I 
108TH CONGRESS 
1ST SESSION H. R. 2402
To expand the number of individuals and families with health insurance 
coverage, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 10, 2003
Ms. KAPTUR (for herself, Mr. LATOURETTE, Mr. CLAY, Mr. MORAN of Vir-
ginia, Mrs. CHRISTENSEN, and Mr. DAVIS of Illinois) introduced the fol-
lowing bill; which was referred to the Committee on Energy and Com-
merce, and in addition to the Committees on Ways and Means, Education 
and the Workforce, and Rules, for a period to be subsequently determined 
by the Speaker, in each case for consideration of such provisions as fall 
within the jurisdiction of the committee concerned 
A BILL 
To expand the number of individuals and families with health 
insurance coverage, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Health Coverage, Affordability, Responsibility, and Eq-
uity Act of 2003’’ or the ‘‘HealthCARE Act of 2003’’. 
(b) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows:
Sec. 1. Short title; table of contents. 
TITLE I—INCREASING HEALTH CARE COVERAGE 
Subtitle A—Medicaid and SCHIP 
Sec. 101. State option to offer medicaid coverage based on need. 
Sec. 102. State option to provide coverage of children under SCHIP in excess 
of the State’s allotment. 
Subtitle B—Refundable Tax Credit for Health Insurance Costs of Low-
Income Individuals and Families 
Sec. 111. Credit for health insurance costs of certain low-income individuals. 
Sec. 112. Advance payment of credit for health insurance costs of eligible low-
income individuals. 
TITLE II—IMPROVING ACCESS TO HEALTH PLANS 
Sec. 201. Definitions. 
Sec. 202. Establishment of health insurance purchasing pools. 
Sec. 203. Purchasing pools. 
Sec. 204. Purchasing pool operators. 
Sec. 205. Contracts with participating insurers. 
Sec. 206. Options for health benefits coverage. 
Sec. 207. Enrollment process for eligible individuals. 
Sec. 208. Plan premiums. 
Sec. 209. Enrollee premium share. 
Sec. 210. Payments to purchasing pool operators and payments to participating 
insurers. 
Sec. 211. State-based reinsurance programs. 
Sec. 212. Coverage under individual health insurance. 
Sec. 213. Use of premium subsidies to unify family coverage with members en-
rolled in medicaid and SCHIP. 
Sec. 214. Coverage through employer-sponsored health insurance. 
Sec. 215. Participation by small employers. 
Sec. 216. Report. 
Sec. 217. Authorization of appropriations. 
TITLE III—NATIONAL ADVISORY COMMISSION ON EXPANDED 
ACCESS TO HEALTH CARE 
Sec. 301. National Advisory Commission on Expanded Access to Health Care. 
Sec. 302. Congressional action. 
TITLE IV—STATE WAIVERS 
Sec. 401. State waivers.
TITLE I—INCREASING HEALTH 
CARE COVERAGE 
Subtitle A—Medicaid and SCHIP 
SEC. 101. STATE OPTION TO OFFER MEDICAID COVERAGE 
BASED ON NEED. 
(a) STATE OPTION.—Section 1902(a)(10)(A)(ii) of 
the Social Security Act (42 U.S.C. 1396a) is amended—
(1) by striking ‘‘or’’ at the end of subclause 
(XVII); 
(2) by adding ‘‘or’’ at the end of subclause 
(XVIII); and 
(3) by adding at the end the following: 
‘‘(XIX) who are not otherwise el-
igible for medical assistance under 
this title and whose income does not 
exceed such income level as the State 
may establish, expressed as a percent-
age (not to exceed 100) of the income 
official poverty line (as defined by the 
Office of Management and Budget, 
and revised annually in accordance 
with section 673(2) of the Omnibus 
Budget Reconciliation Act of 1981) 
applicable to a family of the size in-
volved;’’.
(b) INCREASED FMAP.—Section 1905 of the Social 
Security Act (42 U.S.C. 1396d) is amended—
(1) in the first sentence of subsection (b)—
(A) by striking ‘‘and (4)’’ and inserting 
‘‘(4)’’; and 
(B) by inserting before the period the fol-
lowing: ‘‘, and (5) in the case of a State that 
meets the conditions described in paragraph (1) 
of subsection (x), the Federal medical assist-
ance percentage shall be equal to the need-
based enhanced FMAP described in paragraph 
(2) of subsection (x)’’; and 
(2) by adding at the end the following: 
‘‘(x)(1) For purposes of clause (5) of the first sen-
tence of subsection (b), the conditions described in this 
subsection are the following: 
‘‘(A) The State provides medical assistance to 
individuals 
described 
in 
subsection 
(a)(10)(A)(ii)(XIX). 
‘‘(B) The State uses streamlined enrollment 
and outreach measures to all individuals described in 
subparagraph (A) including—
‘‘(i) the same application and retention 
procedures (such as 1-page enrollment forms 
and enrollment by mail) used by the majority of
State programs under title XXI during the pre-
ceding year; and 
‘‘(ii) outreach efforts proportional in scope 
and reasonably expected effectiveness to those 
employed by the State during a comparable 
stage of implementation of the State’s program 
under title XXI. 
‘‘(C) The State applies eligibility standards and 
methodologies under this title with respect to indi-
viduals residing in the State who have not attained 
age 65 that are not more restrictive (as determined 
under section 1902(a)(10)(C)(i)(III)) than the 
standards and methodologies that applied under this 
title with respect to such individuals as of July 1, 
2003. 
‘‘(2)(A) For purposes of clause (5) of the first sen-
tence of subsection (b), the need-based enhanced FMAP 
for a State for a fiscal year, is equal to the Federal med-
ical assistance percentage (as defined in the first sentence 
of subsection (b)) for the State increased, subject to sub-
paragraph (B), by such percentage increase as would com-
pensate all States for the additional expenditures that 
would be incurred by all States if the States were to pro-
vide medical assistance to all individuals whose income 
does not exceed 100 percent of the income official poverty
line (as defined by the Office of Management and Budget, 
and revised annually in accordance with section 673(2) of 
the Omnibus Budget Reconciliation Act of 1981) applica-
ble to a family of the size involved and who are eligible 
for such assistance only on the basis of section 
1902(a)(10)(A)(ii)(XIX).
‘‘(B) In the case of a State that provides medical as-
sistance 
to 
individuals 
described 
in 
section 
1902(a)(10)(A)(ii)(XIX) but limits such assistance to in-
dividuals with income at or below a percentage of the in-
come official poverty line (as defined by the Office of Man-
agement and Budget, and revised annually in accordance 
with section 673(2) of the Omnibus Budget Reconciliation 
Act of 1981) applicable to a family of the size involved 
that is less than 100, the Secretary shall reduce the need-
based enhanced FMAP otherwise determined for the State 
under subparagraph (A) by a proportion based on the na-
tional income distribution of all individuals in all States 
who are (regardless of whether such individuals are en-
rolled under this title) eligible for medical assistance only 
on the basis of section 1902(a)(10)(A)(ii)(XIX).’’. 
(c) CONFORMING AMENDMENTS.—Section 1905(a) of 
the Social Security Act (42 U.S.C. 1396d(a)) is amended 
in the matter preceding paragraph (1)—
(1) by striking ‘‘or’’ at the end of clause (xii);
(2) by adding ‘‘or’’ at the end of clause (xiii); 
and 
(3) by inserting after clause (xiii) the following: 
‘‘(xiv) individuals who are eligible for medical 
assistance 
on 
the 
basis 
of 
section 
1902(a)(10)(A)(ii)(XIX);’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section take effect on October 1, 2004, and apply to 
medical assistance provided on or after that date, without 
regard to whether final regulations to carry out such 
amendments have been promulgated by such date. 
SEC. 102. STATE OPTION TO PROVIDE COVERAGE OF CHIL-
DREN UNDER SCHIP IN EXCESS OF THE 
STATE’S ALLOTMENT. 
(a) IN GENERAL.—Title XXI of the Social Security 
Act (42 U.S.C. 1397aa et seq.) is amended by adding at 
the end the following: 
‘‘SEC. 2111. STATE OPTION TO PROVIDE COVERAGE OF 
CHILDREN IN EXCESS OF THE STATE’S AL-
LOTMENT. 
‘‘(a) STATE OPTION.—In the case of a State that 
meets the condition described in subsection (b), the fol-
lowing shall apply: 
‘‘(1) Notwithstanding section 2105 and without 
regard to the State’s allotment under section 2104,
the Secretary shall pay the State an amount for 
each quarter equal to the enhanced FMAP of ex-
penditures incurred in the quarter that are described 
in section 2105(a)(1). 
‘‘(2) The Secretary shall reduce the State’s al-
lotment under section 2104, for the first fiscal year 
for which the State amendment described in sub-
section (b) applies, and for each fiscal year there-
after, by an amount equal to the amount that the 
Secretary determines the State would have expended 
to provide child health assistance to targeted low-in-
come children during that fiscal year if that State 
had not elected the State option to provide such as-
sistance in accordance with this section. 
‘‘(3) Subsections (f) and (g) of section 2104 
shall not apply to the State’s reduced allotment 
(after the application of paragraph (2)). 
‘‘(b) CONDITION DESCRIBED.—For purposes of sub-
section (a), the condition described in this subsection is 
that the State has made an irrevocable election, through 
a plan amendment, to provide child health assistance to 
all targeted low-income children residing in the State 
(without regard to date of application for assistance) and 
to cover health services listed in the State plan whenever 
medically necessary.’’.
(b) EFFECTIVE DATE.—The amendment made by 
this section takes effect on October 1, 2004, and applies 
to child health assistance provided on or after that date, 
without regard to whether final regulations to carry out 
such amendment have been promulgated by such date. 
Subtitle B—Refundable Tax Credit 
for Health Insurance Costs of 
Low-Income 
Individuals 
and 
Families 
SEC. 111. CREDIT FOR HEALTH INSURANCE COSTS OF CER-
TAIN LOW-INCOME INDIVIDUALS. 
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to refundable credits) is amended by redes-
ignating section 36 as section 37 and inserting after sec-
tion 35 the following new section: 
‘‘SEC. 36. HEALTH INSURANCE COSTS OF ELIGIBLE LOW-IN-
COME INDIVIDUALS.
‘‘(a) IN GENERAL.—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 
the applicable percentage of the amount paid by the tax-
payer (or on behalf of the taxpayer) for coverage of the 
taxpayer or qualifying family members under qualified
health insurance for eligible coverage months beginning in 
such taxable year. 
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 
this section—
‘‘(1) IN GENERAL.—Subject to paragraph (2), 
the term ‘applicable percentage’ means the standard 
Government contribution (determined for full-time 
Federal employees enrolling in coverage for which 
such 
contribution 
is 
not 
limited 
by 
section 
8906(b)(1) of title 5, United States Code) for an 
employee enrolled in a health benefits plan under 
chapter 89 of title 5, United States Code, for the 
calendar year in which the taxable year begins, ex-
pressed as a percentage of the total premium for 
such plan. 
‘‘(2) INCREASED
PERCENTAGE
FOR
CERTAIN 
TAXPAYERS.—
‘‘(A) IN GENERAL.—In the case of a tax-
payer whose adjusted gross income for the pre-
ceding taxable year does not exceed 150 percent 
of the poverty level, the applicable percentage 
determined under paragraph (1) shall be in-
creased by such percentage points as the Sec-
retary determines will fully compensate such an 
individual for the individual’s limited pur-
chasing power in comparison to individuals 
whose adjusted gross income equals the average 
adjusted gross income for all Federal employ-
ees, to the extent that the amount of the result-
ing increase in the credit amount for all such 
eligible low-income individuals for the taxable 
year is not reasonably expected to exceed the 5 
percentage point dollar amount for that year, as 
determined under subparagraph (B). 
‘‘(B) DETERMINATION OF 5 PERCENTAGE 
POINT DOLLAR AMOUNT.—For purposes of sub-
paragraph (A), the 5 percentage point dollar 
amount for any taxable year is the product of—
‘‘(i) the total number of individuals 
receiving credits under this section for 
such year; and 
‘‘(ii) the amount equal to 5 percent of 
the average health insurance premium 
amount to which such credits are applied. 
‘‘(C) RULE OF CONSTRUCTION.—Nothing 
in this paragraph shall be construed to prevent 
the Secretary from establishing more than 1 
level of supplemental assistance that provides 
greater assistance to individuals with lower in-
come, determined as a percentage of poverty.
‘‘(3) APPLICATION OF FEHBP COVERAGE CAT-
EGORIES TO DETERMINATION OF CREDIT.—The per-
centages described in paragraphs (1) and (2) shall 
be applied to a taxpayer consistent with the coverage 
categories (such as self or family coverage) applied 
with respect to a health benefits plan under chapter 
89 of title 5, United States Code. 
‘‘(c) MAXIMUM PREMIUM AMOUNT.—The amount 
paid for qualified health insurance taken into account 
under subsection (a) for any taxable year shall not exceed 
an amount equal to the capped premium established for 
the applicable State under section 204(c)(10) of the 
Health Coverage, Affordability, Responsibility, and Equity 
Act of 2003 for the calendar year in which the such tax-
able year begins. 
‘‘(d) ELIGIBLE COVERAGE MONTH.—For purposes of 
this section—
‘‘(1) IN GENERAL.—The term ‘eligible coverage 
month’ means any month if during such month the 
taxpayer or a qualifying family member—
‘‘(A) is an eligible low-income individual; 
‘‘(B) is covered by qualified health insur-
ance, the premium for which is paid by the tax-
payer (or on behalf of the taxpayer);
‘‘(C) does not have other specified cov-
erage; and 
‘‘(D) is not imprisoned under Federal, 
State, or local authority. 
‘‘(2) JOINT RETURNS.—In the case of a joint 
return, the requirement of paragraph (1)(A) shall be 
treated as met with respect to any month if at least 
1 spouse satisfies such requirement. 
‘‘(e) ELIGIBLE LOW-INCOME INDIVIDUAL.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—The term ‘eligible low-in-
come individual’ means an individual—
‘‘(A) who has not attained age 65; 
‘‘(B) whose adjusted gross income does not 
exceed 200 percent of the poverty level; 
‘‘(C) who is ineligible for the medicaid pro-
gram or the State children’s health insurance 
program under title XIX or XXI of the Social 
Security Act (other than under section 1928 of 
such Act); 
‘‘(D) who has limited access to health in-
surance coverage through the employer of the 
individual or a member of the individual’s fam-
ily (either because the employer does not offer 
such coverage to the individual or because the
employee contribution for such coverage would 
exceed an amount equal to 5 percent of the 
household income of such individual, as deter-
mined in accordance with paragraph (2)); 
‘‘(E) who applies for a credit under this 
section not later than 60 days after receiving 
notice of potential eligibility for such credit, 
under procedures established by the Secretary; 
and 
‘‘(F) who resides in a State where the eli-
gibility standards and methodologies applied 
under the medicaid and State children’s health 
insurance programs with respect to individuals 
residing in the State who have not attained age 
65 are not more restrictive (as determined 
under section 1902(a)(10)(C)(i)(III) of the So-
cial Security Act) than the standards and meth-
odologies that applied under such programs 
with respect to such individuals as of July 1, 
2003. 
‘‘(2) DETERMINATION OF ELIGIBILITY.—
‘‘(A) SCHIP AGENCY.—
‘‘(i) IN GENERAL.—The determination 
of whether an individual is an eligible low-
income individual for purposes of this sec-
tion shall be made by the State agency 
with responsibility for determining the eli-
gibility of individuals for assistance under 
the State children’s health insurance pro-
gram under title XXI of the Social Secu-
rity Act. 
‘‘(ii) APPLICATION
OF
SCREEN
AND 
ENROLL REQUIREMENTS.—
‘‘(I) IN
GENERAL.—The State 
agency referred to in clause (i) shall 
ensure that individuals applying for a 
certificate of eligibility are screened 
for potential eligibility under the med-
icaid and State children’s health in-
surance programs and that individuals 
found through screening to be eligible 
for assistance under such a program 
are enrolled for assistance under the 
appropriate program. To the max-
imum extent possible pursuant to 
State options under title XIX of the 
Social Security Act, and notwith-
standing any otherwise applicable pro-
vision of, or State plan provision 
under, such title, screening and enroll-
ment activities described in the pre-
vious sentence shall use the proce-
dures employed by the State chil-
dren’s health insurance program oper-
ated under title XXI of the Social Se-
curity Act, if such procedures differ 
from those ordinarily employed by the 
State program operated under title 
XIX of such Act. 
‘‘(II) NO DELAY OF ISSUANCE OF 
CERTIFICATE.—The application of the 
screen and enroll requirements of 
clause (i) shall not delay the issuance 
of a certificate of eligibility to an indi-
vidual for purposes of this section. 
The State agency referred to in clause 
(i) shall adopt procedures to ensure 
that an individual issued a certificate 
of eligibility under this paragraph who 
is subsequently determined to be eligi-
ble for the State medicaid program 
under title XIX of the Social Security 
Act or the State children’s health in-
surance program under XXI of such 
Act shall be enrolled in the appro-
priate program without an interrup-
tion in the individual’s health insur-
ance coverage. 
‘‘(B) STANDARDS.—
‘‘(i) IN
GENERAL.—An individual is 
an eligible low-income individual for pur-
poses of this section if—
‘‘(I) on the basis of the individ-
ual’s tax return for the preceding tax-
able year, the individual meets the re-
quirements of paragraph (1)(B), and 
the individual otherwise satisfies the 
requirements of paragraph (1), or 
‘‘(II) the individual is determined 
to satisfy the requirements of para-
graph (1) after the application of the 
same 
eligibility 
methodologies 
as 
would apply for purposes of deter-
mining the eligibility of an individual 
for assistance under the State chil-
dren’s 
health 
insurance 
program 
under title XXI of the Social Security 
Act. 
‘‘(ii) APPLICATION OF SCHIP INCOME 
DETERMINATION
METHODOLOGIES.—For
purposes of clause (i)(II), determinations 
of income levels shall be made using the 
methodologies described in that clause, to 
the 
extent 
such 
methodologies 
for 
ascertaining household income differ from 
any otherwise applicable method for deter-
mining adjusted gross income or the defini-
tion of adjusted gross income. 
‘‘(C) CERTIFICATE OF ELIGIBILITY.—
‘‘(i) IN GENERAL.—An individual who 
is determined to be an eligible low-income 
individual shall be issued a certificate of 
eligibility by the State agency referred to 
in subparagraph (A). 
‘‘(ii) CERTIFICATE
AMOUNT.—Such 
certificate shall indicate the applicable per-
centage of the amount paid for coverage 
under qualified health insurance that the 
individual is eligible for under this section 
(including any supplemental assistance 
which the individual may be eligible for 
under subsection (b)(2), unless the indi-
vidual elects to not receive such supple-
mental assistance).
‘‘(iii) 12-MONTH PERIOD OF ISSUE.—
The certificate of eligibility shall apply for 
a 12-month period from the date of issue, 
notwithstanding any changes in household 
circumstances following the individual’s ap-
plication for a credit under this section or 
supplemental assistance. 
‘‘(D) SUPPLEMENTAL
ASSISTANCE.—The 
State agency described in subparagraph (A) 
shall determine an individual’s eligibility for 
supplemental assistance under subsection (b)(2) 
based on the methodologies referred to in sub-
paragraph (B)(ii). 
‘‘(f) QUALIFYING FAMILY MEMBER.—For purposes 
of this section—
‘‘(1) IN GENERAL.—The term ‘qualifying family 
member’ means—
‘‘(A) the taxpayer’s spouse; and 
‘‘(B) any dependent of the taxpayer with 
respect to whom the taxpayer is entitled to a 
deduction under section 151(c). 
Such term does not include any individual who is 
not an eligible low-income individual under sub-
section (e)(1).
‘‘(2) SPECIAL DEPENDENCY TEST IN CASE OF 
DIVORCED PARENTS, ETC.—If paragraph (2) or (4) 
of section 152(e) applies to any child with respect to 
any calendar year, in the case of any taxable year 
beginning in such calendar year, such child shall be 
treated as described in paragraph (1)(B) with re-
spect to the custodial parent (within the meaning of 
section 152(e)(1)) and not with respect to the non-
custodial parent. 
‘‘(g) QUALIFIED HEALTH INSURANCE.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—The term ‘qualified health 
insurance’ means any of the following: 
‘‘(A) Coverage under an insurance plan 
participating in a purchasing pool established 
pursuant to section 203 of the Health Cov-
erage, Affordability, Responsibility, and Equity 
Act of 2003. 
‘‘(B) Coverage under individual health in-
surance pursuant to section 212 of such Act. 
‘‘(C) Coverage, pursuant to section 213 of 
such Act, under the medicaid program or the 
State children’s health insurance program if 1 
or more family members qualifies for coverage 
under such program.
‘‘(D) Coverage, pursuant to section 214 of 
such Act, under an employer-sponsored insur-
ance plan, including— 
‘‘(i) coverage under a COBRA con-
tinuation provision (as defined in section 
9832(d)(1));
‘‘(ii) State-based continuation cov-
erage provided under a State law that re-
quires such coverage; 
‘‘(iii) coverage voluntarily offered by a 
former employer of the individual or family 
member; or 
‘‘(iv) coverage under a group health 
plan that is available through the employ-
ment of the individual or a family member. 
‘‘(2) EXCEPTION.—The term ‘qualified health 
insurance’ shall not include—
‘‘(A) a flexible spending or similar ar-
rangement; and 
‘‘(B) any insurance if substantially all of 
its coverage is of excepted benefits described in 
section 9832(c). 
‘‘(3) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) 
EMPLOYER-SPONSORED
INSUR-
ANCE.—
‘‘(i) IN
GENERAL.—The term ‘em-
ployer-sponsored insurance’ means any in-
surance which covers medical care under 
any health plan maintained by any em-
ployer (or former employer) of the tax-
payer or the taxpayer’s spouse. 
‘‘(ii) 
TREATMENT
OF
CAFETERIA 
PLANS.—For purposes of clause (i), the 
cost of coverage shall be treated as paid or 
incurred by an employer to the extent the 
coverage is in lieu of a right to receive cash 
or other qualified benefits under a cafe-
teria plan (as defined in section 125(d)). 
‘‘(B) INDIVIDUAL HEALTH INSURANCE.—
The term ‘individual health insurance’ means 
any insurance which constitutes medical care 
offered to individuals other than in connection 
with a group health plan and does not include 
Federal- or State-based health insurance cov-
erage. 
‘‘(h) OTHER SPECIFIED COVERAGE.—For purposes 
of this section, an individual has other specified coverage 
for any month if, as of the first day of such month—
‘‘(1) COVERAGE UNDER MEDICARE.—Such indi-
vidual is entitled to benefits under part A of title 
XVIII of the Social Security Act or is enrolled under 
part B of such title. 
‘‘(2) CERTAIN OTHER COVERAGE.—Such indi-
vidual—
‘‘(A) is enrolled in a health benefits plan 
under chapter 89 of title 5, United States Code; 
or 
‘‘(B) is entitled to receive benefits under 
chapter 55 of title 10, United States Code. 
‘‘(i) FEDERAL POVERTY LEVEL; POVERTY LEVEL; 
POVERTY.—For purposes of this section, the terms ‘Fed-
eral poverty level’, ‘poverty level’, and ‘poverty’ mean the 
income official poverty line (as defined by the Office of 
Management and Budget, and revised annually in accord-
ance with section 673(2) of the Omnibus Budget Rec-
onciliation Act of 1981) applicable to a family of the size 
involved. 
‘‘(j) SPECIAL RULES.—
‘‘(1) COORDINATION WITH ADVANCE PAYMENTS 
OF CREDIT.—With respect to any taxable year, the 
amount which would (but for this subsection) be al-
lowed as a credit to the taxpayer under subsection 
(a) shall be reduced (but not below zero) by the ag-
gregate amount paid on behalf of such taxpayer 
under section 7528 for months beginning in such 
taxable year. 
‘‘(2) COORDINATION
WITH
OTHER
DEDUC-
TIONS.—Amounts taken into account under sub-
section (a) shall not be taken into account in deter-
mining any deduction allowed under section 162(l) 
or 213. 
‘‘(3) MSA DISTRIBUTIONS.—Amounts distrib-
uted from an Archer MSA (as defined in section 
220(d)) shall not be taken into account under sub-
section (a). 
‘‘(4) DENIAL OF CREDIT TO DEPENDENTS.—No 
credit shall be allowed under this section to any indi-
vidual with respect to whom a deduction under sec-
tion 151 is allowable to another taxpayer for a tax-
able year beginning in the calendar year in which 
such individual’s taxable year begins. 
‘‘(5) BOTH SPOUSES ELIGIBLE LOW-INCOME IN-
DIVIDUALS.—The spouse of the taxpayer shall not 
be treated as a qualifying family member for pur-
poses of subsection (a), if—
‘‘(A) the taxpayer is married at the close 
of the taxable year;
‘‘(B) the taxpayer and the taxpayer’s 
spouse are both eligible low-income individuals 
during the taxable year; and 
‘‘(C) the taxpayer files a separate return 
for the taxable year. 
‘‘(6) MARITAL STATUS; CERTAIN MARRIED IN-
DIVIDUALS
LIVING
APART.—Rules similar to the 
rules of paragraphs (3) and (4) of section 21(e) 
shall apply for purposes of this section. 
‘‘(7) INSURANCE WHICH COVERS OTHER INDI-
VIDUALS.—For purposes of this section, rules simi-
lar to the rules of section 213(d)(6) shall apply with 
respect to any contract for qualified health insurance 
under which amounts are payable for coverage of an 
individual other than the taxpayer and qualifying 
family members. 
‘‘(8) TREATMENT
OF
PAYMENTS.—For pur-
poses of this section: 
‘‘(A) PAYMENTS
BY
SECRETARY.—Any 
payment made by the Secretary on behalf of 
any individual under section 7528 (relating to 
advance payment of credit for health insurance 
costs of eligible low-income individuals) shall be 
treated as having been made by the taxpayer 
(or on behalf of the taxpayer) on the first day
of the month for which such payment was 
made. 
‘‘(B) PAYMENTS BY TAXPAYER.—Any pay-
ment made by the taxpayer (or on behalf of the 
taxpayer) for eligible coverage months shall be 
treated as having been so made on the first day 
of the month for which such payment was 
made. 
‘‘(9) REGULATIONS.—
‘‘(A) IN GENERAL.—The Secretary, in con-
sultation with the Secretary of Health and 
Human Services, shall administer the credit al-
lowed under this section and shall prescribe 
such regulations and other guidance as may be 
necessary or appropriate to carry out this sec-
tion, section 6050U, and section 7528. 
‘‘(B) 
ELIGIBILITY
DETERMINATIONS.—
Such regulations shall include such standards 
as the Secretary of Health and Human Services 
may specify with respect to the requirements 
for eligibility determinations under subsection 
(e)(2). 
‘‘(C) MEASURES TO COMBAT FRAUD AND 
ABUSE.—Such regulations shall include appro-
priate procedures to deter, detect, and penalize
fraudulent efforts to obtain a credit under this 
section by individuals, providers of qualified 
health insurance, and others.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 1324(b) of title 
31, United States Code, is amended by inserting be-
fore the period ‘‘, or from section 36 of such Code’’. 
(2) The table of sections for subpart C of part 
IV of chapter 1 of the Internal Revenue Code of 
1986 is amended by striking the last item and in-
serting the following new items:
‘‘Sec. 36. Health insurance costs of eligible low-income individ-
uals. 
‘‘Sec. 37. Overpayments of tax.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2005. 
(d) REIMBURSEMENT FOR ADMINISTRATIVE COSTS 
INCURRED IN DETERMINING ELIGIBILITY FOR CREDIT.—
(1) IN GENERAL.—The Secretary of Health 
and Human Services shall reimburse States for the 
reasonable administrative costs incurred in making 
eligibility determinations in accordance with section 
36(e) of the Internal Revenue Code of 1986 (as 
added by subsection (a)). Such reimbursement shall
not apply to State costs required under the medicaid 
or State children’s health insurance programs. 
(2) APPLICATION.—A State desiring reimburse-
ment under this subsection shall submit an applica-
tion to the Secretary of Health and Human Services 
in such manner, at such time, and containing such 
information as the Secretary may require. 
(3) APPROPRIATION.—Out of any money in the 
Treasury of the United States not otherwise appro-
priated, there are appropriated such sums as may be 
necessary to carry out this subsection. 
SEC. 112. ADVANCE PAYMENT OF CREDIT FOR HEALTH IN-
SURANCE COSTS OF ELIGIBLE LOW-INCOME 
INDIVIDUALS. 
(a) IN GENERAL.—Chapter 77 of the Internal Rev-
enue Code of 1986 (relating to miscellaneous provisions) 
is amended by adding at the end the following new section: 
‘‘SEC. 7528. ADVANCE PAYMENT OF CREDIT FOR HEALTH 
INSURANCE COSTS OF ELIGIBLE LOW-IN-
COME INDIVIDUALS. 
‘‘(a) GENERAL RULE.—Not later than August 1, 
2005, the Secretary shall establish a program for making 
payments on behalf of certified individuals to providers of 
qualified health insurance (as defined in section 36(g)) for 
such individuals.
‘‘(b) LIMITATION ON ADVANCE PAYMENTS DURING 
ANY TAXABLE YEAR.—The Secretary may make pay-
ments under subsection (a) only to the extent that the 
total amount of such payments made on behalf of any indi-
vidual during the taxable year is not reasonably expected 
to exceed the applicable percentage (as defined in section 
36(b)) of the amount paid by the taxpayer (or on behalf 
of the taxpayer) for coverage of the taxpayer and quali-
fying family members under qualified health insurance for 
eligible coverage months beginning in the taxable year. 
‘‘(c) CERTIFIED INDIVIDUAL.—For purposes of this 
section, the term ‘certified individual’ means any indi-
vidual for whom a health coverage eligibility certificate is 
in effect. 
‘‘(d) HEALTH
COVERAGE
ELIGIBILITY
CERTIFI-
CATE.—For purposes of this section, the term ‘health cov-
erage eligibility certificate’ means any written statement 
that an individual is an eligible low-income individual (as 
defined in section 36(e)) if such statement provides such 
information as the Secretary may require for purposes of 
this section and is issued by the State agency responsible 
for administering the State children’s health insurance 
program under title XXI of the Social Security Act.’’. 
(b) DISCLOSURE
OF RETURN INFORMATION
FOR 
PURPOSES OF CARRYING OUT A PROGRAM FOR ADVANCE
PAYMENT OF CREDIT FOR HEALTH INSURANCE COSTS OF 
ELIGIBLE LOW-INCOME INDIVIDUALS.—
(1) IN
GENERAL.—Subsection (l) of section 
6103 of the Internal Revenue Code of 1986 (relating 
to disclosure of returns and return information for 
purposes other than tax administration) is amended 
by adding at the end the following new paragraph: 
‘‘(19) DISCLOSURE OF RETURN INFORMATION 
FOR PURPOSES OF CARRYING OUT A PROGRAM FOR 
ADVANCE PAYMENT OF CREDIT FOR HEALTH INSUR-
ANCE
COSTS
OF
ELIGIBLE
LOW-INCOME
INDIVID-
UALS.—The Secretary may disclose to providers of 
health insurance for any certified individual (as de-
fined in section 7528(c)) return information with re-
spect to such certified individual only to the extent 
necessary to carry out the program established by 
section 7528 (relating to advance payment of credit 
for health insurance costs of eligible low-income indi-
viduals).’’. 
(2) PROCEDURES
AND
RECORDKEEPING
RE-
LATED TO DISCLOSURES.—Subsection (p) of such 
section is amended—
(A) in paragraph (3)(A) by striking ‘‘or 
(18)’’ and inserting ‘‘(18), or (19)’’; and
(B) in paragraph (4), as amended by sec-
tion 202(b)(2)(B) of the Trade Act of 2002 
(Public Law 107–210; 116 Stat. 961), by strik-
ing ‘‘or (17)’’ after ‘‘any other person described 
in subsection (l)(16)’’ each place it appears and 
inserting ‘‘(18), or (19)’’.
(3) UNAUTHORIZED INSPECTION OF RETURNS 
OR
RETURN
INFORMATION.—Section 
7213A(a)(1)(B) of such Code is amended by striking 
‘‘section 6103(n)’’ and inserting ‘‘subsection (l)(18) 
or (19) or (n) of section 6103’’. 
(c) INFORMATION REPORTING.—
(1) IN GENERAL.—Subpart B of part III of 
subchapter A of chapter 61 of the Internal Revenue 
Code of 1986 (relating to information concerning 
transactions with other persons) is amended by in-
serting after section 6050T the following new sec-
tion: 
‘‘SEC. 6050U. RETURNS RELATING TO CREDIT FOR HEALTH 
INSURANCE COSTS OF ELIGIBLE LOW-IN-
COME INDIVIDUALS. 
‘‘(a) REQUIREMENT OF REPORTING.—Every person 
who is entitled to receive payments for any month of any 
calendar year under section 7528 (relating to advance pay-
ment of credit for health insurance costs of eligible low-
income individuals) with respect to any certified individual 
(as defined in section 7528(c)) shall, at such time as the 
Secretary may prescribe, make the return described in 
subsection (b) with respect to each such individual. 
‘‘(b) FORM AND MANNER OF RETURNS.—A return 
is described in this subsection if such return—
‘‘(1) is in such form as the Secretary may pre-
scribe; and 
‘‘(2) contains—
‘‘(A) the name, address, and TIN of each 
individual referred to in subsection (a); 
‘‘(B) the number of months for which 
amounts were entitled to be received with re-
spect to such individual under section 7528 (re-
lating to advance payment of credit for health 
insurance costs of eligible low-income individ-
uals); 
‘‘(C) the amount entitled to be received for 
each such month; and 
‘‘(D) such other information as the Sec-
retary may prescribe. 
‘‘(c) STATEMENTS TO BE FURNISHED TO INDIVID-
UALS WITH RESPECT TO WHOM INFORMATION IS RE-
QUIRED.—Every person required to make a return under 
subsection (a) shall furnish to each individual whose name
is required to be set forth in such return a written state-
ment showing—
‘‘(1) the name and address of the person re-
quired to make such return and the phone number 
of the information contact for such person; and 
‘‘(2) the information required to be shown on 
the return with respect to such individual. 
The written statement required under the preceding sen-
tence shall be furnished on or before January 31 of the 
year following the calendar year for which the return 
under subsection (a) is required to be made.’’. 
(2) ASSESSABLE PENALTIES.—
(A) 
Subparagraph 
(B) 
of 
section 
6724(d)(1) of such Code (relating to defini-
tions) is amended by redesignating clauses (xii) 
through (xviii) as clauses (xiii) through (xix), 
respectively, and by inserting after clause (xi) 
the following new clause: 
‘‘(xii) section 6050U (relating to re-
turns relating to credit for health insur-
ance costs of eligible low-income individ-
uals),’’. 
(B) Paragraph (2) of section 6724(d) of 
such Code is amended by striking ‘‘or’’ at the 
end of subparagraph (AA), by striking the pe-
(1) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible 
individual’’ means an individual with respect to 
whom a tax credit is allowed under section 36 of the 
Internal Revenue Code of 1986 (as added by section 
111). 
(2) PARTICIPATING INSURER.—The term ‘‘par-
ticipating insurer’’ means an entity with a contract 
under section 205(a). 
(3) 
PRIVATE
GROUP
HEALTH
INSURANCE 
PLAN.—The term ‘‘private group health insurance 
plan’’ means a plan offered by a participating in-
surer that provides health benefits coverage to eligi-
ble individuals and that meets the requirements of 
this title. 
(4) PURCHASING POOL OPERATOR.—The term 
‘‘purchasing pool operator’’ means the entity des-
ignated by the State under section 204. 
(5) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of Health and Human Services. 
(6) SMALL EMPLOYER.—The term ‘‘small em-
ployer’’ means an employer with not less than 2 and 
not more than 100 employees.
SEC. 202. ESTABLISHMENT OF HEALTH INSURANCE PUR-
CHASING POOLS. 
There is established a program under which the Sec-
retary shall ensure that each eligible individual has the 
opportunity to enroll, through a purchasing pool operator, 
in a private group health insurance plan offered by a par-
ticipating insurer under this title. 
SEC. 203. PURCHASING POOLS. 
(a) ESTABLISHMENT OF PURCHASING POOLS.—Each 
State participating in the program under this title shall 
establish a purchasing pool that is available to each eligi-
ble individual who resides in the State. 
(b) TYPES OF PURCHASING POOLS.—
(1) IN
GENERAL.—A purchasing pool estab-
lished under subsection (a) shall be 1 of the fol-
lowing: 
(A) A statewide purchasing pool operated 
by the State. 
(B) A statewide purchasing pool operated 
on behalf of the State by the Director of the 
Office of Personnel Management, or the des-
ignee of such Director. 
(2) OPM OPERATED POOL.—In the case of a 
statewide purchasing pool described in paragraph 
(1)(B), the Director of the Office of Personnel Man-
agement or the Director’s designee, may limit par-
ticipating insurers in such pool to those described in 
section 205(e), except that the Director or such des-
ignee shall ensure that additional private group 
health insurance plans participate in such a pool to 
the extent necessary to meet the requirements of 
section 204(c)(9). 
(c) STATE ELECTION PROCESS.—
(1) IN GENERAL.—Each State participating in 
the program under this title shall notify the Sec-
retary, not later than January 4, 2005, of the type 
of purchasing pool that applies to residents of the 
State. 
(2) DEFAULT CHOICE.—If a State participating 
in the program under this title fails to notify the 
Secretary of the type of purchasing pool elected by 
the State by the date described in paragraph (1), 
the State shall be deemed to have elected the type 
of purchasing pool described in subsection (b)(1)(B). 
(3) CHANGE
OF
ELECTION.—The Secretary 
shall establish procedures under which a State par-
ticipating in the program under this title may 
change the election of the type of purchasing pool 
applicable to residents of the State.
SEC. 204. PURCHASING POOL OPERATORS. 
(a) DESIGNATION.—Each State shall designate a 
purchasing pool operator that shall be responsible for op-
erating the purchasing pool established under section 
203(a). A purchasing pool operator may be (or, to have 
1 or more of its functions performed, may contract with) 
a private entity that has entered into a contract with the 
State if such entity meets requirements established by the 
Secretary for purposes of the program under this title. 
(b) OPERATION SIMILAR TO FEHBP.—Each pur-
chasing pool operator shall operate the purchasing pool 
established under section 203(a) in a manner that is simi-
lar to the manner in which the Director of the Office of 
Personnel Management operates the Federal employees’ 
health benefits program under chapter 89 of title 5, 
United States Code, including (but not limited to) the per-
formance of the specific functions described in subsection 
(c). 
(c) SPECIFIC FUNCTIONS DESCRIBED.—The specific 
functions described in this subsection include the fol-
lowing: 
(1) Each purchasing pool operator shall offer 
one-stop shopping for eligible individuals to enroll 
for health benefits coverage under private, group 
health insurance plans offered by participating in-
surers.
(2) Each purchasing pool operator shall limit 
participating insurers to those that meet the condi-
tions for participation described in this title. 
(3) Each purchasing pool operator shall nego-
tiate (or, in the case of a purchasing pool described 
in section 203(b)(1)(B), shall negotiate or otherwise 
determine) bids and terms of coverage with insurers. 
(4) Each purchasing pool operator shall provide 
eligible individuals with comparative information on 
private group health insurance plans offered by par-
ticipating insurers. 
(5) Each purchasing pool operator shall assist 
eligible individuals in enrolling with a private group 
health insurance plan offered by a participating in-
surer. 
(6) Each purchasing pool operator shall collect 
private group health insurance plan premium pay-
ments for participating insurers and process such 
premium payments. 
(7) Each purchasing pool operator shall rec-
oncile from year to year aggregate premium pay-
ments and claims costs of private group health in-
surance plans consistent with practices under the 
Federal employees’ health benefits program under 
chapter 89 of title 5, United States Code.
(8) Each purchasing pool operator shall offer 
customer service to eligible individuals enrolled for 
health benefits coverage under a private group 
health insurance plan offered by a participating in-
surer. 
(9) Each purchasing pool operator shall ensure 
that each eligible individual has the option of enroll-
ing in either of at least 2 benchmark or benchmark-
equivalent plans with—
(A) a premium at or below a cap estab-
lished by the pool operator for purposes of this 
title; and 
(B) coverage of essential services included 
in the report required under section 301(e)(2), 
with cost-sharing consistent with such report. 
(10) Each purchasing pool operator shall estab-
lish a premium cap for purposes of determining the 
credit limitation under section 36(c) of the Internal 
Revenue Code of 1986, as added by section 111(a). 
The cap required under this paragraph may not be 
less than the premium charged to Federal employees 
by the most highly-enrolled health plan under the 
Federal employees’ health benefits program under 
chapter 89 of title 5, United States Code. If the 
most highly-enrolled plan in that program differs for
Federal enrollees in the State and all Federal enroll-
ees nationally in such plan, the minimum permitted 
premium cap shall be the lower of such premiums.
SEC. 205. CONTRACTS WITH PARTICIPATING INSURERS. 
(a) IN GENERAL.—Each purchasing pool operator 
shall negotiate and enter into contracts for the provision 
of health benefits coverage under the program under this 
title with entities that meet the conditions of participation 
described in subsection (b) and other applicable require-
ments of this Act. 
(b) CONSUMER INFORMATION.—In carrying out its 
duty under section 204(c)(4) to inform eligible individuals 
about private group health plans, the purchasing pool op-
erator shall provide information that meets the require-
ments of section 212(b)(2). 
(c) STATE LICENSURE.—
(1) IN GENERAL.—Subject to paragraph (2), a 
health plan shall not be a participating insurer un-
less the plan has a State license to provide State 
residents with the private group coverage health in-
surance plans that it offers through the pool. 
(2) EXCEPTION.—A pool operator may enter 
into a contract under subsection (a) to cover pool 
participants through a health plan without a State 
license described in paragraph (1) if such plan is of-
fered to Federal employees nationwide and, with re-
spect to such employees, is exempt from State health 
insurance regulation. Nothing in this paragraph 
shall be construed to permit coverage of pool partici-
pants through such a plan except with groups, con-
tracts, and premium rates that are entirely distinct 
from those used for individuals covered under the 
Federal employee’s health benefits program under 
chapter 89 of title 5, United States Code. 
(d) ADDITIONAL STOP-LOSS COVERAGE AND REIN-
SURANCE.—Purchasing pool operators are authorized to 
encourage participation in the program under this title, 
improve covered benefits, reduce out-of-pocket cost-shar-
ing, limit premiums, or achieve other objectives of this Act 
by—
(1) funding stop-loss coverage above levels oth-
erwise offered in the purchasing pool; or 
(2) providing or subsidizing reinsurance in ad-
dition to that provided under section 211. 
(e) PARTICIPATION OF FEHBP PLANS.—
(1) IN GENERAL.—Each entity with a contract 
under section 8902 of title 5, United States Code, 
shall be a participating insurer unless such entity 
notifies the Secretary in writing of its intention not 
to participate in the program under this title prior
to such time as is designated by the Secretary so 
as to allow such decisions to be taken into account 
with respect to eligible individuals’ choice of a pri-
vate group health insurance plan under such pro-
gram. Such participation in the program under this 
title shall include at least the covered benefits and 
provider networks available through such an entity 
and shall not involve greater out-of-pocket cost-shar-
ing than the plan offered by such entity pursuant 
to its contract under section 8902 of title 5, United 
States Code. 
(2) NO EFFECT ON FEHBP COVERAGE.—The 
Director of Office of Personnel Management shall 
take such steps as are necessary to ensure that each 
individual enrolled for health benefits coverage under 
the program under chapter 89 of title 5, United 
States Code, is not adversely affected by eligible in-
dividuals or others enrolled for coverage under the 
program under this title. Such steps shall include 
(but need not be limited to) the establishment of 
separate risk pools, separate contracts with partici-
pating insurers, and separately negotiated pre-
miums.
SEC. 206. OPTIONS FOR HEALTH BENEFITS COVERAGE. 
(a) SCOPE OF HEALTH BENEFITS COVERAGE.—The 
health benefits coverage provided to an eligible individual 
under a private group health insurance plan offered by 
a participating insurer shall consist of any of the fol-
lowing: 
(1) BENCHMARK COVERAGE.—Health benefits 
coverage that is equivalent to the benefits coverage 
in a benchmark benefit package described in sub-
section (b). 
(2) 
BENCHMARK-EQUIVALENT
COVERAGE.—
Health benefits coverage that meets the following re-
quirements: 
(A) INCLUSION
OF
ESSENTIAL
SERV-
ICES.—The coverage includes each of the essen-
tial services identified by the National Advisory 
Commission on Expanded Access to Health 
Care and adopted by Congress under title III. 
(B) AGGREGATE ACTUARIAL VALUE EQUIV-
ALENT
TO
BENCHMARK
PACKAGE.—The cov-
erage has an aggregate actuarial value that is 
equal to or greater than the actuarial value of 
one of the benchmark benefit packages. 
(3) 
ALTERNATIVE
COVERAGE.—Any 
other 
health benefits coverage that the Secretary deter-
mines, upon application by a State, offers health
benefits coverage equivalent to or greater than a 
plan described in and offered under section 8903(1) 
of title 5, United States Code. 
(b) BENCHMARK BENEFIT PACKAGES.—The bench-
mark benefit packages are as follows: 
(1) FEHBP-EQUIVALENT
HEALTH
BENEFITS 
COVERAGE.—The plan described in and offered 
under chapter 89 of title 5, United States Code with 
the highest number of enrollees under such section 
for the year preceding the year in which the private 
group health insurance plan is proposed to be of-
fered. 
(2) PUBLIC
PROGRAM-EQUIVALENT
HEALTH 
BENEFITS COVERAGE.—Coverage provided under the 
State plan approved under the medicaid program 
under title XIX of the Social Security Act or the 
State children’s health insurance program under 
title XXI of such Act (42 U.S.C. 1396 et seq., 
1397aa et seq.) (without regard to coverage provided 
under a waiver of the requirements of either such 
program). 
(3) COVERAGE OFFERED THROUGH HMO.—The 
health insurance coverage plan that—
(A) is offered by a health maintenance or-
ganization (as defined in section 2791(b)(3) of
the Public Health Service Act (42 U.S.C. 33gg–
91(b)(3))); and 
(B) has the largest insured commercial, 
nonmedicaid enrollment of covered lives of such 
coverage plans offered by such a health mainte-
nance organization in the State. 
(4) STATE EMPLOYEE COVERAGE.—The health 
insurance plan that is offered to State employees 
and has the largest enrollment of covered lives of 
any such plan. 
(5) APPLICATION
OF
BENCHMARK
STAND-
ARDS.—A private group health plan offers bench-
mark benefits if, with respect to a benchmark plan 
described in paragraph (1), (2), (3), or (4), the pri-
vate group health plan covers all items and services 
offered by the benchmark plan, with out-of-pocket 
cost-sharing for such items and services that is not 
greater than under the benchmark plan. Nothing in 
this title shall be construed to forbid a private group 
health plan from offering additional items and serv-
ices not covered by such a benchmark plan or reduc-
ing out-of-pocket cost-sharing below levels applicable 
under such plan.
person of the Commission. All members of the Com-
mission who are officers or employees of the United 
States shall serve without compensation in addition 
to that received for their services as officers or em-
ployees of the United States. 
(3) STAFF.—
(A) IN GENERAL.—The Chairperson of the 
Commission may, without regard to the civil 
service laws and regulations, appoint and termi-
nate an executive director and such other addi-
tional personnel as may be necessary to enable 
the Commission to perform its duties. The em-
ployment of an executive director shall be sub-
ject to confirmation by the Commission. 
(B) STAFF
COMPENSATION.—The Chair-
person of the Commission may fix the com-
pensation of the executive director and other 
personnel without regard to chapter 51 and 
subchapter III of chapter 53 of title 5, United 
States Code, relating to classification of posi-
tions and General Schedule pay rates, except 
that the rate of pay for the executive director 
and other personnel may not exceed the rate 
payable for level V of the Executive Schedule 
under section 5316 of such title.