182 
•AMDT. NO. 2786 
year (beginning with 2014), report to the appro-
priate committees of the Congress the results of the 
study conducted under paragraph (1), including any 
recommendations for administrative or legislative 
changes the Comptroller General determines nec-
essary 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 op-
tion, 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 prohibi-
tion. 
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183 
•AMDT. NO. 2786 
(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. 
(b) ESTABLISHMENT OF COMMUNITY HEALTH IN-
SURANCE OPTION.— 
(1) ESTABLISHMENT.—The Secretary shall es-
tablish 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 coverage that provides value, choice, competi-
tion, and stability of affordable, high quality cov-
erage throughout the United States. 
(2) COMMUNITY
HEALTH
INSURANCE
OP-
TION.—In this section, the term ‘‘community health 
insurance 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; 
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184 
•AMDT. NO. 2786 
(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; 
(F) offers a sufficient choice of providers; 
and 
(G) complies with State laws (if any), ex-
cept as otherwise provided for in this title, re-
lating to the laws described in section 1324(b). 
(3) ESSENTIAL HEALTH BENEFITS.— 
(A) GENERAL RULE.—Except as provided 
in subparagraph (B), a community health in-
surance option offered under this section shall 
provide coverage only for the essential health 
benefits described in section 1302(b). 
(B) STATES MAY OFFER ADDITIONAL BEN-
EFITS.—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 
community health insurance option offered in 
such State. 
(C) CREDITS.— 
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185 
•AMDT. NO. 2786 
(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 
as an individual who is enrolled in a quali-
fied health plan. 
(ii) 
NO
ADDITIONAL
FEDERAL 
COST.—A requirement by a State under 
subparagraph (B) that benefits in addition 
to the essential health benefits required 
under subparagraph (A) be provided to en-
rollees of a community health insurance 
option shall not affect the amount of a pre-
mium tax credit provided under section 
36B of the Internal 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
SERV-
ICES.—Nothing in this Act shall prohibit an in-
dividual enrolled in a community health insur-
ance option from paying out-of-pocket the full 
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186 
•AMDT. NO. 2786 
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 subpara-
graph (B) shall prohibit any type of medical 
provider from accepting an out-of-pocket pay-
ment from an individual enrolled in a commu-
nity health insurance option for a service other-
wise 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 in-
surance 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 geo-
graphically adjusted premium rates in an 
amount sufficient to cover expected costs (in-
cluding claims and administrative costs) using 
methods in general use by qualified health 
plans. 
(B) APPLICABLE RULES.—The provisions 
of title XXVII of the Public Health Service Act 
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187 
•AMDT. NO. 2786 
relating to premiums shall apply to community 
health insurance options under this section, in-
cluding modified community rating provisions 
under section 2701 of such Act. 
(C) COLLECTION
OF
DATA.—The Sec-
retary shall collect data as necessary to set pre-
mium rates under subparagraph (A). 
(D) 
NATIONAL
POOLING.—Notwith-
standing any other provision of law, the Sec-
retary may treat all enrollees in community 
health insurance options as members of a single 
pool. 
(E) CONTINGENCY
MARGIN.—In estab-
lishing premium rates under subparagraph (A), 
the Secretary 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 
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188 
•AMDT. NO. 2786 
paid by health insurance issuers offering quali-
fied health plans through the Exchange. 
(C) INNOVATION.—Subject to the limits 
contained in subparagraph (A), a State Advi-
sory Council established or designated under 
subsection (d) may develop or encourage the 
use of innovative payment policies that promote 
quality, efficiency and savings to consumers. 
(7) SOLVENCY AND CONSUMER PROTECTION.— 
(A) SOLVENCY.—The Secretary shall es-
tablish a Federal solvency standard to be ap-
plied with respect to a community health insur-
ance option. A community health insurance op-
tion shall also be subject to the solvency stand-
ard of each State in which such community 
health insurance 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. 
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189 
•AMDT. NO. 2786 
(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 reg-
ulations to establish additional requirements for 
a community health insurance option. 
(B) 
APPLICABILITY.—Any 
requirement 
promulgated under subparagraph (A) shall be 
applicable 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 oper-
ations of a community health insurance option. 
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190 
•AMDT. NO. 2786 
Such amounts shall remain available until ex-
pended. 
(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— 
(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 re-
quirements in paragraph (4)) for the purposes de-
scribed 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 conces-
sions. 
(4) REPAYMENT.— 
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191 
•AMDT. NO. 2786 
(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 re-
payments at rates that do not exceed the mar-
ket interest rate (as determined by the Sec-
retary). 
(B) SANCTIONS IN CASE OF FOR-PROFIT 
CONVERSION.—In any case in which the Sec-
retary enters into a contract with a qualified 
entity for the offering of a community health 
insurance option and such entity is determined 
to be a for-profit entity by the Secretary, such 
entity 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.— 
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192 
•AMDT. NO. 2786 
(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 Ad-
visory Council to provide recommendations to the 
Secretary on the operations and policies of a com-
munity health insurance option in the State. Such 
Council shall provide recommendations on at least 
the following: 
(A) policies and procedures to integrate 
quality improvement and cost containment 
mechanisms into the health care delivery sys-
tem; 
(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 Ad-
visory Council shall be representatives of the public 
and shall include health care consumers and pro-
viders. 
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193 
•AMDT. NO. 2786 
(3) APPLICABILITY OF RECOMMENDATIONS.— 
The Secretary may apply the recommendations of a 
State Advisory Council to a community health insur-
ance 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 per-
forming administrative functions (including 
functions described in subsection (a)(4) of sec-
tion 1874A of the Social Security Act) with re-
spect to a community health insurance option in 
the same manner as the Secretary may enter 
into contracts under subsection (a)(1) of such 
section. The Secretary shall have the same au-
thority with respect to a community health in-
surance option under this section as the Sec-
retary 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 
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195 
•AMDT. NO. 2786 
(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 ben-
eficiary 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-end, prepayment intelligent data-matching 
technology similar to that used by hedge funds, in-
vestment 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 
paragraph (1) shall be for a term of at least 5 years 
but not more than 10 years, as determined by the 
Secretary. At the end of each such term, the Sec-
retary shall conduct a competitive bidding process 
for the purposes of renewing existing contracts or 
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196 
•AMDT. NO. 2786 
selecting new qualified entities with which to enter 
into contracts 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 Sec-
retary 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. 
(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 in-
volved and an opportunity for a hearing. The Sec-
retary may revoke such contract if the Secretary de-
termines that such administrator has engaged in 
fraud, deception, waste, abuse of power, negligence, 
mismanagement of taxpayer dollars, or gross mis-
management. An entity that has had a contract re-
voked under this paragraph shall not be qualified to 
enter into a subsequent contract under this sub-
section. 
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197 
•AMDT. NO. 2786 
(7) FEE FOR ADMINISTRATION.— 
(A) IN GENERAL.—The Secretary shall pay 
the contracting administrator a fee for the 
management, administration, and delivery of 
the benefits under this section. 
(B) REQUIREMENT
FOR
HIGH
QUALITY 
ADMINISTRATION.—The Secretary may increase 
the fee described in subparagraph (A) by not 
more than 10 percent, or reduce the fee de-
scribed in subparagraph (A) by not more than 
50 percent, based on the extent to which the 
contracting administrator, in the determination 
of the Secretary, meets performance require-
ments established by the Secretary, in at least 
the following areas: 
(i) Maintaining low premium costs 
and low cost sharing requirements, pro-
vided that such requirements are con-
sistent with section 1302. 
(ii) Reducing administrative costs and 
promoting administrative simplification for 
beneficiaries. 
(iii) Promoting high quality clinical 
care. 
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198 
•AMDT. NO. 2786 
(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) during the contract period. 
(8) LIMITATION.—Notwithstanding the terms 
of a contract under this subsection, the Secretary 
shall negotiate the reimbursement rates for purposes 
of subsection (b)(6). 
(f) REPORT
BY HHS AND INSOLVENCY WARN-
INGS.— 
(1) IN GENERAL.—On an annual basis, the Sec-
retary shall conduct a study on the solvency of a 
community health insurance option and submit to 
Congress 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.— 
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199 
•AMDT. NO. 2786 
(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 sub-
mission 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, 
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 
insurance 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, guide-
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200 
•AMDT. NO. 2786 
books, enrollment 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 
private health insurance issuer shall not be subject to any 
Federal or State law described in subsection (b) if a quali-
fied health plan offered under the Consumer Operated and 
Oriented 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 
subject to such law. 
(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; 
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•AMDT. NO. 2786 
(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-
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 
offering 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 
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202 
•AMDT. NO. 2786 
satisfaction of the Secretary, and the Secretary cer-
tifies, 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 
premium an eligible individual is required 
to pay for coverage under the standard 
health plan for the individual and the indi-
vidual’s dependents does not exceed the 
amount of the monthly premium that the 
eligible individual would have been required 
to pay (in the rating area in which the in-
dividual resides) if the individual had en-
rolled in the applicable second lowest cost 
silver 
plan 
(as 
defined 
in 
section 
36B(b)(3)(B) of the Internal Revenue 
Code of 1986) offered to the individual 
through an Exchange; and 
(ii) that the cost-sharing an eligible 
individual is required to pay under the 
standard health plan does not exceed— 
(I) 
the 
cost-sharing 
required 
under a platinum plan in the case of 
an eligible individual with household 
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203 
•AMDT. NO. 2786 
income not in excess of 150 percent of 
the poverty line for the size of the 
family involved; and 
(II) the cost-sharing required 
under a gold plan in the case of an el-
igible 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 
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 
benefits described in section 1302(b); and 
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204 
•AMDT. NO. 2786 
(3) in the case of a plan that provides health 
insurance 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 pro-
gram shall establish a competitive process for enter-
ing into contracts with standard health plans under 
subsection (a), including negotiation of premiums 
and cost-sharing and negotiation of benefits in addi-
tion to the essential health benefits described in sec-
tion 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 inclu-
sion of innovative features in the plan, includ-
ing— 
(i) care coordination and care man-
agement for enrollees, especially for those 
with chronic health conditions; 
(ii) incentives for use of preventive 
services; and 
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205 
•AMDT. NO. 2786 
(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. 
(D) PERFORMANCE
MEASURES.—Estab-
lishing specific performance measures and 
standards 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 
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206 
•AMDT. NO. 2786 
standards, 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 eligi-
ble individuals within a State to ensure individ-
uals 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 
standard 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 
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.— 
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207 
•AMDT. NO. 2786 
(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-shar-
ing of, or to provide additional benefits for, eligible 
individuals enrolled in standard health plans within 
the State. Amounts in the trust fund, and expendi-
tures of such amounts, shall not be included in de-
termining the amount of any non-Federal funds for 
purposes of meeting any matching or expenditure re-
quirement of any federally-funded program. 
(3) AMOUNT OF PAYMENT.— 
(A) SECRETARIAL DETERMINATION.— 
(i) IN GENERAL.—The amount deter-
mined under this paragraph for any fiscal 
year is the amount the Secretary deter-
mines is equal to 85 percent of the pre-
mium tax credits under section 36B of the 
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208 
•AMDT. NO. 2786 
Internal Revenue Code of 1986, and the 
cost-sharing 
reductions 
under 
section 
1402, that would have been provided for 
the fiscal year to eligible individuals en-
rolled in standard health plans in the State 
if such eligible individuals were allowed to 
enroll in qualified health plans through an 
Exchange established 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 
premium tax credits and cost-sharing re-
ductions that would have been provided to 
eligible individuals described in clause (i), 
including the age and income of the en-
rollee, whether the enrollment is for self- 
only or family coverage, geographic dif-
ferences in average spending for health 
care across rating 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 
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209 
•AMDT. NO. 2786 
health plan through an Exchange, and 
whether any reconciliation of the credit or 
cost-sharing reductions would have oc-
curred if the enrollee had been so enrolled. 
This determination shall take into consid-
eration 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 spe-
cial focus on enrollees with income below 
200 percent of poverty. 
(iii) CERTIFICATION.—The Chief Ac-
tuary of the Centers for Medicare & Med-
icaid Services, in consultation with the Of-
fice of Tax Analysis of the Department of 
the Treasury, shall certify whether the 
methodology used to make determinations 
under this subparagraph, and such deter-
minations, meet the requirements of clause 
(ii). Such certifications shall be based on 
sufficient data from the State and from 
comparable States about their experience 
with programs created by this Act. 
(B) CORRECTIONS.—The Secretary shall 
adjust the payment for any fiscal year to reflect 
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210 
•AMDT. NO. 2786 
any error in the determinations under subpara-
graph (A) for any preceding fiscal year. 
(4) APPLICATION
OF
SPECIAL
RULES.—The 
provisions 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 ‘‘el-
igible 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 pro-
gram under title XIX of the Social Security Act 
for benefits that at a minimum consist of the 
essential 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 
the Internal Revenue Code of 1986) or is eligi-
ble for an employer-sponsored plan that is not 
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211 
•AMDT. NO. 2786 
affordable coverage (as determined under sec-
tion 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 en-
sure compliance with the requirements of this section, in-
cluding ensuring that the State program meets— 
(1) eligibility verification requirements for par-
ticipation in the program; 
(2) the requirements for use of Federal funds 
received by the program; and 
(3) the quality and performance standards 
under this section. 
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212 
•AMDT. NO. 2786 
(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 imple-
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213 
•AMDT. NO. 2786 
ment a plan meeting the requirements for 
a waiver 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 re-
spect to a State waiver under paragraph (1), under 
which, due to the structure of the State plan, indi-
viduals and small employers in the State would not 
qualify for the premium tax credits, cost-sharing re-
ductions, 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 
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214 
•AMDT. NO. 2786 
be eligible, the Secretary shall provide for an alter-
native means by which the aggregate amount of such 
credits or reductions that would have been paid on 
behalf of participants in the Exchanges established 
under this title had the State not received such waiv-
er, shall be paid to the State for purposes of imple-
menting the State plan under the waiver. Such 
amount shall be determined annually by the Sec-
retary, taking into consideration the experience of 
other States with respect to participation in an Ex-
change and credits and reductions 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 regula-
tions described in subparagraph (B). 
(B) REGULATIONS.—Not later than 180 
days after the date of enactment of this Act, 
the Secretary shall promulgate regulations re-
lating to waivers under this section that pro-
vide— 
(i) a process for public notice and 
comment at the State level, including pub-
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215 
•AMDT. NO. 2786 
lic hearings, sufficient to ensure a mean-
ingful level of public input; 
(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 require-
ments that are in addition to, or duplica-
tive of, requirements imposed under the 
Administrative Procedures Act, or require-
ments that are unreasonable or unneces-
sarily burdensome 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 
program under the waiver; and 
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216 
•AMDT. NO. 2786 
(v) a process for the periodic evalua-
tion by the Secretary of the program under 
the waiver. 
(C) REPORT.—The Secretary shall annu-
ally report to Congress concerning actions 
taken by the Secretary with respect to applica-
tions 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 
‘‘Secretary’’ 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 
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217 
•AMDT. NO. 2786 
(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.— 
(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 sec-
tion 1302(b) and offered through Exchanges es-
tablished 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 experience 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 
spending that are at least as affordable as the 
provisions of this title would provide; 
(C) will provide coverage to at least a com-
parable number of its residents as the provi-
sions of this title would provide; and 
(D) will not increase the Federal deficit. 
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•AMDT. NO. 2786 
(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-
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 deter-
mine the scope of a waiver of a requirement de-
scribed 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 Sec-
retary shall make a determination under subsection 
(a)(1) not later than 180 days after the receipt of 
an application from a State under such subsection. 
(2) EFFECT OF DETERMINATION.— 
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220 
•AMDT. NO. 2786 
Association of Insurance Commissioners, issue regu-
lations for the creation of health care choice com-
pacts under which 2 or more States may enter into 
an agreement under which— 
(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, 
network adequacy, and consumer protec-
tion standards (including standards relat-
ing to rating), including addressing dis-
putes as to the performance of the con-
tract, 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 ju-
risdiction of each such State with regard to 
the standards described in clause (i) (in-
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221 
•AMDT. NO. 2786 
cluding allowing 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 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 deter-
mines that such health care choice compact— 
(A) will provide coverage that is at least as 
comprehensive as the coverage defined in sec-
tion 1302(b) and offered through Exchanges es-
tablished under this title; 
(B) will provide coverage and cost sharing 
protections 
against 
excessive 
out-of-pocket 
spending that are at least as affordable as the 
provisions of this title would provide; 
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222 
•AMDT. NO. 2786 
(C) will provide coverage to at least a com-
parable number of its residents as the provi-
sions of this title would provide; 
(D) will not increase the Federal deficit; 
and 
(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 
compact 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 
requirements of this subsection (in this subsection a 
‘‘nationwide qualified health plan’’)— 
(A) the issuer of the plan may offer the 
nationwide qualified health plan in the indi-
vidual or small group market in more than 1 
State; and 
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223 
•AMDT. NO. 2786 
(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. 
(2) STATE OPT-OUT.—A State may, by specific 
reference in a law enacted after the date of enact-
ment of this title, provide that this subsection shall 
not apply to that State. Such opt-out shall be effec-
tive 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 nationwide qualified health plan if, in the deter-
mination 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 im-
poses that do not prevent the application of a 
requirement of part A of title XXVII of the 
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224 
•AMDT. NO. 2786 
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, 
including the requirement to offer the silver and 
gold levels of the plan in each Exchange in the 
State for the market in which the plan is of-
fered; 
(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 rat-
ing areas in which it is offered; 
(E) the issuer offers the nationwide quali-
fied health plan in at least 60 percent of the 
participating 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 par-
ticipating 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 
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225 
•AMDT. NO. 2786 
(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 
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 quali-
fied health plan is offered, the issuer shall file all na-
tionwide qualified health plan forms with the regu-
lator in each participating State in which the plan 
will be offered. An issuer may appeal the disapproval 
of a nationwide qualified health plan form to the 
Secretary. 
(5) APPLICABLE RULES.—The Secretary shall, 
in consultation with the National Association of In-
surance Commissioners, issue rules for the offering 
of nationwide qualified health plans under this sub-
section. Nationwide qualified health plans may be of-
fered 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 
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226 
•AMDT. NO. 2786 
under this subsection shall include at least the es-
sential benefits package described in section 1302. 
(7) STATE
LAW
MANDATING
BENEFIT
COV-
ERAGE
BY
A
HEALTH
BENEFITS
PLAN.—For the 
purposes of this subsection, a State law mandating 
benefit coverage by a health plan is a law that man-
dates health insurance coverage or the offer of 
health insurance coverage for specific health services 
or specific diseases. A law that mandates health in-
surance coverage or reimbursement for services pro-
vided 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 de-
pendents, is not a State law mandating benefit cov-
erage by a health benefits plan. 
PART V—REINSURANCE AND RISK ADJUSTMENT 
SEC. 1341. TRANSITIONAL REINSURANCE PROGRAM FOR 
INDIVIDUAL 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 
subsection (b); and 
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227 
•AMDT. NO. 2786 
(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 
consultation with the National Association of Insur-
ance Commissioners (the ‘‘NAIC’’), shall include 
provisions that enable States to establish and main-
tain 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 
payments to health insurance issuers described 
in subparagraph (A) that cover high risk indi-
viduals in the individual market (excluding 
grandfathered health plans) for any plan year 
beginning in such 3-year period. 
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228 
•AMDT. NO. 2786 
(2) 
HIGH-RISK
INDIVIDUAL; 
PAYMENT 
AMOUNTS.—The Secretary shall include the fol-
lowing 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 
purposes of the reinsurance program estab-
lished under this section. Such method shall 
provide for identification of individuals as high- 
risk individuals 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 equi-
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229 
•AMDT. NO. 2786 
table allocation of available funds through rec-
onciliation 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 
(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 de-
scribed in paragraph (1)(A) contributing to the 
reinsurance program under this section is re-
quired to contribute under such paragraph for 
each plan year beginning in the 36-month pe-
riod beginning January 1, 2014. The contribu-
tion amount for any plan year may be based on 
the percentage of revenue of each issuer and 
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230 
•AMDT. NO. 2786 
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 periodically throughout the plan 
year. 
(B) SPECIFIC REQUIREMENTS.—The meth-
od under this paragraph shall be designed so 
that— 
(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 re-
insurance entity; 
(iii) 
the 
aggregate 
contribution 
amounts for all States shall, based on the 
best estimates of the NAIC and without 
regard to amounts described in clause (ii), 
equal $10,000,000,000 for plan years be-
ginning in 2014, $6,000,000,000 for plan 
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231 
•AMDT. NO. 2786 
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 
$2,000,000,000 for 2015, and an addi-
tional $1,000,000,000 for 2016. 
Nothing in this subparagraph shall be con-
strued to preclude a State from collecting addi-
tional 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 pay-
ments under any reinsurance program of a 
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232 
•AMDT. NO. 2786 
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 
Treasury 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— 
(1) IN GENERAL.—The term ‘‘applicable rein-
surance entity’’ means a not-for-profit organiza-
tion— 
(A) the purpose of which is to help sta-
bilize 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 
adverse 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 im-
plement the reinsurance program. 
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233 
•AMDT. NO. 2786 
(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 Internal Revenue Code of 1986. The preceding 
sentence shall not apply to the tax imposed by sec-
tion 511 such Code (relating to tax on unrelated 
business taxable 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 re-
insurance program established under this section. The 
State may coordinate 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 
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234 
•AMDT. NO. 2786 
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 aggre-
gate premiums. Such program shall be based on the pro-
gram 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— 
(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 excess 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. 
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235 
•AMDT. NO. 2786 
(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 
Secretary an amount equal to the sum of 2.5 
percent 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 allow-
able costs of a plan for any year is an amount 
equal to the total costs (other than administra-
tive costs) of the plan in providing benefits cov-
ered by the plan. 
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236 
•AMDT. NO. 2786 
(B) REDUCTION
FOR
RISK
ADJUSTMENT 
AND
REINSURANCE
PAYMENTS.—Allowable 
costs shall reduced by any risk adjustment and 
reinsurance 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 
criteria and methods developed under subsection (b), 
each State shall assess a charge on health plans and 
health insurance issuers (with respect to health in-
surance coverage) described in subsection (c) if the 
actuarial risk of the enrollees of such plans or cov-
erage 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). 
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237 
•AMDT. NO. 2786 
(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 actu-
arial 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 provi-
sions of the Employee Retirement Income Security 
Act of 1974). 
(b) CRITERIA
AND METHODS.—The Secretary, in 
consultation with States, shall establish criteria and meth-
ods to be used in carrying out the risk adjustment activi-
ties under this section. The Secretary may utilize criteria 
and 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 indi-
vidual or small group market within the State. This sub-
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238 
•AMDT. NO. 2786 
section 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 
QUALIFIED HEALTH PLAN. 
(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 insert-
ing after section 36A the following new section: 
‘‘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— 
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239 
•AMDT. NO. 2786 
‘‘(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 re-
spect to all coverage months of the taxpayer occur-
ring 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 of-
fered 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 taxpayer and which were enrolled in 
through an Exchange established by the State 
under 1311 of the Patient Protection and Af-
fordable 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 
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240 
•AMDT. NO. 2786 
‘‘(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 pro-
vided in clause (ii), the applicable percent-
age with respect to any taxpayer for any 
taxable year is equal to 2.8 percent, in-
creased 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 
100 percent of the poverty line for a 
family of the size involved, bears to 
‘‘(II) an amount equal to 200 
percent of the poverty line for a fam-
ily of the size involved. 
‘‘(ii) SPECIAL RULE FOR TAXPAYERS 
UNDER 133 PERCENT OF POVERTY LINE.— 
If a taxpayer’s household income for the 
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241 
•AMDT. NO. 2786 
taxable year is in excess of 100 percent, 
but not more than 133 percent, of the pov-
erty line for a family of the size involved, 
the taxpayer’s applicable percentage shall 
be 2 percent. 
‘‘(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 
between the preceding calendar year and 
2013 over the rate of income growth for 
such period. 
‘‘(B) APPLICABLE SECOND LOWEST COST 
SILVER
PLAN.—The applicable second lowest 
cost silver plan with respect to any applicable 
taxpayer 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 
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242 
•AMDT. NO. 2786 
‘‘(ii) provides— 
‘‘(I) self-only coverage in the case 
of an applicable taxpayer— 
‘‘(aa) whose tax for the tax-
able year is determined under 
section 1(c) (relating to unmar-
ried individuals other than sur-
viving spouses and heads of 
households) and who is not al-
lowed a deduction under section 
151 for the taxable year with re-
spect to a dependent, 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. 
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 
taxpayer 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. 
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243 
•AMDT. NO. 2786 
‘‘(C) ADJUSTED
MONTHLY
PREMIUM.— 
The adjusted monthly premium for an applica-
ble second lowest cost silver plan is the monthly 
premium which would have been charged (for 
the rating area with respect to which the pre-
miums under paragraph (2)(A) were deter-
mined) 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 man-
ner allowed under section 2701 of the Public 
Health Service Act. In the case of a State par-
ticipating in the wellness discount demonstra-
tion project under section 2705(d) of the Public 
Health Service Act, the adjusted monthly pre-
mium shall be determined without regard to 
any premium discount or rebate 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 
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244 
•AMDT. NO. 2786 
‘‘(ii) a State requires a qualified 
health plan under section 1311(d)(3)(B) of 
such Act to cover benefits in addition to 
the essential health benefits required to be 
provided by the plan, 
the portion of the premium for the plan prop-
erly allocable (under rules prescribed by the 
Secretary of Health and Human Services) to 
such additional benefits shall not be taken into 
account in determining either the monthly pre-
mium 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 
and Affordable Care Act for any plan year, the 
portion of the premium for the plan described 
in such section that (under regulations pre-
scribed by the Secretary) is properly allocable 
to pediatric dental benefits which are included 
in the essential health benefits required to be 
provided by a qualified health plan under sec-
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245 
•AMDT. NO. 2786 
tion 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 APPLI-
CABLE 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 exceed 400 percent of an amount equal to 
the poverty line for a family of the size in-
volved. 
‘‘(B) SPECIAL RULE FOR CERTAIN INDI-
VIDUALS LAWFULLY PRESENT IN THE UNITED 
STATES.—If— 
‘‘(i) a taxpayer has a household in-
come which is not greater than 100 per-
cent of an amount equal to the poverty line 
for a family 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 
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246 
•AMDT. NO. 2786 
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 
taxable year, the taxpayer shall be treated as an 
applicable 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 
section to any individual with respect to whom 
a deduction under section 151 is allowable to 
another taxpayer for a taxable year beginning 
in the calendar year in which such individual’s 
taxable year begins. 
‘‘(2) COVERAGE MONTH.—For purposes of this 
subsection— 
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247 
•AMDT. NO. 2786 
‘‘(A) IN
GENERAL.—The term ‘coverage 
month’ means, with respect to an applicable 
taxpayer, 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 sub-
section (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 sec-
tion 1412 of the Patient Protection and 
Affordable Care Act). 
‘‘(B) EXCEPTION
FOR
MINIMUM
ESSEN-
TIAL COVERAGE.— 
‘‘(i) IN
GENERAL.—The term ‘cov-
erage month’ shall not include any month 
with respect to an individual if for such 
month the individual is eligible for min-
imum essential coverage other than eligi-
bility for coverage described in section 
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248 
•AMDT. NO. 2786 
5000A(f)(1)(C) (relating to coverage in the 
individual market). 
‘‘(ii) 
MINIMUM
ESSENTIAL
COV-
ERAGE.—The term ‘minimum essential 
coverage’ 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 
coverage— 
‘‘(I) consists of an eligible em-
ployer-sponsored plan (as defined in 
section 5000A(f)(2)), and 
‘‘(II) the employee’s required 
contribution (within the meaning of 
section 5000A(e)(1)(B)) with respect 
to the plan exceeds 9.8 percent of the 
applicable taxpayer’s household in-
come. 
This clause shall also apply to an indi-
vidual who is eligible to enroll in the plan 
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249 
•AMDT. NO. 2786 
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 treat-
ed as eligible for minimum essential cov-
erage if such coverage consists of an eligi-
ble employer-sponsored plan (as defined in 
section 5000A(f)(2)) and the plan’s share 
of the total allowed costs of benefits pro-
vided under the plan is less than 60 per-
cent 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 de-
scribed in the last sentence of clause (i)) is 
covered under the eligible employer-spon-
sored plan or the grandfathered health 
plan. 
‘‘(iv) INDEXING.—In the case of plan 
years beginning in any calendar year after 
2014, the Secretary shall adjust the 9.8 
percent under clause (i)(II) in the same 
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250 
•AMDT. NO. 2786 
manner 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 Pa-
tient Protection and Affordable Care Act, ex-
cept that such term shall not include a qualified 
health plan which is a catastrophic plan de-
scribed 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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251 
•AMDT. NO. 2786 
‘‘(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 in-
come— 
‘‘(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. 
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252 
•AMDT. NO. 2786 
‘‘(3) POVERTY LINE.— 
‘‘(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 
Exchange for coverage during a taxable year 
beginning in a calendar year, the poverty line 
used shall be the most recently published pov-
erty line as of the 1st day of the regular enroll-
ment 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 
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253 
•AMDT. NO. 2786 
by the portion (if any) of such premiums which 
is attributable to such individuals, 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 indi-
viduals into account, and 
‘‘(II) the taxpayer’s household in-
come is equal to the product of the 
taxpayer’s household income (deter-
mined without regard to this sub-
section) and a fraction— 
‘‘(aa) 
the 
numerator 
of 
which is the poverty line for the 
taxpayer’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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254 
•AMDT. NO. 2786 
‘‘(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 law-
fully present only if the individual is, and is reason-
ably expected to be for the entire period of enroll-
ment 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 
section. 
‘‘(f) RECONCILIATION
OF CREDIT
AND ADVANCE 
CREDIT.— 
‘‘(1) IN GENERAL.—The amount of the credit 
allowed under this section for any taxable year shall 
be reduced (but not below zero) by the amount of 
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255 
•AMDT. NO. 2786 
any 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 
section (determined without regard to para-
graph (1)), the tax imposed by this chapter for 
the taxable year shall be increased by the 
amount of such excess. 
‘‘(B) LIMITATION
ON
INCREASE
WHERE 
INCOME LESS THAN 400 PERCENT OF POVERTY 
LINE.— 
‘‘(i) IN GENERAL.—In the case of an 
applicable taxpayer whose household in-
come is less than 400 percent of the pov-
erty line for the size of the family involved 
for the taxable year, the amount of the in-
crease 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). 
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256 
•AMDT. NO. 2786 
‘‘(ii) INDEXING OF AMOUNT.—In the 
case of any calendar year beginning after 
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 adjust-
ment determined under section 1(f)(3) 
for the calendar year, determined by 
substituting ‘calendar year 2013’ 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 mul-
tiple of $50. 
‘‘(g) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary to carry out the pro-
visions 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 Pa-
tient Protection and Affordable Care Act, and 
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257 
•AMDT. NO. 2786 
‘‘(2) the application of subsection (f) where the 
filing status of the taxpayer for a taxable year is dif-
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 add-
ing 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 
individuals 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 pre-
miums.’’. 
(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, 
including— 
(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 
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258 
•AMDT. NO. 2786 
for employee health insurance expenses of 
small employers under section 45R of such 
Code 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 in-
come 
used 
for 
purposes 
of 
section 
36B(c)(2)(C) of the Internal Revenue Code 
of 1986 (as added by this section) is the 
appropriate level for determining whether 
employer-provided coverage is affordable 
for an employee and whether such level 
may be lowered without significantly in-
creasing the costs to the Federal Govern-
ment and reducing employer-provided cov-
erage; 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-
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259 
•AMDT. NO. 2786 
ommendations relating to the matters studied 
under such subparagraph. 
(2) 
APPROPRIATE
COMMITTEES
OF
CON-
GRESS.—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 Com-
merce of the House of Representatives and the Com-
mittee on Finance and the Committee on Health, 
Education, Labor and Pensions 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 Rev-
enue 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 De-
cember 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— 
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260 
•AMDT. NO. 2786 
(1) the Secretary shall notify the issuer of the 
plan of such eligibility; and 
(2) the issuer shall reduce the cost-sharing 
under the plan at the level and in the manner speci-
fied in subsection (c). 
(b) ELIGIBLE INSURED.—In this section, the term 
‘‘eligible 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 per-
cent 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 
individual 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 pock-
et limit under section 1302(c)(1) in the case 
of— 
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261 
•AMDT. NO. 2786 
(i) an eligible insured whose household 
income is more than 100 percent but not 
more than 200 percent of the poverty line 
for a family of the size involved, by two- 
thirds; 
(ii) an eligible insured whose house-
hold 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 
eligible insured described in para-
graph (2)(A); 
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262 
•AMDT. NO. 2786 
(II) 80 percent in the case of an 
eligible insured described in para-
graph (2)(B); and 
(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 ac-
tuarial values to exceed the levels specified 
in clause (i). 
(2) ADDITIONAL REDUCTION FOR LOWER IN-
COME INSUREDS.—The Secretary shall establish pro-
cedures under which the issuer of a qualified health 
plan to which this section applies shall further re-
duce cost-sharing under the plan in a manner suffi-
cient 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 
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263 
•AMDT. NO. 2786 
(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 share of the total allowed costs of bene-
fits provided 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 Sec-
retary may establish a capitated payment sys-
tem to carry out the payment of cost-sharing 
reductions under this section. Any such system 
shall take into account the value of the reduc-
tions and make appropriate risk adjustments to 
such payments. 
(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 
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264 
•AMDT. NO. 2786 
qualified health plan under section 1311(d)(3)(B) to 
cover benefits in addition to the essential health ben-
efits required to be provided by the plan, the reduc-
tions in cost-sharing under this section shall not 
apply to such additional benefits. 
(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 reg-
ulations prescribed by the Secretary) is properly al-
locable to pediatric dental benefits which are in-
cluded 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
POV-
ERTY.—If an individual enrolled in any qualified 
health plan in the individual market through an Ex-
change is an Indian (as defined in section 4(d) of 
the Indian Self-Determination and Education Assist-
ance Act (25 U.S.C. 450b(d))) whose household in-
come is not more than 300 percent of the poverty 
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265 
•AMDT. NO. 2786 
line for a family of the size involved, then, for pur-
poses 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. 
(2) ITEMS OR SERVICES FURNISHED THROUGH 
INDIAN HEALTH PROVIDERS.—If an Indian (as so 
defined) enrolled in a qualified health plan is fur-
nished an item or service directly by the Indian 
Health Service, an Indian Tribe, Tribal Organiza-
tion, or Urban Indian Organization or through refer-
ral under contract health services— 
(A) no cost-sharing under the plan shall be 
imposed under the plan for such item or serv-
ice; 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 sub-
paragraph (A). 
(3) PAYMENT.—The Secretary shall pay to the 
issuer of a qualified health plan the amount nec-
essary to reflect the increase in actuarial value of 
the plan required by reason of this subsection. 
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266 
•AMDT. NO. 2786 
(e) RULES
FOR
INDIVIDUALS
NOT
LAWFULLY 
PRESENT.— 
(1) IN GENERAL.—If an individual who is an el-
igible insured is not lawfully present— 
(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 indi-
viduals into account, and 
(II) the taxpayer’s household in-
come is equal to the product of the 
taxpayer’s household income (deter-
mined without regard to this sub-
section) and a fraction— 
(aa) the numerator of which 
is the poverty line for the tax-
payer’s family size determined 
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267 
•AMDT. NO. 2786 
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). 
(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 bur-
den is placed on individuals enrolling in qualified 
health plans through an Exchange and taxpayers eli-
gible for the credit allowable under this section. 
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268 
•AMDT. NO. 2786 
(f) DEFINITIONS AND SPECIAL RULES.—In this sec-
tion: 
(1) IN GENERAL.—Any term used in this sec-
tion which is also used in section 36B of the Inter-
nal Revenue Code of 1986 shall have the meaning 
given such term by such section. 
(2) LIMITATIONS
ON
REDUCTION.—No cost- 
sharing 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 allowed to the insured (or an applicable tax-
payer 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 de-
termination is made under section 1412 and not the 
taxable year for which the credit under section 36B 
of such Code is allowed. 
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•AMDT. NO. 2786 
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 
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 sec-
tion 36B of such Code or section 1402— 
(A) whether the individual meets the in-
come and coverage requirements of such sec-
tions; and 
(B) the amount of the tax credit or re-
duced cost-sharing; 
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•AMDT. NO. 2786 
(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 sec-
tion 1311(d)(4)(H) attesting that, for purposes of 
the individual responsibility requirement under sec-
tion 5000A of the Internal Revenue Code of 1986, 
an individual is entitled to an exemption from either 
the individual responsibility requirement or the pen-
alty imposed by such section. 
(b) INFORMATION REQUIRED TO BE PROVIDED BY 
APPLICANTS.— 
(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 
enrollee. 
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271 
•AMDT. NO. 2786 
(2) CITIZENSHIP OR IMMIGRATION STATUS.— 
The following information shall be provided with re-
spect 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 num-
ber. 
(B) In the case of an individual whose eli-
gibility is based on an attestation of the enroll-
ee’s immigration status, the enrollee’s social se-
curity number (if applicable) and such identi-
fying information with respect to the enrollee’s 
immigration status as the Secretary, after con-
sultation with the Secretary of Homeland Secu-
rity, determines appropriate. 
(3) ELIGIBILITY AND AMOUNT OF TAX CREDIT 
OR REDUCED COST-SHARING.—In the case of an en-
rollee with respect to whom a premium tax credit or 
reduced cost-sharing under section 36B of such 
Code or section 1402 is being claimed, the following 
information: 
(A) INFORMATION
REGARDING
INCOME 
AND FAMILY SIZE.—The information described 
in section 6103(l)(21) for the taxable year end-
ing with or within the second calendar year pre-
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272 
•AMDT. NO. 2786 
ceding the calendar year in which the plan year 
begins. 
(B) CHANGES
IN
CIRCUMSTANCES.—The 
information 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 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 min-
imum essential coverage or affordable minimum es-
sential coverage, 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. 
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273 
•AMDT. NO. 2786 
(C) If the employer provides such min-
imum essential coverage, the lowest cost option 
for the enrollee’s or individual’s enrollment sta-
tus and the enrollee’s or individual’s required 
contribution (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-
formation described in this paragraph with respect 
to the new employer. 
(5) EXEMPTIONS FROM INDIVIDUAL RESPONSI-
BILITY
REQUIREMENTS.—In the case of an indi-
vidual who is seeking an exemption certificate under 
section 1311(d)(4)(H) from any requirement or pen-
alty imposed by section 5000A, the following infor-
mation: 
(A) In the case of an individual seeking ex-
emption based on the individual’s status as a 
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274 
•AMDT. NO. 2786 
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 cov-
erage or the individual’s status as a taxpayer 
with household income less than 100 percent of 
the poverty line, the information described in 
paragraphs (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 informa-
tion provided by an applicant under subsection (b) 
to the Secretary for verification in accordance with 
the requirements of this subsection and subsection 
(d). 
(2) CITIZENSHIP OR IMMIGRATION STATUS.— 
(A) COMMISSIONER
OF
SOCIAL
SECU-
RITY.—The Secretary shall submit to the Com-
missioner of Social Security the following infor-
mation for a determination as to whether the 
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275 
•AMDT. NO. 2786 
information provided is consistent with the in-
formation 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 
individual— 
(I) who attests that the indi-
vidual 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-
curity has notified the Secretary 
under subsection (e)(3) that the attes-
tation is inconsistent with information 
in the records maintained by the 
Commissioner; 
the Secretary shall submit to the Secretary 
of Homeland Security the information de-
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276 
•AMDT. NO. 2786 
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. 
(3) ELIGIBILITY FOR TAX CREDIT AND COST- 
SHARING REDUCTION.—The Secretary shall submit 
the information described in subsection (b)(3)(A) 
provided under paragraph (3), (4), or (5) of sub-
section (b) to the Secretary of the Treasury for 
verification of household income and family size for 
purposes of eligibility. 
(4) METHODS.— 
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277 
•AMDT. NO. 2786 
(A) IN GENERAL.—The Secretary, in con-
sultation with the Secretary of the Treasury, 
the Secretary of Homeland Security, and the 
Commissioner of Social Security, shall provide 
that verifications and determinations under this 
subsection shall be done— 
(i) through use of an on-line system 
or otherwise for the electronic submission 
of, and response to, the information sub-
mitted under this subsection with respect 
to an applicant; 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 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 de-
termines such modifications would reduce the 
administrative costs and burdens on the appli-
cant, including allowing an applicant to request 
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278 
•AMDT. NO. 2786 
the Secretary of the Treasury to provide the in-
formation described in paragraph (3) directly to 
the Exchange or to the Secretary. The Sec-
retary shall not make any such modification un-
less the Secretary determines that any applica-
ble requirements under this section and section 
6103 of the Internal Revenue Code of 1986 
with respect to the confidentiality, disclosure, 
maintenance, or use of information will be met. 
(d) VERIFICATION BY SECRETARY.—In the case of 
information provided under subsection (b) that is not re-
quired under subsection (c) to be submitted to another 
person for verification, the Secretary shall verify the accu-
racy of such information in such manner as the Secretary 
determines appropriate, including delegating responsibility 
for verification to the Exchange. 
(e) ACTIONS RELATING TO VERIFICATION.— 
(1) IN GENERAL.—Each person to whom the 
Secretary provided information under subsection (c) 
shall report to the Secretary under the method es-
tablished 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 
Secretary provided information under subsection (d) 
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279 
•AMDT. NO. 2786 
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 
premium tax credits and cost-sharing re-
ductions 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. 
(B) EXEMPTION
FROM
INDIVIDUAL
RE-
SPONSIBILITY.—If information provided by an 
applicant under subsection (b)(5) is verified 
under subsections (c) and (d), the Secretary 
shall issue the certification of exemption de-
scribed in section 1311(d)(4)(H). 
(3) INCONSISTENCIES INVOLVING ATTESTATION 
OF CITIZENSHIP OR LAWFUL PRESENCE.—If the in-
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280 
•AMDT. NO. 2786 
formation provided by any applicant under sub-
section (b)(2) is inconsistent with information in the 
records maintained by the Commissioner of Social 
Security or Secretary of Homeland Security, which-
ever is applicable, the applicant’s eligibility will be 
determined in the same manner as an individual’s 
eligibility under the medicaid program is determined 
under section 1902(ee) of the Social Security Act (as 
in effect on January 1, 2010). 
(4) INCONSISTENCIES
INVOLVING
OTHER
IN-
FORMATION.— 
(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 
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-
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281 
•AMDT. NO. 2786 
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 
subparagraph (A), the Exchange shall— 
(I) notify the applicant of such 
fact; 
(II) provide the applicant an op-
portunity to either present satisfac-
tory documentary evidence or resolve 
the inconsistency with the person 
verifying the information under sub-
section (c) or (d) during the 90-day 
period beginning the date on which 
the notice required under subclause 
(I) is sent to the applicant. 
The Secretary may extend the 90-day pe-
riod under subclause (II) for enrollments 
occurring during 2014. 
(B) SPECIFIC
ACTIONS
NOT
INVOLVING 
CITIZENSHIP OR LAWFUL PRESENCE.— 
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282 
•AMDT. NO. 2786 
(i) IN GENERAL.—Except as provided 
in paragraph (3), the Exchange shall, dur-
ing any period before the close of the pe-
riod 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 appli-
cation. 
(ii) ELIGIBILITY
OR
AMOUNT
OF 
CREDIT OR REDUCTION.—If an inconsist-
ency involving the eligibility for, or amount 
of, any premium tax credit or cost-sharing 
reduction is unresolved under this sub-
section as of the close of the period under 
subparagraph (A)(ii)(II), the Exchange 
shall notify the applicant of the amount (if 
any) of the credit or reduction that is de-
termined on the basis of the records main-
tained by persons under subsection (c). 
(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- 
sharing reduction under section 1402 be-
cause the enrollee’s (or related individ-
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283 
•AMDT. NO. 2786 
ual’s) employer does not provide minimum 
essential coverage through an employer- 
sponsored plan or that the employer does 
provide that coverage but it is not afford-
able coverage, the Exchange shall notify 
the employer of such fact and that the em-
ployer may be liable for the payment as-
sessed 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 
applicant 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 
under this paragraph of the appeals processes 
established under subsection (f). 
(f) APPEALS AND REDETERMINATIONS.— 
(1) IN GENERAL.—The Secretary, in consulta-
tion with the Secretary of the Treasury, the Sec-
retary of Homeland Security, and the Commissioner 
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284 
•AMDT. NO. 2786 
of Social Security, shall establish procedures by 
which the Secretary or one of such other Federal of-
ficers— 
(A) hears and makes decisions with respect 
to appeals of any determination under sub-
section (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 pro-
vide minimum essential coverage through an 
employer-sponsored plan or that the employer 
does provide that coverage but it is not afford-
able coverage with respect to an employee. Such 
process shall provide an employer the oppor-
tunity to— 
(i) present information to the Ex-
change for review of the determination ei-
ther by the Exchange or the person mak-
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285 
•AMDT. NO. 2786 
ing the determination, including evidence 
of the employer-sponsored plan and em-
ployer contributions to the plan; and 
(ii) have access to the data used to 
make the determination to the extent al-
lowable 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 informa-
tion with respect to an employee for purposes of 
determining 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 
not the employee’s income is above or 
below the threshold by which the afford-
ability of an employer’s health insurance 
coverage is measured; and 
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•AMDT. NO. 2786 
(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
INFORMA-
TION.— 
(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, 
determine 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 
information 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, ensur-
ing the efficient operation of the Exchange, in-
cluding verifying the eligibility of an individual 
to enroll through an Exchange or to claim a 
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287 
•AMDT. NO. 2786 
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 same meanings as when used in section 
6662 of the Internal Revenue Code of 
1986. 
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288 
•AMDT. NO. 2786 
(ii) 
REASONABLE
CAUSE
EXCEP-
TION.—No penalty shall be imposed under 
clause (i) if the Secretary determines that 
there was a reasonable cause for the fail-
ure and that the person acted in good 
faith. 
(B) 
KNOWING
AND
WILLFUL
VIOLA-
TIONS.—Any person who knowingly and will-
fully provides false or fraudulent information 
under subsection (b) shall be subject, in addi-
tion to any other penalties that may be pre-
scribed by law, to a civil penalty of not more 
than $250,000. 
(2) IMPROPER USE OR DISCLOSURE OF INFOR-
MATION.—Any person who knowingly and willfully 
uses or discloses information in violation of sub-
section (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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•AMDT. NO. 2786 
(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 ad-
ministration of this title and section 4980H of the 
Internal 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 qualified health plan through an Exchange if 
an employer does not provide affordable cov-
erage. 
(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 
report the results of the study conducted under 
paragraph (1), including any recommendations for 
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290 
•AMDT. NO. 2786 
legislative changes, to the Committees on Finance 
and Health, Education, Labor and Pensions of the 
Senate and the Committees of Education and Labor 
and Ways and Means of the House of Representa-
tives. 
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 pro-
gram under which— 
(1) upon request of an Exchange, advance de-
terminations are made under section 1411 with re-
spect 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 
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291 
•AMDT. NO. 2786 
employee of the employer were determined to be 
eligible for the premium tax credit under sec-
tion 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 ad-
vance payments of such credit or reductions to the 
issuers of the qualified health plans in order to re-
duce 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 
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292 
•AMDT. NO. 2786 
enrollment period as may be specified by the 
Secretary); and 
(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 information included with an application form 
demonstrates substantial changes in income, changes 
in family size or other household circumstances, 
change in filing status, the filing of an application 
for unemployment benefits, or other significant 
changes affecting eligibility, including— 
(A) allowing an individual claiming a de-
crease of 20 percent or more in income, or fil-
ing 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 
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293 
•AMDT. NO. 2786 
(B) the determination of household income 
in cases where the taxpayer was not required to 
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 ad-
vance determination 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 al-
lowed under section 36B of the Internal Rev-
enue 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 
insured for any period by the amount of 
the advance payment for the period; 
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294 
•AMDT. NO. 2786 
(ii) notify the Exchange and the Sec-
retary of such reduction; 
(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 Sec-
retary shall also notify the Secretary of the Treasury 
and the Exchange under paragraph (1) if an ad-
vance payment 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 no-
tice. 
(d) NO FEDERAL PAYMENTS FOR INDIVIDUALS NOT 
LAWFULLY PRESENT.—Nothing in this subtitle or the 
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295 
•AMDT. NO. 2786 
amendments made by this subtitle allows Federal pay-
ments, credits, or cost-sharing reductions for individuals 
who are not lawfully present in the United States. 
(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 
system 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 continue participation in, applicable State health 
subsidy programs. Such system shall ensure that if an in-
dividual applying to an Exchange is found through screen-
ing to be eligible for medical assistance under the State 
medicaid plan under title XIX, or eligible for enrollment 
under a State children’s health insurance program 
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296 
•AMDT. NO. 2786 
(CHIP) under title XXI of such Act, the individual is en-
rolled for assistance under such plan or program. 
(b) REQUIREMENTS RELATING TO FORMS AND NO-
TICE.— 
(1) REQUIREMENTS RELATING TO FORMS.— 
(A) IN GENERAL.—The Secretary shall de-
velop and provide to each State a single, 
streamlined 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 charac-
teristics of individuals who qualify for ap-
plicable 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 
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297 
•AMDT. NO. 2786 
form developed under subparagraph (A) if the 
alternative form is consistent with standards 
promulgated by the Secretary under this sec-
tion. 
(C) 
SUPPLEMENTAL
ELIGIBILITY 
FORMS.—The Secretary may allow a State to 
use a supplemental or alternative form in the 
case of individuals who apply for eligibility that 
is not determined on the basis of the household 
income (as defined in section 36B of the Inter-
nal 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 
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298 
•AMDT. NO. 2786 
health subsidy programs a secure, electronic inter-
face allowing an exchange of data (including infor-
mation contained in the application forms described 
in subsection (b)) that allows a determination of eli-
gibility for all such programs based on a single ap-
plication. Such interface shall be compatible with the 
method established for data verification under sec-
tion 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 determina-
tion of eligibility and authorizing dis-
closure of the information described in 
paragraph (3) to applicable State 
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299 
•AMDT. NO. 2786 
health coverage subsidy programs for 
purposes of determining and estab-
lishing eligibility; and 
(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 
applicable 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, includ-
ing 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 admin-
istrative and other costs of use of the data 
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300 
•AMDT. NO. 2786 
matching arrangement under paragraph (2) 
outweigh its expected gains in accuracy, effi-
ciency, and program participation. 
(4) SECRETARIAL STANDARDS.—The Secretary 
shall, after consultation with persons in possession 
of the data to be matched and representatives of ap-
plicable State health subsidy programs, promulgate 
standards governing the timing, contents, and proce-
dures for data matching described in this subsection. 
Such standards shall take into account administra-
tive and other costs and the value of data matching 
to the establishment, verification, and updating of 
eligibility for applicable State health subsidy pro-
grams. 
(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 Sec-
retary may establish 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— 
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301 
•AMDT. NO. 2786 
(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 
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 public 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 
Exchange, including the premium tax credits under 
section 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. 
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302 
•AMDT. NO. 2786 
SEC. 1414. DISCLOSURES TO CARRY OUT ELIGIBILITY RE-
QUIREMENTS FOR CERTAIN PROGRAMS. 
(a) DISCLOSURE OF TAXPAYER RETURN INFORMA-
TION AND SOCIAL SECURITY NUMBERS.— 
(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 
following 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, 
employees, and contractors of the Department 
of Health and Human Services return informa-
tion of any taxpayer whose income is relevant 
in determining 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 par-
ticipation 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 
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303 
•AMDT. NO. 2786 
Protection and Affordable Care Act. Such re-
turn information shall be limited to— 
‘‘(i) taxpayer identity information 
with respect to such taxpayer, 
‘‘(ii) the filing status of such tax-
payer, 
‘‘(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 
defined 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 informa-
tion is not available. 
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304 
•AMDT. NO. 2786 
‘‘(B) INFORMATION
TO
EXCHANGE
AND 
STATE
AGENCIES.—The Secretary of Health 
and Human Services may disclose to an Ex-
change established under the Patient Protection 
and Affordable Care Act or its contractors, or 
to a State agency administering a State pro-
gram described in subparagraph (A) or its con-
tractors, any inconsistency between the infor-
mation 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 re-
duction described in subparagraph (A), 
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305 
•AMDT. NO. 2786 
‘‘(ii) determining eligibility for partici-
pation 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: 
‘‘(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 
authorized to collect and use the names 
and social security account numbers of in-
dividuals as required to administer the pro-
visions of, and the amendments made by, 
the such Act.’’. 
(b) CONFIDENTIALITY
AND
DISCLOSURE.—Para-
graph (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 
preceding subparagraph (A), 
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306 
•AMDT. NO. 2786 
(2) by inserting ‘‘or any entity described in sub-
section (l)(21),’’ after ‘‘or (o)(1)(A)’’ in subpara-
graph (F)(ii), and 
(3) by inserting ‘‘or any entity described in sub-
section (l)(21),’’ after ‘‘or (20)’’ both places it ap-
pears in the matter after subparagraph (F). 
(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 
FEDERAL AND FEDERALLY-ASSISTED PRO-
GRAMS. 
For purposes of determining the eligibility of any in-
dividual 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 
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307 
•AMDT. NO. 2786 
(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. 
PART II—SMALL BUSINESS TAX CREDIT 
SEC. 1421. CREDIT FOR EMPLOYEE HEALTH INSURANCE 
EXPENSES OF SMALL BUSINESSES. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating 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 em-
ployer health insurance credit determined under this sec-
tion for any taxable year in the credit period is the amount 
determined under subsection (b). 
‘‘(b) HEALTH INSURANCE CREDIT AMOUNT.—Sub-
ject to subsection (c), the amount determined under this 
subsection 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— 
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308 
•AMDT. NO. 2786 
‘‘(1) the aggregate amount of nonelective con-
tributions the employer made on behalf of its em-
ployees during the taxable year under the arrange-
ment described in subsection (d)(4) for premiums 
for qualified health plans offered by the employer to 
its employees through an Exchange, or 
‘‘(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 
premium equal to the average premium (as deter-
mined by the Secretary of Health and Human Serv-
ices) for the small group market in the rating area 
in which the employee enrolls for coverage. 
‘‘(c) PHASEOUT
OF CREDIT AMOUNT BASED
ON 
NUMBER 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. 
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309 
•AMDT. NO. 2786 
‘‘(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— 
‘‘(1) IN
GENERAL.—The term ‘eligible small 
employer’ 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 
described 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 di-
viding— 
‘‘(i) the total number of hours of serv-
ice for which wages were paid by the em-
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310 
•AMDT. NO. 2786 
ployer to employees during the taxable 
year, by 
‘‘(ii) 2,080. 
Such number shall be rounded to the next low-
est whole number if not otherwise a whole num-
ber. 
‘‘(B) EXCESS HOURS NOT COUNTED.—If 
an employee works in excess of 2,080 hours of 
service during any taxable year, such excess 
shall not be taken into account under subpara-
graph (A). 
‘‘(C) HOURS OF SERVICE.—The Secretary, 
in consultation with the Secretary of Labor, 
shall prescribe such regulations, rules, and 
guidance as may be necessary to determine the 
hours of service of an employee, including rules 
for the application of this paragraph to employ-
ees 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— 
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311 
•AMDT. NO. 2786 
‘‘(i) the aggregate amount of wages 
which were paid by the employer to em-
ployees during the taxable year, by 
‘‘(ii) the number of full-time equiva-
lent employees of the employee determined 
under paragraph (2) for the taxable year. 
Such amount shall be rounded to the next low-
est multiple of $1,000 if not otherwise such a 
multiple. 
‘‘(B) DOLLAR AMOUNT.—For purposes of 
paragraph (1)(B)— 
‘‘(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 adjustment determined under section 
1(f)(3) for the calendar year, determined 
by substituting ‘calendar year 2012’ for 
‘calendar year 1992’ in subparagraph (B) 
thereof. 
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312 
•AMDT. NO. 2786 
‘‘(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 sea-
sonal worker of an employer shall not be taken 
into account in determining the full-time equiv-
alent employees and average annual wages of 
the employer unless the worker works for the 
employer on more than 120 days during the 
taxable year. 
‘‘(B) DEFINITION
OF
SEASONAL
WORK-
ER.—The term ‘seasonal worker’ means a work-
er who performs labor or services on a seasonal 
basis as defined by the Secretary of Labor, in-
cluding workers covered by section 500.20(s)(1) 
of title 29, Code of Federal Regulations and re-
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313 
•AMDT. NO. 2786 
tail workers employed exclusively during holiday 
seasons. 
‘‘(e) OTHER RULES AND DEFINITIONS.—For pur-
poses 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 
‘‘(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 
‘employee’ shall include a leased employee with-
in the meaning of section 414(n). 
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314 
•AMDT. NO. 2786 
‘‘(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 mean-
ing given such term by section 3121(a) (determined 
without regard to any dollar limitation contained in 
such section). 
‘‘(5) AGGREGATION AND OTHER RULES MADE 
APPLICABLE.— 
‘‘(A) AGGREGATION
RULES.—All employ-
ers treated as a single employer under sub-
section (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. 
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315 
•AMDT. NO. 2786 
‘‘(f) CREDIT MADE AVAILABLE TO TAX-EXEMPT ELI-
GIBLE 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 em-
ployer, 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 eligi-
ble small employer which is any organization de-
scribed in section 501(c) which is exempt from tax-
ation under section 501(a). 
‘‘(3) PAYROLL TAXES.—For purposes of this 
subsection— 
‘‘(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), 
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316 
•AMDT. NO. 2786 
‘‘(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 
purposes of subparagraph (A). 
‘‘(g) APPLICATION
OF SECTION
FOR CALENDAR 
YEARS 2011, 2012, AND 2013.—In the case of any tax-
able year beginning in 2011, 2012, or 2013, the following 
modifications 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 taxable year is in a credit period and for pur-
poses of applying this section to taxable years begin-
ning after 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 de-
termined— 
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317 
•AMDT. NO. 2786 
‘‘(A) by substituting ‘35 percent (25 per-
cent in the case of a tax-exempt eligible small 
employer)’ 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 cov-
erage (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 
subsection (d)(4) solely because it provides for the 
offering 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 
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318 
•AMDT. NO. 2786 
Affordable 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 pro-
visions 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 limi-
tations under subsection (c) through the use of multiple 
entities.’’. 
(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 strik-
ing the period at the end of paragraph (35) and inserting 
‘‘, plus’’, and by inserting after paragraph (35) the fol-
lowing: 
‘‘(36) the small employer health insurance cred-
it 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 
redesignating clauses (vi), (vii), and (viii) as clauses (vii), 
(viii), and (ix), respectively, and by inserting after clause 
(v) the following new clause: 
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319 
•AMDT. NO. 2786 
‘‘(vi) the credit determined under sec-
tion 45R,’’. 
(d) DISALLOWANCE OF DEDUCTION FOR CERTAIN 
EXPENSES FOR WHICH CREDIT ALLOWED.— 
(1) IN GENERAL.—Section 280C of the Internal 
Revenue Code of 1986 (relating to disallowance of 
deduction for certain expenses for which credit al-
lowed), as amended by section 1401(b), is amended 
by adding at the end the following new subsection: 
‘‘(h) CREDIT FOR EMPLOYEE HEALTH INSURANCE 
EXPENSES OF SMALL EMPLOYERS.—No deduction shall 
be allowed for that portion of the premiums for qualified 
health plans (as defined in section 1301(a) of the Patient 
Protection and Affordable Care Act), or for health insur-
ance coverage 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 ‘‘, 
and’’, and by adding at the end the following new 
paragraph: 
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320 
•AMDT. NO. 2786 
‘‘(14) the small employer health insurance cred-
it 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 add-
ing 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 find-
ings: 
(1) IN GENERAL.—The individual responsibility 
requirement provided for in this section (in this sub-
section referred to as the ‘‘requirement’’) is commer-
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321 
•AMDT. NO. 2786 
cial and economic in nature, and substantially af-
fects 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 
increase from $2,500,000,000,000, or 17.6 per-
cent 
of 
the 
economy, 
in 
2009 
to 
$4,700,000,000,000 in 2019. Private health in-
surance 
spending 
is 
projected 
to 
be 
$854,000,000,000 in 2009, and pays for med-
ical 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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322 
•AMDT. NO. 2786 
(C) The requirement, together with the 
other provisions of this Act, will add millions of 
new consumers to the health insurance market, 
increasing the supply of, and demand for, 
health care services. According to the Congres-
sional Budget Office, the requirement will in-
crease 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 
families. 
(F) Under the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1001 et 
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323 
•AMDT. NO. 2786 
seq.), the Public Health Service Act (42 U.S.C. 
201 et seq.), and this Act, the Federal Govern-
ment 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 insurance 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 
significantly increasing health insurance cov-
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324 
•AMDT. NO. 2786 
erage and the size of purchasing pools, which 
will increase economies of scale, the require-
ment, together with the other provisions of this 
Act, will significantly reduce administrative 
costs and lower health insurance premiums. 
The requirement is essential to creating effec-
tive health insurance markets that do not re-
quire 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 com-
merce subject to Federal regulation. 
(b) IN GENERAL.—Subtitle D of the Internal Rev-
enue 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 ES-
SENTIAL COVERAGE. 
‘‘(a) REQUIREMENT TO MAINTAIN MINIMUM ESSEN-
TIAL COVERAGE.—An applicable individual shall for each 
month beginning after 2013 ensure that the individual, 
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325 
•AMDT. NO. 2786 
and any dependent of the individual who is an applicable 
individual, is covered under minimum essential coverage 
for such month. 
‘‘(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 begin-
ning after 2013, then, except as provided in sub-
section (d), there is hereby imposed a penalty with 
respect to the individual in the amount determined 
under subsection (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 tax-
payer’s taxable year including such month, such 
other taxpayer shall be liable for such penalty, 
or 
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326 
•AMDT. NO. 2786 
‘‘(B) files a joint return for the taxable 
year including such month, such individual and 
the spouse of such individual shall be jointly lia-
ble for such penalty. 
‘‘(c) AMOUNT OF PENALTY.— 
‘‘(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 dol-
lar amount is $750. 
‘‘(B) PHASE
IN.—The applicable dollar 
amount is $95 for 2014 and $350 for 2015. 
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327 
•AMDT. NO. 2786 
‘‘(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 
respect to such individual for the month shall 
be 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 
applicable dollar amount shall be equal to $750, 
increased 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 
‘calendar 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 
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328 
•AMDT. NO. 2786 
equal to the number of individuals for whom 
the taxpayer is allowed a deduction under sec-
tion 151 (relating to allowance of deduction for 
personal exemptions) for the taxable year. 
‘‘(B) HOUSEHOLD
INCOME.—The term 
‘household income’ means, with respect to any 
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 in-
come— 
‘‘(i) decreased by the amount of any 
deduction allowable under paragraph (1), 
(3), (4), or (10) of section 62(a), 
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329 
•AMDT. NO. 2786 
‘‘(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.— 
‘‘(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.— 
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330 
•AMDT. NO. 2786 
‘‘(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 adherent of established te-
nets or teachings of such sect or division as de-
scribed in such section. 
‘‘(B) HEALTH CARE SHARING MINISTRY.— 
‘‘(i) IN
GENERAL.—Such term shall 
not include any individual for any month if 
such individual is a member of a health 
care sharing ministry for the month. 
‘‘(ii) HEALTH
CARE
SHARING
MIN-
ISTRY.—The term ‘health care sharing 
ministry’ means an organization— 
‘‘(I) which is described in section 
501(c)(3) and is exempt from taxation 
under section 501(a), 
‘‘(II) members of which share a 
common set of ethical or religious be-
liefs and share medical expenses 
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331 
•AMDT. NO. 2786 
among members in accordance with 
those beliefs and without regard to 
the State in which a member resides 
or is employed, 
‘‘(III) members of which retain 
membership even after they develop a 
medical condition, 
‘‘(IV) which (or a predecessor of 
which) has been in existence at all 
times since December 31, 1999, and 
medical expenses of its members have 
been shared continuously and without 
interruption since at least December 
31, 1999, and 
‘‘(V) which conducts an annual 
audit which is performed by an inde-
pendent certified public accounting 
firm in accordance with generally ac-
cepted 
accounting 
principles 
and 
which is made available to the public 
upon request. 
‘‘(3) INDIVIDUALS NOT LAWFULLY PRESENT.— 
Such term shall not include an individual for any 
month if for the month the individual is not a citizen 
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332 
•AMDT. NO. 2786 
or national of the United States or an alien lawfully 
present in the United States. 
‘‘(4) INCARCERATED INDIVIDUALS.—Such term 
shall not include an individual for any month if for 
the month the individual is incarcerated, other than 
incarceration pending the disposition of charges. 
‘‘(e) EXEMPTIONS.—No penalty shall be imposed 
under subsection (a) with respect to— 
‘‘(1) INDIVIDUALS WHO CANNOT AFFORD COV-
ERAGE.— 
‘‘(A) IN GENERAL.—Any applicable indi-
vidual for any month if the applicable individ-
ual’s required contribution (determined on an 
annual basis) for coverage for the month ex-
ceeds 8 percent of such individual’s household 
income for the taxable year described in section 
1412(b)(1)(B) of the Patient Protection and 
Affordable Care Act. For purposes of applying 
this subparagraph, the taxpayer’s household in-
come shall be increased by any exclusion from 
gross income for any portion of the required 
contribution made through a salary reduction 
arrangement. 
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333 
•AMDT. NO. 2786 
‘‘(B) 
REQUIRED
CONTRIBUTION.—For 
purposes of this paragraph, the term ‘required 
contribution’ means— 
‘‘(i) in the case of an individual eligi-
ble to purchase minimum essential cov-
erage consisting of coverage through an el-
igible-employer-sponsored plan, the portion 
of the annual premium which would be 
paid by the individual (without regard to 
whether paid through salary reduction or 
otherwise) for self-only coverage, or 
‘‘(ii) in the case of an individual eligi-
ble only to purchase minimum essential 
coverage described in subsection (f)(1)(C), 
the annual premium for the lowest cost 
bronze plan available in the individual 
market through the Exchange in the State 
in the rating area in which the individual 
resides (without regard to whether the in-
dividual purchased a qualified health plan 
through the Exchange), reduced by the 
amount of the credit allowable under sec-
tion 36B for the taxable year (determined 
as if the individual was covered by a quali-
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334 
•AMDT. NO. 2786 
fied health plan offered through the Ex-
change for the entire taxable year). 
‘‘(C) SPECIAL
RULES
FOR
INDIVIDUALS 
RELATED
TO
EMPLOYEES.—For purposes of 
subparagraph (B)(i), if an applicable individual 
is eligible for minimum essential coverage 
through an employer by reason of a relationship 
to an employee, the determination shall be 
made by reference to the affordability of the 
coverage to the employee. 
‘‘(D) INDEXING.—In the case of plan years 
beginning in any calendar year after 2014, sub-
paragraph (A) shall be applied by substituting 
for ‘8 percent’ the percentage the Secretary of 
Health and Human Services determines reflects 
the excess of the rate of premium growth be-
tween the preceding calendar year and 2013 
over the rate of income growth for such period. 
‘‘(2) TAXPAYERS
WITH
INCOME
UNDER
100 
PERCENT OF POVERTY LINE.—Any applicable indi-
vidual for any month during a calendar year if the 
individual’s household income for the taxable year 
described in section 1412(b)(1)(B) of the Patient 
Protection and Affordable Care Act is less than 100 
percent of the poverty line for the size of the family 
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335 
•AMDT. NO. 2786 
involved (determined in the same manner as under 
subsection (b)(4)). 
‘‘(3) MEMBERS OF INDIAN TRIBES.—Any appli-
cable individual for any month during which the in-
dividual is a member of an Indian tribe (as defined 
in section 45A(c)(6)). 
‘‘(4) 
MONTHS
DURING
SHORT
COVERAGE 
GAPS.— 
‘‘(A) IN GENERAL.—Any month the last 
day of which occurred during a period in which 
the applicable individual was not covered by 
minimum essential coverage for a continuous 
period of less than 3 months. 
‘‘(B) SPECIAL
RULES.—For purposes of 
applying this paragraph— 
‘‘(i) the length of a continuous period 
shall be determined without regard to the 
calendar years in which months in such pe-
riod occur, 
‘‘(ii) if a continuous period is greater 
than the period allowed under subpara-
graph (A), no exception shall be provided 
under this paragraph for any month in the 
period, and 
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336 
•AMDT. NO. 2786 
‘‘(iii) if there is more than 1 contin-
uous period described in subparagraph (A) 
covering months in a calendar year, the ex-
ception provided by this paragraph shall 
only apply to months in the first of such 
periods. 
The Secretary shall prescribe rules for the col-
lection of the penalty imposed by this section in 
cases where continuous periods include months 
in more than 1 taxable year. 
‘‘(5) HARDSHIPS.—Any applicable individual 
who for any month is determined by the Secretary 
of Health and Human Services under section 
1311(d)(4)(H) to have suffered a hardship with re-
spect to the capability to obtain coverage under a 
qualified health plan. 
‘‘(f) MINIMUM ESSENTIAL COVERAGE.—For pur-
poses of this section— 
‘‘(1) IN GENERAL.—The term ‘minimum essen-
tial coverage’ means any of the following: 
‘‘(A) 
GOVERNMENT
SPONSORED
PRO-
GRAMS.—Coverage under— 
‘‘(i) the Medicare program under part 
A of title XVIII of the Social Security Act, 
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337 
•AMDT. NO. 2786 
‘‘(ii) the Medicaid program under title 
XIX of the Social Security Act, 
‘‘(iii) the CHIP program under title 
XXI of the Social Security Act, 
‘‘(iv) the TRICARE for Life program, 
‘‘(v) the veteran’s health care program 
under chapter 17 of title 38, United States 
Code, or 
‘‘(vi) a health plan under section 
2504(e) of title 22, United States Code 
(relating to Peace Corps volunteers). 
‘‘(B) EMPLOYER-SPONSORED PLAN.—Cov-
erage under an eligible employer-sponsored 
plan. 
‘‘(C) PLANS
IN
THE
INDIVIDUAL
MAR-
KET.—Coverage under a health plan offered in 
the individual market within a State. 
‘‘(D) GRANDFATHERED HEALTH PLAN.— 
Coverage under a grandfathered health plan. 
‘‘(E) 
OTHER
COVERAGE.—Such 
other 
health benefits coverage, such as a State health 
benefits risk pool, as the Secretary of Health 
and Human Services, in coordination with the 
Secretary, recognizes for purposes of this sub-
section. 
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338 
•AMDT. NO. 2786 
‘‘(2) ELIGIBLE EMPLOYER-SPONSORED PLAN.— 
The term ‘eligible employer-sponsored plan’ means, 
with respect to any employee, a group health plan or 
group health insurance coverage offered by an em-
ployer to the employee which is— 
‘‘(A) a governmental plan (within the 
meaning of section 2791(d)(8) of the Public 
Health Service Act), or 
‘‘(B) any other plan or coverage offered in 
the small or large group market within a State. 
Such term shall include a grandfathered health plan 
described in paragraph (1)(D) offered in a group 
market. 
‘‘(3) EXCEPTED BENEFITS NOT TREATED AS 
MINIMUM ESSENTIAL COVERAGE.—The term ‘min-
imum essential coverage’ shall not include health in-
surance coverage which consists of coverage of ex-
cepted benefits— 
‘‘(A) described in paragraph (1) of sub-
section (c) of section 2791 of the Public Health 
Service Act; or 
‘‘(B) described in paragraph (2), (3), or 
(4) of such subsection if the benefits are pro-
vided under a separate policy, certificate, or 
contract of insurance. 
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339 
•AMDT. NO. 2786 
‘‘(4) INDIVIDUALS RESIDING OUTSIDE UNITED 
STATES OR RESIDENTS OF TERRITORIES.—Any ap-
plicable individual shall be treated as having min-
imum essential coverage for any month— 
‘‘(A) if such month occurs during any pe-
riod described in subparagraph (A) or (B) of 
section 911(d)(1) which is applicable to the in-
dividual, or 
‘‘(B) if such individual is a bona fide resi-
dent of any possession of the United States (as 
determined under section 937(a)) for such 
month. 
‘‘(5) INSURANCE-RELATED TERMS.—Any term 
used in this section which is also used in title I of 
the Patient Protection and Affordable Care Act shall 
have the same meaning as when used in such title. 
‘‘(g) ADMINISTRATION AND PROCEDURE.— 
‘‘(1) IN
GENERAL.—The penalty provided by 
this section shall be paid upon notice and demand by 
the Secretary, and except as provided in paragraph 
(2), shall be assessed and collected in the same man-
ner as an assessable penalty under subchapter B of 
chapter 68. 
‘‘(2) SPECIAL
RULES.—Notwithstanding any 
other provision of law— 
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340 
•AMDT. NO. 2786 
‘‘(A) WAIVER OF CRIMINAL PENALTIES.— 
In the case of any failure by a taxpayer to time-
ly pay any penalty imposed by this section, such 
taxpayer shall not be subject to any criminal 
prosecution or penalty with respect to such fail-
ure. 
‘‘(B) LIMITATIONS
ON
LIENS
AND
LEV-
IES.—The Secretary shall not— 
‘‘(i) file notice of lien with respect to 
any property of a taxpayer by reason of 
any failure to pay the penalty imposed by 
this section, or 
‘‘(ii) levy on any such property with 
respect to such failure.’’. 
(c) CLERICAL AMENDMENT.—The table of chapters 
for subtitle D of the Internal Revenue Code of 1986 is 
amended by inserting after the item relating to chapter 
47 the following new item: 
‘‘CHAPTER 48—MAINTENANCE OF MINIMUM ESSENTIAL COVERAGE.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after De-
cember 31, 2013. 
SEC. 1502. REPORTING OF HEALTH INSURANCE COVERAGE. 
(a) IN GENERAL.—Part III of subchapter A of chap-
ter 61 of the Internal Revenue Code of 1986 is amended 
by inserting after subpart C the following new subpart: 
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341 
•AMDT. NO. 2786 
‘‘Subpart D—Information Regarding Health 
Insurance Coverage 
‘‘Sec. 6055. Reporting of health insurance coverage. 
‘‘SEC. 6055. REPORTING OF HEALTH INSURANCE COV-
ERAGE. 
‘‘(a) IN GENERAL.—Every person who provides min-
imum essential coverage to an individual during a calendar 
year shall, at such time as the Secretary may prescribe, 
make a return described in subsection (b). 
‘‘(b) FORM AND MANNER OF RETURN.— 
‘‘(1) IN GENERAL.—A return is described in 
this subsection if such return— 
‘‘(A) is in such form as the Secretary may 
prescribe, and 
‘‘(B) contains— 
‘‘(i) the name, address and TIN of 
the primary insured and the name and 
TIN of each other individual obtaining cov-
erage under the policy, 
‘‘(ii) the dates during which such indi-
vidual was covered under minimum essen-
tial coverage during the calendar year, 
‘‘(iii) in the case of minimum essential 
coverage which consists of health insurance 
coverage, information concerning— 
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342 
•AMDT. NO. 2786 
‘‘(I) whether or not the coverage 
is a qualified health plan offered 
through 
an 
Exchange 
established 
under section 1311 of the Patient 
Protection and Affordable Care Act, 
and 
‘‘(II) in the case of a qualified 
health plan, the amount (if any) of 
any advance payment under section 
1412 of the Patient Protection and 
Affordable Care Act of any cost-shar-
ing reduction under section 1402 of 
such Act or of any premium tax credit 
under section 36B with respect to 
such coverage, and 
‘‘(iv) such other information as the 
Secretary may require. 
‘‘(2) INFORMATION RELATING TO EMPLOYER- 
PROVIDED
COVERAGE.—If minimum essential cov-
erage provided to an individual under subsection (a) 
consists of health insurance coverage of a health in-
surance issuer provided through a group health plan 
of an employer, a return described in this subsection 
shall include— 
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343 
•AMDT. NO. 2786 
‘‘(A) the name, address, and employer 
identification number of the employer maintain-
ing the plan, 
‘‘(B) the portion of the premium (if any) 
required to be paid by the employer, and 
‘‘(C) if the health insurance coverage is a 
qualified health plan in the small group market 
offered through an Exchange, such other infor-
mation as the Secretary may require for admin-
istration of the credit under section 45R (relat-
ing to credit for employee health insurance ex-
penses of small employers). 
‘‘(c) STATEMENTS TO BE FURNISHED TO INDIVID-
UALS WITH RESPECT TO WHOM INFORMATION IS RE-
PORTED.— 
‘‘(1) IN GENERAL.—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 statement showing— 
‘‘(A) the name and address of the person 
required to make such return and the phone 
number of the information contact for such per-
son, and 
‘‘(B) the information required to be shown 
on the return with respect to such individual. 
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344 
•AMDT. NO. 2786 
‘‘(2) TIME
FOR
FURNISHING
STATEMENTS.— 
The written statement required under paragraph (1) 
shall be furnished on or before January 31 of the 
year following the calendar year for which the return 
under subsection (a) was required to be made. 
‘‘(d) COVERAGE
PROVIDED
BY
GOVERNMENTAL 
UNITS.—In the case of coverage provided by any govern-
mental unit or any agency or instrumentality thereof, the 
officer or employee who enters into the agreement to pro-
vide such coverage (or the person appropriately designated 
for purposes of this section) shall make the returns and 
statements required by this section. 
‘‘(e) MINIMUM ESSENTIAL COVERAGE.—For pur-
poses of this section, the term ‘minimum essential cov-
erage’ has the meaning given such term by section 
5000A(f).’’. 
(b) ASSESSABLE PENALTIES.— 
(1) Subparagraph (B) of section 6724(d)(1) of 
the Internal Revenue Code of 1986 (relating to defi-
nitions) is amended by striking ‘‘or’’ at the end of 
clause (xxii), by striking ‘‘and’’ at the end of clause 
(xxiii) and inserting ‘‘or’’, and by inserting after 
clause (xxiii) the following new clause: 
VerDate Nov 24 2008 
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345 
•AMDT. NO. 2786 
‘‘(xxiv) section 6055 (relating to re-
turns relating to information regarding 
health insurance coverage), and’’. 
(2) Paragraph (2) of section 6724(d) of such 
Code is amended by striking ‘‘or’’ at the end of sub-
paragraph (EE), by striking the period at the end 
of subparagraph (FF) and inserting ‘‘, or’’ and by 
inserting after subparagraph (FF) the following new 
subparagraph: 
‘‘(GG) section 6055(c) (relating to state-
ments relating to information regarding health 
insurance coverage).’’. 
(c) NOTIFICATION OF NONENROLLMENT.—Not later 
than June 30 of each year, the Secretary of the Treasury, 
acting through the Internal Revenue Service and in con-
sultation with the Secretary of Health and Human Serv-
ices, shall send a notification to each individual who files 
an individual income tax return and who is not enrolled 
in minimum essential coverage (as defined in section 
5000A of the Internal Revenue Code of 1986). Such noti-
fication shall contain information on the services available 
through the Exchange operating in the State in which 
such individual resides. 
(d) CONFORMING AMENDMENT.—The table of sub-
parts for part III of subchapter A of chapter 61 of such 
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346 
•AMDT. NO. 2786 
Code is amended by inserting after the item relating to 
subpart C the following new item: 
‘‘SUBPART D—INFORMATION REGARDING HEALTH INSURANCE COVERAGE’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to calendar years beginning after 
2013. 
PART II—EMPLOYER RESPONSIBILITIES 
SEC. 1511. AUTOMATIC ENROLLMENT FOR EMPLOYEES OF 
LARGE EMPLOYERS. 
The Fair Labor Standards Act of 1938 is amended 
by inserting after section 18 (29 U.S.C. 218) the fol-
lowing: 
‘‘SEC. 18A. AUTOMATIC ENROLLMENT FOR EMPLOYEES OF 
LARGE EMPLOYERS. 
‘‘In accordance with regulations promulgated by the 
Secretary, an employer to which this Act applies that has 
more than 200 full-time employees and that offers employ-
ees enrollment in 1 or more health benefits plans shall 
automatically enroll new full-time employees in one of the 
plans offered (subject to any waiting period authorized by 
law) and to continue the enrollment of current employees 
in a health benefits plan offered through the employer. 
Any automatic enrollment program shall include adequate 
notice and the opportunity for an employee to opt out of 
any coverage the individual or employee were automati-
cally enrolled in. Nothing in this section shall be construed 
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347 
•AMDT. NO. 2786 
to supersede any State law which establishes, implements, 
or continues in effect any standard or requirement relating 
to employers in connection with payroll except to the ex-
tent that such standard or requirement prevents an em-
ployer from instituting the automatic enrollment program 
under this section.’’. 
SEC. 1512. EMPLOYER REQUIREMENT TO INFORM EMPLOY-
EES OF COVERAGE OPTIONS. 
The Fair Labor Standards Act of 1938 is amended 
by inserting after section 18A (as added by section 1513) 
the following: 
‘‘SEC. 18B. NOTICE TO EMPLOYEES. 
‘‘(a) IN GENERAL.—In accordance with regulations 
promulgated by the Secretary, an employer to which this 
Act applies, shall provide to each employee at the time 
of hiring (or with respect to current employees, not later 
than March 1, 2013), written notice— 
‘‘(1) informing the employee of the existence of 
an Exchange, including a description of the services 
provided by such Exchange, and the manner in 
which the employee may contact the Exchange to re-
quest assistance; 
‘‘(2) if the employer plan’s share of the total al-
lowed costs of benefits provided under the plan is 
less than 60 percent of such costs, that the employee 
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348 
•AMDT. NO. 2786 
may be eligible for a premium tax credit under sec-
tion 36B of the Internal Revenue Code of 1986 and 
a cost sharing reduction under section 1402 of the 
Patient Protection and Affordable Care Act if the 
employee purchases a qualified health plan through 
the Exchange; and 
‘‘(3) if the employee purchases a qualified 
health plan through the Exchange, the employee will 
lose the employer contribution (if any) to any health 
benefits plan offered by the employer and that all or 
a portion of such contribution may be excludable 
from income for Federal income tax purposes. 
‘‘(b) EFFECTIVE DATE.—Subsection (a) shall take 
effect with respect to employers in a State beginning on 
March 1, 2013.’’. 
SEC. 1513. SHARED RESPONSIBILITY FOR EMPLOYERS. 
(a) IN GENERAL.—Chapter 43 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following: 
‘‘SEC. 4980H. SHARED RESPONSIBILITY FOR EMPLOYERS 
REGARDING HEALTH COVERAGE. 
‘‘(a) LARGE EMPLOYERS NOT OFFERING HEALTH 
COVERAGE.—If— 
‘‘(1) any applicable large employer fails to offer 
to its full-time employees (and their dependents) the 
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349 
•AMDT. NO. 2786 
opportunity to enroll in minimum essential coverage 
under an eligible employer-sponsored plan (as de-
fined in section 5000A(f)(2)) for any month, and 
‘‘(2) at least one full-time employee of the ap-
plicable large employer has been certified to the em-
ployer under section 1411 of the Patient Protection 
and Affordable Care Act as having enrolled for such 
month in a qualified health plan with respect to 
which an applicable premium tax credit or cost-shar-
ing reduction is allowed or paid with respect to the 
employee, 
then there is hereby imposed on the employer an assess-
able payment equal to the product of the applicable pay-
ment amount and the number of individuals employed by 
the employer as full-time employees during such month. 
‘‘(b) LARGE EMPLOYERS WITH WAITING PERIODS 
EXCEEDING 30 DAYS.— 
‘‘(1) IN GENERAL.—In the case of any applica-
ble large employer which requires an extended wait-
ing period to enroll in any minimum essential cov-
erage under an employer-sponsored plan (as defined 
in section 5000A(f)(2)), there is hereby imposed on 
the employer an assessable payment, in the amount 
specified in paragraph (2), for each full-time em-
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