allowed costs of benefits 
provided under the plan to 90 percent of such 
costs; and 
(B) in the case of an eligible insured whose 
household income is more than 150 percent but 
not more than 200 percent of the poverty line for 
a family of the size involved, increase the plan’s 
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share of the total allowed costs of benefits pro-
vided under the plan to 80 percent of such costs. 
(3) METHODS FOR REDUCING COST-SHARING.— 
(A) IN GENERAL.—An issuer of a qualified 
health plan making reductions under this sub-
section shall notify the Secretary of such reduc-
tions and the Secretary shall make periodic and 
timely payments to the issuer equal to the value 
of the reductions. 
(B) CAPITATED PAYMENTS.—The Secretary 
may establish a capitated payment system to 
carry out the payment of cost-sharing reductions 
under this section. Any such system shall take 
into account the value of the reductions and 
make appropriate risk adjustments to such pay-
ments. 
(4) ADDITIONAL
BENEFITS.—If a qualified 
health plan under section 1302(b)(5) offers benefits in 
addition to the essential health benefits required to be 
provided by the plan, or a State requires a qualified 
health plan under section 1311(d)(3)(B) to cover ben-
efits in addition to the essential health benefits re-
quired to be provided by the plan, the reductions in 
cost-sharing under this section shall not apply to such 
additional benefits. 
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(5) SPECIAL
RULE
FOR
PEDIATRIC
DENTAL 
PLANS.—If an individual enrolls in both a qualified 
health plan and a plan described in section 
1311(d)(2)(B)(ii)(I) for any plan year, subsection (a) 
shall not apply to that portion of any reduction in 
cost-sharing under subsection (c) that (under regula-
tions prescribed by the Secretary) is properly allo-
cable to pediatric dental benefits which are included 
in the essential health benefits required to be provided 
by 
a 
qualified 
health 
plan 
under 
section 
1302(b)(1)(J). 
(d) SPECIAL RULES FOR INDIANS.— 
(1) INDIANS UNDER 300 PERCENT OF POVERTY.— 
If an individual enrolled in any qualified health plan 
in the individual market through an Exchange is an 
Indian (as defined in section 4(d) of the Indian Self- 
Determination and Education Assistance Act (25 
U.S.C. 450b(d))) whose household income is not more 
than 300 percent of the poverty line for a family of 
the size involved, then, for purposes of this section— 
(A) such individual shall be treated as an 
eligible insured; and 
(B) the issuer of the plan shall eliminate 
any cost-sharing under the plan. 
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(2) ITEMS OR SERVICES FURNISHED THROUGH 
INDIAN HEALTH PROVIDERS.—If an Indian (as so de-
fined) enrolled in a qualified health plan is furnished 
an item or service directly by the Indian Health 
Service, an Indian Tribe, Tribal Organization, or 
Urban Indian Organization or through referral under 
contract health services— 
(A) no cost-sharing under the plan shall be 
imposed under the plan for such item or service; 
and 
(B) the issuer of the plan shall not reduce 
the payment to any such entity for such item or 
service by the amount of any cost-sharing that 
would be due from the Indian but for subpara-
graph (A). 
(3) PAYMENT.—The Secretary shall pay to the 
issuer of a qualified health plan the amount necessary 
to reflect the increase in actuarial value of the plan 
required by reason of this subsection. 
(e) 
RULES
FOR
INDIVIDUALS
NOT
LAWFULLY 
PRESENT.— 
(1) IN GENERAL.—If an individual who is an el-
igible insured is not lawfully present— 
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(A) no cost-sharing reduction under this 
section shall apply with respect to the indi-
vidual; and 
(B) for purposes of applying this section, 
the determination as to what percentage a tax-
payer’s household income bears to the poverty 
level for a family of the size involved shall be 
made under one of the following methods: 
(i) A method under which— 
(I) the taxpayer’s family size is 
determined by not taking such individ-
uals into account, and 
(II) the taxpayer’s household in-
come is equal to the product of the tax-
payer’s household income (determined 
without regard to this subsection) and 
a fraction— 
(aa) the numerator of which 
is the poverty line for the tax-
payer’s family size determined 
after application of subclause (I), 
and 
(bb) 
the 
denominator 
of 
which is the poverty line for the 
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taxpayer’s family size determined 
without regard to subclause (I). 
(ii) A comparable method reaching the 
same result as the method under clause (i). 
(2) LAWFULLY PRESENT.—For purposes of this 
section, an individual shall be treated as lawfully 
present only if the individual is, and is reasonably 
expected to be for the entire period of enrollment for 
which the cost-sharing reduction under this section is 
being claimed, a citizen or national of the United 
States or an alien lawfully present in the United 
States. 
(3) SECRETARIAL
AUTHORITY.—The Secretary, 
in consultation with the Secretary of the Treasury, 
shall prescribe rules setting forth the methods by 
which calculations of family size and household in-
come are made for purposes of this subsection. Such 
rules shall be designed to ensure that the least burden 
is placed on individuals enrolling in qualified health 
plans through an Exchange and taxpayers eligible for 
the credit allowable under this section. 
(f) DEFINITIONS AND SPECIAL RULES.—In this sec-
tion: 
(1) IN GENERAL.—Any term used in this section 
which is also used in section 36B of the Internal Rev-
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enue Code of 1986 shall have the meaning given such 
term by such section. 
(2) LIMITATIONS ON REDUCTION.—No cost-shar-
ing reduction shall be allowed under this section with 
respect to coverage for any month unless the month is 
a coverage month with respect to which a credit is al-
lowed to the insured (or an applicable taxpayer on 
behalf of the insured) under section 36B of such Code. 
(3) DATA USED FOR ELIGIBILITY.—Any deter-
mination under this section shall be made on the 
basis of the taxable year for which the advance deter-
mination is made under section 1412 and not the tax-
able year for which the credit under section 36B of 
such Code is allowed. 
Subpart B—Eligibility Determinations 
SEC. 1411. PROCEDURES FOR DETERMINING ELIGIBILITY 
FOR EXCHANGE PARTICIPATION, PREMIUM 
TAX CREDITS AND REDUCED COST-SHARING, 
AND INDIVIDUAL RESPONSIBILITY EXEMP-
TIONS. 
(a) ESTABLISHMENT
OF PROGRAM.—The Secretary 
shall establish a program meeting the requirements of this 
section for determining— 
(1) whether an individual who is to be covered 
in the individual market by a qualified health plan 
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offered through an Exchange, or who is claiming a 
premium tax credit or reduced cost-sharing, meets the 
requirements of sections 1312(f)(3), 1402(e), and 
1412(d) of this title and section 36B(e) of the Internal 
Revenue Code of 1986 that the individual be a citizen 
or national of the United States or an alien lawfully 
present in the United States; 
(2) in the case of an individual claiming a pre-
mium tax credit or reduced cost-sharing under section 
36B of such Code or section 1402— 
(A) whether the individual meets the income 
and coverage requirements of such sections; and 
(B) the amount of the tax credit or reduced 
cost-sharing; 
(3) whether an individual’s coverage under an 
employer-sponsored health benefits plan is treated as 
unaffordable 
under 
sections 
36B(c)(2)(C) 
and 
5000A(e)(2); and 
(4) whether to grant a certification under section 
1311(d)(4)(H) attesting that, for purposes of the indi-
vidual responsibility requirement under section 
5000A of the Internal Revenue Code of 1986, an indi-
vidual is entitled to an exemption from either the in-
dividual responsibility requirement or the penalty 
imposed by such section. 
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(b) INFORMATION REQUIRED TO BE PROVIDED BY AP-
PLICANTS.— 
(1) IN GENERAL.—An applicant for enrollment 
in a qualified health plan offered through an Ex-
change in the individual market shall provide— 
(A) the name, address, and date of birth of 
each individual who is to be covered by the plan 
(in this subsection referred to as an ‘‘enrollee’’); 
and 
(B) the information required by any of the 
following paragraphs that is applicable to an en-
rollee. 
(2) CITIZENSHIP OR IMMIGRATION STATUS.—The 
following information shall be provided with respect 
to every enrollee: 
(A) In the case of an enrollee whose eligi-
bility is based on an attestation of citizenship of 
the enrollee, the enrollee’s social security number. 
(B) In the case of an individual whose eligi-
bility is based on an attestation of the enrollee’s 
immigration status, the enrollee’s social security 
number (if applicable) and such identifying in-
formation with respect to the enrollee’s immigra-
tion status as the Secretary, after consultation 
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with the Secretary of Homeland Security, deter-
mines appropriate. 
(3) ELIGIBILITY AND AMOUNT OF TAX CREDIT OR 
REDUCED COST-SHARING.—In the case of an enrollee 
with respect to whom a premium tax credit or re-
duced cost-sharing under section 36B of such Code or 
section 1402 is being claimed, the following informa-
tion: 
(A) INFORMATION REGARDING INCOME AND 
FAMILY SIZE.—The information described in sec-
tion 6103(l)(21) for the taxable year ending with 
or within the second calendar year preceding the 
calendar year in which the plan year begins. 
(B) CHANGES IN CIRCUMSTANCES.—The in-
formation described in section 1412(b)(2), in-
cluding information with respect to individuals 
who were not required to file an income tax re-
turn for the taxable year described in subpara-
graph (A) or individuals who experienced 
changes in marital status or family size or sig-
nificant reductions in income. 
(4) EMPLOYER-SPONSORED
COVERAGE.—In the 
case of an enrollee with respect to whom eligibility for 
a premium tax credit under section 36B of such Code 
or cost-sharing reduction under section 1402 is being 
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established on the basis that the enrollee’s (or related 
individual’s) employer is not treated under section 
36B(c)(2)(C) of such Code as providing minimum es-
sential coverage or affordable minimum essential cov-
erage, the following information: 
(A) The name, address, and employer iden-
tification number (if available) of the employer. 
(B) Whether the enrollee or individual is a 
full-time employee and whether the employer 
provides such minimum essential coverage. 
(C) If the employer provides such minimum 
essential coverage, the lowest cost option for the 
enrollee’s or individual’s enrollment status and 
the enrollee’s or individual’s required contribu-
tion 
(within 
the 
meaning 
of 
section 
5000A(e)(1)(B) of such Code) under the em-
ployer-sponsored plan. 
(D) If an enrollee claims an employer’s 
minimum essential coverage is unaffordable, the 
information described in paragraph (3). 
If an enrollee changes employment or obtains addi-
tional employment while enrolled in a qualified 
health plan for which such credit or reduction is al-
lowed, the enrollee shall notify the Exchange of such 
change or additional employment and provide the in-
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formation described in this paragraph with respect to 
the new employer. 
(5) EXEMPTIONS FROM INDIVIDUAL RESPONSI-
BILITY REQUIREMENTS.—In the case of an individual 
who is seeking an exemption certificate under section 
1311(d)(4)(H) from any requirement or penalty im-
posed by section 5000A, the following information: 
(A) In the case of an individual seeking ex-
emption based on the individual’s status as a 
member of an exempt religious sect or division, 
as a member of a health care sharing ministry, 
as an Indian, or as an individual eligible for a 
hardship exemption, such information as the 
Secretary shall prescribe. 
(B) In the case of an individual seeking ex-
emption based on the lack of affordable coverage 
or the individual’s status as a taxpayer with 
household income less than 100 percent of the 
poverty line, the information described in para-
graphs (3) and (4), as applicable. 
(c) VERIFICATION
OF INFORMATION CONTAINED
IN 
RECORDS OF SPECIFIC FEDERAL OFFICIALS.— 
(1) 
INFORMATION
TRANSFERRED
TO
SEC-
RETARY.—An Exchange shall submit the information 
provided by an applicant under subsection (b) to the 
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Secretary for verification in accordance with the re-
quirements of this subsection and subsection (d). 
(2) CITIZENSHIP OR IMMIGRATION STATUS.— 
(A) COMMISSIONER OF SOCIAL SECURITY.— 
The Secretary shall submit to the Commissioner 
of Social Security the following information for 
a determination as to whether the information 
provided is consistent with the information in 
the records of the Commissioner: 
(i) The name, date of birth, and social 
security number of each individual for 
whom such information was provided under 
subsection (b)(2). 
(ii) The attestation of an individual 
that the individual is a citizen. 
(B) SECRETARY
OF
HOMELAND
SECU-
RITY.— 
(i) IN GENERAL.—In the case of an in-
dividual— 
(I) who attests that the individual 
is an alien lawfully present in the 
United States; or 
(II) who attests that the indi-
vidual is a citizen but with respect to 
whom the Commissioner of Social Se-
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curity has notified the Secretary under 
subsection (e)(3) that the attestation is 
inconsistent with information in the 
records maintained by the Commis-
sioner; 
the Secretary shall submit to the Secretary 
of Homeland Security the information de-
scribed in clause (ii) for a determination as 
to whether the information provided is con-
sistent with the information in the records 
of the Secretary of Homeland Security. 
(ii) INFORMATION.—The information 
described in clause (ii) is the following: 
(I) The name, date of birth, and 
any identifying information with re-
spect to the individual’s immigration 
status 
provided 
under 
subsection 
(b)(2). 
(II) The attestation that the indi-
vidual is an alien lawfully present in 
the United States or in the case of an 
individual described in clause (i)(II), 
the attestation that the individual is a 
citizen. 
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(3) ELIGIBILITY
FOR
TAX
CREDIT
AND
COST- 
SHARING
REDUCTION.—The Secretary shall submit 
the information described in subsection (b)(3)(A) pro-
vided under paragraph (3), (4), or (5) of subsection 
(b) to the Secretary of the Treasury for verification 
of household income and family size for purposes of 
eligibility. 
(4) METHODS.— 
(A) IN GENERAL.—The Secretary, in con-
sultation with the Secretary of the Treasury, the 
Secretary of Homeland Security, and the Com-
missioner of Social Security, shall provide that 
verifications and determinations under this sub-
section shall be done— 
(i) through use of an on-line system or 
otherwise for the electronic submission of, 
and response to, the information submitted 
under this subsection with respect to an ap-
plicant; or 
(ii) by determining the consistency of 
the information submitted with the infor-
mation maintained in the records of the 
Secretary of the Treasury, the Secretary of 
Homeland Security, or the Commissioner of 
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Social Security through such other method 
as is approved by the Secretary. 
(B) 
FLEXIBILITY.—The 
Secretary 
may 
modify the methods used under the program es-
tablished by this section for the Exchange and 
verification of information if the Secretary deter-
mines such modifications would reduce the ad-
ministrative costs and burdens on the applicant, 
including allowing an applicant to request the 
Secretary of the Treasury to provide the infor-
mation described in paragraph (3) directly to 
the Exchange or to the Secretary. The Secretary 
shall not make any such modification unless the 
Secretary determines that any applicable re-
quirements under this section and section 6103 
of the Internal Revenue Code of 1986 with re-
spect to the confidentiality, disclosure, mainte-
nance, or use of information will be met. 
(d) VERIFICATION BY SECRETARY.—In the case of in-
formation provided under subsection (b) that is not required 
under subsection (c) to be submitted to another person for 
verification, the Secretary shall verify the accuracy of such 
information in such manner as the Secretary determines 
appropriate, 
including 
delegating 
responsibility 
for 
verification to the Exchange. 
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(e) ACTIONS RELATING TO VERIFICATION.— 
(1) IN GENERAL.—Each person to whom the Sec-
retary provided information under subsection (c) 
shall report to the Secretary under the method estab-
lished under subsection (c)(4) the results of its 
verification and the Secretary shall notify the Ex-
change of such results. Each person to whom the Sec-
retary provided information under subsection (d) 
shall report to the Secretary in such manner as the 
Secretary determines appropriate. 
(2) VERIFICATION.— 
(A) ELIGIBILITY
FOR
ENROLLMENT
AND 
PREMIUM TAX CREDITS AND COST-SHARING RE-
DUCTIONS.—If information provided by an ap-
plicant under paragraphs (1), (2), (3), and (4) 
of subsection (b) is verified under subsections (c) 
and (d)— 
(i) the individual’s eligibility to enroll 
through the Exchange and to apply for pre-
mium tax credits and cost-sharing reduc-
tions shall be satisfied; and 
(ii) the Secretary shall, if applicable, 
notify the Secretary of the Treasury under 
section 1412(c) of the amount of any ad-
vance payment to be made. 
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(B) EXEMPTION FROM INDIVIDUAL RESPON-
SIBILITY.—If information provided by an appli-
cant under subsection (b)(5) is verified under 
subsections (c) and (d), the Secretary shall issue 
the certification of exemption described in section 
1311(d)(4)(H). 
(3) INCONSISTENCIES
INVOLVING
ATTESTATION 
OF CITIZENSHIP OR LAWFUL PRESENCE.—If the infor-
mation provided by any applicant under subsection 
(b)(2) is inconsistent with information in the records 
maintained by the Commissioner of Social Security 
or Secretary of Homeland Security, whichever is ap-
plicable, the applicant’s eligibility will be determined 
in the same manner as an individual’s eligibility 
under the medicaid program is determined under sec-
tion 1902(ee) of the Social Security Act (as in effect 
on January 1, 2010). 
(4) INCONSISTENCIES INVOLVING OTHER INFOR-
MATION.— 
(A) IN GENERAL.—If the information pro-
vided by an applicant under subsection (b) 
(other than subsection (b)(2)) is inconsistent 
with information in the records maintained by 
persons under subsection (c) or is not verified 
under subsection (d), the Secretary shall notify 
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HR 3590 EAS/PP 
the Exchange and the Exchange shall take the 
following actions: 
(i) REASONABLE
EFFORT.—The Ex-
change shall make a reasonable effort to 
identify and address the causes of such in-
consistency, 
including 
through 
typo-
graphical or other clerical errors, by con-
tacting the applicant to confirm the accu-
racy of the information, and by taking such 
additional actions as the Secretary, through 
regulation or other guidance, may identify. 
(ii) NOTICE
AND
OPPORTUNITY
TO 
CORRECT.—In the case the inconsistency or 
inability to verify is not resolved under sub-
paragraph (A), the Exchange shall— 
(I) notify the applicant of such 
fact; 
(II) provide the applicant an op-
portunity to either present satisfactory 
documentary evidence or resolve the in-
consistency with the person verifying 
the information under subsection (c) or 
(d) during the 90-day period beginning 
the date on which the notice required 
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HR 3590 EAS/PP 
under subclause (I) is sent to the ap-
plicant. 
The Secretary may extend the 90-day pe-
riod under subclause (II) for enrollments oc-
curring during 2014. 
(B) SPECIFIC ACTIONS NOT INVOLVING CITI-
ZENSHIP OR LAWFUL PRESENCE.— 
(i) IN GENERAL.—Except as provided 
in paragraph (3), the Exchange shall, dur-
ing any period before the close of the period 
under subparagraph (A)(ii)(II), make any 
determination under paragraphs (2), (3), 
and (4) of subsection (a) on the basis of the 
information contained on the application. 
(ii) ELIGIBILITY OR AMOUNT OF CRED-
IT OR REDUCTION.—If an inconsistency in-
volving the eligibility for, or amount of, any 
premium tax credit or cost-sharing reduc-
tion is unresolved under this subsection as 
of the close of the period under subpara-
graph (A)(ii)(II), the Exchange shall notify 
the applicant of the amount (if any) of the 
credit or reduction that is determined on 
the basis of the records maintained by per-
sons under subsection (c). 
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HR 3590 EAS/PP 
(iii) EMPLOYER
AFFORDABILITY.—If 
the Secretary notifies an Exchange that an 
enrollee is eligible for a premium tax credit 
under section 36B of such Code or cost-shar-
ing reduction under section 1402 because 
the enrollee’s (or related individual’s) em-
ployer does not provide minimum essential 
coverage through an employer-sponsored 
plan or that the employer does provide that 
coverage but it is not affordable coverage, 
the Exchange shall notify the employer of 
such fact and that the employer may be lia-
ble for the payment assessed under section 
4980H of such Code. 
(iv) EXEMPTION.—In any case where 
the inconsistency involving, or inability to 
verify, information provided under sub-
section (b)(5) is not resolved as of the close 
of 
the 
period 
under 
subparagraph 
(A)(ii)(II), the Exchange shall notify an ap-
plicant that no certification of exemption 
from any requirement or payment under 
section 5000A of such Code will be issued. 
(C) APPEALS
PROCESS.—The Exchange 
shall also notify each person receiving notice 
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HR 3590 EAS/PP 
under this paragraph of the appeals processes es-
tablished under subsection (f). 
(f) APPEALS AND REDETERMINATIONS.— 
(1) IN GENERAL.—The Secretary, in consultation 
with the Secretary of the Treasury, the Secretary of 
Homeland Security, and the Commissioner of Social 
Security, shall establish procedures by which the Sec-
retary or one of such other Federal officers— 
(A) hears and makes decisions with respect 
to appeals of any determination under subsection 
(e); and 
(B) redetermines eligibility on a periodic 
basis in appropriate circumstances. 
(2) EMPLOYER LIABILITY.— 
(A) IN GENERAL.—The Secretary shall es-
tablish a separate appeals process for employers 
who are notified under subsection (e)(4)(C) that 
the employer may be liable for a tax imposed by 
section 4980H of the Internal Revenue Code of 
1986 with respect to an employee because of a 
determination that the employer does not provide 
minimum essential coverage through an em-
ployer-sponsored plan or that the employer does 
provide that coverage but it is not affordable cov-
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HR 3590 EAS/PP 
erage with respect to an employee. Such process 
shall provide an employer the opportunity to— 
(i) present information to the Ex-
change for review of the determination ei-
ther by the Exchange or the person making 
the determination, including evidence of the 
employer-sponsored plan and employer con-
tributions to the plan; and 
(ii) have access to the data used to 
make the determination to the extent allow-
able by law. 
Such process shall be in addition to any rights 
of appeal the employer may have under subtitle 
F of such Code. 
(B) 
CONFIDENTIALITY.—Notwithstanding 
any provision of this title (or the amendments 
made by this title) or section 6103 of the Inter-
nal Revenue Code of 1986, an employer shall not 
be entitled to any taxpayer return information 
with respect to an employee for purposes of de-
termining whether the employer is subject to the 
penalty under section 4980H of such Code with 
respect to the employee, except that— 
(i) the employer may be notified as to 
the name of an employee and whether or 
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not the employee’s income is above or below 
the threshold by which the affordability of 
an employer’s health insurance coverage is 
measured; and 
(ii) this subparagraph shall not apply 
to an employee who provides a waiver (at 
such time and in such manner as the Sec-
retary may prescribe) authorizing an em-
ployer to have access to the employee’s tax-
payer return information. 
(g) CONFIDENTIALITY OF APPLICANT INFORMATION.— 
(1) IN GENERAL.—An applicant for insurance 
coverage or for a premium tax credit or cost-sharing 
reduction shall be required to provide only the infor-
mation strictly necessary to authenticate identity, de-
termine eligibility, and determine the amount of the 
credit or reduction. 
(2) RECEIPT OF INFORMATION.—Any person who 
receives information provided by an applicant under 
subsection (b) (whether directly or by another person 
at the request of the applicant), or receives informa-
tion from a Federal agency under subsection (c), (d), 
or (e), shall— 
(A) use the information only for the pur-
poses of, and to the extent necessary in, ensuring 
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HR 3590 EAS/PP 
the efficient operation of the Exchange, including 
verifying the eligibility of an individual to enroll 
through an Exchange or to claim a premium tax 
credit or cost-sharing reduction or the amount of 
the credit or reduction; and 
(B) not disclose the information to any 
other person except as provided in this section. 
(h) PENALTIES.— 
(1) FALSE OR FRAUDULENT INFORMATION.— 
(A) CIVIL PENALTY.— 
(i) IN GENERAL.—If— 
(I) any person fails to provides 
correct information under subsection 
(b); and 
(II) such failure is attributable to 
negligence or disregard of any rules or 
regulations of the Secretary, 
such person shall be subject, in addition to 
any other penalties that may be prescribed 
by law, to a civil penalty of not more than 
$25,000 with respect to any failures involv-
ing an application for a plan year. For 
purposes of this subparagraph, the terms 
‘‘negligence’’ and ‘‘disregard’’ shall have the 
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HR 3590 EAS/PP 
same meanings as when used in section 
6662 of the Internal Revenue Code of 1986. 
(ii) REASONABLE CAUSE EXCEPTION.— 
No penalty shall be imposed under clause 
(i) if the Secretary determines that there 
was a reasonable cause for the failure and 
that the person acted in good faith. 
(B) KNOWING AND WILLFUL VIOLATIONS.— 
Any person who knowingly and willfully pro-
vides false or fraudulent information under sub-
section (b) shall be subject, in addition to any 
other penalties that may be prescribed by law, to 
a civil penalty of not more than $250,000. 
(2) IMPROPER USE OR DISCLOSURE OF INFORMA-
TION.—Any person who knowingly and willfully uses 
or discloses information in violation of subsection (g) 
shall be subject, in addition to any other penalties 
that may be prescribed by law, to a civil penalty of 
not more than $25,000. 
(3) LIMITATIONS ON LIENS AND LEVIES.—The 
Secretary (or, if applicable, the Attorney General of 
the United States) shall not— 
(A) file notice of lien with respect to any 
property of a person by reason of any failure to 
pay the penalty imposed by this subsection; or 
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(B) levy on any such property with respect 
to such failure. 
(i) STUDY OF ADMINISTRATION OF EMPLOYER RE-
SPONSIBILITY.— 
(1) IN GENERAL.—The Secretary of Health and 
Human Services shall, in consultation with the Sec-
retary of the Treasury, conduct a study of the proce-
dures that are necessary to ensure that in the admin-
istration of this title and section 4980H of the Inter-
nal Revenue Code of 1986 (as added by section 1513) 
that the following rights are protected: 
(A) The rights of employees to preserve their 
right to confidentiality of their taxpayer return 
information and their right to enroll in a quali-
fied health plan through an Exchange if an em-
ployer does not provide affordable coverage. 
(B) The rights of employers to adequate due 
process and access to information necessary to 
accurately determine any payment assessed on 
employers. 
(2) REPORT.—Not later than January 1, 2013, 
the Secretary of Health and Human Services shall re-
port the results of the study conducted under para-
graph (1), including any recommendations for legisla-
tive changes, to the Committees on Finance and 
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Health, Education, Labor and Pensions of the Senate 
and the Committees of Education and Labor and 
Ways and Means of the House of Representatives. 
SEC. 1412. ADVANCE DETERMINATION AND PAYMENT OF 
PREMIUM TAX CREDITS AND COST-SHARING 
REDUCTIONS. 
(a) IN GENERAL.—The Secretary, in consultation with 
the Secretary of the Treasury, shall establish a program 
under which— 
(1) upon request of an Exchange, advance deter-
minations are made under section 1411 with respect 
to the income eligibility of individuals enrolling in a 
qualified health plan in the individual market 
through the Exchange for the premium tax credit al-
lowable under section 36B of the Internal Revenue 
Code of 1986 and the cost-sharing reductions under 
section 1402; 
(2) the Secretary notifies— 
(A) the Exchange and the Secretary of the 
Treasury of the advance determinations; and 
(B) the Secretary of the Treasury of the 
name and employer identification number of 
each employer with respect to whom 1 or more 
employee of the employer were determined to be 
eligible for the premium tax credit under section 
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36B of the Internal Revenue Code of 1986 and 
the cost-sharing reductions under section 1402 
because— 
(i) the employer did not provide min-
imum essential coverage; or 
(ii) the employer provided such min-
imum essential coverage but it was deter-
mined under section 36B(c)(2)(C) of such 
Code to either be unaffordable to the em-
ployee or not provide the required min-
imum actuarial value; and 
(3) the Secretary of the Treasury makes advance 
payments of such credit or reductions to the issuers 
of the qualified health plans in order to reduce the 
premiums payable by individuals eligible for such 
credit. 
(b) ADVANCE DETERMINATIONS.— 
(1) IN GENERAL.—The Secretary shall provide 
under the program established under subsection (a) 
that advance determination of eligibility with respect 
to any individual shall be made— 
(A) during the annual open enrollment pe-
riod applicable to the individual (or such other 
enrollment period as may be specified by the 
Secretary); and 
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(B) on the basis of the individual’s house-
hold income for the most recent taxable year for 
which the Secretary, after consultation with the 
Secretary of the Treasury, determines informa-
tion is available. 
(2) CHANGES
IN
CIRCUMSTANCES.—The Sec-
retary shall provide procedures for making advance 
determinations on the basis of information other than 
that described in paragraph (1)(B) in cases where in-
formation included with an application form dem-
onstrates substantial changes in income, changes in 
family size or other household circumstances, change 
in filing status, the filing of an application for unem-
ployment benefits, or other significant changes affect-
ing eligibility, including— 
(A) allowing an individual claiming a de-
crease of 20 percent or more in income, or filing 
an application for unemployment benefits, to 
have eligibility for the credit determined on the 
basis of household income for a later period or 
on the basis of the individual’s estimate of such 
income for the taxable year; and 
(B) the determination of household income 
in cases where the taxpayer was not required to 
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file a return of tax imposed by this chapter for 
the second preceding taxable year. 
(c) PAYMENT OF PREMIUM TAX CREDITS AND COST- 
SHARING REDUCTIONS.— 
(1) IN GENERAL.—The Secretary shall notify the 
Secretary of the Treasury and the Exchange through 
which the individual is enrolling of the advance deter-
mination under section 1411. 
(2) PREMIUM TAX CREDIT.— 
(A) IN
GENERAL.—The Secretary of the 
Treasury shall make the advance payment under 
this section of any premium tax credit allowed 
under section 36B of the Internal Revenue Code 
of 1986 to the issuer of a qualified health plan 
on a monthly basis (or such other periodic basis 
as the Secretary may provide). 
(B) ISSUER RESPONSIBILITIES.—An issuer 
of a qualified health plan receiving an advance 
payment with respect to an individual enrolled 
in the plan shall— 
(i) reduce the premium charged the in-
sured for any period by the amount of the 
advance payment for the period; 
(ii) notify the Exchange and the Sec-
retary of such reduction; 
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(iii) include with each billing state-
ment the amount by which the premium for 
the plan has been reduced by reason of the 
advance payment; and 
(iv) in the case of any nonpayment of 
premiums by the insured— 
(I) notify the Secretary of such 
nonpayment; and 
(II) allow a 3-month grace period 
for nonpayment of premiums before 
discontinuing coverage. 
(3) COST-SHARING REDUCTIONS.—The Secretary 
shall also notify the Secretary of the Treasury and the 
Exchange under paragraph (1) if an advance pay-
ment of the cost-sharing reductions under section 
1402 is to be made to the issuer of any qualified 
health plan with respect to any individual enrolled in 
the plan. The Secretary of the Treasury shall make 
such advance payment at such time and in such 
amount as the Secretary specifies in the notice. 
(d) NO FEDERAL PAYMENTS FOR INDIVIDUALS NOT 
LAWFULLY PRESENT.—Nothing in this subtitle or the 
amendments made by this subtitle allows Federal payments, 
credits, or cost-sharing reductions for individuals who are 
not lawfully present in the United States. 
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(e) STATE FLEXIBILITY.—Nothing in this subtitle or 
the amendments made by this subtitle shall be construed 
to prohibit a State from making payments to or on behalf 
of an individual for coverage under a qualified health plan 
offered through an Exchange that are in addition to any 
credits or cost-sharing reductions allowable to the indi-
vidual under this subtitle and such amendments. 
SEC. 1413. STREAMLINING OF PROCEDURES FOR ENROLL-
MENT THROUGH AN EXCHANGE AND STATE 
MEDICAID, CHIP, AND HEALTH SUBSIDY PRO-
GRAMS. 
(a) IN GENERAL.—The Secretary shall establish a sys-
tem meeting the requirements of this section under which 
residents of each State may apply for enrollment in, receive 
a determination of eligibility for participation in, and con-
tinue participation in, applicable State health subsidy pro-
grams. Such system shall ensure that if an individual ap-
plying to an Exchange is found through screening to be eli-
gible for medical assistance under the State medicaid plan 
under title XIX, or eligible for enrollment under a State 
children’s health insurance program (CHIP) under title 
XXI of such Act, the individual is enrolled for assistance 
under such plan or program. 
(b) REQUIREMENTS RELATING TO FORMS AND NO-
TICE.— 
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(1) REQUIREMENTS RELATING TO FORMS.— 
(A) IN GENERAL.—The Secretary shall de-
velop and provide to each State a single, stream-
lined form that— 
(i) may be used to apply for all appli-
cable State health subsidy programs within 
the State; 
(ii) may be filed online, in person, by 
mail, or by telephone; 
(iii) may be filed with an Exchange or 
with State officials operating one of the 
other applicable State health subsidy pro-
grams; and 
(iv) is structured to maximize an ap-
plicant’s ability to complete the form satis-
factorily, taking into account the character-
istics of individuals who qualify for appli-
cable State health subsidy programs. 
(B) STATE
AUTHORITY
TO
ESTABLISH 
FORM.—A State may develop and use its own 
single, streamlined form as an alternative to the 
form developed under subparagraph (A) if the al-
ternative form is consistent with standards pro-
mulgated by the Secretary under this section. 
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(C) SUPPLEMENTAL ELIGIBILITY FORMS.— 
The Secretary may allow a State to use a sup-
plemental or alternative form in the case of indi-
viduals who apply for eligibility that is not de-
termined on the basis of the household income (as 
defined in section 36B of the Internal Revenue 
Code of 1986). 
(2) NOTICE.—The Secretary shall provide that 
an applicant filing a form under paragraph (1) shall 
receive notice of eligibility for an applicable State 
health subsidy program without any need to provide 
additional information or paperwork unless such in-
formation or paperwork is specifically required by 
law when information provided on the form is incon-
sistent with data used for the electronic verification 
under paragraph (3) or is otherwise insufficient to 
determine eligibility. 
(c) REQUIREMENTS RELATING TO ELIGIBILITY BASED 
ON DATA EXCHANGES.— 
(1) DEVELOPMENT OF SECURE INTERFACES.— 
Each State shall develop for all applicable State 
health subsidy programs a secure, electronic interface 
allowing an exchange of data (including information 
contained in the application forms described in sub-
section (b)) that allows a determination of eligibility 
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for all such programs based on a single application. 
Such interface shall be compatible with the method es-
tablished 
for 
data 
verification 
under 
section 
1411(c)(4). 
(2) DATA MATCHING PROGRAM.—Each applica-
ble State health subsidy program shall participate in 
a data matching arrangement for determining eligi-
bility for participation in the program under para-
graph (3) that— 
(A) provides access to data described in 
paragraph (3); 
(B) applies only to individuals who— 
(i) receive assistance from an applica-
ble State health subsidy program; or 
(ii) apply for such assistance— 
(I) by filing a form described in 
subsection (b); or 
(II) by requesting a determination 
of eligibility and authorizing disclosure 
of the information described in para-
graph (3) to applicable State health 
coverage subsidy programs for purposes 
of determining and establishing eligi-
bility; and 
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(C) consistent with standards promulgated 
by the Secretary, including the privacy and data 
security safeguards described in section 1942 of 
the Social Security Act or that are otherwise ap-
plicable to such programs. 
(3) DETERMINATION OF ELIGIBILITY.— 
(A) IN
GENERAL.—Each applicable State 
health subsidy program shall, to the maximum 
extent practicable— 
(i) establish, verify, and update eligi-
bility for participation in the program 
using the data matching arrangement under 
paragraph (2); and 
(ii) determine such eligibility on the 
basis of reliable, third party data, including 
information described in sections 1137, 
453(i), and 1942(a) of the Social Security 
Act, obtained through such arrangement. 
(B) EXCEPTION.—This paragraph shall not 
apply in circumstances with respect to which the 
Secretary determines that the administrative 
and other costs of use of the data matching ar-
rangement under paragraph (2) outweigh its ex-
pected gains in accuracy, efficiency, and pro-
gram participation. 
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(4) SECRETARIAL
STANDARDS.—The Secretary 
shall, after consultation with persons in possession of 
the data to be matched and representatives of applica-
ble State health subsidy programs, promulgate stand-
ards governing the timing, contents, and procedures 
for data matching described in this subsection. Such 
standards shall take into account administrative and 
other costs and the value of data matching to the es-
tablishment, verification, and updating of eligibility 
for applicable State health subsidy programs. 
(d) ADMINISTRATIVE AUTHORITY.— 
(1) AGREEMENTS.—Subject to section 1411 and 
section 6103(l)(21) of the Internal Revenue Code of 
1986 and any other requirement providing safeguards 
of privacy and data integrity, the Secretary may es-
tablish model agreements, and enter into agreements, 
for the sharing of data under this section. 
(2) AUTHORITY
OF
EXCHANGE
TO
CONTRACT 
OUT.—Nothing in this section shall be construed to— 
(A) 
prohibit 
contractual 
arrangements 
through which a State medicaid agency deter-
mines eligibility for all applicable State health 
subsidy programs, but only if such agency com-
plies with the Secretary’s requirements ensuring 
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reduced administrative costs, eligibility errors, 
and disruptions in coverage; or 
(B) change any requirement under title XIX 
that eligibility for participation in a State’s 
medicaid program must be determined by a pub-
lic agency. 
(e) APPLICABLE
STATE
HEALTH
SUBSIDY
PRO-
GRAM.—In this section, the term ‘‘applicable State health 
subsidy program’’ means— 
(1) the program under this title for the enroll-
ment in qualified health plans offered through an Ex-
change, including the premium tax credits under sec-
tion 36B of the Internal Revenue Code of 1986 and 
cost-sharing reductions under section 1402; 
(2) a State medicaid program under title XIX of 
the Social Security Act; 
(3) a State children’s health insurance program 
(CHIP) under title XXI of such Act; and 
(4) a State program under section 1331 estab-
lishing qualified basic health plans. 
SEC. 1414. DISCLOSURES TO CARRY OUT ELIGIBILITY RE-
QUIREMENTS FOR CERTAIN PROGRAMS. 
(a) DISCLOSURE OF TAXPAYER RETURN INFORMATION 
AND SOCIAL SECURITY NUMBERS.— 
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(1) TAXPAYER
RETURN
INFORMATION.—Sub-
section (l) of section 6103 of the Internal Revenue 
Code of 1986 is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(21) DISCLOSURE OF RETURN INFORMATION TO 
CARRY OUT ELIGIBILITY REQUIREMENTS FOR CERTAIN 
PROGRAMS.— 
‘‘(A) IN
GENERAL.—The Secretary, upon 
written request from the Secretary of Health and 
Human Services, shall disclose to officers, em-
ployees, and contractors of the Department of 
Health and Human Services return information 
of any taxpayer whose income is relevant in de-
termining any premium tax credit under section 
36B or any cost-sharing reduction under section 
1402 of the Patient Protection and Affordable 
Care Act or eligibility for participation in a 
State medicaid program under title XIX of the 
Social Security Act, a State’s children’s health 
insurance program under title XXI of the Social 
Security Act, or a basic health program under 
section 1331 of Patient Protection and Affordable 
Care Act. Such return information shall be lim-
ited to— 
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‘‘(i) taxpayer identity information 
with respect to such taxpayer, 
‘‘(ii) the filing status of such taxpayer, 
‘‘(iii) the number of individuals for 
whom a deduction is allowed under section 
151 with respect to the taxpayer (including 
the taxpayer and the taxpayer’s spouse), 
‘‘(iv) the modified gross income (as de-
fined in section 36B) of such taxpayer and 
each of the other individuals included under 
clause (iii) who are required to file a return 
of tax imposed by chapter 1 for the taxable 
year, 
‘‘(v) such other information as is pre-
scribed by the Secretary by regulation as 
might indicate whether the taxpayer is eli-
gible for such credit or reduction (and the 
amount thereof), and 
‘‘(vi) the taxable year with respect to 
which the preceding information relates or, 
if applicable, the fact that such information 
is not available. 
‘‘(B) INFORMATION
TO
EXCHANGE
AND 
STATE AGENCIES.—The Secretary of Health and 
Human Services may disclose to an Exchange 
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established under the Patient Protection and Af-
fordable Care Act or its contractors, or to a State 
agency administering a State program described 
in subparagraph (A) or its contractors, any in-
consistency between the information provided by 
the Exchange or State agency to the Secretary 
and the information provided to the Secretary 
under subparagraph (A). 
‘‘(C) RESTRICTION ON USE OF DISCLOSED 
INFORMATION.—Return 
information 
disclosed 
under subparagraph (A) or (B) may be used by 
officers, employees, and contractors of the De-
partment of Health and Human Services, an 
Exchange, or a State agency only for the pur-
poses of, and to the extent necessary in— 
‘‘(i) establishing eligibility for partici-
pation in the Exchange, and verifying the 
appropriate amount of, any credit or reduc-
tion described in subparagraph (A), 
‘‘(ii) determining eligibility for par-
ticipation in the State programs described 
in subparagraph (A).’’. 
(2) 
SOCIAL
SECURITY
NUMBERS.—Section 
205(c)(2)(C) of the Social Security Act is amended by 
adding at the end the following new clause: 
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‘‘(x) The Secretary of Health and 
Human Services, and the Exchanges estab-
lished under section 1311 of the Patient 
Protection and Affordable Care Act, are au-
thorized to collect and use the names and 
social security account numbers of individ-
uals as required to administer the provi-
sions of, and the amendments made by, the 
such Act.’’. 
(b) CONFIDENTIALITY AND DISCLOSURE.—Paragraph 
(3) of section 6103(a) of such Code is amended by striking 
‘‘or (20)’’ and inserting ‘‘(20), or (21)’’. 
(c) PROCEDURES AND RECORDKEEPING RELATED TO 
DISCLOSURES.—Paragraph (4) of section 6103(p) of such 
Code is amended— 
(1) by inserting ‘‘, or any entity described in 
subsection (l)(21),’’ after ‘‘or (20)’’ in the matter pre-
ceding subparagraph (A), 
(2) by inserting ‘‘or any entity described in sub-
section (l)(21),’’ after ‘‘or (o)(1)(A)’’ in subparagraph 
(F)(ii), and 
(3) by inserting ‘‘or any entity described in sub-
section (l)(21),’’ after ‘‘or (20)’’ both places it appears 
in the matter after subparagraph (F). 
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(d) UNAUTHORIZED DISCLOSURE OR INSPECTION.— 
Paragraph (2) of section 7213(a) of such Code is amended 
by striking ‘‘or (20)’’ and inserting ‘‘(20), or (21)’’. 
SEC. 1415. PREMIUM TAX CREDIT AND COST-SHARING RE-
DUCTION PAYMENTS DISREGARDED FOR FED-
ERAL AND FEDERALLY-ASSISTED PROGRAMS. 
For purposes of determining the eligibility of any indi-
vidual for benefits or assistance, or the amount or extent 
of benefits or assistance, under any Federal program or 
under any State or local program financed in whole or in 
part with Federal funds— 
(1) any credit or refund allowed or made to any 
individual by reason of section 36B of the Internal 
Revenue Code of 1986 (as added by section 1401) 
shall not be taken into account as income and shall 
not be taken into account as resources for the month 
of receipt and the following 2 months; and 
(2) any cost-sharing reduction payment or ad-
vance payment of the credit allowed under such sec-
tion 36B that is made under section 1402 or 1412 
shall be treated as made to the qualified health plan 
in which an individual is enrolled and not to that in-
dividual. 
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PART II—SMALL BUSINESS TAX CREDIT 
SEC. 1421. CREDIT FOR EMPLOYEE HEALTH INSURANCE EX-
PENSES OF SMALL BUSINESSES. 
(a) IN GENERAL.—Subpart D of part IV of subchapter 
A of chapter 1 of the Internal Revenue Code of 1986 (relat-
ing to business-related credits) is amended by inserting 
after section 45Q the following: 
‘‘SEC. 45R. EMPLOYEE HEALTH INSURANCE EXPENSES OF 
SMALL EMPLOYERS. 
‘‘(a) GENERAL RULE.—For purposes of section 38, in 
the case of an eligible small employer, the small employer 
health insurance credit determined under this section for 
any taxable year in the credit period is the amount deter-
mined under subsection (b). 
‘‘(b) HEALTH INSURANCE CREDIT AMOUNT.—Subject 
to subsection (c), the amount determined under this sub-
section with respect to any eligible small employer is equal 
to 50 percent (35 percent in the case of a tax-exempt eligible 
small employer) of the lesser of— 
‘‘(1) the aggregate amount of nonelective con-
tributions the employer made on behalf of its employ-
ees during the taxable year under the arrangement de-
scribed in subsection (d)(4) for premiums for quali-
fied health plans offered by the employer to its em-
ployees through an Exchange, or 
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‘‘(2) the aggregate amount of nonelective con-
tributions which the employer would have made dur-
ing the taxable year under the arrangement if each 
employee taken into account under paragraph (1) had 
enrolled in a qualified health plan which had a pre-
mium equal to the average premium (as determined 
by the Secretary of Health and Human Services) for 
the small group market in the rating area in which 
the employee enrolls for coverage. 
‘‘(c) PHASEOUT OF CREDIT AMOUNT BASED ON NUM-
BER OF EMPLOYEES AND AVERAGE WAGES.—The amount 
of the credit determined under subsection (b) without regard 
to this subsection shall be reduced (but not below zero) by 
the sum of the following amounts: 
‘‘(1) Such amount multiplied by a fraction the 
numerator of which is the total number of full-time 
equivalent employees of the employer in excess of 10 
and the denominator of which is 15. 
‘‘(2) Such amount multiplied by a fraction the 
numerator of which is the average annual wages of 
the employer in excess of the dollar amount in effect 
under subsection (d)(3)(B) and the denominator of 
which is such dollar amount. 
‘‘(d) ELIGIBLE SMALL EMPLOYER.—For purposes of 
this section— 
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‘‘(1) IN GENERAL.—The term ‘eligible small em-
ployer’ means, with respect to any taxable year, an 
employer— 
‘‘(A) which has no more than 25 full-time 
equivalent employees for the taxable year, 
‘‘(B) the average annual wages of which do 
not exceed an amount equal to twice the dollar 
amount in effect under paragraph (3)(B) for the 
taxable year, and 
‘‘(C) which has in effect an arrangement de-
scribed in paragraph (4). 
‘‘(2) FULL-TIME EQUIVALENT EMPLOYEES.— 
‘‘(A) IN
GENERAL.—The term ‘full-time 
equivalent employees’ means a number of em-
ployees equal to the number determined by divid-
ing— 
‘‘(i) the total number of hours of serv-
ice for which wages were paid by the em-
ployer to employees during the taxable year, 
by 
‘‘(ii) 2,080. 
Such number shall be rounded to the next lowest 
whole number if not otherwise a whole number. 
‘‘(B) EXCESS HOURS NOT COUNTED.—If an 
employee works in excess of 2,080 hours of serv-
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ice during any taxable year, such excess shall not 
be taken into account under subparagraph (A). 
‘‘(C) HOURS OF SERVICE.—The Secretary, 
in consultation with the Secretary of Labor, 
shall prescribe such regulations, rules, and guid-
ance as may be necessary to determine the hours 
of service of an employee, including rules for the 
application of this paragraph to employees who 
are not compensated on an hourly basis. 
‘‘(3) AVERAGE ANNUAL WAGES.— 
‘‘(A) IN
GENERAL.—The average annual 
wages of an eligible small employer for any tax-
able year is the amount determined by divid-
ing— 
‘‘(i) the aggregate amount of wages 
which were paid by the employer to employ-
ees during the taxable year, by 
‘‘(ii) the number of full-time equivalent 
employees of the employee determined under 
paragraph (2) for the taxable year. 
Such amount shall be rounded to the next lowest 
multiple of $1,000 if not otherwise such a mul-
tiple. 
‘‘(B) DOLLAR
AMOUNT.—For purposes of 
paragraph (1)(B)— 
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‘‘(i) 2011, 2012, AND 2013.—The dollar 
amount in effect under this paragraph for 
taxable years beginning in 2011, 2012, or 
2013 is $20,000. 
‘‘(ii) SUBSEQUENT
YEARS.—In the 
case of a taxable year beginning in a cal-
endar year after 2013, the dollar amount in 
effect under this paragraph shall be equal to 
$20,000, multiplied by the cost-of-living ad-
justment determined under section 1(f)(3) 
for the calendar year, determined by sub-
stituting ‘calendar year 2012’ for ‘calendar 
year 1992’ in subparagraph (B) thereof. 
‘‘(4) CONTRIBUTION
ARRANGEMENT.—An ar-
rangement is described in this paragraph if it re-
quires an eligible small employer to make a nonelec-
tive contribution on behalf of each employee who en-
rolls in a qualified health plan offered to employees 
by the employer through an exchange in an amount 
equal to a uniform percentage (not less than 50 per-
cent) of the premium cost of the qualified health plan. 
‘‘(5) SEASONAL WORKER HOURS AND WAGES NOT 
COUNTED.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The number of hours of 
service worked by, and wages paid to, a seasonal 
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worker of an employer shall not be taken into ac-
count in determining the full-time equivalent 
employees and average annual wages of the em-
ployer unless the worker works for the employer 
on more than 120 days during the taxable year. 
‘‘(B) DEFINITION OF SEASONAL WORKER.— 
The term ‘seasonal worker’ means a worker who 
performs labor or services on a seasonal basis as 
defined by the Secretary of Labor, including 
workers covered by section 500.20(s)(1) of title 
29, Code of Federal Regulations and retail work-
ers employed exclusively during holiday seasons. 
‘‘(e) OTHER RULES AND DEFINITIONS.—For purposes 
of this section— 
‘‘(1) EMPLOYEE.— 
‘‘(A) CERTAIN
EMPLOYEES
EXCLUDED.— 
The term ‘employee’ shall not include— 
‘‘(i) an employee within the meaning 
of section 401(c)(1), 
‘‘(ii) any 2-percent shareholder (as de-
fined in section 1372(b)) of an eligible small 
business which is an S corporation, 
‘‘(iii) any 5-percent owner (as defined 
in section 416(i)(1)(B)(i)) of an eligible 
small business, or 
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‘‘(iv) any individual who bears any of 
the relationships described in subpara-
graphs (A) through (G) of section 152(d)(2) 
to, or is a dependent described in section 
152(d)(2)(H) of, an individual described in 
clause (i), (ii), or (iii). 
‘‘(B) LEASED EMPLOYEES.—The term ‘em-
ployee’ shall include a leased employee within 
the meaning of section 414(n). 
‘‘(2) CREDIT PERIOD.—The term ‘credit period’ 
means, with respect to any eligible small employer, 
the 2-consecutive-taxable year period beginning with 
the 1st taxable year in which the employer (or any 
predecessor) offers 1 or more qualified health plans to 
its employees through an Exchange. 
‘‘(3) NONELECTIVE
CONTRIBUTION.—The term 
‘nonelective contribution’ means an employer con-
tribution other than an employer contribution pursu-
ant to a salary reduction arrangement. 
‘‘(4) WAGES.—The term ‘wages’ has the meaning 
given such term by section 3121(a) (determined with-
out regard to any dollar limitation contained in such 
section). 
‘‘(5) AGGREGATION AND OTHER RULES MADE AP-
PLICABLE.— 
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‘‘(A) AGGREGATION RULES.—All employers 
treated as a single employer under subsection 
(b), (c), (m), or (o) of section 414 shall be treated 
as a single employer for purposes of this section. 
‘‘(B) OTHER RULES.—Rules similar to the 
rules of subsections (c), (d), and (e) of section 52 
shall apply. 
‘‘(f) CREDIT MADE AVAILABLE TO TAX-EXEMPT ELIGI-
BLE SMALL EMPLOYERS.— 
‘‘(1) IN GENERAL.—In the case of a tax-exempt 
eligible small employer, there shall be treated as a 
credit allowable under subpart C (and not allowable 
under this subpart) the lesser of— 
‘‘(A) the amount of the credit determined 
under this section with respect to such employer, 
or 
‘‘(B) the amount of the payroll taxes of the 
employer during the calendar year in which the 
taxable year begins. 
‘‘(2) 
TAX-EXEMPT
ELIGIBLE
SMALL
EM-
PLOYER.—For purposes of this section, the term ‘tax- 
exempt eligible small employer’ means an eligible 
small employer which is any organization described 
in section 501(c) which is exempt from taxation 
under section 501(a). 
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‘‘(3) PAYROLL TAXES.—For purposes of this sub-
section— 
‘‘(A) IN GENERAL.—The term ‘payroll taxes’ 
means— 
‘‘(i) amounts required to be withheld 
from the employees of the tax-exempt eligi-
ble small employer under section 3401(a), 
‘‘(ii) amounts required to be withheld 
from such employees under section 3101(b), 
and 
‘‘(iii) amounts of the taxes imposed on 
the tax-exempt eligible small employer 
under section 3111(b). 
‘‘(B) SPECIAL RULE.—A rule similar to the 
rule of section 24(d)(2)(C) shall apply for pur-
poses of subparagraph (A). 
‘‘(g) APPLICATION OF SECTION FOR CALENDAR YEARS 
2011, 2012, AND 2013.—In the case of any taxable year 
beginning in 2011, 2012, or 2013, the following modifica-
tions to this section shall apply in determining the amount 
of the credit under subsection (a): 
‘‘(1) NO CREDIT PERIOD REQUIRED.—The credit 
shall be determined without regard to whether the tax-
able year is in a credit period and for purposes of ap-
plying this section to taxable years beginning after 
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2013, no credit period shall be treated as beginning 
with a taxable year beginning before 2014. 
‘‘(2) AMOUNT OF CREDIT.—The amount of the 
credit determined under subsection (b) shall be deter-
mined— 
‘‘(A) by substituting ‘35 percent (25 percent 
in the case of a tax-exempt eligible small em-
ployer)’ for ‘50 percent (35 percent in the case 
of a tax-exempt eligible small employer)’, 
‘‘(B) by reference to an eligible small em-
ployer’s nonelective contributions for premiums 
paid for health insurance coverage (within the 
meaning of section 9832(b)(1)) of an employee, 
and 
‘‘(C) by substituting for the average pre-
mium determined under subsection (b)(2) the 
amount the Secretary of Health and Human 
Services determines is the average premium for 
the small group market in the State in which the 
employer is offering health insurance coverage 
(or for such area within the State as is specified 
by the Secretary). 
‘‘(3) CONTRIBUTION
ARRANGEMENT.—An ar-
rangement shall not fail to meet the requirements of 
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subsection (d)(4) solely because it provides for the of-
fering of insurance outside of an Exchange. 
‘‘(h) INSURANCE DEFINITIONS.—Any term used in this 
section which is also used in the Public Health Service Act 
or subtitle A of title I of the Patient Protection and Afford-
able Care Act shall have the meaning given such term by 
such Act or subtitle. 
‘‘(i) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary to carry out the provi-
sions of this section, including regulations to prevent the 
avoidance of the 2-year limit on the credit period through 
the use of successor entities and the avoidance of the limita-
tions under subsection (c) through the use of multiple enti-
ties.’’. 
(b) CREDIT TO BE PART OF GENERAL BUSINESS 
CREDIT.—Section 38(b) of the Internal Revenue Code of 
1986 (relating to current year business credit) is amended 
by striking ‘‘plus’’ at the end of paragraph (34), by striking 
the period at the end of paragraph (35) and inserting ‘‘, 
plus’’, and by inserting after paragraph (35) the following: 
‘‘(36) the small employer health insurance credit 
determined under section 45R.’’. 
(c) CREDIT ALLOWED AGAINST ALTERNATIVE MIN-
IMUM TAX.—Section 38(c)(4)(B) of the Internal Revenue 
Code of 1986 (defining specified credits) is amended by re-
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designating clauses (vi), (vii), and (viii) as clauses (vii), 
(viii), and (ix), respectively, and by inserting after clause 
(v) the following new clause: 
‘‘(vi) the credit determined under sec-
tion 45R,’’. 
(d) DISALLOWANCE OF DEDUCTION FOR CERTAIN EX-
PENSES FOR WHICH CREDIT ALLOWED.— 
(1) IN GENERAL.—Section 280C of the Internal 
Revenue Code of 1986 (relating to disallowance of de-
duction for certain expenses for which credit allowed), 
as amended by section 1401(b), is amended by adding 
at the end the following new subsection: 
‘‘(h) CREDIT FOR EMPLOYEE HEALTH INSURANCE EX-
PENSES OF SMALL EMPLOYERS.—No deduction shall be al-
lowed for that portion of the premiums for qualified health 
plans (as defined in section 1301(a) of the Patient Protec-
tion and Affordable Care Act), or for health insurance cov-
erage in the case of taxable years beginning in 2011, 2012, 
or 2013, paid by an employer which is equal to the amount 
of the credit determined under section 45R(a) with respect 
to the premiums.’’. 
(2) DEDUCTION FOR EXPIRING CREDITS.—Sec-
tion 196(c) of such Code is amended by striking 
‘‘and’’ at the end of paragraph (12), by striking the 
period at the end of paragraph (13) and inserting ‘‘, 
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and’’, and by adding at the end the following new 
paragraph: 
‘‘(14) the small employer health insurance credit 
determined under section 45R(a).’’. 
(e) CLERICAL AMENDMENT.—The table of sections for 
subpart D of part IV of subchapter A of chapter 1 of the 
Internal Revenue Code of 1986 is amended by adding at 
the end the following: 
‘‘Sec. 45R. Employee health insurance expenses of small employers.’’. 
(f) EFFECTIVE DATES.— 
(1) IN
GENERAL.—The amendments made by 
this section shall apply to amounts paid or incurred 
in taxable years beginning after December 31, 2010. 
(2) MINIMUM TAX.—The amendments made by 
subsection (c) shall apply to credits determined under 
section 45R of the Internal Revenue Code of 1986 in 
taxable years beginning after December 31, 2010, and 
to carrybacks of such credits. 
Subtitle F—Shared Responsibility 
for Health Care 
PART I—INDIVIDUAL RESPONSIBILITY 
SEC. 1501. REQUIREMENT TO MAINTAIN MINIMUM ESSEN-
TIAL COVERAGE. 
(a) FINDINGS.—Congress makes the following findings: 
(1) IN GENERAL.—The individual responsibility 
requirement provided for in this section (in this sub-
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section referred to as the ‘‘requirement’’) is commer-
cial and economic in nature, and substantially affects 
interstate commerce, as a result of the effects described 
in paragraph (2). 
(2) EFFECTS ON THE NATIONAL ECONOMY AND 
INTERSTATE
COMMERCE.—The effects described in 
this paragraph are the following: 
(A) The requirement regulates activity that 
is commercial and economic in nature: economic 
and financial decisions about how and when 
health care is paid for, and when health insur-
ance is purchased. 
(B) Health insurance and health care serv-
ices are a significant part of the national econ-
omy. National health spending is projected to in-
crease from $2,500,000,000,000, or 17.6 percent 
of the economy, in 2009 to $4,700,000,000,000 in 
2019. Private health insurance spending is pro-
jected to be $854,000,000,000 in 2009, and pays 
for medical supplies, drugs, and equipment that 
are shipped in interstate commerce. Since most 
health insurance is sold by national or regional 
health insurance companies, health insurance is 
sold in interstate commerce and claims pay-
ments flow through interstate commerce. 
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(C) The requirement, together with the other 
provisions of this Act, will add millions of new 
consumers to the health insurance market, in-
creasing the supply of, and demand for, health 
care services. According to the Congressional 
Budget Office, the requirement will increase the 
number and share of Americans who are insured. 
(D) The requirement achieves near-uni-
versal coverage by building upon and strength-
ening the private employer-based health insur-
ance system, which covers 176,000,000 Ameri-
cans nationwide. In Massachusetts, a similar re-
quirement has strengthened private employer- 
based coverage: despite the economic downturn, 
the number of workers offered employer-based 
coverage has actually increased. 
(E) Half of all personal bankruptcies are 
caused in part by medical expenses. By signifi-
cantly increasing health insurance coverage, the 
requirement, together with the other provisions of 
this Act, will improve financial security for fam-
ilies. 
(F) Under the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1001 et seq.), 
the Public Health Service Act (42 U.S.C. 201 et 
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seq.), and this Act, the Federal Government has 
a significant role in regulating health insurance 
which is in interstate commerce. 
(G) Under sections 2704 and 2705 of the 
Public Health Service Act (as added by section 
1201 of this Act), if there were no requirement, 
many individuals would wait to purchase health 
insurance until they needed care. By signifi-
cantly increasing health insurance coverage, the 
requirement, together with the other provisions of 
this Act, will minimize this adverse selection and 
broaden the health insurance risk pool to include 
healthy individuals, which will lower health in-
surance premiums. The requirement is essential 
to creating effective health insurance markets in 
which improved health insurance products that 
are guaranteed issue and do not exclude coverage 
of pre-existing conditions can be sold. 
(H) Administrative costs for private health 
insurance, which were $90,000,000,000 in 2006, 
are 26 to 30 percent of premiums in the current 
individual and small group markets. By signifi-
cantly increasing health insurance coverage and 
the size of purchasing pools, which will increase 
economies of scale, the requirement, together with 
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the other provisions of this Act, will significantly 
reduce administrative costs and lower health in-
surance premiums. The requirement is essential 
to creating effective health insurance markets 
that do not require underwriting and eliminate 
its associated administrative costs. 
(3) SUPREME COURT RULING.—In United States 
v. South-Eastern Underwriters Association (322 U.S. 
533 (1944)), the Supreme Court of the United States 
ruled that insurance is interstate commerce subject to 
Federal regulation. 
(b) IN GENERAL.—Subtitle D of the Internal Revenue 
Code of 1986 is amended by adding at the end the following 
new chapter: 
‘‘CHAPTER 48—MAINTENANCE OF 
MINIMUM ESSENTIAL COVERAGE 
‘‘Sec. 5000A. Requirement to maintain minimum essential coverage. 
‘‘SEC. 5000A. REQUIREMENT TO MAINTAIN MINIMUM ESSEN-
TIAL COVERAGE. 
‘‘(a) REQUIREMENT TO MAINTAIN MINIMUM ESSEN-
TIAL COVERAGE.—An applicable individual shall for each 
month beginning after 2013 ensure that the individual, and 
any dependent of the individual who is an applicable indi-
vidual, is covered under minimum essential coverage for 
such month. 
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‘‘(b) SHARED RESPONSIBILITY PAYMENT.— 
‘‘(1) IN GENERAL.—If an applicable individual 
fails to meet the requirement of subsection (a) for 1 
or more months during any calendar year beginning 
after 2013, then, except as provided in subsection (d), 
there is hereby imposed a penalty with respect to the 
individual in the amount determined under sub-
section (c). 
‘‘(2) INCLUSION
WITH
RETURN.—Any penalty 
imposed by this section with respect to any month 
shall be included with a taxpayer’s return under 
chapter 1 for the taxable year which includes such 
month. 
‘‘(3) PAYMENT OF PENALTY.—If an individual 
with respect to whom a penalty is imposed by this 
section for any month— 
‘‘(A) is a dependent (as defined in section 
152) of another taxpayer for the other taxpayer’s 
taxable year including such month, such other 
taxpayer shall be liable for such penalty, or 
‘‘(B) files a joint return for the taxable year 
including such month, such individual and the 
spouse of such individual shall be jointly liable 
for such penalty. 
‘‘(c) AMOUNT OF PENALTY.— 
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‘‘(1) IN
GENERAL.—The penalty determined 
under this subsection for any month with respect to 
any individual is an amount equal to 1⁄12 of the ap-
plicable dollar amount for the calendar year. 
‘‘(2) DOLLAR LIMITATION.—The amount of the 
penalty imposed by this section on any taxpayer for 
any taxable year with respect to all individuals for 
whom the taxpayer is liable under subsection (b)(3) 
shall not exceed an amount equal to 300 percent the 
applicable dollar amount (determined without regard 
to paragraph (3)(C)) for the calendar year with or 
within which the taxable year ends. 
‘‘(3) APPLICABLE DOLLAR AMOUNT.—For pur-
poses of paragraph (1)— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraphs (B) and (C), the applicable dollar 
amount is $750. 
‘‘(B) PHASE
IN.—The applicable dollar 
amount is $95 for 2014 and $350 for 2015. 
‘‘(C) SPECIAL
RULE
FOR
INDIVIDUALS 
UNDER AGE 18.—If an applicable individual has 
not attained the age of 18 as of the beginning of 
a month, the applicable dollar amount with re-
spect to such individual for the month shall be 
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equal to one-half of the applicable dollar amount 
for the calendar year in which the month occurs. 
‘‘(D) INDEXING OF AMOUNT.—In the case of 
any calendar year beginning after 2016, the ap-
plicable dollar amount shall be equal to $750, in-
creased by an amount equal to— 
‘‘(i) $750, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year, determined by substituting ‘cal-
endar year 2015’ for ‘calendar year 1992’ 
in subparagraph (B) thereof. 
If the amount of any increase under clause (i) 
is not a multiple of $50, such increase shall be 
rounded to the next lowest multiple of $50. 
‘‘(4) TERMS RELATING TO INCOME AND FAMI-
LIES.—For purposes of this section— 
‘‘(A) FAMILY
SIZE.—The family size in-
volved with respect to any taxpayer shall be 
equal to the number of individuals for whom the 
taxpayer is allowed a deduction under section 
151 (relating to allowance of deduction for per-
sonal exemptions) for the taxable year. 
‘‘(B) 
HOUSEHOLD
INCOME.—The 
term 
‘household income’ means, with respect to any 
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taxpayer for any taxable year, an amount equal 
to the sum of— 
‘‘(i) the modified gross income of the 
taxpayer, plus 
‘‘(ii) the aggregate modified gross in-
comes of all other individuals who— 
‘‘(I) were taken into account in 
determining the taxpayer’s family size 
under paragraph (1), and 
‘‘(II) were required to file a re-
turn of tax imposed by section 1 for 
the taxable year. 
‘‘(C) MODIFIED GROSS INCOME.—The term 
‘modified gross income’ means gross income— 
‘‘(i) decreased by the amount of any 
deduction allowable under paragraph (1), 
(3), (4), or (10) of section 62(a), 
‘‘(ii) increased by the amount of inter-
est received or accrued during the taxable 
year which is exempt from tax imposed by 
this chapter, and 
‘‘(iii) determined without regard to 
sections 911, 931, and 933. 
‘‘(D) POVERTY LINE.— 
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‘‘(i) IN GENERAL.—The term ‘poverty 
line’ has the meaning given that term in 
section 2110(c)(5) of the Social Security Act 
(42 U.S.C. 1397jj(c)(5)). 
‘‘(ii) POVERTY
LINE
USED.—In the 
case of any taxable year ending with or 
within a calendar year, the poverty line 
used shall be the most recently published 
poverty line as of the 1st day of such cal-
endar year. 
‘‘(d) APPLICABLE INDIVIDUAL.—For purposes of this 
section— 
‘‘(1) IN GENERAL.—The term ‘applicable indi-
vidual’ means, with respect to any month, an indi-
vidual other than an individual described in para-
graph (2), (3), or (4). 
‘‘(2) RELIGIOUS EXEMPTIONS.— 
‘‘(A) 
RELIGIOUS
CONSCIENCE
EXEMP-
TION.—Such term shall not include any indi-
vidual for any month if such individual has in 
effect an exemption under section 1311(d)(4)(H) 
of the Patient Protection and Affordable Care 
Act which certifies that such individual is a 
member of a recognized religious sect or division 
thereof described in section 1402(g)(1) and an 
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