I
104TH CONGRESS
2D SESSION
H. R. 4110
To amend the Internal Revenue Code of 1986 to require that group health
plans and insurers offer access to coverage for children and to assist
families in the purchase of such coverage.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 18, 1996
Mr. STARK introduced the following bill; which was referred to the Committee
on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to require
that group health plans and insurers offer access to
coverage for children and to assist families in the pur-
chase of such coverage.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Children Health Insur-
ance Act of 1996’’.
SEC. 2. HEALTH INSURANCE AVAILABILITY FOR CHILDREN.
(a) IN GENERAL.—The Internal Revenue Code of
1986 (as amended by the Health Insurance Portability
and Accountability Act of 1996) is amended by adding at
the end the following:
‘‘Subtitle L—Health Insurance
Availability for Children
‘‘CHAPTER 101—HEALTH INSURANCE
AVAILABILITY FOR CHILDREN
‘‘Sec. 9901. Excise tax on failure to meet requirement of access
to coverage.
‘‘Sec. 9902. Requirement of access to coverage.
‘‘Sec. 9903. Definitions.
‘‘SEC. 9901. EXCISE TAX ON FAILURE TO MEET REQUIRE-
MENT OF ACCESS TO COVERAGE.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed
a tax on the failure of—
‘‘(1) a group health plan to meet the coverage
requirements of section 9902(a); and
‘‘(2) an insurer that offers health insurance
coverage (other than to a group health plan subject
to paragraph (1)) to meet the requirements of sec-
tion 9902(b).
‘‘(b) AMOUNT OF TAX.—
‘‘(1) GROUP HEALTH PLAN.—
‘‘(A) IN
GENERAL.—The amount of tax
imposed by subsection (a)(1) on any failure
with respect to a participant or beneficiary of a
group health plan shall be 25 percent of each
premium received by the group health plan for
the plan year in which such failure occurs.
‘‘(B) SELF-INSURED PLANS.—In the case
that the group health plan is self-insured, the
cost to the plan of the coverage of participants
and beneficiaries shall be treated as the pre-
mium received for the purposes of subpara-
graph (A).
‘‘(2) INSURER OFFERING INDIVIDUAL HEALTH
INSURANCE
COVERAGE.—The amount of tax im-
posed by subsection (a)(2) on any failure of an in-
surer with respect to an individual described in para-
graph (1) or (2) of section 9902(b) shall be 25 per-
cent of the total amount of the premiums paid to the
insurer for such coverage for the plan year in which
such failure occurs.
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT
DISCOVERED
EXERCISING
REASONABLE
DILI-
GENCE.—No tax shall be imposed by subsection (a)
on any failure during any period for which it is es-
tablished to the satisfaction of the Secretary that
none of the persons referred to in subsection (e)
knew, or exercising reasonable diligence would have
known, that such failure existed.
‘‘(2) TAX NOT TO APPLY TO FAILURES COR-
RECTED WITHIN 30 DAYS.—No tax shall be imposed
by subsection (a) on any failure if—
‘‘(A) such failure was due to reasonable
cause and not to willful neglect, and
‘‘(B) such failure is corrected during the
30-day period beginning on the 1st date any of
the persons referred to in subsection (e) knew,
or exercising reasonable diligence would have
known, that such failure existed.
‘‘(3) WAIVER.—In the case of a failure which is
due to reasonable cause and not to willful neglect,
the Secretary may waive part or all of the tax im-
posed by subsection (a) to the extent that the pay-
ment of such tax would be excessive relative to the
failure involved.
‘‘(d) TAX NOT TO APPLY TO CERTAIN PLANS.—This
section shall not apply to—
‘‘(1) any governmental plan (within the mean-
ing of section 414(d)), or
‘‘(2) any church plan (within the meaning of
section 414(e)).
‘‘(e) LIABILITY FOR TAX.—The following shall be re-
sponsible for the tax imposed by subsection (a):
‘‘(1) In the case of the tax imposed by sub-
section (a)(1) on a group health plan, the plan.
‘‘(2) In the case of the tax imposed by sub-
section (a)(2) on an insurer offering health insur-
ance coverage, the insurer.
‘‘SEC. 9902. REQUIREMENT OF ACCESS TO COVERAGE.
‘‘(a) GROUP HEALTH PLANS.—
‘‘(1) IN
GENERAL.—Each group health plan
that provides coverage to any participant (or bene-
ficiary) must offer qualifying coverage for each
qualifying young dependent of an individual who is
a participant or beneficiary under the plan.
‘‘(2) TIMING OF OFFER.—The offer under para-
graph (1) shall be made at the time a person first
becomes a qualifying young dependent and at least
annually thereafter.
‘‘(b) HEALTH INSURANCE COVERAGE.—Each insurer
that offers health insurance coverage in the individual
market must offer qualifying coverage for each individual
who is under 21 years of age, residing in the United
States, and a citizen or national of the United States (or
alien permanently residing in the United States under
color of law).
‘‘(c) QUALIFYING COVERAGE.—For purposes of this
section—
‘‘(1) IN GENERAL.—The term ‘qualifying cov-
erage’ means coverage of health care benefits that
provides for at least the following benefits, without
any limitation based on a pre-existing condition with
respect to such benefits and without any waiting pe-
riod for coverage with respect to such benefits:
‘‘(A) MEDICARE BENEFITS.—Benefits pro-
vided under parts A and B of title XVIII of the
Social Security Act, or benefits determined to
be actuarially equivalent to (or greater than)
such benefits; except that in no case shall the
coinsurance attributable to benefits under part
B of such title exceed (with respect to provision
of an item or service) the lesser of $10 or 10
percent of the recognized payment amount with
respect to such item or service (determined
without regard to cost-sharing).
‘‘(B) WELL CHILD CARE BENEFITS.—
‘‘(i) IN GENERAL.—Payment for the
following items and services, without the
application of deductibles, coinsurance, and
copayments:
‘‘(I) Newborn and well-baby care,
including normal newborn care and
United States under color of law), and a dependent (as
defined in section 152) of the individual.
‘‘SEC. 9903. DEFINITIONS.
‘‘In this chapter—
‘‘(1) GROUP HEALTH PLAN.—The term ‘group
health plan’ has the meaning given such term in sec-
tion 5000(b)(1), but does not include such a plan
that has medical benefits that only consist of cov-
erage described in paragraph (2)(B).
‘‘(2) HEALTH INSURANCE COVERAGE.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘health insurance
coverage’ means benefits consisting of medical
care (provided directly, through insurance or re-
imbursement, or otherwise) under any hospital
or medical service policy or certificate, hospital
or medical service plan contract, or health
maintenance organization group contract of-
fered by an insurer or a health maintenance or-
ganization.
‘‘(B) EXCEPTION.—Such term does not in-
clude coverage under any separate policy, cer-
tificate, or contract only for one or more of any
of the following:
‘‘(i) Coverage for accident, credit-only,
vision, disability income, long-term care,
nursing home care, community-based care
dental, on-site medical clinics, or employee
assistance programs, or any combination
thereof.
‘‘(ii) Medicare supplemental health in-
surance (within the meaning of section
1882(g)(1) of the Social Security Act (42
U.S.C. 1395ss(g)(1))) and similar supple-
mental coverage provided under a group
health plan.
‘‘(iii) Coverage issued as a supplement
to liability insurance.
‘‘(iv) Liability insurance, including
general liability insurance and automobile
liability insurance.
‘‘(v) Workers’ compensation or similar
insurance.
‘‘(vi) Automobile medical-payment in-
surance.
‘‘(vii) Coverage for a specified disease
or illness.
‘‘(viii) Hospital or fixed indemnity in-
surance.
‘‘(ix) Short-term limited duration in-
surance.
‘‘(x) Such other coverage, comparable
to that described in previous clauses, as
may be specified in regulations prescribed
under this title.
‘‘(3) HEALTH MAINTENANCE ORGANIZATION.—
The 
term 
‘health 
maintenance 
organization’
means—
‘‘(A) a federally qualified health mainte-
nance organization (as defined in section
1301(a) of the Public Health Service Act (42
U.S.C. 300e(a))),
‘‘(B) an organization recognized under
State law as a health maintenance organization,
or
‘‘(C) a similar organization regulated
under State law for solvency in the same man-
ner and to the same extent as such a health
maintenance organization,
if it is subject to State law which regulates insur-
ance (within the meaning of section 514(b)(2) of the
Employee Retirement Income Security Act of 1974).
‘‘(4) INSURER.—The term ‘insurer’ means an
insurance company, insurance service, or insurance
organization (including a health maintenance organi-
zation) which is licensed to engage in the business
of insurance in a State and which is subject to State
law which regulates insurance (within the meaning
of section 514(b)(2)(A) of the Employee Retirement
Income Security Act of 1974).
‘‘(5) INDIVIDUAL MARKET.—The term ‘individ-
ual market’ means the market for health insurance
coverage offered to individuals and not to employers
or in connection with a group health plan and does
not include the market for such coverage issued only
by an insurer that makes such coverage available
only on the basis of affiliation with an association.
‘‘(6) INCORPORATION
OF
CERTAIN
DEFINI-
TIONS.—The terms ‘beneficiary’ and ‘participant’
have the meanings given such terms in section 3 of
the Employee Retirement Income Security Act of
1974.’’.
(b) CLERICAL AMENDMENT.—The table of contents
for the Internal Revenue Code of 1986 is amended by add-
ing after the item relating to subtitle K the following new
item:
‘‘Subtitle L. Health Insurance Availability for Children.’’
(c) EFFECTIVE DATE.—The requirement of section
9902 of the Internal Revenue Code of 1986 (as added by
subsection (a) of this section) shall take effect on January
1, 1998, and shall apply to coverage offered on or after
such date regardless of whether the plan year began before
such date.
SEC. 3. REFUNDABLE TAX CREDIT FOR PURCHASE OF
HEALTH COVERAGE FOR CHILDREN.
(a) GENERAL RULE.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by redesignating section 35 as section
36 and by inserting after section 34 the following new sec-
tion:
‘‘SEC. 35. PURCHASE OF HEALTH COVERAGE FOR CHIL-
DREN.
‘‘(a) GENERAL RULE.—In the case of an individual,
there shall be allowed as a credit against the tax imposed
by this subtitle for the taxable year an amount equal to
80 percent of the qualified health premiums paid in the
taxable year by the taxpayer.
‘‘(b) APPLICATION OF CREDIT AGAINST TAX LIABIL-
ITY.—
‘‘(1) IN GENERAL.—The credit allowable under
subsection (a) shall be applied against tax liability at
the rate of $0.50 of credit for each $1 of tax liabil-
ity.
‘‘(2) TAX
LIABILITY.—For the purposes of
paragraph (1), the term ‘tax liability’ means the ex-
cess (if any) of—
‘‘(A) the sum of—
‘‘(i) the tax imposed by this chapter
for the taxable year (reduced by the credits
allowable against such tax other than the
credits allowable under this subpart), and
‘‘(ii) the taxpayer’s social security
taxes for such taxable year, over
‘‘(B) the credit allowed for the taxable year
under section 32.
‘‘(3) SOCIAL SECURITY TAXES.—For purposes
of paragraph (2)—
‘‘(A) IN GENERAL.—The term ‘social secu-
rity taxes’ means, with respect to any taxpayer
for any taxable year—
‘‘(i) the amount of the taxes imposed
by sections 3101 and 3201(a) on amounts
received by the taxpayer during the cal-
endar year in which the taxable year be-
gins,
‘‘(ii) one-half of the amount of the
taxes imposed by section 1401 on the self-
employment income of the taxpayer for the
taxable year, and
‘‘(iii) one-half of the amount of the
taxes imposed by section 3211(a)(1) on
amounts received by the taxpayer during
the calendar year in which the taxable year
begins.
‘‘(B) COORDINATION
WITH
SPECIAL
RE-
FUND OF SOCIAL SECURITY TAXES.—The term
‘social security taxes’ shall not include any
taxes to the extent the taxpayer is entitled to
a special refund of such taxes under section
6413(c).
‘‘(C) SPECIAL RULE.—Any amounts paid
pursuant to an agreement under section 3121(l)
(relating to agreements entered into by Amer-
ican employers with respect to foreign affiliates)
which are equivalent to the taxes referred to in
subparagraph (A)(i) shall be treated as taxes
referred to in such subparagraph.
‘‘(c) DEFINITIONS.—For the purposes of this sec-
tion—
‘‘(1) QUALIFIED HEALTH PREMIUM.—The term
‘qualified health premium’ means the amount paid
for health coverage of a qualifying young dependent.
‘‘(2) HEALTH
COVERAGE.—The term ‘health
coverage’ means health insurance coverage (as de-
fined by section 9902(b)) that includes qualifying
coverage (as defined by section 9902(c)).
‘‘(3) QUALIFYING
YOUNG
DEPENDENT.—The
term ‘qualifying young dependent’ has the meaning
given such term by section 9902(d).’’.
(b) CLERICAL AMENDMENT.—The table of sections
for subpart C of part IV of subchapter A of chapter 1
is amended by striking the item relating to section 35 and
inserting the following new items:
‘‘Sec. 35. Purchase of health coverage for children.
‘‘Sec. 36. Overpayments of tax.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1997.
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