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SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Medicaid Health Allow-
ance Act of 1993’’.
SEC. 2. ESTABLISHMENT OF PROGRAM.
(a) IN GENERAL.—Title XIX of the Social Security
Act (42 U.S.C. 1396 et seq.) is amended by adding at
the end the following new section:
‘‘STATE HEALTH ALLOWANCE PROGRAMS
‘‘SEC. 1931. (a) TREATMENT
OF EXPENDITURES
UNDER HEALTH ALLOWANCE PROGRAMS AS MEDICAL
ASSISTANCE UNDER STATE PLAN.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of this title, for purposes of determining
the amount to be paid to a State under section
1903(a)(1) for quarters in any fiscal year, amounts
expended by an eligible State (as described in sub-
section (b)) during the fiscal year under a State
health allowance program (as described in subsection
(c)) shall be included in the total amount expended
during the fiscal year as medical assistance under
the State plan (except as provided under paragraph
(2) or under subsection (d)(1)(C)).
‘‘(2) FEDERAL
PAYMENT
RESTRICTED
TO
ACUTE
CARE
SERVICES.—No amounts expended
under a State health allowance program that are at-
tributable to medical assistance described in para-
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graphs (4), (14), (15), (23), or (24) of section
1905(a) shall be included in the total amount ex-
pended as medical assistance under the State plan.
‘‘(b) ELIGIBILITY OF STATE.—
‘‘(1) IN GENERAL.—A State is eligible for pur-
poses of subsection (a) if the State submits (at such
time and in such form as the Secretary may require)
an application to the Secretary containing the fol-
lowing information and assurances:
‘‘(A) Assurances that the State laws gov-
erning the sale and marketing of health plans
reflect standards established by the National
Association of Insurance Commissioners (or by
the Secretary in accordance with paragraph
(3)) relating to community rating of premiums
that meet the requirements of paragraph (2).
‘‘(B) Assurances that the State laws gov-
erning the sale and marketing of health insur-
ance plans reflect standards established by the
National Association of Insurance Commis-
sioners (or by the Secretary in accordance with
paragraph (3)) relating to pre-existing condi-
tions and guaranteed renewability.
‘‘(C) Assurances that the State has adopt-
ed and is enforced standards regarding quality
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assurance for health benefit plans participating
in the State health allowance program, includ-
ing standards regarding—
‘‘(i) uniform reporting requirements
for such plans relating to a minimum set
of clinical data, patient satisfaction data,
and other information that may be used by
individuals to compare the quality of var-
ious plans; and
‘‘(ii) the establishment or designation
of an entity of the State government to
collect the data described in clause (i) and
to regularly report such data to the Sec-
retary.
‘‘(D) Such other information and assur-
ances as the Secretary may require.
‘‘(2) REQUIREMENTS FOR RATING BANDS FOR
PREMIUMS.—
‘‘(A) IN GENERAL.—Under the standards
relating to community rating of premiums es-
tablished by the National Association of Insur-
ance Commissioners or by the Secretary, for a
class of business of a carrier, the premium rates
charged during a rating period to employers
with similar demographic or other objective
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characteristics (not relating to claims experi-
ence, health status, or duration of coverage) for
the same or similar coverage, or the rates which
could be charged to such employers under the
rating system for that class of business, shall
not vary from the index rate by more than 15
percent of the index rate.
‘‘(B) DEFINITIONS.—In this paragraph:
‘‘(i) BASE PREMIUM RATE.—The term
‘base premium rate’ means, for each class
of business for each rating period, the low-
est premium rate charged or which could
have charged under a rating system for
that class of business by the carrier to em-
ployers with similar demographic or other
objective characteristics (not relating to
claims experience, health status, or dura-
tion of coverage) for health benefit plans
with the same or similar coverage.
‘‘(ii) CARRIER.—The term ‘carrier’
means any entity which provides health in-
surance or health benefits in a State, and
includes a licensed insurance company, a
prepaid hospital or medical service plan, a
health maintenance organization, the plan
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sponsor of a multiple employer welfare ar-
rangement or an employee benefit plan (as
defined under the Employee Retirement
Income Security Act of 1974), or any other
entity providing a plan of health insurance
subject to State insurance regulation.
‘‘(iii) CLASS OF BUSINESS.—The term
‘class of business’ means, with respect to a
carrier, all (or a distinct group of) small
employers as shown on the records of the
carrier. For purposes of the preceding sen-
tence—
‘‘(I) a carrier may establish, sub-
ject to subclause (II), a distinct group
of employers on the basis that the ap-
plicable health benefit plans either—
‘‘(aa) are marketed and sold
through individuals and organiza-
tions which are not participating
in the marketing or sale of other
distinct groups of employers for
the carrier,
‘‘(bb) have been acquired
from another carrier as a distinct
group, or
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‘‘(cc) are provided through
an association that has a mem-
bership of not less than 100 em-
ployers and that has been formed
for purposes other than obtaining
health coverage;
‘‘(II) a carrier may not establish
more than 2 groupings under each
class of business based on the car-
rier’s use of managed-care techniques
if the techniques are expected to
produce substantial variation in health
care costs; and
‘‘(III) notwithstanding subclauses
(I) and (II), a State commissioner of
Insurance of a State, upon application
and if authorized under State law,
may 
approve 
additional 
distinct
groups upon a finding that such ap-
proval would enhance the efficiency
and fairness of the employer market-
place.
‘‘(iv) DEMOGRAPHIC
CHARACTERIS-
TICS.—The term ‘demographic characteris-
tics’ means age, gender, industry, geo-
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graphic area, family composition, and
group size.
‘‘(v) INDEX RATE.—The term ‘‘index
rate’’ means, with respect to a class of
business, the arithmetic average of the ap-
plicable base premium rate and the cor-
responding highest premium rate for the
class.
‘‘(3) ESTABLISHMENT OF STANDARDS BY SEC-
RETARY.—If, after the expiration of the 9-month pe-
riod that begins on the date of the enactment of this
Act, the National Association of Insurance Commis-
sioners has not established the standards described
in paragraph (1), the Secretary shall establish such
standards not later than 1 year after the date of the
enactment of this Act.
‘‘(c) STATE HEALTH ALLOWANCE PROGRAM DE-
SCRIBED.—
‘‘(1) ENROLLMENT OF PARTICIPATING INDIVID-
UALS IN APPROVED HEALTH BENEFIT PLANS.—In
this section, a State health allowance program is a
program in effect in all the political subdivisions of
the State (except as provided in (c)) under which the
State makes payments to the individual’s insurer as
an allowance towards the costs of providing the indi-
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described in clause (i) for the year exceeds
or is less than the actuarial value of such
medical assistance for the preceding year;
‘‘(B) at least one of the plans approved by
the State shall be a health maintenance organi-
zation or other plan under which payments are
otherwise made on a capitated basis for provid-
ing medical assistance to individuals enrolled in
the State plan under this title; and
‘‘(C) in the case of an individual who is en-
titled to benefits under the State plan under
this title as of the first month during which the
State health allowance program is in effect, an
approved plan may not require the individual to
contribute a greater amount of cost-sharing
than the individual would have been required to
contribute under the State plan (except as may
be imposed on an individual described in sub-
paragraph (B) or subparagraph (C) of sub-
section (d)(1)).
‘‘(3) WAIVER
OF
STATEWIDENESS
REQUIRE-
MENT.—At the request of a State, the Secretary
may waive for a period not to exceed 3 years (sub-
ject to one 3-year extension) the requirement under
paragraph (1) that the State health allowance pro-
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gram be in effect in all political subdivisions of the
State.
‘‘(d) ELIGIBILITY OF INDIVIDUALS TO PARTICIPATE
IN ALLOWANCE PROGRAM.—
‘‘(1) IN GENERAL.—An individual is eligible to
participate in a State health allowance program de-
scribed in subsection (c) if the individual meets such
criteria as the State may impose, except that—
‘‘(A) the State shall enroll the individual in
the program if the individual’s income is equal
to or less than 100 percent of the official pov-
erty line (as defined by the Office of Manage-
ment and Budget, and revised annually in ac-
cordance with section 673(2) of the Omnibus
Budget Reconciliation Act of 1991) applicable
to a family of the size involved;
‘‘(B) the State may enroll the individual in
the program if the individual’s income is great-
er than 100 percent of such official poverty
line, except that the State may require such an
individual to contribute additional cost-sharing
towards the health benefit plan if such cost-
sharing is determined in accordance with a slid-
ing scale based on the individual’s income;
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‘‘(C) the State may enroll an individual
who is described in subparagraph (B) and
whose income is equal to or greater than 200
percent of such official poverty line in the pro-
gram, except that no amounts expended by the
State during a fiscal year on behalf of such an
individual may be included in the total amount
expended during the fiscal year as medical as-
sistance under the State plan; and
‘‘(D) no individual shall be eligible to par-
ticipate in the program if the individual is enti-
tled to benefits under title XVIII of the Social
Security Act pursuant to section 226 of such
Act.
‘‘(2) AUTOMATIC
ELIGIBILITY
OF
MEDICAID
CATEGORICALLY
ELIGIBLE
INDIVIDUALS.—Under
the criteria imposed by a State under paragraph (1),
any individual to whom the State makes medical as-
sistance available under the State plan under this
title pursuant to clause (i) of section 1902(a)(10)(A)
shall be eligible to participate in the State health al-
lowance program.
‘‘(3) USE
OF
RESOURCE
STANDARD.—Under
the criteria imposed by a State under paragraph (1),
a State may not require an individual to meet any
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resource standard unless the Secretary approves the
State’s use of such a standard.
‘‘(e) EVALUATIONS AND REPORTS.—
‘‘(1) EVALUATIONS.—Not later than 3 years
after the date of the enactment of this section (and
at such subsequent intervals as the Secretary consid-
ers appropriate), the Secretary shall evaluate the ef-
fectiveness of the State health allowance programs
for which Federal financial participation is provided
under this section, and the impact of such programs
on increasing the number of individuals with health
insurance coverage in participating States and in
controlling the costs of health care in such States.
‘‘(2) REPORTS.—Not later than 3 years after
the date of the enactment of this section (and at
such subsequent intervals as the Secretary considers
appropriate), the Secretary shall submit a report on
the program to Congress.’’.
(b) ENSURING BUDGET NEUTRALITY THROUGH RE-
DUCTION IN DISPROPORTIONATE SHARE HOSPITAL PAY-
MENTS FOR PARTICIPATING STATES.—Section 1923 of
the Social Security Act (42 U.S.C. 1396r–4) is amended
by adding at the end the following new subsection:
‘‘(g) REDUCTION IN PAYMENT ADJUSTMENTS FOR
STATES WITH HEALTH ALLOWANCE PROGRAMS.—In the
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case of a State operating a State health allowance pro-
gram under section 1931 in a fiscal year, the Secretary
shall reduce the total payment adjustments made under
this section for hospitals in the State for quarters in the
year by such amount as the Secretary determines to be
necessary to ensure that the total amount paid to the
State under section 1903(a)(1) for the year does not ex-
ceed the amount that would have been paid to the State
under such section for the year if the State did not operate
such a program.
SEC. 3. EFFECTIVE DATE.
The amendments made by section 2 shall apply to
calendar quarters beginning on or after January 1, 1994.
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