1015
Title VI, Subtitle A
ance per capita target for the alliance for
the year; divided by
(ii) the sum, for noncomplying plans
offered by the alliance, of the plan propor-
tions of alliance excess bid amounts (de-
scribed in subparagraph (B)(i)) for the
year.
(B) PLAN PROPORTION OF ALLIANCE EX-
CESS BID AMOUNT DESCRIBED.—
(i) IN GENERAL.—The ‘‘plan propor-
tion of alliance excess bid amount’’ de-
scribed in this clause, for a noncomplying
plan, is the product of—
(I) the excess bid amount (as de-
fined in paragraph (3)) for the plan,
and
(II) the plan enrollment propor-
tion (as defined in clause (ii)) for the
plan.
(ii) 
PLAN
ENROLLMENT
PROPOR-
TION.—In clause (i)(II), the term ‘‘plan
enrollment proportion’’ means, with respect
to a health plan offered by a regional alli-
ance, the total enrollment of alliance eligi-
ble individuals enrolled in such plan ex-
1016
Title VI, Subtitle A
pressed as a percentage of the total enroll-
ment of alliance eligible individuals in all
regional alliance plans offered by the alli-
ance. Such proportion shall be computed
based on the information used in com-
puting the weighted average accepted bid
for the alliance under section 6004(c)(1).
(3) EXCESS BID AMOUNT.—In this subsection,
the ‘‘excess bid amount’’, with respect to a noncom-
plying plan for a year, is the amount by which—
(A) the accepted bid for the year (not tak-
ing into account any voluntary reduction under
section 6004(e)), exceeds
(B) the maximum complying bid (as de-
fined in subsection (d)) for the plan for the
year.
(d) MAXIMUM COMPLYING BID.—
(1) FIRST
YEAR.—In this part for the first
year, the ‘‘maximum complying bid’’ for each plan
offered by a regional alliance, is the regional alliance
per capita premium target for the alliance (deter-
mined under section 6003) for the year.
(2) SUBSEQUENT YEARS.—In this part, subject
to paragraph (3), for a subsequent year, the ‘‘max-
1017
Title VI, Subtitle A
imum complying bid’’, for a plan offered by an alli-
ance for a year, is the sum of the following:
(A) NET PREVIOUS YEAR ACCEPTED BID
FOR PLAN.—The accepted bid for the previous
year (not taking into account any voluntary re-
duction under section 6004(e)), minus the
amount of any plan payment reduction for the
plan for that year.
(B) ALLIANCE-WIDE
INFLATION
ALLOW-
ANCE.—The amount by which—
(i) the regional alliance per capita
premium target for the year, exceeds
(ii) such target for the previous year,
or, if less, the weighted average accepted
bid (computed under section 6004(c)(1))
for such year.
(3) SPECIAL RULES FOR NEW PLANS.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), in the case of a plan that is first of-
fered by a regional alliance in a year after the
first year the maximum complying bid shall be
the regional alliance per capita premium target
for the year.
(B) AUTHORITY.—The Board or a State
may establish rules to modify the application of
1018
Title VI, Subtitle A
subparagraph (A) for regional alliance health
plans in the State in order—
(i) to prevent abusive premium prac-
tices by entities previously offering plans,
or
(ii) to encourage the availability of all
types of plans in the State and to permit
establishment of new plans.
SEC. 6012. PROVIDER PAYMENT REDUCTION.
(a) PARTICIPATING PROVIDERS.—
(1) IN GENERAL.—Each regional alliance health
plan, as part of its contract under section 1406(e)
with any participating provider (as defined in section
1407(c), or group of participating providers) shall—
(A) include a provision that provides that
if the plan is a noncomplying plan for a year,
payments to the provider (or group) shall be re-
duced by the applicable network reduction per-
centage (described in paragraph (2)) for the
year, and
(B) not include any provision which the
State determines otherwise varies the payments
to such providers (or group) because of, or in
relation to, a plan payment reduction under sec-
1019
Title VI, Subtitle A
tion 6011 or otherwise is intended to nullify the
effect of subparagraph (A).
The Board may issue regulations relating to the re-
quirements of this paragraph.
(2) APPLICABLE
NETWORK
REDUCTION
PER-
CENTAGE.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), the ‘‘applicable network reduction
percentage’’, with respect to participating pro-
viders of a noncomplying plan for a year is—
(i) 
the 
plan 
payment 
reduction
amount for the plan for the year (as deter-
mined under section 6011(c)), divided by
(ii) the final accepted bid for the plan
for the year,
adjusted under subparagraph (B).
(B) 
INDUCED
VOLUME
OFFSET.—The
Board shall provide for an appropriate increase
of the percentage reduction computed under
subparagraph (A) to take into account any esti-
mated increase in volume of services provided
that may reasonably be anticipated as a con-
sequence of applying a reduction in payment
under this subsection. The Board may compute
and apply such increase differently for different
1020
Title VI, Subtitle A
classes of providers or services or different
types of health plans (as the Board may de-
fine).
(b) OTHER PROVIDERS.—
(1) IN GENERAL.—Each regional alliance health
plan that is a noncomplying plan in a year shall pro-
vide for a reduction in the amount of payments to
providers (or groups of providers) that are not par-
ticipating providers under the applicable alliance fee
schedule under section 1406(c)(3) by the applicable
nonnetwork reduction percentage (described in para-
graph (2)) for the year.
(2) APPLICABLE
NONNETWORK
REDUCTION
PERCENTAGE.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), the ‘‘applicable nonnetwork reduc-
tion percentage’’, with respect to nonpartici-
pating providers of a noncomplying plan for a
year is—
(i) 
the 
plan 
payment 
reduction
amount for the plan for the year (as deter-
mined under section 6011(c)), divided by
(ii) the final accepted bid for the plan
for the year,
adjusted under subparagraph (B).
1021
Title VI, Subtitle A
(B) 
INDUCED
VOLUME
OFFSET.—The
Board shall provide for an appropriate increase
of the percentage reduction computed under
subparagraph (A) to take into account any esti-
mated increase in volume of services provided
that may reasonably be anticipated as a con-
sequence of applying a reduction in payment
under this subsection. The Board may compute
and apply such increase differently for different
classes of providers or services or different
types of health plans (as the Board may de-
fine).
(c) APPLICATION TO COST SHARING AND TO BAL-
ANCE BILLING RESTRICTIONS.—For purposes of applying
section 1406(d) (relating to balance billing limitations)
and part 3 of subtitle B of title I (relating to computation
of cost sharing), the payment basis otherwise used for
computing any limitation on billing or cost sharing shall
be such payment basis as adjusted by any reductions ef-
fected under this section.
PART 2—CORPORATE ALLIANCES HEALTH
EXPENDITURES
SEC. 6021. CALCULATION OF PREMIUM EQUIVALENTS.
(a) IN GENERAL.—By January 1, 1998, the Board
shall develop a methodology for calculating an annual per
1022
Title VI, Subtitle A
capita expenditure equivalent for amounts paid for cov-
erage for the comprehensive benefit package within a cor-
porate alliance.
(b) ADJUSTMENT PERMITTED.—Such methodology
shall permit a corporate alliance to petition the Secretary
of Labor for an adjustment of the inflation adjustment
that would otherwise apply to compensate for material
changes in the demographic characteristics of the eligible
individuals receiving coverage through the alliance.
(c) REPORTING.—In 2001 and each subsequent year,
each corporate alliance shall report to the Secretary of
Labor, in a form and manner specified by the Secretary,
the average of the annual per capita expenditure equiva-
lent for the previous 3-year period.
SEC. 6022. TERMINATION OF CORPORATE ALLIANCE FOR
EXCESS INCREASE IN EXPENDITURES.
(a) TERMINATION.—
(1) IN GENERAL.—If a corporate alliance has
two excess years (as defined in subsection (b)) in a
3-year-period, then, effective beginning with the sec-
ond year following the second excess year in such
period—
(A) the Secretary of Labor shall terminate
the corporate alliance, and
1023
Title VI, Subtitle A
(B) employers that were corporate alliance
employers with respect to such corporate alli-
ance shall become regional alliance employers
(unless, in the case of a corporate alliance with
a plan sponsor described in subparagraph (B)
or (C) of section 1311(b)(1), the employers be-
come corporate alliance employers of another
such corporate alliance).
(2) INITIAL
3-YEAR-PERIOD.—Paragraph (1)
shall first apply to the 3-year-period beginning with
1998.
(3) SPECIAL
SUBSEQUENT
TREATMENT
FOR
LARGE EMPLOYERS.—In the case of corporate alli-
ance employers described in paragraph (1)(B) that
are large employers, the employer premium pay-
ments under section 6121 are subject to adjustment
under section 6124.
(4) NO FURTHER ELECTION.—If a corporate al-
liance of a large employer is terminated under this
subsection, no employer that is a corporate alliance
employer for that alliance is eligible to be a sponsor
of a corporate alliance.
(b) EXCESS YEAR.—
1024
Title VI, Subtitle A
(1) IN GENERAL.—In subsection (a), the term
‘‘excess year’’ means, for a corporate alliance, a year
(after 2000) for which—
(A) the rate of increase for the corporate
alliance (specified in paragraph (2)) for the
year, exceeds
(B) the national corporate inflation factor
(specified in paragraph (3)) for the year.
(2) RATE OF INCREASE FOR CORPORATE ALLI-
ANCE.—The rate of increase for a corporate alliance
for a year, specified in this paragraph, is the per-
centage by which—
(A) the average of the annual per capita
expenditure equivalent for the corporate alliance
(reported under section 6021(c)) for the 3-year
period ending with such year, exceeds
(B) the average of the annual per capita
expenditure equivalent for the corporate alliance
(reported under such subsection) for the 3-year
period ending with the previous year.
(3) NATIONAL
CORPORATE
INFLATION
FAC-
TOR.—The national corporate inflation factor for a
year, specified in this paragraph, is the average of
the general health care inflation factors (as defined
1025
Title VI, Subtitle A
in section 6001(a)(3)) for each of the 3 years ending
with such year.
PART 3—TREATMENT OF SINGLE-PAYER STATES
SEC. 6031. SPECIAL RULES FOR SINGLE-PAYER STATES.
In the case of a Statewide single-payer State, for pur-
poses of section 1222(6), the Board shall compute a State-
wide per capita premium target for each year in the same
manner as a regional alliance per capita premium target
is determined under section 6003.
PART 4—TRANSITION PROVISIONS
SEC. 6041. MONITORING PRICES AND EXPENDITURES.
(a) IN GENERAL.—The Secretary shall establish a
program to monitor prices and expenditures in the health
care system in the United States.
(b) REPORTS.—The Secretary shall periodically re-
port to the President on—
(1) the rate of increase in expenditures in each
sector of the health care system, and
(2) how such rates compare with rate of overall
increase in health care spending and rate of increase
in the consumer price index.
(c) ACCESS TO INFORMATION.—
(1) IN GENERAL.—The Secretary may obtain,
through surveys or otherwise, information on prices
and expenditures for health care services. The Sec-
1026
Title VI, Subtitle B
retary may compel health care providers and third
party payers to disclose such information as is nec-
essary to carry out the program under this section.
(2) CONFIDENTIALITY.—Non-public informa-
tion obtained under this subsection with respect to
individual patients is confidential.
(d) PERIODIC REPORTS.—The Secretary shall peri-
odically issue public reports on the matters described in
subsection (b).
Subtitle B—Premium-Related
Financings
PART 1—FAMILY PREMIUM PAYMENTS
Subpart A—Family Share
SEC. 6101. FAMILY SHARE OF PREMIUM.
(a) REQUIREMENT.—Each family enrolled in a re-
gional alliance health plan or in a corporate alliance health
plan in a class of family enrollment is responsible for pay-
ment of the family share of premium payable respecting
such enrollment. Such premium may be paid by an em-
ployer or other person on behalf of such a family.
(b) FAMILY SHARE OF PREMIUM DEFINED.—
(1) IN GENERAL.—In this subtitle, the term
‘‘family share of premium’’ means, with respect to
enrollment of a family—
1027
Title VI, Subtitle B
(A) in a regional alliance health plan, the
amount specified in paragraph (2) for the class,
or
(B) in a corporate alliance health plan, the
amount specified in paragraph (3) for the class.
(2) REGIONAL ALLIANCE.—
(A) IN GENERAL.—The amount specified
in this paragraph for a health plan based on a
class of family enrollment is the sum of the
base amounts described in subparagraph (B)
reduced (but not below zero) by the sum of the
amounts described in subparagraph (C).
(B) BASE.—The base amounts described
in this subparagraph (for a plan for a class of
enrollment) are as follows:
(i) REGIONAL ALLIANCE PREMIUM.—
The premium specified in section 6102(a)
with respect to such class of enrollment.
(ii) 
FAMILY
COLLECTION
SHORT-
FALL.—20 percent of the family collection
shortfall add-on (computed under section
6107 for such class).
(C) 
CREDITS
AND
DISCOUNTS.—The
amounts described in this subparagraph (for a
plan for a class of enrollment) are as follows:
1028
Title VI, Subtitle B
(i) ALLIANCE CREDIT.—The amount
of 
the 
alliance 
credit 
under 
section
6103(a).
(ii) INCOME
RELATED
DISCOUNT.—
The amount of any income-related discount
provided under section 6104(a)(1).
(iii) EXCESS PREMIUM CREDIT.—The
amount of any excess premium credit pro-
vided under section 6105.
(iv) CORPORATE
ALLIANCE
OPT-IN
CREDIT.—The amount of any corporate al-
liance opt-in credit provided under section
6106.
(v) ADDITIONAL CREDIT FOR SSI AND
AFDC RECIPIENTS.—In the case of an SSI
or AFDC family or for whom the amount
described in clause (ii) is equal to the
amount described in section 6104(b)(1)(A),
the amount described in subparagraph
(B)(ii).
(D) LIMIT
ON
MISCELLANEOUS
CRED-
ITS.—In no case shall the family share, due to
credits under subparagraph (C), be less than
zero.
(3) CORPORATE ALLIANCE.—
1029
Title VI, Subtitle B
(A) IN GENERAL.—The amount specified
in this paragraph for a health plan based on a
class of family enrollment is the premium de-
scribed in subparagraph (B) reduced (but not
below zero) by the sum of the amounts de-
scribed in subparagraph (C).
(B) PREMIUM.—The premium described in
this subparagraph (for a plan for a class of en-
rollment) is premium specified under section
1384 with respect to the plan and class of en-
rollment involved.
(C) 
CREDITS
AND
DISCOUNTS.—The
amounts described in this subparagraph (for a
plan for a class of enrollment) are as follows:
(i) ALLIANCE CREDIT.—The amount
of 
the 
alliance 
credit 
under 
section
6103(b).
(ii) INCOME
RELATED
DISCOUNT.—
The amount of any income-related discount
provided under section 6104(a)(2).
SEC. 6102. AMOUNT OF PREMIUM.
(a) REGIONAL ALLIANCE.—The amount of the pre-
mium charged by a regional alliance for all families in a
class of family enrollment under a regional alliance health
plan offered by the alliance is equal to the product of—
1030
Title VI, Subtitle B
(1) the final accepted bid for the plan (as de-
fined in section 6000(a)(2)),
(2) the uniform per capita conversion factor
(specified under section 1341(b)) for the alliance,
and
(3) the premium class factor established by the
Board for that class under section 1531.
(b) REFERENCE TO CORPORATE ALLIANCE PREMIUM
PROVISIONS.—The amount of the premium charged by a
corporate alliance for all families in a class of family en-
rollment under a corporate alliance health plan offered by
the alliance is specified under section 1384.
(c) SPECIAL RULES FOR DIVIDED FAMILIES.—In the
case of an individual who is a qualifying employee of an
employer, if the individual has a spouse or child who is
not treated as part of the individual’s family because of
section 1012—
(1) the combined premium for both families
under this section shall be computed as though such
section had not applied if such combined premium is
less than the total of the premiums otherwise appli-
cable (without regard to this subsection),
(2) the regional alliance shall divide such com-
bined premium between the families proportionally
(consistent with rules established by the Board), and
1031
Title VI, Subtitle B
(3) in such case, credits and other amounts
shall be pro-rated in a manner consistent with rules
established by the Board.
SEC. 6103. ALLIANCE CREDIT.
(a) REGIONAL ALLIANCES.—The credit provided
under this section for a family enrolled in a regional alli-
ance health plan through a regional alliance for a class
of family enrollment is equal to 80 percent of the weighted
average premium (as defined in section 6000(b)) for
health plans offered by the alliance for the class.
(b) CORPORATE ALLIANCES.—The credit provided
under this section for a family enrolled in a corporate alli-
ance health plan for a class of family enrollment is equal
to the minimum employer premium payment required
under section 6131 with respect to the family.
SEC. 6104. PREMIUM DISCOUNT BASED ON INCOME.
(a) IN GENERAL.—
(1) 
ENROLLEES
IN
REGIONAL
ALLIANCE
HEALTH PLANS.—Each family enrolled with a re-
gional alliance health plan is entitled to a premium
discount under this section, in the amount specified
in subsection (b), if the family—
(A) is an AFDC or SSI family,
(B) is determined, under subpart D of part
3 of subtitle D of title I, to have family ad-
1032
Title VI, Subtitle B
justed income below 150 percent of the applica-
ble poverty level, or
(C) is a family described in subsection
(c)(3) for which the family obligation amount
under subsection (c) for the year would other-
wise exceed a specified percent of family ad-
justed income described in such subsection.
(2) ENROLLEES
IN
CORPORATE
ALLIANCE
HEALTH PLANS.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), each family enrolled with a cor-
porate alliance health plan in a class of family
enrollment by virtue of the full-time employ-
ment of a low-wage employee (as defined in
subparagraph (B)) is entitled to a premium dis-
count under this section in the amount (if any)
by which—
(i) 95 percent of the premium (speci-
fied in section 1384) for the least expen-
sive corporate alliance health plan that is
offered to the employee and that is a lower
or combination cost sharing plan (as de-
fined in paragraphs (7) and (20) of section
1902 for that class and premium area), ex-
ceeds
1033
Title VI, Subtitle B
(ii) the alliance credit under section
6103(b) for that class.
(B) LOW-WAGE EMPLOYEE DEFINED.—
(i) IN GENERAL.—In this paragraph,
the term ‘‘low-wage employee’’ means, with
respect to an employer, an employee who is
employed on a full-time basis and who is
receiving wages (as defined in section
1901(a)(1)(A)) for employment for the em-
ployer, at an annual rate of less than
$15,000 (as adjusted under clause (ii)).
(ii) INDEXING.—For a year after
1994, the dollar amount specified in clause
(i) shall be increased or decreased by the
same percentage as the percentage increase
or decrease by which the average CPI (de-
scribed in section 1902(9)) for the 12-
month-period ending with August 31 of the
preceding year exceeds such average for
the 12-month period ending with August
31, 1993.
(C) TIMING OF DETERMINATION.—
(i) IN GENERAL.—The determination
of whether or not an employee is a low-
wage employee shall be made, in accord-
1034
Title VI, Subtitle B
ance with rules of the Secretary of Labor,
at the time of initial enrollment and shall
also be made at the time of each subse-
quent open enrollment period, on the basis
of the wages payable by the employer at
that time.
(ii) EFFECTIVE
DATE.—Such deter-
mination shall apply as of the effective
date of the initial enrollment, or, in the
case of an open enrollment period, as of
the effective date of changes in enrollment
during such period.
(3) NO LIABILITY FOR INDIANS AND CERTAIN
VETERANS AND MILITARY PERSONNEL.—
(A) IN GENERAL.—In the case of an indi-
vidual described in subparagraph (B), because
the applicable health plan does not impose any
premium for such an individual, the individual
is not eligible for any premium discount under
this section.
(B) INDIVIDUALS
DESCRIBED.—An indi-
vidual described in this subparagraph is—
(i) an electing veteran (as defined in
section 1012(d)(1)) who is enrolled under
a health plan of the Department of Vet-
1035
Title VI, Subtitle B
erans Affairs and who, under the laws and
rules as in effect as of December 31, 1994,
has a service-connected disability or who is
unable to defray the expenses of necessary
care as determined under section 1722(a)
of title 38, United States Code,
(ii) active duty military personnel (as
defined in section 1012(d)(2)), and
(iii) an electing Indian (as defined in
section 1012(d)(3)).
(4) MONTHLY APPLICATION TO AFDC AND SSI
FAMILIES.—Paragraph (1)(A) (and the family obli-
gation amount under subsection (c) insofar as it re-
lates to an AFDC or SSI family) shall be applied to
the premium or family obligation amount only for
months in which the family is such an AFDC or SSI
family.
(b) AMOUNT OF PREMIUM DISCOUNT FOR REGIONAL
ALLIANCE HEALTH PLANS.—
(1) IN
GENERAL.—Subject to the succeeding
paragraphs of this subsection, the amount of the
premium discount under this subsection for a family
enrolled in a regional alliance health plan under a
class of family enrollment is equal to—
1036
Title VI, Subtitle B
(A) 20 percent of the weighted average
premium for regional alliance health plans of-
fered by the regional alliance for that class of
enrollment, increased by any amount provided
under paragraph (2); reduced (but not below
zero) by
(B) the sum of—
(i) the family obligation amount de-
scribed in subsection (c), and
(ii) the amount of any employer pay-
ment (not required under part 2) towards
the family share of premiums for covered
members of the family.
(2) INCREASE TO ASSURE ENROLLMENT IN AT-
OR-BELOW-AVERAGE-COST PLAN.—If a regional alli-
ance determines that a family eligible for a discount
under this section is unable to enroll in a at-or-
below-average-cost plan (as defined in paragraph
(3)) that serves the area in which the family resides,
the amount of the premium discount under this sub-
section is increased but only to such amount as will
permit the family to enroll in a regional alliance
health plan without the need to pay a family share
of premium under this part in excess of the sum de-
scribed in paragraph (1)(B).
1037
Title VI, Subtitle B
(3) AT-OR-BELOW-AVERAGE-COST
PLAN
DE-
FINED.—In this section, the term ‘‘at-or-below-aver-
age-cost plan’’ means a regional alliance health plan
the premium for which does not exceed, for the class
of family enrollment involved, the weighted average
premium for the regional alliance.
(c) FAMILY OBLIGATION AMOUNT.—
(1) DETERMINATION.—Subject to paragraphs
(2) and (3), the family obligation amount under this
subsection is determined as follows:
(A) NO OBLIGATION IF INCOME BELOW IN-
COME THRESHOLD AMOUNT OR IF AFDC OR SSI
FAMILY.—If the family adjusted income (as de-
fined in section 1372(d)) of the family is less
than the income threshold amount (specified in
paragraph (4)) or if the family is an AFDC or
SSI family, the family obligation amount is
zero.
(B) INCOME ABOVE INCOME THRESHOLD
AMOUNT.—If such income is at least such in-
come threshold amount and the family is not an
AFDC or SSI family, the family obligation
amount is the sum of the following:
(i) FOR
INCOME
(ABOVE
INCOME
THRESHOLD
AMOUNT)
UP
TO
THE
POV-
1038
Title VI, Subtitle B
ERTY LEVEL.—The product of the initial
marginal rate (specified in paragraph (2))
and the amount by which—
(I) the family adjusted income
(not including any portion that ex-
ceeds the applicable poverty level for
the class of family involved), exceeds
(II) 
such 
income 
threshold
amount.
(ii) GRADUATED PHASE OUT OF DIS-
COUNT UP TO 150 PERCENT OF POVERTY
LEVEL.—The product of the final marginal
rate (specified in paragraph (2)) and the
amount by which the family adjusted in-
come exceeds 100 percent (but is less than
150 percent) of the applicable poverty
level.
(2) MARGINAL RATES.—In paragraph (1)—
(A) INDIVIDUAL MARGINAL RATES.—For a
year for an individual class of enrollment—
(i) INITIAL
MARGINAL
RATE.—The
initial marginal rate is the ratio of—
(I) 3 percent of the applicable
poverty level for the individual class of
enrollment for the year, to
1039
Title VI, Subtitle B
(II) the amount by which such
poverty level exceeds such income
threshold amount.
(ii) FINAL
MARGINAL
RATE.—The
final marginal rate is the ratio of—
(I) the amount by which the gen-
eral family share (as defined in sub-
paragraph (C)) for an individual class
of enrollment exceeds 3 percent of the
applicable poverty level (for an indi-
vidual class of enrollment for the
year); to
(II) 50 percent of such poverty
level.
(B) FAMILY
MARGINAL
RATES.—For a
year for a family class of enrollment (as defined
in section 1011(c)(2)(A))—
(i) INITIAL
MARGINAL
RATE.—The
initial marginal rate is the ratio of—
(I) 3 percent of the applicable
poverty level for a dual parent class of
enrollment for the year, to
(II) the amount by which such
poverty level exceeds such income
threshold amount.
1040
Title VI, Subtitle B
(ii) FINAL
MARGINAL
RATE.—The
final marginal rate is the ratio of—
(I) the amount by which the gen-
eral family share (as defined in sub-
paragraph (C)) for a dual parent class
of enrollment exceeds 3 percent of the
applicable poverty level (for such a
class for the year); to
(II) 50 percent of such poverty
level.
(C) GENERAL
FAMILY
SHARE.—In sub-
paragraphs (A) and (B), the term ‘‘general
family share’’ means, for a class, the weighted
average premium for the class minus the alli-
ance credit (determined without regard to this
section).
(3) LIMITATION TO 3.9 PERCENT FOR ALL FAM-
ILIES.—
(A) IN GENERAL.—
(i) FAMILIES
WITH
INCOME
BELOW
150 PERCENT OF POVERTY.—In the case of
a family with family adjusted income of
less than 150 percent of the applicable
poverty level, in no case shall the family
obligation amount under this subsection
1042
Title VI, Subtitle B
(ii) ROUNDING.—The dollar amounts
adjusted under this subparagraph shall be
rounded each year to the nearest multiple
of $100.
(C) INDEXING OF PERCENTAGE.—
(i) IN
GENERAL.—The percentage
specified in subparagraph (A) shall be ad-
justed for any year after 1994 so that the
percentage for the year bears the same
ratio to the percentage so specified as the
ratio of—
(I) 1 plus the general health care
inflation factor (as defined in section
6001(a)(3)) for the year, bears to
(II) 1 plus the percentage speci-
fied in section 1136(b) (relating to in-
dexing of dollar amounts related to
cost sharing) for the year.
(ii) 
ROUNDING.—Any 
adjustment
under clause (i) for a year shall be round-
ed to the nearest multiple of 1⁄10 of 1 per-
centage point.
(4) INCOME THRESHOLD AMOUNT.—
(A) IN GENERAL.—For purposes of this
subtitle, the income threshold amount specified
1043
Title VI, Subtitle B
in this paragraph is $1,000 (adjusted under
subparagraph (B)) .
(B) INDEXING.—For a year after 1994,
the income threshold amount specified in sub-
paragraph (A) shall be increased or decreased
by the same percentage as the percentage in-
crease or decrease by which the average CPI
(described in section 1902(9)) for the 12-
month-period ending with August 31 of the pre-
ceding year exceeds such average for the 12-
month period ending with August 31, 1993.
(C) ROUNDING.—Any increase or decrease
under subparagraph (B) for a year shall be
rounded to the nearest multiple of $10.
SEC. 6105. EXCESS PREMIUM CREDIT.
(a) IN GENERAL.—If plan payment reductions are
made for one or more regional alliance health plans offered
by a regional alliance for plan payments in a year under
section 6021, the alliance shall provide for a credit under
this section, in the amount described in subsection (b),
in the case of each family enrolled in a regional alliance
health plan offered by the alliance for premiums in the
year.
(b) AMOUNT OF CREDIT.—
1044
Title VI, Subtitle B
(1) IN GENERAL.—Subject to paragraph (2),
the amount of the credit under this subsection, for
a family enrolled in a class of family enrollment for
a regional alliance for a year, is the amount that
would be the weighted average premium for such al-
liance, class, and year, if the per capita excess pre-
mium amount (determined under subsection (c)) for
the alliance for the year were substituted for the re-
duced weighted average accepted bid for the regional
alliance for the year.
(2) ADJUSTMENT TO ACCOUNT FOR USE OF ES-
TIMATES.—Subject to section 1361(b)(3), if the
total payments made by a regional alliance to all re-
gional alliance health plans in a year under section
1351(b) exceeds (or is less than) the total of such
payments estimated by the alliance (based on the re-
duced weighted average accepted bid under sub-
section (c)(1)), because of a difference between—
(A) the alliance’s estimate of the distribu-
tion of enrolled families between excess pre-
mium plans and other plans, and
(B) the actual distribution of such enrolled
families among such plans,
the amount of the credit under this section in the
second succeeding year shall be reduced (or in-
1045
Title VI, Subtitle B
creased, respectively) by the amount of such excess
(or deficit) in the total of such payments made by
the alliance to all such plans.
(c) PER CAPITA EXCESS PREMIUM AMOUNT.—The
per capita excess premium amount, for a regional alliance
for a year, is the amount by which—
(1) the reduced weighted average accepted bid
(as defined in section 6000(a)(1)) for the alliance
for the year, exceeds
(2) the regional alliance per capita premium
target for the alliance for the year.
SEC. 6106. CORPORATE ALLIANCE OPT-IN CREDIT.
(a) IN GENERAL.—If a regional alliance is owed a
payment adjustment under section 6124 for a year, then
the alliance shall provide for a credit under this section
equal to 20 percent of the amount described in subsection
(b), in the case of each family enrolled in a regional alli-
ance plan offered by the alliance.
(b) AMOUNT OF CREDIT.—The amount described in
this subsection, for a family enrolled in a class of family
enrollment for a regional alliance for a year, is the amount
that would be the weighted average premium for such alli-
ance, class, and year, if the per capita corporate alliance
opt-in amount (determined under subsection (c)) for the
alliance for the year were substituted for the reduced
1046
Title VI, Subtitle B
weighted average accepted bid for the regional alliance for
the year.
(c) PER CAPITA CORPORATE ALLIANCE OPT-IN
AMOUNT.—The per capita corporate alliance opt-in
amount, for a regional alliance for a year, is—
(1) the total amount of the payment adjust-
ments owed for the year under section 6124, divided
by
(2) the estimated average number of regional
alliance eligible individuals in the regional alliance
during the year (reduced by the average number of
such individuals whose family share of premiums,
determined without regard to this section and sec-
tion 6107, is zero).
SEC. 6107. FAMILY COLLECTION SHORTFALL ADD-ON.
(a) IN GENERAL.—The family collection shortfall
add-on, for a regional alliance for a class of enrollment
for a year, is the amount that would be the weighted aver-
age premium for such alliance, class, and year, if the per
capita collection shortfall amount (determined under sub-
section (b)) for the alliance for the year were substituted
for the reduced weighted average accepted bid for the re-
gional alliance for the year.
(b) COMPUTATION
OF PER CAPITA ADJUSTMENT
FOR COLLECTION SHORTFALLS.—
1047
Title VI, Subtitle B
(1) PER
CAPITA
COLLECTION
SHORTFALL
AMOUNT.—The 
per 
capita 
collection 
shortfall
amount, for a regional alliance for a year, under this
subsection is equal to—
(A) the amount estimated under paragraph
(2)(A) for the year, divided by
(B) the estimated average number of re-
gional alliance eligible individuals in the re-
gional alliance during the year (reduced by the
average number of such individuals whose fam-
ily share of premiums, determined without re-
gard to this section and section 6106, is zero).
(2) AGGREGATE COLLECTION SHORTFALL.—
(A) IN GENERAL.—Each regional alliance
shall estimate, for each year (beginning with
the first year) the total amount of payments
which the alliance can reasonably identify as
owed to the alliance under this Act (taking into
account any premium reduction or discount
under this subtitle and including amounts owed
under subpart B and not taking into account
any penalties) for the year and not likely to be
collected (after making collection efforts de-
scribed in section 1345) during a period speci-
1048
Title VI, Subtitle B
fied by the Secretary beginning on the first day
of the year.
(B) 
EXCLUSION
OF
GOVERNMENT
DEBTS.—The amount under subparagraph (A)
shall not include any payments owed to a re-
gional alliance by the Federal, State, or local
governments.
(C) ADJUSTMENT FOR PREVIOUS SHORT-
FALL
ESTIMATION
DISCREPANCY.—Subject to
section 1361(b)(3), the amount estimated under
this paragraph for a year shall be adjusted to
reflect over (or under) estimations in the
amounts so computed under this paragraph for
previous years (based on actual collections),
taking into account interest payable based upon
borrowings (or savings) attributable to such
over or under estimations.
Subpart B—Repayment of Alliance Credit by Certain
Families
SEC. 6111. REPAYMENT OF ALLIANCE CREDIT BY CERTAIN
FAMILIES.
(a) IN GENERAL.—Subject to the succeeding provi-
sions of this subpart, each family which is provided an
alliance credit under section 6103(a) for a class of enroll-
ment is liable to the regional alliance for repayment of
1049
Title VI, Subtitle B
an amount equal to the base employment monthly pre-
mium (applicable to such class) for the month under sec-
tion 6122.
(b) REDUCTION
FOR
SELF-EMPLOYMENT
PAY-
MENTS.—The liability of a family under this section for
a year shall be reduced (but not below zero) by the amount
of any employer payments made in the year under section
6126 based on the net earnings from self-employment of
a family member.
SEC. 6112. NO LIABILITY FOR FAMILIES EMPLOYED FULL-
TIME; REDUCTION IN LIABILITY FOR PART-
TIME EMPLOYMENT.
(a) IN GENERAL.—The amount of any liability under
section 6111 shall be reduced, in accordance with rules
established by the National Health Board consistent with
this section, based on employer premiums payable under
section 6121 with respect to the employment of a family
member who is a qualifying employee or with respect to
a family member. In no case shall the reduction under this
section result in any payment owing to a family.
(b) CREDIT FOR FULL-TIME AND PART-TIME EM-
PLOYMENT.—
(1) IN GENERAL.—Under rules of the Board, in
the case of a family enrolled under a class of family
enrollment, if a family member is a qualifying em-
1050
Title VI, Subtitle B
ployee for a month and (except in the case described
in section 6114(a)) the employer is liable for pay-
ment 
under 
section 
6121 
based 
on 
such
employment—
(A) FULL-TIME EMPLOYMENT CREDIT.—If
the employment is on a full-time basis (as de-
fined in section 1901(b)(2)(A)) the liability
under section 6111 shall be reduced by the
credit amount described in subparagraph (C).
(B) PART-TIME EMPLOYMENT CREDIT.—If
the employment is on a part-time basis (as de-
fined in section 1901(b)(2)(A)) the liability
under section 6111 shall be reduced by the em-
ployment 
ratio 
(as 
defined 
in 
section
1901(b)(2)(B)) of the credit amount described
in subparagraph (C).
(C) FULL-TIME
MONTHLY
CREDIT.—The
amount of the credit under this subparagraph,
with respect to employment by an employer in
a month, is 1⁄12 (or, if applicable, the fraction
described in paragraph (2)) of the amount owed
under section 6111, based on the class of en-
rollment, for the year.
(2) COVERAGE
DURING
ONLY
PART
OF
A
YEAR.—In the case of a family that is not enrolled
1051
Title VI, Subtitle B
in a regional alliance health plan for all the months
in a year, the fraction described in this paragraph
is 1 divided by the number of months in the year in
which the family was enrolled in such a plan.
(3) AGGREGATION OF CREDITS.—For purposes
of paragraph (1)—
(A) INDIVIDUALS.—In the case of an indi-
vidual who is a qualifying employee of more
than one employer in a month, the credit for
the month shall equal the sum of the credits
earned with respect to employment by each em-
ployer. Such sum may exceed the credit amount
described in paragraph (1)(C).
(B) COUPLES.—In the case of a couple
each spouse of which is a qualifying employee
in a month, the credit for the month shall equal
the sum of the credits earned with respect to
employment by each spouse. Such sum may ex-
ceed the credit amount described in paragraph
(1)(C).
(c) TREATMENT OF CHANGE OF ENROLLMENT STA-
TUS.—In the case of a family for which the class of family
enrollment changes during a year, the Board shall estab-
lish rules for appropriate conversion and allocation of the
credit amounts under the previous provisions of this sec-
1052
Title VI, Subtitle B
tion in a manner that reflects the relative values of the
base employment monthly premiums (as determined under
section 6122) among the different classes of family enroll-
ment.
SEC. 6113. LIMITATION OF LIABILITY BASED ON INCOME.
(a) IN GENERAL.—In the case of an eligible family
described in subsection (b), the repayment amount re-
quired under this subpart (after taking into account any
work credit earned under section 6112) with respect to
a year shall not exceed the amount of liability described
in subsection (c) for the year.
(b) ELIGIBLE FAMILY DESCRIBED.—An eligible fam-
ily described in this subsection is a family which is deter-
mined, under subpart B of part 3 of subtitle D of title
I by the regional alliance for the alliance area in which
the family resides, to have wage-adjusted income (as de-
fined in subsection (d)) below 250 percent of the applica-
ble poverty level.
(c) AMOUNT OF LIABILITY.—
(1) DETERMINATION.—Subject to subsection
(f), in the case of a family enrolled in a class of en-
rollment with wage-adjusted income (as defined in
subsection (d)), the amount of liability under this
subsection is determined as follows:
1053
Title VI, Subtitle B
(A) NO OBLIGATION IF INCOME BELOW IN-
COME THRESHOLD AMOUNT OR IF AFDC OR SSI
FAMILY.—If such income is less than the in-
come threshold amount (specified in section
6104(c)(4)) or if the family is an AFDC or SSI
family, the amount of liability is zero.
(B) INCOME ABOVE INCOME THRESHOLD
AMOUNT.—If such income is at least such in-
come threshold amount and the family is not an
AFDC or SSI family, the amount of liability is
the sum of the following:
(i) 5.5 PERCENT OF INCOME (ABOVE
INCOME THRESHOLD AMOUNT) UP TO THE
POVERTY
LEVEL.—The initial marginal
rate (specified in paragraph (2)(A)) of the
amount by which—
(I) the wage-adjusted income
(not including any portion that ex-
ceeds the applicable poverty level for
the class of family involved), exceeds
(II) 
such 
income 
threshold
amount.
(ii) GRADUATED PHASE OUT OF DIS-
COUNT UP TO 250 PERCENT OF POVERTY
LEVEL.—The final marginal rate (specified
1054
Title VI, Subtitle B
in paragraph (2)(B)) of the amount by
which the wage-adjusted income exceeds
100 percent of the applicable poverty level.
(2) MARGINAL RATES.—In paragraph (1)—
(A) INITIAL MARGINAL RATE.—The initial
marginal rate, for a year for a class of enroll-
ment, is the ratio of—
(i) 5.5 percent of the applicable pov-
erty level for the class of enrollment for
the year, to
(ii) the amount by which such poverty
level 
exceeds 
such 
income 
threshold
amount.
(B) FINAL
MARGINAL
RATE.—The final
marginal rate, for a year for a class of enroll-
ment, is the ratio of—
(i) the amount by which (I) the
amount of the repayment amount de-
scribed in section 6111(a) exceeds (II) 5.5
percent of the applicable poverty level (for
the class and year); to
(ii) 150 percent of such poverty level.
(3) MONTHLY APPLICATION TO AFDC AND SSI
FAMILIES.—Paragraph (1) insofar as it relates to an
AFDC or SSI family shall be applied so as to reduce
1055
Title VI, Subtitle B
to zero the liability amount only for months in which
the family is such an AFDC or SSI family.
(d) WAGE-ADJUSTED INCOME DEFINED.—In this
subtitle, the term ‘‘wage-adjusted income’’ means, for a
family, family adjusted income of the family (as defined
in section 1372(d)(1)), reduced by the sum of the fol-
lowing:
(1)(A) Subject to subparagraph (B), the
amount of any wages included in such family’s in-
come that is received for employment which is taken
into account in the computation of the amount of
employer premiums under section 6121 (without
consideration of section 6126).
(B) The reduction under subparagraph (A)
shall not exceed for a year $5,000 (adjusted under
section 6104(c)(3)(B)) multiplied by the number of
months (including portions of months) of employ-
ment with respect to which employer premiums were
payable under section 6121 (determined in a manner
consistent with section 1901(b)(3)).
(2) The amount of net earnings from self em-
ployment of the family taken into account under sec-
tion 6126.
1056
Title VI, Subtitle B
(3) The amount of unemployment compensation
included in income under section 85 of the Internal
Revenue Code of 1986.
(e) DETERMINATIONS.—A family’s wage-adjusted in-
come and the amount of liability under subsection (c) shall
be determined by the applicable regional alliance upon ap-
plication by a family under under subpart B of part 3 of
subtitle D of title I.
(f) NO LIABILITY FOR INDIANS AND CERTAIN VET-
ERANS AND MILITARY PERSONNEL.—The provisions of
paragraph (3) of section 6104(a) shall apply to the reduc-
tion in liability under this section in the same manner as
such paragraph applies to the premium discount under
section 6104.
SEC. 6114. SPECIAL TREATMENT OF CERTAIN RETIREES
AND QUALIFIED SPOUSES AND CHILDREN.
(a) TREATMENT AS FULL-TIME EMPLOYEE.—Sub-
ject to subsection (d), an individual who is an eligible re-
tiree (as defined in subsection (b)) or a qualified spouse
or child (as defined in subsection (c)) for a month in a
year (beginning with 1998) is considered, for purposes of
section 6112, to be a full-time employee described in such
section in such month.
(b) ELIGIBLE RETIREE DEFINED.—In this section,
the term ‘‘eligible retiree’’ means, for a month, an indi-
1057
Title VI, Subtitle B
vidual who establishes to the satisfaction of the regional
alliance (for the alliance area in which the individual re-
sides), pursuant to rules of the Secretary, that the indi-
vidual, as of the first day of the month—
(1) is at least 55, but less than 65, years of
age,
(2) is not employed on a full-time basis (as de-
fined in section 1901(b)(2)(A)),
(3) would be eligible (under section 226(a) of
the Social Security Act) for hospital insurance bene-
fits under part A of title XVIII of such Act if the
individual were 65 years of age based only on the
employment of the individual, and
(4) is not a medicare-eligible individual.
(c) QUALIFIED SPOUSE OR CHILD DEFINED.—In
subsection (a), the term ‘‘qualified spouse or child’’ means,
in relation to an eligible retiree for a month, an individual
who establishes to the satisfaction of the regional alliance
(for the alliance area in which the individual resides)
under rules of the Secretary that the requirements in one
of the following paragraphs is met with respect to the indi-
vidual:
(1) The individual (A) is under 65 years of age
and is (and has been for a period of at least one
1058
Title VI, Subtitle B
year) married to an eligible retiree or (B) is a child
of the eligible retiree.
(2) In the case of a person who was an eligible
retiree at the time of the person’s death—
(A) the individual was (and had for a pe-
riod of at least one year been) married to the
retiree at the time of the person’s death,
(B) the individual is under 65 years of age,
(C) the individual is not employed on a
full-time 
basis 
(as 
defined 
in 
section
1901(b)(2)(A)),
(D) the individual is not remarried, and
(E) the deceased spouse would still be an
eligible retiree in the month if such spouse had
not died.
(3) The individual is a child of an individual de-
scribed in paragraph (2).
(d) APPLICATION.—An individual may not be deter-
mined to be an eligible retiree or qualified spouse or child
unless an application has been filed with the regional alli-
ance. Such application shall contain such information as
the Secretary may require to establish such status and
verify information in the application. Any material mis-
representation in the application is subject to a penalty
1059
Title VI, Subtitle B
in the same manner as a misrepresentation described in
section 1374(i)(2).
SEC. 6115. SPECIAL TREATMENT OF CERTAIN MEDICARE
BENEFICIARIES.
In the case of an individual who would be a medicare-
eligible individual in a month but for the application of
section 1012(a) on the basis of employment (in the month
or a previous month) of the individual or the individual’s
spouse or parent, the individual (or spouse or parent, as
the case may be) so employed is considered, for purposes
of section 6112, to be a full-time employee described in
such section in such month.
PART 2—EMPLOYER PREMIUM PAYMENTS
Subpart A—Regional Alliance Employers
SEC. 6121. EMPLOYER PREMIUM PAYMENT REQUIRED.
(a) REQUIREMENT.—
(1) IN GENERAL.—Each regional alliance em-
ployer described in paragraph (2) for a month shall
pay to the regional alliance that provides health cov-
erage to a qualifying employee of the employer an
employer premium in a amount at least equal to the
amount specified in subsection (b). Such payments
shall be made in accordance with section 1345(c).
(2) EMPLOYER DESCRIBED.—An employer de-
scribed in this paragraph for a month is an employer
1060
Title VI, Subtitle B
that in the month employs one or more qualifying
employees (as defined in section 1901(b)(1)).
(3) TREATMENT OF CERTAIN EMPLOYMENT BY
CORPORATE ALLIANCE EMPLOYERS.—A corporate al-
liance employer shall be deemed, for purposes of this
subpart, to be a regional alliance employer with re-
spect to qualifying employees who are not corporate
alliance eligible individuals.
(b) PREMIUM PAYMENT AMOUNT.—
(1) IN GENERAL.—Except as provided in sec-
tion 6123 (relating to a discount for certain employ-
ers), section 6124 (relating to large employers elect-
ing coverage in a regional alliance), and section
6125 (relating to the employer collection shortfall
add-on), the amount of the employer premium pay-
ment, for a month for qualifying employees of the
employer who reside in an alliance area, is the sum
of the payment amounts computed under paragraph
(2) for each class of family enrollment with respect
to such employees in such area.
(2) PAYMENT AMOUNT FOR ALL EMPLOYEES IN
A
CLASS
OF
FAMILY
ENROLLMENT.—Subject to
paragraph (3), the payment amount under this para-
graph, for an employer for a class of family enroll-
1061
Title VI, Subtitle B
ment for a month for qualifying employees residing
in an alliance area, is the product of—
(A) the base employment monthly premium
determined under section 6122 for the class of
family enrollment for the previous month for
the regional alliance, and
(B) the number of full-time equivalent em-
ployees (determined under section 1901(b)(2))
enrolled in that class of family enrollment for
the previous month and residing in the alliance
area.
(3) TREATMENT OF CERTAIN EMPLOYEES.—In
applying this subpart in the case of a qualifying em-
ployee (other than a medicare-eligible individual)
who is not enrolled in any alliance health plan—
(A) the employee is deemed enrolled in a
regional alliance health plan (for the alliance
area in which the individual resides) in the dual
parent class of enrollment, and
(B) if the employee’s residence is not
known, the employee is deemed to reside in the
alliance area in which the employee principally
is employed for the employer.
(4) TRANSITIONAL RULES FOR FIRST MONTH IN
FIRST YEAR FOR A STATE.—In the case of an em-
1062
Title VI, Subtitle B
ployer for a State in the first month of the State’s
first year—
(A) the premium amount for such month
shall be computed by substituting ‘‘month’’ for
‘‘previous month’’ in paragraph (2);
(B) payment for such month shall be made
on the first of the month based on an estimate
of the payment for such month;
(C) an adjustment shall be made to the
payment in the following month to reflect the
difference between the payment in the first
month and the payment in the following month
(calculated without regard to the adjustment
under this subparagraph); and
(D) the reconciliation of premiums for
such first month under section 1602(c) shall be
included in the reconciliation of premiums for
the following 12 months.
(5) SPECIAL RULES FOR DIVIDED FAMILIES.—
In the case of an individual who is a qualifying em-
ployee of an employer, if the individual has a spouse
or child who is not treated as part of the individual’s
family because of section 1012—
1063
Title VI, Subtitle B
(A) the employer premium payment under
this section shall be computed as though such
section had not applied, and
(B) the regional alliance shall make pro-
portional payments (consistent with rules estab-
lished by the Secretary) to the health plans (if
different) of the qualifying employee and of the
employee’s spouse and children.
(c) APPLICATION DURING TRANSITION PERIOD.—
(1) IN
GENERAL.—For purposes of applying
this subpart in the case of an employer described in
paragraph (3), there shall only be taken into account
qualifying employees (and wages of such employees)
who reside in a participating State.
(2) EXCEPTION.—Paragraph (1) shall not
apply in determining the average number of full-time
equivalent employees or whether an employer is a
small employer.
(3) EMPLOYER DESCRIBED.—An employer de-
scribed in this paragraph is an employer that em-
ploys one or more qualifying employees in a partici-
pating State and one or more qualifying employees
in a State that is not a participating State.
1064
Title VI, Subtitle B
SEC. 6122. COMPUTATION OF BASE EMPLOYMENT MONTH-
LY PREMIUM.
(a) IN GENERAL.—Each regional alliance shall pro-
vide for the computation for each year (beginning with the
first year) of a base employment monthly premium for
each class of family enrollment as follows:
(1) INDIVIDUAL ENROLLMENT.—The base em-
ployment monthly premium for the individual class
of enrollment is equal to 1⁄12 of 80 percent of the
credit-adjusted weighted average premium (as de-
fined in paragraph (4)) for such regional alliance for
the individual class of enrollment.
(2) COUPLE-ONLY ENROLLMENT.—
(A) IN GENERAL.—The base employment
monthly premium for the couple-only class of
enrollment is equal to 1⁄12 of 80 percent of the
product described in subparagraph (B), divided
by the sum described in subparagraph (C).
(B) TOTAL PREMIUMS FOR COUPLE-ONLY
ENROLLMENTS.—The product described in this
subparagraph is—
(i) the credit-adjusted weighted aver-
age premium for such regional alliance for
the couple-only class of enrollment, multi-
plied by
1065
Title VI, Subtitle B
(ii) the sum, for all the months in the
year, of the number of covered families re-
ceiving coverage through regional alliance
health plans of the regional alliance within
such class of enrollment in each such
month.
(C) NUMBER
OF
WORKERS
AND
EXTRA
WORKERS.—The sum described in this subpara-
graph is—
(i) the sum specified in subparagraph
(B)(ii), plus
(ii) the number of additional workers
(determined under subsection (b)(1)), for
families receiving coverage within such
class from regional alliance health plans of-
fered by the regional alliance.
(3) SINGLE
AND
DUAL
PARENT
ENROLL-
MENTS.—
(A) IN GENERAL.—The base employment
monthly premium for the single parent and
dual parent classes of enrollment is equal to 1⁄12
of 80 percent of the sum described in subpara-
graph (B), divided by the sum described in sub-
paragraph (C).
1066
Title VI, Subtitle B
(B) TOTAL PREMIUMS FOR SINGLE AND
DUAL
PARENT
ENROLLMENTS.—The sum de-
scribed in this subparagraph is the sum of the
products described in the following clauses:
(i) TOTAL
PREMIUMS
FOR
SINGLE
PARENT ENROLLMENT.—The product of—
(I) the credit-adjusted weighted
average premium for such regional al-
liance for the single parent class of
enrollment, multiplied by
(II) the sum, for all the months
in the year, of the number of covered
families receiving coverage through re-
gional alliance health plans of the re-
gional alliance within such class of en-
rollment in each such month.
(ii) TOTAL PREMIUMS FOR DUAL PAR-
ENT ENROLLMENT.—The product of—
(I) the credit-adjusted weighted
average premium for such regional al-
liance for the dual parent class of en-
rollment, multiplied by
(II) the sum, for all the months
in the year, of the number of covered
families receiving coverage through re-
1067
Title VI, Subtitle B
gional alliance health plans of the re-
gional alliance within such class of en-
rollment in each such month.
(C) NUMBER
OF
WORKERS
AND
EXTRA
WORKERS.—The sum described in this subpara-
graph is—
(i) the sum specified in subparagraph
(B)(i)(II); plus
(ii) the sum specified in subparagraph
(B)(ii)(II); plus
(iii) the number of additional workers
(determined under subsection (b)(1)), for
families receiving coverage within the dual
parent class of enrollment from regional al-
liance health plans offered by the regional
alliance.
(4) CREDIT-ADJUSTED
WEIGHTED
AVERAGE
PREMIUM DEFINED.—In this subsection, the term
‘‘credit-adjusted weighted average premium’’ means,
for a class of enrollment and a regional alliance, the
weighted average premium for the class and alliance,
reduced by the amount described in section 6106(b)
for such class and alliance.
(b) DETERMINATION OF ADDITIONAL WORKERS FOR
COUPLE-ONLY AND DUAL PARENT CLASS.—
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Title VI, Subtitle B
(1) IN GENERAL.—Subject to paragraph (4),
the regional alliance shall determine, for each couple
class of family enrollment and in a manner specified
by the Board, an estimated total number of addi-
tional workers equal to—
(A) 12 times the alliance-wide monthly av-
erage number of premium payments (as deter-
mined under paragraph (2)) for covered fami-
lies (as defined in paragraph (3)) within such
class of enrollment, minus
(B) the sum described in subsection
(a)(2)(B)(ii) or (a)(3)(B)(ii)(II) for the couple-
only and dual parent classes, respectively.
(2) COMPUTATION OF ALLIANCE-WIDE MONTH-
LY AVERAGE NUMBER.—
(A) IN GENERAL.—In determining the alli-
ance-wide monthly average number of premium
payments under paragraph (1)(A), a covered
family shall count for a month as 1, or, if
greater, the number computed under subpara-
graph (B) (but in no case greater than 2).
(B) COUNTING
OF
FAMILIES
IN
WHICH
BOTH
SPOUSES
ARE
QUALIFYING
EMPLOY-
EES.—The number computed under this sub-
paragraph over all families within a couple-only
1069
Title VI, Subtitle B
or dual parent class of enrollment in which both
spouses are qualifying employees is determined
on an alliance-wide basis based on the fol-
lowing:
(i) For such a spouse, determine,
using 
the 
rules 
under 
section
1902(b)(1)(A), how many full-time equiva-
lent employees the spouse is counted as,
but not to exceed 1 for either spouse.
(ii) Add the 2 numbers determined
under clause (i) for spouses in such fami-
lies.
(3) COVERED FAMILY DEFINED.—In this sub-
section, the term ‘‘covered family’’ means a family
other than—
(A) an SSI family or AFDC family,
(B) a family in which a spouse is a medi-
care-eligible individual, or
(C) a family that is enrolled in a health
plan other than a regional alliance health plan.
(4) ADJUSTMENT TO ACCOUNT FOR USE OF ES-
TIMATES.—Subject to section 1361(b)(3), if the
total receipts of a regional alliance to all regional al-
liance health plans in a year under this subpart ex-
ceeds, or is less than, the total of such receipts esti-
1070
Title VI, Subtitle B
mated by the alliance (based on the base employ-
ment monthly premium under subsection (a)), be-
cause of a difference between—
(A) the alliance’s estimate of the estimated
total number of additional workers for the alli-
ance and the estimate of the number of covered
families, and
(B) the actual total number of additional
workers and the actual number of covered fami-
lies,
the estimated total number of additional workers to
be applied under this section in the second suc-
ceeding year shall be reduced, or increased, respec-
tively, in a manner that results in total receipts of
the alliance under this subpart in such succeeding
year being increased or decreased by the amount of
such excess (or deficit).
(c) BASIS FOR DETERMINATIONS.—
(1) PREMIUMS.—The determinations of pre-
miums and families under plans under this section
shall be made in a manner determined by the Board
and based on the premiums and families used by the
Board in carrying out subtitle A and shall be based
on estimates on an annualized basis.
1071
Title VI, Subtitle B
(2) EMPLOYMENT.—The determinations of em-
ployment under this section for the first year for a
State shall be based on estimates of employment es-
tablished by the regional alliance in accordance with
standards promulgated by the Secretary of Labor in
consultation with the National Health Board.
(3) REPORTS.—In accordance with rules estab-
lished by the Secretary of Labor in consultation with
the National Health Board, a regional alliance may
require regional alliance employers to submit such
periodic information on employment as may be nec-
essary to monitor the determinations made under
this section, including months and extent of employ-
ment.
(d) TIMING
OF DETERMINATION.—Determinations
under this section for a year shall be made by not later
than December 1, or such other date as the Board may
specify, before the beginning of the year.
SEC. 6123. PREMIUM DISCOUNT FOR CERTAIN EMPLOYERS.
(a) EMPLOYER DISCOUNT.—
(1) IN GENERAL.—Subject to section 6124(c)
(relating to phase in for certain large corporate alli-
ance employers) and section 6125 (relating to the
employer collection shortfall add-on), the amount of
the employer premium payment required under this
1072
Title VI, Subtitle B
subpart for a regional alliance employer for any year
shall not exceed the limiting percentage (as defined
in subsection (b)) of the employer’s wages for that
year.
(2) EXCLUSION OF GOVERNMENTAL EMPLOY-
ERS AND CERTAIN CORPORATE ALLIANCE EMPLOY-
ERS.—Paragraph (1) shall not apply to—
(A) the Federal Government, a State gov-
ernment, or a unit of local government, or a
unit or instrumentality of such government, be-
fore 2002; and
(B) a corporate alliance employer which is
treated as a regional alliance employer under
section 6131(a)(2).
(b) LIMITING
PERCENTAGE
DEFINED.—In sub-
section (a)—
(1) ANY EMPLOYER.—For an employer that is
not a small employer (as defined in subsection (c)),
the limiting percentage is 7.9 percent.
(2) SMALL EMPLOYERS.—For an employer that
is a small employer and that has an average number
of full-time equivalent employees and average annual
wages per full-time equivalent employee (as deter-
mined under subsection (d)), the limiting percentage
1073
Title VI, Subtitle B
is the applicable percentage determined based on fol-
lowing table:
Limiting Percentage
Average number of full-time
equivalent employees
Employer’s average annual wages per full-time equivalent employee
are:
$0–
$12,000
$12,001–
$15,000
$15,001–
$18,000
$18,001–
$21,000
$21,001–
$24,000
Fewer than 25 ...............
3.5%
4.4%
5.3%
6.2%
7.1%
25 but fewer than 50 .....
4.4%
5.3%
6.2%
7.1%
7.9%
50 but not over 75 .........
5.3%
6.2%
7.1%
7.9%
7.9%
(c) SMALL EMPLOYER DEFINED.—
(1) IN GENERAL.—In this section—
(A) the term ‘‘small employer’’ means an
employer that does not employ, on average,
more than 75 full-time equivalent employees;
and
(B) the average number of full-time equiv-
alent employees shall be determined by aver-
aging the number of full-time equivalent em-
ployees employed by the employer in each
countable month during the year.
(2) COUNTABLE
MONTH.—In paragraph (1),
the term ‘‘countable month’’ means, for an em-
ployer, a month in which the employer employs any
qualifying employee.
1074
Title VI, Subtitle B
(3) DETERMINATIONS.—The number of full-
time equivalent employees shall be determined using
the rules under section 1901(b)(2).
(d) AVERAGE ANNUAL WAGES PER FULL-TIME
EQUIVALENT EMPLOYEE DEFINED.—
(1) IN
GENERAL.—In this section, the term
‘‘average annual wages per full-time equivalent em-
ployee’’ means, for an employer for a year—
(A) the total wages paid in the year to in-
dividuals who, at the time of payment of the
wages, are qualifying employees of the em-
ployer; divided by
(B) the number of full-time equivalent em-
ployees of the employer in the year.
(2) DETERMINATION.—The Board may estab-
lish rules relating to the computation of the average
annual wages for employers.
(e) DETERMINATIONS.—For purposes of this section,
the number of employees and average wages shall be de-
termined on an annual basis.
(f) TREATMENT OF CERTAIN SELF-EMPLOYED INDI-
VIDUALS.—In the case of an individual who is a partner
in a partnership, is a 2-percent shareholder in an S cor-
poration (within the meaning of section 1372 of the Inter-
nal Revenue Code of 1986), or is any other individual who
1075
Title VI, Subtitle B
carries on a trade or business as a sole proprietorship,
for purposes of this section—
(1) the individual is deemed to be an employee
of the partnership, S corporation, or proprietorship,
and
(2) the individual’s net earnings from self em-
ployment attributable to the partnership, S corpora-
tion, or sole proprietorship are deemed to be wages
from the partnership, S corporation, or proprietor-
ship.
(g) APPLICATION
TO EMPLOYERS.—An employer
that claims that this section applies—
(1) shall provide notice to the regional alliance
involved of the claim at the time of making pay-
ments under this subpart; and
(2) shall make available such information (and
provide access to such information) as the regional
alliance may require (in accordance with regulations
of the Secretary of Labor) to audit the determina-
tion of—
(A) whether the employer is a small em-
ployer, and, if so, the average number of full-
time equivalent employees and average annual
wages of the employer; and
1076
Title VI, Subtitle B
(B) the total wages paid by the employer
for qualifying employees.
(h) TREATMENT
OF
MULTI-ALLIANCE
EMPLOY-
ERS.—In the case in which this section is applied to an
employer that makes employer premium payments to more
than one regional alliance, the reduction under this section
shall be applied in a pro-rated manner to the premium
payments made to all such alliances.
SEC. 6124. PAYMENT ADJUSTMENT FOR LARGE EMPLOYERS
ELECTING COVERAGE IN A REGIONAL ALLI-
ANCE.
(a) APPLICATION OF SECTION.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, this section shall apply to
the employer premium payments for full-time em-
ployees in a State of an employer if—
(A)(i) the employer is an eligible sponsor
described in section 1311(b)(1)(A), (ii) the em-
ployer elected to be a corporate alliance under
section 1312(a)(1), and (iii) the election is ter-
minated under section 1313;
(B)(i) the employer is such an eligible
sponsor as of the first day of the first year of
the State, and (ii) the employer did not provide
the notice required under section 1312(a)(1)
1077
Title VI, Subtitle B
(with respect to an election to become a cor-
porate alliance); or
(C)(i) the employer is such an eligible
sponsor, (ii) the employer subsequently became
a large employer and elected to be a corporate
alliance under section 1312(a)(2), and (iii) the
election was terminated under section 1313.
(2) EFFECTIVE DATE.—In the case of an em-
ployer described in—
(A) paragraph (1)(A) or (1)(C), this sec-
tion shall first apply on the effective date of the
termination of the election under section 1313,
or
(B) paragraph (1)(B), this section shall
first apply as of January 1, 1996 (or, if later
with respect to a State, the first day of the first
year for the State).
(3) TREATMENT OF EMPLOYEES IN SMALL ES-
TABLISHMENTS.—This section shall not apply to the
payment of premiums for full-time employees of an
employer described in paragraph (1)(A) or (1)(C), if
the employees are employed at an establishment with
respect to which the option described in section
1311(c)(1)(B) was exercised.
1078
Title VI, Subtitle B
(4) SUNSET.—This section shall cease applying
to an employer with respect to employment in a
State after the 7th year in which this section applies
to the employer in the State.
(5) LARGE EMPLOYER DEFINED.—In this sec-
tion, the term ‘‘large employer’’ has the meaning
given such term in section 1311(e)(3).
(b) ADDITIONAL AMOUNT.—
(1) IN GENERAL.—If an employer subject to
this section for a year has an excess risk proportion
(specified in paragraph (3)) of greater than zero
with respect to an alliance area, then the employer
shall provide, on a monthly basis, for payment to the
regional alliance for such area of an amount equal
to 1⁄12 of the excess risk amount described in para-
graph (2) for the year.
(2) EXCESS
RISK
AMOUNT.—The excess risk
amount described in this paragraph, for an employer
for a year with respect to an alliance area, is equal
to the product of the following:
(A) The reduced weighted average accept-
ed bid for the regional alliance for the area for
the year.
(B) The total average number of alliance
eligible individuals who—
1079
Title VI, Subtitle B
(i) were full-time employees (or family
members of such employees) of the em-
ployer, and
(ii) residing in the regional alliance
area,
in the year before the first year in which this
section applies to the employer.
(C) The excess risk proportion (specified in
paragraph (3)) for the employer for such area.
(D) The phase-down percentage (specified
in paragraph (4)) for the year.
(3) EXCESS RISK PROPORTION.—
(A) IN GENERAL.—The ‘‘excess risk pro-
portion’’, specified in this paragraph, with re-
spect to an employer and an alliance area, is a
percentage that reflects, for the year before the
first year in which this section applies to the
employer, the amount by which—
(i) the average demographic risk for
employees (and family members) described
in paragraph (2)(B) residing in the alli-
ance area, exceeds
(ii) the average demographic risk for
all regional alliance eligible individuals re-
siding in the area.
1080
Title VI, Subtitle B
(B) MEASUREMENT
OF
DEMOGRAPHIC
RISK.—
(i) IN
GENERAL.—Demographic risk
under subparagraph (A) shall be meas-
ured, in a manner specified by the Board,
based on the demographic characteristics
described in section 6001(c)(1)(A), that re-
late to the actuarial value of the com-
prehensive benefit package.
(ii) PROVISION
OF
INFORMATION.—
Each employer to which this section ap-
plies shall submit, to each regional alliance
for which an additional payment may be
required under this section, such informa-
tion (and at such time) as the Board may
require in order to determine the demo-
graphic risk referred to in subparagraph
(A)(i).
(4) PHASE-DOWN
PERCENTAGE.—The phase
down percentage, specified in this paragraph for an
employer for—
(A) each of the first 4 years to which this
section applies to the employer, is 100 percent,
(B) the fifth such year, is 75 percent,
(C) the sixth such year, is 50 percent, and
1081
Title VI, Subtitle B
(D) the seventh such year, is 25 percent.
(c) PHASE IN OF EMPLOYER PREMIUM DISCOUNT.—
For—
(1) each of the first 4 years in which this sec-
tion applies to such employer, section 6123 shall not
apply to the employer;
(2) the fifth such year, section 6123 shall apply
to the employer but the reduction in premium pay-
ment effected by such section shall be 25 percent of
the reduction that would otherwise apply (but for
this subsection);
(3) the sixth such year, section 6123 shall apply
to the employer but the reduction in premium pay-
ment effected by such section shall be 50 percent of
the reduction that would otherwise apply (but for
this subsection);
(4) the seventh such year, section 6123 shall
apply to the employer but the reduction in premium
payment effected by such section shall be 75 percent
of the reduction that would otherwise apply (but for
this subsection); or
(5) a subsequent year, section 6123 shall apply
to the employer without any reduction under this
subsection.
1082
Title VI, Subtitle B
SEC. 6125. EMPLOYER COLLECTION SHORTFALL ADD-ON.
(a) IN GENERAL.—The amount payable by an em-
ployer under this subpart shall be increased by the amount
computed under subsection (b).
(b) AMOUNT.—The amount under this subsection for
an employer is equal to the premium payment amount that
would be computed under section 6121(b)(2) if the per
capita collection shortfall amount (computed under section
6107(b)(1)) for the year were substituted for the reduced
weighted average accepted bid for the year. The reduced
weighted average accepted bid is used under section
6000(b)(1) in computing the weighted average premium,
which in turn is used under section 6122(a)(1) in com-
puting the base employment monthly premium, which in
turn is used under section 6121(b)(2)(A) in computing the
employer premium amount.
(c) DISCOUNT NOT APPLICABLE.—Section 6123
shall not apply to the increase in the amount payable by
virtue of this section.
SEC. 6126. APPLICATION TO SELF-EMPLOYED INDIVIDUALS.
(a) IN GENERAL.—A self-employed individual (as de-
fined in section 1901(c)(2)) shall be considered, for pur-
poses of this subpart to be an employer of himself or her-
self and to pay wages to himself or herself equal to the
amount of net earnings from self-employment (as defined
in section 1901(c)(1)).
1083
Title VI, Subtitle B
(b) CREDIT FOR EMPLOYER PREMIUMS.—
(1) IN GENERAL.—In the case of a self-em-
ployed individual, the amount of any employer pre-
mium payable by virtue of subsection (a) in a year
shall be reduced (but not below zero) by the sum of
the following:
(A) Subject to paragraph (2), the amount
of any employer premiums payable under this
subpart (determined not taking into account
any adjustment in the premium amounts under
section 6123 or 6124) with respect to the em-
ployment of that individual in the year.
(B) The product of (i) the number of
months in the year the individual was employed
on a full-time basis by a corporate alliance em-
ployer, and (ii) the employer premium that
would have been payable for such months under
this subpart (determined not taking into ac-
count any adjustment in the premium amounts
under section 6123 or 6124) for the class of en-
rollment if such employer had been a regional
alliance employer.
(2) SPECIAL
RULE
FOR
CERTAIN
CLOSELY-
HELD BUSINESSES.—
1084
Title VI, Subtitle B
(A) IN GENERAL.—In the case of an indi-
vidual who—
(i) has wage-adjusted income (as de-
fined in section 6113(d), determined with-
out regard to paragraphs (1)(B) and (2)
thereof) that exceeds 250 percent (or such
higher percentage as the Board may estab-
lish) of the applicable poverty level, and
(ii) is both a substantial owner and an
employee of a closely held business,
the amount of any reduction under paragraph
(1)(A) that is attributable to the individual’s
employment by that business shall be appro-
priately reduced in accordance with rules pre-
scribed by the Board, in order to prevent indi-
viduals from avoiding payment of the full
amount owed through fraudulent or secondary
employment arrangements.
(B) CLOSELY HELD BUSINESS.—For pur-
poses of subparagraph (A), a business is ‘‘close-
ly held’’ if it is an employer that meets the re-
quirements of section 542(a)(2) of the Internal
Revenue Code of 1986 or similar requirements
as appropriate in the case of a partnership or
other entity.
1085
Title VI, Subtitle B
Subpart B—Corporate Alliance Employers
SEC. 6131. EMPLOYER PREMIUM PAYMENT REQUIRED.
(a) PER EMPLOYEE PREMIUM PAYMENT.—Subject
to section 6124, each corporate alliance employer of a cor-
porate alliance that in a month in a year employs a quali-
fying employee who is—
(1) enrolled in a corporate alliance health plan
offered by the alliance, shall provide for a payment
toward the premium for the plan in an amount at
least equal to the corporate employer premium speci-
fied in subsection (b); or
(2) is not so enrolled, shall make employer pre-
mium payments with respect to such employment
under subpart A in the same manner as if the em-
ployer were a regional alliance employer (except as
otherwise provided in such subpart).
(b) CORPORATE EMPLOYER PREMIUM.—
(1) AMOUNT.—
(A) IN GENERAL.—Except as provided in
paragraph (2), the amount of the corporate em-
ployer premium for a month in a year for a
class of family enrollment for a family residing
in a premium area (established under section
1384(b)) is 80 percent of the weighted average
monthly premium of the corporate alliance
health plans offered by the corporate alliance
1086
Title VI, Subtitle B
for that class of enrollment for families residing
in that area.
(B) 
APPLICATION
TO
SELF-INSURED
PLANS.—In applying this paragraph in the case
of one or more corporate alliance health plans
that are self-insured plans—
(i) the ‘‘premium’’ for the plan is the
actuarial equivalent of such premium,
based upon the methodology (or such other
consistent methodology) used under section
6021(a) (relating to application of pre-
mium caps to corporate alliance health
plans), and
(ii) the premium amount, for different
classes and, if applicable, for different pre-
mium areas, shall be computed in a man-
ner based on such factors as may bear a
reasonable relationship to costs for the
provision of the comprehensive benefit
package to the different classes in such
areas.
The Secretary of Labor shall establish rules to
carry out this subparagraph.
(2) LOW-WAGE EMPLOYEES.—In the case of a
low-wage employee entitled to a premium discount
1087
Title VI, Subtitle C
under section 6104(a)(2), the amount of the em-
ployer premium payment for a month in a year for
a class of family enrollment shall be increased by the
amount of such premium discount.
(c) DETERMINATIONS.—
(1) BASIS.—Determinations under this section
shall be made based on such information as the Sec-
retary of Labor shall specify.
(2) TIMING.—Determinations of the monthly
premiums under this section for months in a year
shall be made not later than December 1 of the pre-
vious year.
Subtitle C—Payments to Regional
Alliance Health Plans
SEC. 6201. COMPUTATION OF BLENDED PLAN PER CAPITA
PAYMENT AMOUNT.
(a) IN GENERAL.—For purposes of section 1351, the
blended plan per capita payment amount for a regional
alliance health plan for enrollments in an alliance for a
year is equal to the sum of the 3 components described
in subsection (b), multiplied by any adjustment factor ap-
plied for the year under section 6202(d).
(b) SUM
OF PRODUCTS.—The 3 components de-
scribed in this subsection are:
1088
Title VI, Subtitle C
(1) PLAN BID COMPONENT FOR THAT PLAN.—
The product of—
(A) the final accepted bid for plan (as
defined in section 6000(a)(2)) for the year,
and
(B) the plan bid proportion deter-
mined under section 6202(a)(1) for the
year.
(2) AFDC COMPONENT FOR ALLIANCE.—The
product of—
(A) the AFDC per capita premium
amount for the regional alliance for the
year (determined under section 9012), and
(B) the AFDC proportion determined
under section 6202(a)(2) for the year.
(3) SSI 
COMPONENT
FOR
ALLIANCE.—The
product of—
(A) the SSI per capita premium
amount for the regional alliance for the
year (determined under section 9013) for
the year, and
(B) the SSI proportion determined
under section 6202(a)(3) for the year.
1089
Title VI, Subtitle C
SEC. 6202. COMPUTATION OF PLAN BID, AFDC, AND SSI
PROPORTIONS.
(a) IN GENERAL.—For purposes of this subtitle:
(1) PLAN
BID
PROPORTION.—The ‘‘plan bid
proportion’’ is, for a class of enrollment, 1 minus the
sum of (A) the AFDC proportion, and (B) the SSI
proportion.
(2) AFDC PROPORTION.—The ‘‘AFDC propor-
tion’’ is, for a class of family enrollment for a year,
the ratio of—
(A) the average of the number of AFDC
recipients (as determined under subsection (c))
enrolled in regional alliance health plans in that
class of enrollment for the year, to
(B) the average of the total number of in-
dividuals enrolled in regional alliance health
plans in that class of enrollment for the year.
(3) SSI PROPORTION.—The ‘‘SSI proportion’’
is, for a class of family enrollment for a year, the
ratio of—
(A) the average of the number of SSI re-
cipients (as determined under subsection (c))
enrolled in regional alliance health plans in that
class of enrollment for the year, to
(B) the average described in paragraph
(2)(B).
1090
Title VI, Subtitle C
(b) COMPUTATION.—
(1) PROJECTIONS.—The proportions described
in subsection (a) shall be determined and applied by
the State, based upon the best available data, at
least 1 month before the date bids are submitted
under section 6004 before the beginning of the cal-
endar year involved.
(2) ACTUAL.—For purposes of making adjust-
ments under subsection (d), the regional alliance
shall determine, after the end of each year, the ac-
tual proportions described in subsection (a).
(c) COUNTING OF AFDC AND SSI RECIPIENTS.—
For purposes of subsections (a)(2)(A) and (a)(3)(A), the
terms ‘‘SSI recipient’’ and ‘‘AFDC recipient’’ do not in-
clude a medicare-eligible individual.
(d) ADJUSTMENTS FOR DISCREPANCIES IN ESTI-
MATIONS.—
(1) IN GENERAL.—If the actual AFDC propor-
tion or SSI proportion (as determined under sub-
section (a)) for a year (in this subsection referred to
as the ‘‘reference year’’), determined after the end
of the year based upon actual number of AFDC re-
cipients and SSI recipients in the year, is different
from the projected AFDC and SSI proportions (as
determined under subsection (b)(1)) used in com-
1091
Title VI, Subtitle C
puting the blended plan payment amount for the
year, then, subject to section 1361(b)(3), the re-
gional alliance shall adjust the blended plan payment
amount in the second succeeding year (in this sub-
section referred to as the ‘‘applicable year’’) in the
manner described in paragraph (2). By regulation
the Secretary may apply the adjustment, based on
estimated amounts, in the year before the applicable
year, with final adjustment in the applicable year.
(2) ADJUSTMENT DESCRIBED.—
(A) POSITIVE
CASH
FLOW.—If the cash
flow difference (as defined in paragraph (3)(A))
for the reference year is positive, then in the
applicable year the blended plan payment
amount shall be increased by the adjustment
percentage described in paragraph (4).
(B) NEGATIVE CASH FLOW.—If the cash
flow difference (as defined in paragraph (3)(A))
for the reference year is negative, then in the
applicable year the blended plan payment
amount shall be reduced by the adjustment per-
centage described in paragraph (4).
(3) CASH
FLOW
DIFFERENCE
DEFINED.—In
this subsection:
1092
Title VI, Subtitle C
(A) IN GENERAL.—The term ‘‘cash flow
difference’’ means, for a regional alliance for a
reference year—
(i) the actual cash flow (as defined in
subparagraph (B)) for the alliance for the
year, minus
(ii) the reconciled cash flow (as de-
fined in subparagraph (C)) for the alliance
for the year.
(B) ACTUAL CASH FLOW.—The term ‘‘ac-
tual cash flow’’ means, for a regional alliance
for a reference year, the total amount paid by
the regional alliance to the regional alliance
health plans in the year based on the blended
plan payment amount (computed on the basis
of projected AFDC and SSI proportions deter-
mined under subsection (b)(1)).
(C) RECONCILED CASH FLOW.—The term
‘‘reconciled cash flow’’ means, for a regional al-
liance for a reference year, the total amount
that would have been paid to regional alliance
health plans in the year if such payments had
been made based on the blended plan payment
amount computed on the basis of the actual
AFDC and SSI proportions for the year (deter-
1093
Title VII
mined under subsection (b)(2), rather than
based on such payment amount computed on
the basis of the projected AFDC and SSI pro-
portions for the year (determined under sub-
section (b)(1)).
(4) PERCENTAGE ADJUSTMENT.—The percent-
age adjustment described in this paragraph for a re-
gional alliance for an applicable year is the ratio (ex-
pressed as a percentage) of—
(A) the cash flow difference for the ref-
erence year, to
(B) the total payments estimated by the
regional alliance to be paid to regional alliance
health plans under this subtitle in the applica-
ble year (determined without regard to any ad-
justment under this subsection).
TITLE VII—REVENUE
PROVISIONS
TABLE OF CONTENTS OF TITLE
Page
Sec. 7001. Amendment of 1986 Code .....................................................
1094
Subtitle A—Financing Provisions
PART 1—INCREASE IN TAX ON TOBACCO PRODUCTS
Sec. 7111. Increase in excise taxes on tobacco products ........................
1094
Sec. 7112. Modifications of certain tobacco tax provisions ....................
1100
Sec. 7113. Imposition of excise tax on manufacture or importation of
roll-your-own tobacco ....................................................
1105
PART 2—HEALTH RELATED ASSESSMENTS
1094
Title VII
Sec. 7121. Health related assessments ...................................................
1107
PART 3—RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES
Sec. 7131. Recapture of certain health care subsidies received by high-
income individuals .........................................................
1116
PART 4—OTHER PROVISIONS
Sec. 7141. Modification to self-employment tax treatment of certain S
corporation shareholders and partners .........................
1125
Sec. 7142. Extending medicare coverage of, and application of hospital
insurance tax to, all State and local government em-
ployees ...........................................................................
1128
Subtitle B—Tax Treatment of Employer-Provided Health Care
Sec. 7201. Limitation on exclusion for employer-provided health bene-
fits .................................................................................
1133
Sec. 7202. Health benefits may not be provided under cafeteria plans
1138
Sec. 7203. Increase in deduction for health insurance costs of self-em-
ployed individuals ..........................................................
1139
Sec. 7204. Limitation on prepayment of medical insurance premiums
1142
Subtitle C—Employment Status Provisions
Sec. 7301. Anti-abuse regulations relating to employment status ..........
1143
Sec. 7302. Increase in services reporting penalties .................................
1144
Sec. 7303. Revision of section 530 safe harbor rules .............................
1146
Subtitle D—Tax Treatment of Funding of Retiree Health
Benefits
Sec. 7401. Post-retirement medical and life insurance reserves .............
1153
Sec. 7402. Health benefits accounts maintained by pension plans ........
1154
Subtitle E—Coordination With COBRA Continuing Care
Provisions
Sec. 7501. Coordination with COBRA continuing care provisions .........
1157
Subtitle F—Tax Treatment of Organizations Providing Health
Care Services and Related Organizations
Sec. 7601. Treatment of nonprofit health care organizations ................
1159
Sec. 7602. Tax treatment of taxable organizations providing health in-
surance and other prepaid health care services ............
1163
Sec. 7603. Exemption from income tax for regional alliances ................
1170
Subtitle G—Tax Treatment of Long-term Care Insurance and
Services
Sec. 7701. Qualified long-term care services treated as medical care ....
1171
Sec. 7702. Treatment of long-term care insurance .................................
1175
Sec. 7703. Tax treatment of accelerated death benefits under life in-
surance contracts ..........................................................
1187
Sec. 7704. Tax treatment of companies issuing qualified accelerated
death benefit riders .......................................................
1190
1095
Title VII, Subtitle A
Subtitle H—Tax Incentives for Health Services Providers
Sec. 7801. Nonrefundable credit for certain primary health services
providers ........................................................................
1192
Sec. 7802. Expensing of medical equipment ...........................................
1197
Subtitle I—Miscellaneous Provisions
Sec. 7901. Credit for cost of personal assistance services required by
employed individuals .....................................................
1199
Sec. 7902. Denial of tax-exempt status for borrowings of health care-
related entities ...............................................................
1204
Sec. 7903. Disclosure of return information for administration of cer-
tain programs under the Health Security Act ..............
1205
SEC. 7001. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in
this title an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Internal Revenue Code
of 1986.
Subtitle A—Financing Provisions
PART 1—INCREASE IN TAX ON TOBACCO
PRODUCTS
SEC. 7111. INCREASE IN EXCISE TAXES ON TOBACCO
PRODUCTS.
(a) CIGARETTES.—Subsection (b) of section 5701 is
amended—
(1) by striking ‘‘$12 per thousand ($10 per
thousand on cigarettes removed during 1991 or
1992)’’ in paragraph (1) and inserting ‘‘$49.50 per
thousand’’, and
1096
Title VII, Subtitle A
(2) by striking ‘‘$25.20 per thousand ($21 per
thousand on cigarettes removed during 1991 or
1992)’’ in paragraph (2) and inserting ‘‘$103.95 per
thousand’’.
(b) CIGARS.—Subsection (a) of section 5701 is
amended—
(1) by striking ‘‘$1.125 cents per thousand
(93.75 cents per thousand on cigars removed during
1991 or 1992)’’ in paragraph (1) and inserting
‘‘$38.621⁄2 per thousand’’, and
(2) by striking ‘‘equal to’’ and all that follows
in paragraph (2) and inserting ‘‘equal to 52.594 per-
cent of the price for which sold but not more than
$123.75 per thousand.’’
(c) CIGARETTE PAPERS.—Subsection (c) of section
5701 is amended by striking ‘‘0.75 cent (0.625 cent on
cigarette papers removed during 1991 or 1992)’’ and in-
serting ‘‘3.09 cents’’.
(d) CIGARETTE TUBES.—Subsection (d) of section
5701 is amended by striking ‘‘1.5 cents (1.25 cents on
cigarette tubes removed during 1991 or 1992)’’ and in-
serting ‘‘6.19 cents’’.
(e) SMOKELESS TOBACCO.—Subsection (e) of section
5701 is amended—
1097
Title VII, Subtitle A
(1) by striking ‘‘36 cents (30 cents on snuff re-
moved during 1991 or 1992)’’ in paragraph (1) and
inserting ‘‘$12.86’’, and
(2) by striking ‘‘12 cents (10 cents on chewing
tobacco removed during 1991 or 1992)’’ in para-
graph (2) and inserting ‘‘$12.62’’.
(f) PIPE TOBACCO.—Subsection (f) of section 5701
is amended by striking ‘‘67.5 cents (56.25 cents on pipe
tobacco removed during 1991 or 1992)’’ and inserting
‘‘$13.171⁄2’’.
(g) EFFECTIVE DATE.—The amendments made by
this section shall apply to articles removed (as defined in
section 5702(k) of the Internal Revenue Code of 1986,
as amended by this Act) after September 30, 1994.
(h) FLOOR STOCKS TAXES.—
(1) IMPOSITION OF TAX.—On tobacco products
and cigarette papers and tubes manufactured in or
imported into the United States which are removed
before October 1, 1994, and held on such date for
sale by any person, there is hereby imposed a tax in
an amount equal to the excess of—
(A) the tax which would be imposed under
section 5701 of the Internal Revenue Code of
1986 on the article if the article had been re-
moved on such date, over
1098
Title VII, Subtitle A
(B) the prior tax (if any) imposed under
section 5701 or 7652 of such Code on such ar-
ticle.
(2) AUTHORITY TO EXEMPT CIGARETTES HELD
IN VENDING MACHINES.—To the extent provided in
regulations prescribed by the Secretary, no tax shall
be imposed by paragraph (1) on cigarettes held for
retail sale on October 1, 1994, by any person in any
vending machine. If the Secretary provides such a
benefit with respect to any person, the Secretary
may reduce the $500 amount in paragraph (3) with
respect to such person.
(3) CREDIT AGAINST TAX.—Each person shall
be allowed as a credit against the taxes imposed by
paragraph (1) an amount equal to $500. Such credit
shall not exceed the amount of taxes imposed by
paragraph (1) for which such person is liable.
(4) LIABILITY FOR TAX AND METHOD OF PAY-
MENT.—
(A) LIABILITY FOR TAX.—A person hold-
ing cigarettes on October 1, 1994, to which any
tax imposed by paragraph (1) applies shall be
liable for such tax.
(B) METHOD OF PAYMENT.—The tax im-
posed by paragraph (1) shall be paid in such
1099
Title VII, Subtitle A
manner as the Secretary shall prescribe by reg-
ulations.
(C) TIME
FOR
PAYMENT.—The tax im-
posed by paragraph (1) shall be paid on or be-
fore December 31, 1994.
(5) ARTICLES
IN
FOREIGN
TRADE
ZONES.—
Notwithstanding the Act of June 18, 1934 (48 Stat.
998, 19 U.S.C. 81a) and any other provision of law,
any article which is located in a foreign trade zone
on October 1, 1994, shall be subject to the tax im-
posed by paragraph (1) if—
(A) internal revenue taxes have been deter-
mined, or customs duties liquidated, with re-
spect to such article before such date pursuant
to a request made under the 1st proviso of sec-
tion 3(a) of such Act, or
(B) such article is held on such date under
the supervision of a customs officer pursuant to
the 2d proviso of such section 3(a).
(6) 
DEFINITIONS.—For 
purposes 
of 
this
subsection—
(A) IN GENERAL.—Terms used in this sub-
section which are also used in section 5702 of
the Internal Revenue Code of 1986 shall have
the respective meanings such terms have in
1100
Title VII, Subtitle A
such section, and such term shall include arti-
cles first subject to the tax imposed by section
5701 of such Code by reason of the amend-
ments made by this Act.
(B) SECRETARY.—The term ‘‘Secretary’’
means the Secretary of the Treasury or his del-
egate.
(7) CONTROLLED
GROUPS.—Rules similar to
the rules of section 5061(e)(3) of such Code shall
apply for purposes of this subsection.
(8) OTHER LAWS APPLICABLE.—All provisions
of law, including penalties, applicable with respect to
the taxes imposed by section 5701 of such Code
shall, insofar as applicable and not inconsistent with
the provisions of this subsection, apply to the floor
stocks taxes imposed by paragraph (1), to the same
extent as if such taxes were imposed by such section
5701. The Secretary may treat any person who bore
the ultimate burden of the tax imposed by para-
graph (1) as the person to whom a credit or refund
under such provisions may be allowed or made.
1101
Title VII, Subtitle A
SEC. 7112. MODIFICATIONS OF CERTAIN TOBACCO TAX
PROVISIONS.
(a) EXEMPTION FOR EXPORTED TOBACCO PROD-
UCTS AND CIGARETTE PAPERS AND TUBES TO APPLY
ONLY TO ARTICLES MARKED FOR EXPORT.—
(1) Subsection (b) of section 5704 is amended
by adding at the end thereof the following new sen-
tence: ‘‘Tobacco products and cigarette papers and
tubes may not be transferred or removed under this
subsection unless such products or papers and tubes
bear such marks, labels, or notices as the Secretary
shall by regulations prescribe.’’
(2) Section 5761 is amended by redesignating
subsections (c) and (d) as subsections (d) and (e),
respectively, and by inserting after subsection (b)
the following new subsection:
‘‘(c) SALE OF TOBACCO PRODUCTS AND CIGARETTE
PAPERS AND TUBES FOR EXPORT.—Except as provided
in subsections (b) and (d) of section 5704—
‘‘(1) every person who sells, relands, or receives
within the jurisdiction of the United States any to-
bacco products or cigarette papers or tubes which
have been labeled or shipped for exportation under
this chapter,
1102
Title VII, Subtitle A
‘‘(2) every person who sells or receives such re-
landed tobacco products or cigarette papers or tubes,
and
‘‘(3) every person who aids or abets in such
selling, relanding, or receiving,
shall, in addition to the tax and any other penalty provided
in this title, be liable for a penalty equal to the greater
of $1,000 or 5 times the amount of the tax imposed by
this chapter. All tobacco products and cigarette papers
and tubes relanded within the jurisdiction of the United
States, and all vessels, vehicles, and aircraft used in such
relanding or in removing such products, papers, and tubes
from the place where relanded, shall be forfeited to the
United States.’’
(3) Subsection (a) of section 5761 is amended
by striking ‘‘subsection (b)’’ and inserting ‘‘sub-
section (b) or (c)’’.
(4) Subsection (d) of section 5761, as redesig-
nated by paragraph (2), is amended by striking
‘‘The penalty imposed by subsection (b)’’ and insert-
ing ‘‘The penalties imposed by subsections (b) and
(c)’’.
(5)(A) Subpart F of chapter 52 is amended by
adding at the end thereof the following new section:
1103
Title VII, Subtitle A
‘‘SEC. 5754. RESTRICTION ON IMPORTATION OF PRE-
VIOUSLY EXPORTED TOBACCO PRODUCTS.
‘‘(a) IN GENERAL.—Tobacco products and cigarette
papers and tubes previously exported from the United
States may be imported or brought into the United States
only as provided in section 5704(d).
‘‘(b) CROSS REFERENCE.—
‘‘For penalty for the sale of cigarettes in the
United States which are labeled for export, see sec-
tion 5761(d).’’
(B) The table of sections for subpart F of chap-
ter 52 is amended by adding at the end thereof the
following new item:
‘‘Sec. 5754. Restriction on importation of previously exported to-
bacco products.’’
(b) IMPORTERS REQUIRED TO BE QUALIFIED.—
(1) Sections 5712, 5713(a), 5721, 5722,
5762(a)(1), and 5763(b) and (c) are each amended
by inserting ‘‘or importer’’ after ‘‘manufacturer’’.
(2) The heading of subsection (b) of section
5763 is amended by inserting ‘‘QUALIFIED IMPORT-
ERS,’’ after ‘‘MANUFACTURERS,’’.
(3) The heading for subchapter B of chapter 52
is amended by inserting ‘‘and Importers’’ after
‘‘Manufacturers’’.
(4) The item relating to subchapter B in the
table of subchapters for chapter 52 is amended by
inserting ‘‘and importers’’ after ‘‘manufacturers’’.
1104
Title VII, Subtitle A
(c) REPEAL OF TAX-EXEMPT SALES TO EMPLOYEES
OF CIGARETTE MANUFACTURERS.—
(1) 
Subsection 
(a) 
of 
section 
5704 
is
amended—
(A) by striking ‘‘EMPLOYEE USE OR’’ in
the heading, and
(B) by striking ‘‘for use or consumption by
employees or’’ in the text.
(2) Subsection (e) of section 5723 is amended
by striking ‘‘for use or consumption by their employ-
ees, or for experimental purposes’’ and inserting
‘‘for experimental purposes’’.
(d) REPEAL OF TAX-EXEMPT SALES TO UNITED
STATES.—Subsection (b) of section 5704 is amended by
striking ‘‘and manufacturers may similarly remove such
articles for use of the United States;’’.
(e) BOOKS OF 25 OR FEWER CIGARETTE PAPERS
SUBJECT TO TAX.—Subsection (c) of section 5701 is
amended by striking ‘‘On each book or set of cigarette
papers containing more than 25 papers,’’ and inserting
‘‘On cigarette papers,’’.
(f) STORAGE OF TOBACCO PRODUCTS.—Subsection
(k) of section 5702 is amended by inserting ‘‘under section
5704’’ after ‘‘internal revenue bond’’.
1105
Title VII, Subtitle A
(g) AUTHORITY TO PRESCRIBE MINIMUM MANUFAC-
TURING
ACTIVITY
REQUIREMENTS.—Section 5712 is
amended by striking ‘‘or’’ at the end of paragraph (1),
by redesignating paragraph (2) as paragraph (3), and by
inserting after paragraph (1) the following new paragraph:
‘‘(2) the activity proposed to be carried out at
such premises does not meet such minimum capacity
or activity requirements as the Secretary may pre-
scribe, or’’.
(h) LIMITATION ON COVER OVER OF TAX ON TO-
BACCO PRODUCTS.—Section 7652 is amended by adding
at the end thereof the following new subsection:
‘‘(h) LIMITATION ON COVER OVER OF TAX ON TO-
BACCO PRODUCTS.—For purposes of this section, with re-
spect to taxes imposed under section 5701 or this section
on any tobacco product or cigarette paper or tube, the
amount covered into the treasuries of Puerto Rico and the
Virgin Islands shall not exceed the rate of tax under sec-
tion 5701 in effect on the article on the day before the
date of the enactment of the Health Security Act.’’
(i) EFFECTIVE DATE.—The amendments made by
this section shall apply to articles removed (as defined in
section 5702(k) of the Internal Revenue Code of 1986,
as amended by this Act) after September 30, 1994.
1106
Title VII, Subtitle A
SEC. 7113. IMPOSITION OF EXCISE TAX ON MANUFACTURE
OR IMPORTATION OF ROLL-YOUR-OWN TO-
BACCO.
(a) IN GENERAL.—Section 5701 (relating to rate of
tax) is amended by redesignating subsection (g) as sub-
section (h) and by inserting after subsection (f) the fol-
lowing new subsection:
‘‘(g) ROLL-YOUR-OWN TOBACCO.—On roll-your-own
tobacco, manufactured in or imported into the United
States, there shall be imposed a tax of $12.50 per pound
(and a proportionate tax at the like rate on all fractional
parts of a pound).’’
(b) ROLL-YOUR-OWN TOBACCO.—Section 5702 (re-
lating to definitions) is amended by adding at the end
thereof the following new subsection :
‘‘(p) ROLL-YOUR-OWN TOBACCO.—The term ‘roll-
your-own tobacco’ means any tobacco which, because of
its appearance, type, packaging, or labeling, is suitable for
use and likely to be offered to, or purchased by, consumers
as tobacco for making cigarettes.’’
(c) TECHNICAL AMENDMENTS.—
(1) Subsection (c) of section 5702 is amended
by striking ‘‘and pipe tobacco’’ and inserting ‘‘pipe
tobacco, and roll-your-own tobacco’’.
(2) 
Subsection 
(d) 
of 
section 
5702 
is
amended—
1107
Title VII, Subtitle A
(A) in the material preceding paragraph
(1), by striking ‘‘or pipe tobacco’’ and inserting
‘‘pipe tobacco, or roll-your-own tobacco’’, and
(B) by striking paragraph (1) and insert-
ing the following new paragraph:
‘‘(1) a person who produces cigars, cigarettes,
smokeless tobacco, pipe tobacco, or roll-your-own to-
bacco solely for his own personal consumption or
use, and’’.
(3) The chapter heading for chapter 52 is
amended to read as follows:
‘‘CHAPTER 52—TOBACCO PRODUCTS AND
CIGARETTE PAPERS AND TUBES’’.
(4) The table of chapters for subtitle E is
amended by striking the item relating to chapter 52
and inserting the following new item:
‘‘Chapter 52. Tobacco products and cigarette papers and tubes.’’
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to roll-your-own tobacco re-
moved (as defined in section 5702(k) of the Internal
Revenue Code of 1986, as amended by this Act)
after September 30, 1994.
(2) TRANSITIONAL RULE.—Any person who—
(A) on the date of the enactment of this
Act is engaged in business as a manufacturer of
1108
Title VII, Subtitle A
roll-your-own tobacco or as an importer of to-
bacco products or cigarette papers and tubes,
and
(B) before October 1, 1994, submits an
application under subchapter B of chapter 52
of such Code to engage in such business,
may, notwithstanding such subchapter B, continue
to engage in such business pending final action on
such application. Pending such final action, all pro-
visions of such chapter 52 shall apply to such appli-
cant in the same manner and to the same extent as
if such applicant were a holder of a permit under
such chapter 52 to engage in such business.
PART 2—HEALTH RELATED ASSESSMENTS
SEC. 7121. HEALTH RELATED ASSESSMENTS.
(a) IN GENERAL.—Subtitle C (relating to employ-
ment taxes) is amended by inserting after chapter 24 the
following new chapter:
‘‘CHAPTER 24A—HEALTH RELATED
ASSESSMENTS
‘‘Subchapter A. Assessment on corporate alliance employers.
‘‘Subchapter B. Temporary assessment on employers with retiree
health benefit costs.
‘‘Subchapter C. Definitions and administrative provisions.
‘‘Subchapter A—Assessment on Corporate
Alliance Employers
‘‘Sec. 3461. Assessment on corporate alliance employers.
1109
Title VII, Subtitle A
‘‘SEC. 3461. ASSESSMENT ON CORPORATE ALLIANCE EM-
PLOYERS.
‘‘(a) IMPOSITION OF ASSESSMENT.—Every corporate
alliance employer shall pay (in addition to any other
amount imposed by this subtitle) for each calendar year
an assessment equal to 1 percent of the payroll of such
employer.
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) CORPORATE
ALLIANCE
EMPLOYER.—The
term ‘corporate alliance employer’ means any em-
ployer if any individual, by reason of being an em-
ployee of such employer, is provided with health cov-
erage through any corporate alliance described in
section 1311 of the Health Security Act.
‘‘(2) PAYROLL.—The term ‘payroll’ means the
sum of—
‘‘(A) the wages (as defined in section
3121(a) without regard to paragraph (1) there-
of) paid by the employer during the calendar
year, plus
‘‘(B)(i) in the case of a sole proprietorship,
the net earnings from self-employment of the
proprietor from such trade or business for the
taxable year ending with or within the calendar
year,
1110
Title VII, Subtitle A
‘‘(ii) in the case of a partnership, the ag-
gregate of the net earnings from self-employ-
ment of each partner which is attributable to
such partnership for the taxable year of such
partnership ending with or within the calendar
year, and
‘‘(iii) in the case of an S corporation, the
aggregate of the net earnings from self-employ-
ment of each shareholder which is attributable
to such corporation for the taxable year of such
corporation ending with or within the calendar
year.
‘‘(3) NET
EARNINGS
FROM
SELF-EMPLOY-
MENT.—The term ‘net earnings from self-employ-
ment’ has the meaning given such term by section
1402; except that the amount thereof—
‘‘(A) may never be less than zero, and
‘‘(B) shall be determined without regard to
any deduction for an assessment under this sec-
tion to the extent attributable to payroll de-
scribed in paragraph (2)(B).
‘‘(c) 
SPECIAL
RULES.—For 
purposes 
of 
this
section—
‘‘(1) TREATMENT OF CERTAIN EMPLOYERS IN
MULTIEMPLOYER CORPORATE ALLIANCES.—An em-
1111
Title VII, Subtitle A
ployer who is a corporate alliance employer solely by
reason of employees who are provided with health
coverage through a corporate alliance the eligible
sponsor of which is a multiemployer plan described
in section 1311(b)(1)(B) of the Health Security Act
is not subject to the assessment under this section.
In the case of an employer who is a corporate alli-
ance employer in part (but not solely) by reason of
such employees, the payroll of such employer shall
be determined without taking into account such em-
ployees.
‘‘(2) CONTROLLED GROUP RULES.—All persons
treated as a single employer under section 1901 of
the Health Security Act (relating to employer pre-
miums for comprehensive health care) shall be treat-
ed as a single employer.
‘‘(3) APPLICATION OF ASSESSMENT BEGINNING
IN 1996.—
‘‘(A) IN GENERAL.—Every employer eligi-
ble to elect to be an eligible sponsor under sec-
tion 1311 of the Health Security Act shall be
treated as a corporate alliance employer as of
January 1, 1996, unless the employer waives
such employer’s rights ever to be treated as
1112
Title VII, Subtitle A
such a sponsor. The waiver under this subpara-
graph shall be irrevocable.
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to any employer referred to in
the first sentence of paragraph (1).
‘‘SEC. 3462. TEMPORARY ASSESSMENT ON EMPLOYERS
WITH RETIREE HEALTH BENEFIT COSTS.
‘‘(a) IMPOSITION OF ASSESSMENT.—Every employer
with base period retiree health costs shall pay (in addition
to any other amount imposed by this subtitle) for each
calendar year to which this section applies an assessment
equal to the amount determined under subsection (b).
‘‘(b) AMOUNT OF ASSESSMENT.—For purposes of
subsection (a), the amount determined under this sub-
section with respect to any employer for any calendar year
is 50 percent of the greater of—
‘‘(1) the adjusted base period retiree health
costs of such employer for such calendar year, or
‘‘(2) the amount (determined in the manner
prescribed by the Secretary) by which such employ-
er’s applicable retiree health costs for such calendar
year were reduced by reason of the enactment of the
Health Security Act.
‘‘(c) DEFINITIONS.—For purposes of this section—
1113
Title VII, Subtitle A
‘‘(1) BASE PERIOD RETIREE HEALTH COSTS.—
The term ‘base period retiree health costs’ means
the average of the applicable retiree health costs of
the employer for calendar years 1991, 1992, and
1993.
‘‘(2) 
ADJUSTED
BASE
PERIOD
RETIREE
HEALTH COSTS.—
‘‘(A) IN
GENERAL.—The term ‘adjusted
base period retiree health costs’ means, with re-
spect to any employer for any calendar year,
the base period retiree health costs of the em-
ployer adjusted in the manner prescribed by the
Secretary to reflect increases in the medical
care component of the Consumer Price Index
during the period after 1992 and before such
calendar year.
‘‘(B) ADJUSTMENTS
FOR
ACQUISITIONS
AND DISPOSITIONS.—Rules similar to the rules
of subparagraphs (A) and (B) of section
41(f)(3) shall apply to acquisitions and disposi-
tions after December 31, 1993.
‘‘(3) APPLICABLE RETIREE HEALTH COSTS.—
‘‘(A) IN GENERAL.—The term ‘applicable
retiree health costs’ means, with respect to any
employer for any calendar year, the aggregate
1114
Title VII, Subtitle A
cost (including administrative costs) of the
health benefits or coverage provided during
such calendar year (whether directly by the em-
ployer or through a plan described in section
401(h) or a welfare benefit fund as defined in
section 419(e)) to individuals who are entitled
to receive such benefits or coverage by reason
of being retired employees of such employer (or
by reason of being a spouse or other beneficiary
of such an employee).
‘‘(B) ONLY
BENEFITS
AND
COVERAGE
AFTER
AGE
AND
BEFORE
AGE
TAKEN
INTO
ACCOUNT.—In applying subparagraph
(A), there shall be taken into account only
health benefits and coverage provided after the
date the retired employee attained age 55 and
before the date such employee attained (or, but
for the death of such employee, would have at-
tained) age 65.
‘‘(d) YEARS TO WHICH ASSESSMENT APPLIES.—This
section shall apply to calendar years 1998, 1999, and
2000.
1115
Title VII, Subtitle A
‘‘Subchapter C—Definitions and
Administrative Provisions
‘‘SEC. 3463. DEFINITIONS AND ADMINISTRATIVE PROVI-
SIONS
‘‘(a) EMPLOYER.—For purposes of this chapter—
‘‘(1) IN GENERAL.—The term ‘employer’ means
any person or governmental entity for whom an indi-
vidual performs services, of whatever nature, as an
employee (as defined in section 3401(c)).
‘‘(2) SPECIAL RULES.—
‘‘(A) An individual who owns the entire in-
terest in an unincorporated trade or business
shall be treated as his own employer.
‘‘(B) A partnership shall be treated as the
employer of each partner who is an employee
within the meaning of section 401(c)(1).
‘‘(C) An S corporation shall be treated as
the employer of each shareholder who is an em-
ployee within the meaning of section 401(c)(1).
‘‘(b) ASSESSMENTS TO APPLY TO GOVERNMENTAL
AND OTHER TAX-EXEMPT ENTITIES.—Notwithstanding
any other provision of law or rule of law, none of the fol-
lowing shall be exempt from the assessments imposed by
this chapter:
1116
Title VII, Subtitle A
‘‘(1) The United States, any State or political
subdivision thereof, the District of Columbia, and
any agency or instrumentality of any of the fore-
going.
‘‘(2) Any other entity otherwise exempt from
tax under chapter 1.
‘‘(c) ADMINISTRATIVE PROVISIONS.—
‘‘(1) PAYMENT.—
‘‘(A) 
SECTION
3461.—Any 
assessment
under section 3461 shall be paid at the same
time and in the same manner as the tax im-
posed by chapter 21.
‘‘(B) 
SECTION
3462.—Any 
assessment
under section 3462 for any calendar year shall
be paid on or before March 15 of the following
calendar year; except that the Secretary may
require quarterly estimated payments of such
assessment in a manner similar to the require-
ments of section 6655.
‘‘(2) COLLECTION, ETC.—For purposes of sub-
title F, any assessment under this subchapter shall
be treated as if it were a tax imposed by this sub-
title.’’
1117
Title VII, Subtitle A
(b) CLERICAL AMENDMENT.—The table of chapters
for subtitle C is amended by inserting after the item relat-
ing to chapter 24 the following new item:
‘‘Chapter 24A. Health-related assessments.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1996.
PART 3—RECAPTURE OF CERTAIN HEALTH CARE
SUBSIDIES
SEC. 7131. RECAPTURE OF CERTAIN HEALTH CARE SUB-
SIDIES RECEIVED BY HIGH-INCOME INDIVID-
UALS.
(a) IN GENERAL.—Subchapter A of chapter 1 is
amended by adding at the end thereof the following new
part:
‘‘PART VIII—CERTAIN HEALTH CARE SUBSIDIES
RECEIVED BY HIGH-INCOME INDIVIDUALS
‘‘Sec. 59B. Recapture of certain health care subsidies.
‘‘SEC. 59B. RECAPTURE OF CERTAIN HEALTH CARE SUB-
SIDIES.
‘‘(a) IMPOSITION OF RECAPTURE AMOUNT.—In the
case of an individual, if the modified adjusted gross in-
come of the taxpayer for the taxable year exceeds the
threshold amount, such taxpayer shall pay (in addition to
any other amount imposed by this subtitle) a recapture
amount for such taxable year equal to the sum of—
1118
Title VII, Subtitle A
‘‘(1) the aggregate of the Medicare part B re-
capture amounts (if any) for months during such
year that a premium is paid under part B of title
XVIII of the Social Security Act for the coverage of
the individual under such part, and
‘‘(2) the aggregate reductions (if any) in the in-
dividual’s liability for periods after December 31,
1997, under section 6111 of the Health Security Act
(relating to repayment of alliance credit by certain
families) pursuant to section 6114 of such Act (re-
lating to special treatment of certain retirees and
qualified spouses and children) for months during
such year.
‘‘(b) MEDICARE PART B PREMIUM RECAPTURE
AMOUNT FOR MONTH.—For purposes of this section, the
Medicare part B premium recapture amount for any
month is the amount equal to the excess of—
‘‘(1) 150 percent of the monthly actuarial rate
for enrollees age 65 and over determined for that
calendar year under section 1839(b) of the Social
Security Act, over
‘‘(2) the total monthly premium under section
1839 of the Social Security Act (determined without
regard to subsections (b) and (f) of section 1839 of
such Act).
1119
Title VII, Subtitle A
‘‘(c) PHASEIN OF RECAPTURE AMOUNT.—
‘‘(1) IN
GENERAL.—If the modified adjusted
gross income of the taxpayer for any taxable year
exceeds the threshold amount by less than $15,000,
the recapture amount imposed by this section for
such taxable year shall be an amount which bears
the same ratio to the recapture amount which would
(but for this subsection) be imposed by this section
for such taxable year as such excess bears to
$15,000.
‘‘(2) JOINT RETURNS.—If a recapture amount
is determined separately for each spouse filing a
joint return, paragraph (1) shall be applied by sub-
stituting ‘$30,000’ for ‘$15,000’ each place it ap-
pears.
‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—
For purposes of this section—
‘‘(1) THRESHOLD AMOUNT.—The term ‘thresh-
old amount’ means—
‘‘(A) except as otherwise provided in this
paragraph, $90,000,
‘‘(B) $115,000 in the case of a joint re-
turn, and
‘‘(C) zero in the case of a taxpayer who—
1120
Title VII, Subtitle A
‘‘(i) is married (as determined under
section 7703) but does not file a joint re-
turn for such year, and
‘‘(ii) does not live apart from his
spouse at all times during the taxable year.
‘‘(2) MODIFIED
ADJUSTED
GROSS
INCOME.—
The term ‘modified adjusted gross income’ means
adjusted gross income—
‘‘(A) determined without regard to sections
135, 911, 931, and 933, and
‘‘(B) increased by the amount of interest
received or accrued by the taxpayer during the
taxable year which is exempt from tax.
‘‘(3) JOINT RETURNS.—In the case of a joint
return—
‘‘(A) the recapture amount under sub-
section (a) shall be the sum of the recapture
amounts determined separately for each spouse,
and
‘‘(B) subsections (a) and (c) shall be ap-
plied by taking into account the combined modi-
fied adjusted gross income of the spouses.
‘‘(4) COORDINATION
WITH
OTHER
PROVI-
SIONS.—
1121
Title VII, Subtitle A
‘‘(A) TREATED AS TAX FOR SUBTITLE F.—
For purposes of subtitle F, the recapture
amount imposed by this section shall be treated
as if it were a tax imposed by section 1.
‘‘(B) NOT TREATED AS TAX FOR CERTAIN
PURPOSES.—The recapture amount imposed by
this section shall not be treated as a tax im-
posed 
by 
this 
chapter 
for 
purposes 
of
determining—
‘‘(i) the amount of any credit allow-
able under this chapter, or
‘‘(ii) the amount of the minimum tax
under section 55.
‘‘(C) TREATED AS PAYMENT FOR MEDICAL
INSURANCE.—The recapture amount imposed
by this section shall be treated as an amount
paid for insurance covering medical care, within
the meaning of section 213(d).’’
(b) TRANSFERS TO SUPPLEMENTAL MEDICAL IN-
SURANCE TRUST FUND.—
(1) IN
GENERAL.—There are hereby appro-
priated to the Supplemental Medical Insurance
Trust Fund amounts equivalent to the aggregate in-
crease in liabilities under chapter 1 of the Internal
Revenue Code of 1986 which is attributable to the
1122
Title VII, Subtitle A
application of section 59B(a)(1) of such Code, as
added by this section.
(2) TRANSFERS.—The amounts appropriated
by paragraph (1) to the Supplemental Medical In-
surance Trust Fund shall be transferred from time
to time (but not less frequently than quarterly) from
the general fund of the Treasury on the basis of es-
timates made by the Secretary of the Treasury of
the amounts referred to in paragraph (1). Any quar-
terly payment shall be made on the first day of such
quarter and shall take into account the recapture
amounts referred to in such section 59B(a)(1) for
such quarter. Proper adjustments shall be made in
the amounts subsequently transferred to the extent
prior estimates were in excess of or less than the
amounts required to be transferred.
(c) REPORTING REQUIREMENTS.—
(1)(A) Paragraph (1) of section 6050F(a) (re-
lating to returns relating to social security benefits)
is amended by striking ‘‘and’’ at the end of subpara-
graph (B) and by inserting after subparagraph (C)
the following new subparagraph:
‘‘(D) the number of months during the cal-
endar year for which a premium was paid under
part B of title XVIII of the Social Security Act
1123
Title VII, Subtitle A
for the coverage of such individual under such
part, and’’.
(B) Paragraph (2) of section 6050F(b) is
amended to read as follows:
‘‘(2) the information required to be shown on
such return with respect to such individual.’’
(C) Subparagraph (A) of section 6050F(c)(1) is
amended by inserting before the comma ‘‘and in the
case of the information specified in subsection
(a)(1)(D)’’.
(D) The heading for section 6050F is amended
by inserting ‘‘AND
MEDICARE
PART
B
COV-
ERAGE’’ before the period.
(E) The item relating to section 6050F in the
table of sections for subpart B of part III of sub-
chapter A of chapter 61 is amended by inserting
‘‘and Medicare part B coverage’’ before the period.
(2)(A) Subpart B of part III of subchapter A
of chapter 61 (relating to information concerning
transactions with other persons) is amended by add-
ing at the end thereof the following new section:
‘‘SEC. 6050Q. RETURNS RELATING TO CERTAIN RETIREE
HEALTH CARE SUBSIDIES.
‘‘(a) IN GENERAL.—Every alliance (as defined in sec-
tion 1301 of the Health Security Act) that reduces an in-
1124
Title VII, Subtitle A
dividual’s liability under section 6111 of such Act (relating
to repayment of alliance credit by certain families) pursu-
ant to section 6114 of such Act (relating to special treat-
ment of certain retirees and qualified spouses and chil-
dren) shall make a return (according to the forms and
regulations prescribed by the Secretary) setting forth—
‘‘(1) the aggregate amount of such reductions
by such alliance with respect to any individual dur-
ing such calendar year, and
‘‘(2) the name and address of such individual.
‘‘(b) STATEMENTS TO BE FURNISHED TO INDIVID-
UALS WITH RESPECT TO WHOM INFORMATION IS RE-
QUIRED TO BE REPORTED.—Every alliance 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—
‘‘(1) the name and address of such alliance, and
‘‘(2) the information required to be shown on
the return with respect to such individual.
‘‘(c) DUE DATE FOR RETURNS AND STATEMENTS.—
The written return required under subsection (a) shall be
made, and the statement required under subsection (b)
shall be furnished to the individual, on or before January
31 of the second year following the calendar year for which
the return under subsection (a) is required to be made.’’
1126
Title VII, Subtitle A
(1) April 16, 1997, with respect to any under-
payment to the extent that such underpayment re-
sulted from section 59B(a)(1) of the Internal Rev-
enue Code of 1986, as added by this section, and
(2) April 16, 1999, with respect to any under-
payment to the extent that such underpayment re-
sulted from section 59B(a)(2) of such Code, as
added by this section.
(e) CLERICAL AMENDMENT.—The table of parts for
subchapter A of chapter 1 is amended by adding at the
end thereof the following new item:
‘‘Part VIII. Certain health care subsidies received by high-income
individuals.’’
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to periods after December 31,
1995, in taxable years ending after such date.
PART 4—OTHER PROVISIONS
SEC. 7141. MODIFICATION TO SELF-EMPLOYMENT TAX
TREATMENT OF CERTAIN S CORPORATION
SHAREHOLDERS AND PARTNERS.
(a) TREATMENT
OF
CERTAIN
S CORPORATION
SHAREHOLDERS.—
(1) AMENDMENT
TO
INTERNAL
REVENUE
CODE.—Section 1402 (relating to definitions) is
amended by adding at the end thereof the following
new subsection:
1127
Title VII, Subtitle A
‘‘(k) TREATMENT
OF CERTAIN S CORPORATION
SHAREHOLDERS.—
‘‘(1) IN
GENERAL.—In the case of any
individual—
‘‘(A) who is a 2-percent shareholder (as
defined in section 1372(b)) of an S corporation
for any taxable year of such corporation, and
‘‘(B) who materially participates in the ac-
tivities of such S corporation during such tax-
able year,
such shareholder’s net earnings from self-employ-
ment for such shareholder’s taxable year in which
the taxable year of the S corporation ends shall in-
clude such shareholder’s pro rata share (as deter-
mined under section 1366(a)) of the taxable income
or loss of such corporation from service-related busi-
nesses carried on by such corporation.
‘‘(2) CERTAIN EXCEPTIONS TO APPLY.—In de-
termining the amount to be taken into account
under paragraph (1), the exceptions provided in sub-
section (a) shall apply, except that, in the case of
the exceptions provided in subsection (a)(5), the
rules of subparagraph (B) thereof shall apply to
shareholders in S corporations.
1128
Title VII, Subtitle A
‘‘(3) SERVICE-RELATED
BUSINESS.—For pur-
poses of this subsection, the term ‘service-related
business’ means any trade or business described in
subparagraph (A) of section 1202(e)(3).’’
(2) AMENDMENT TO SOCIAL SECURITY ACT.—
Section 211 of the Social Security Act is amended
by adding at the end the following new subsection:
‘‘Treatment of Certain S Corporation Shareholders
‘‘(k)(1) In the case of any individual—
‘‘(A) who is a 2-percent shareholder (as defined
in section 1372(b) of the Internal Revenue Code of
1986) of an S corporation for any taxable year of
such corporation, and
‘‘(B) who materially participates in the activi-
ties of such S corporation during such taxable year,
such shareholder’s net earnings from self-employment for
such shareholder’s taxable year in which the taxable year
of the S corporation ends shall include such shareholder’s
pro rata share (as determined under section 1366(a) of
such Code) of the taxable income or loss of such corpora-
tion from service-related businesses (as defined in section
1402(k)(3) of such Code) carried on by such corporation.
‘‘(2) In determining the amount to be taken into ac-
count under paragraph (1), the exceptions provided in
subsection (a) shall apply, except that, in the case of the
1129
Title VII, Subtitle A
exceptions provided in subsection (a)(5), the rules of sub-
paragraph (B) thereof shall apply to shareholders in S cor-
porations.’’.
(b) TREATMENT OF CERTAIN LIMITED PARTNERS.—
(1) AMENDMENT
OF
INTERNAL
REVENUE
CODE.—Paragraph (13) of section 1402(a) is
amended by striking ‘‘limited partner, as such’’ and
inserting ‘‘limited partner who does not materially
participate in the activities of the partnership’’.
(2) AMENDMENT OF SOCIAL SECURITY ACT.—
Paragraph (12) of section 211(a) of the Social Secu-
rity Act is amended by striking ‘‘limited partner, as
such’’ and inserting ‘‘limited partner who does not
materially participate in the activities of the partner-
ship’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years of individuals be-
ginning after December 31, 1995, and to taxable years
of S corporations and partnerships ending with or within
such taxable years of individuals.
SEC. 7142. EXTENDING MEDICARE COVERAGE OF, AND AP-
PLICATION OF HOSPITAL INSURANCE TAX
TO, ALL STATE AND LOCAL GOVERNMENT
EMPLOYEES.
(a) IN GENERAL.—
1130
Title VII, Subtitle A
(1) APPLICATION
OF
HOSPITAL
INSURANCE
TAX.—Section 3121(u)(2) is amended by striking
subparagraphs (C) and (D).
(2) COVERAGE
UNDER
MEDICARE.—Section
210(p) of the Social Security Act (42 U.S.C. 410(p))
is amended by striking paragraphs (3) and (4).
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to services performed
after September 30, 1995.
(b) TRANSITION
IN BENEFITS
FOR STATE
AND
LOCAL GOVERNMENT EMPLOYEES
AND FORMER EM-
PLOYEES.—
(1) IN GENERAL.—
(A) EMPLOYEES
NEWLY
SUBJECT
TO
TAX.—For purposes of sections 226, 226A, and
1811 of the Social Security Act, in the case of
any individual who performs services during the
calendar quarter beginning October 1, 1995,
the wages for which are subject to the tax im-
posed by section 3101(b) of the Internal Rev-
enue Code of 1986 only because of the amend-
ment made by subsection (a), the individual’s
medicare qualified State or local government
employment (as defined in subparagraph (B))
performed before October 1, 1995, shall be con-
1131
Title VII, Subtitle A
sidered to be ‘‘employment’’ (as defined for pur-
poses of title II of such Act), but only for pur-
poses of providing the individual (or another
person) with entitlement to hospital insurance
benefits under part A of title XVIII of such Act
for months beginning with October 1995.
(B) MEDICARE
QUALIFIED
STATE
OR
LOCAL
GOVERNMENT
EMPLOYMENT
DE-
FINED.—In this paragraph, the term ‘‘medicare
qualified State or local government employ-
ment’’ means medicare qualified government
employment described in section 210(p)(1)(B)
of the Social Security Act (determined without
regard to section 210(p)(3) of such Act, as in
effect before its repeal under subsection (a)(2)).
(2) AUTHORIZATION
OF
APPROPRIATIONS.—
There are authorized to be appropriated to the Fed-
eral Hospital Insurance Trust Fund from time to
time such sums as the Secretary of Health and
Human Services deems necessary for any fiscal year
on account of—
(A) payments made or to be made during
such fiscal year from such Trust Fund with re-
spect to individuals who are entitled to benefits
1132
Title VII, Subtitle A
under title XVIII of the Social Security Act
solely by reason of paragraph (1),
(B) the additional administrative expenses
resulting or expected to result therefrom, and
(C) any loss in interest to such Trust
Fund resulting from the payment of those
amounts, in order to place such Trust Fund in
the same position at the end of such fiscal year
as it would have been in if this subsection had
not been enacted.
(3) INFORMATION TO INDIVIDUALS WHO ARE
PROSPECTIVE MEDICARE BENEFICIARIES BASED ON
STATE AND LOCAL GOVERNMENT EMPLOYMENT.—
Section 226(g) of the Social Security Act (42 U.S.C.
426(g)) is amended—
(A) 
by 
redesignating 
paragraphs 
(1)
through (3) as subparagraphs (A) through (C),
respectively,
(B) by inserting ‘‘(1)’’ after ‘‘(g)’’, and
(C) by adding at the end the following new
paragraph:
‘‘(2) The Secretary, in consultation with State
and local governments, shall provide procedures de-
signed to assure that individuals who perform medi-
care qualified government employment by virtue of
1133
Title VII, Subtitle A
service described in section 210(a)(7) are fully in-
formed with respect to (A) their eligibility or poten-
tial eligibility for hospital insurance benefits (based
on such employment) under part A of title XVIII,
(B) the requirements for, and conditions of, such eli-
gibility, and (C) the necessity of timely application
as a condition of becoming entitled under subsection
(b)(2)(C), giving particular attention to individuals
who apply for an annuity or retirement benefit and
whose eligibility for such annuity or retirement ben-
efit is based on a disability.’’
(c) TECHNICAL AMENDMENTS.—
(1) Subparagraph (A) of section 3121(u)(2) is
amended by striking ‘‘subparagraphs (B) and (C),’’
and inserting ‘‘subparagraph (B),’’.
(2) Subparagraph (B) of section 210(p)(1) of
the Social Security Act (42 U.S.C. 410(p)(1)) is
amended by striking ‘‘paragraphs (2) and (3).’’ and
inserting ‘‘paragraph (2).’’
(3) Section 218 of the Social Security Act (42
U.S.C. 418) is amended by striking subsection (n).
(4) The amendments made by this subsection
shall apply after September 30, 1995.
1134
Title VII, Subtitle B
Subtitle B—Tax Treatment of
Employer-Provided Health Care
SEC. 7201. LIMITATION ON EXCLUSION FOR EMPLOYER-
PROVIDED HEALTH BENEFITS.
(a) GENERAL RULE.—Section 106 (relating to con-
tributions by employer to accident and health plans) is
amended to read as follows:
‘‘SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT
AND HEALTH PLANS.
‘‘(a) GENERAL RULE.—Except as otherwise provided
in this section, gross income of an employee does not in-
clude employer-provided coverage under an accident or
health plan.
‘‘(b) INCLUSION OF CERTAIN BENEFITS NOT PART
OF COMPREHENSIVE BENEFIT PACKAGE.—
‘‘(1) IN GENERAL.—Effective on and after Jan-
uary 1, 2004, gross income of an employee shall in-
clude employer-provided coverage under any accident
or health plan except to the extent that—
‘‘(A) such coverage consists of comprehen-
sive health coverage described in section 1101
of the Health Security Act,
‘‘(B) such coverage consists of coverage of
cost sharing amounts under the comprehensive
benefit package described in such section (in-
1135
Title VII, Subtitle B
cluding such coverage under a cost sharing pol-
icy under section 1421(b)(2) of such Act), or
‘‘(C) such coverage consists of permitted
coverage.
‘‘(2) PERMITTED COVERAGE.—For purposes of
this subsection, the term ‘permitted coverage’
means—
‘‘(A) any coverage providing wages or pay-
ments in lieu of wages for any period during
which the employee is absent from work on ac-
count of sickness or injury,
‘‘(B) any coverage providing for payments
referred to in section 105(c),
‘‘(C) any coverage provided to an employee
or former employee after such employee has at-
tained age 65, unless such coverage is provided
by reason of the current employment of the in-
dividual 
(within 
the 
meaning 
of 
section
1862(b)(1)(A)(i)(I) of the Social Security Act)
with the employer providing the coverage,
‘‘(D) any coverage under a qualified long-
term care insurance policy (as defined in sec-
tion 7702B),
1136
Title VII, Subtitle B
‘‘(E) any coverage provided under Federal
law to any individual (or spouse or dependent
thereof) by reason of such individual being—
‘‘(i) a member of the Armed Forces of
the United States, or
‘‘(ii) a veteran, and
‘‘(F) any other coverage to the extent that
the Secretary determines that the continuation
of an exclusion for such coverage is not incon-
sistent with the purposes of this subsection.
‘‘(3) SPECIAL RULES FOR FLEXIBLE SPENDING
ARRANGEMENTS.—
‘‘(A) IN
GENERAL.—To the extent that
any employer-provided coverage is provided
through a flexible spending or similar arrange-
ment, paragraph (1) shall be applied by sub-
stituting ‘January 1, 1997,’ for ‘January 1,
2004’.
‘‘(B) 
FLEXIBLE
SPENDING
ARRANGE-
MENT.—For purposes of this paragraph, a
flexible spending arrangement is a benefit pro-
gram which provides employees with coverage
under which—
‘‘(i) specified incurred expenses may
be reimbursed (subject to reimbursement
1137
Title VII, Subtitle B
maximums and other reasonable condi-
tions), and
‘‘(ii) the maximum amount of reim-
bursement which is reasonably available to
a participant for such coverage is less than
200 percent of the value of such coverage.
In the case of an insured plan, the maximum
amount reasonably available shall be deter-
mined on the basis of the underlying coverage.
‘‘(c) SPECIAL RULES FOR DETERMINING AMOUNT OF
INCLUSION.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the value of any coverage shall be determined
on the basis of the average cost of providing such
coverage to the beneficiaries receiving such coverage.
‘‘(2) SPECIAL RULE.—To the extent provided
by the Secretary, cost determinations under para-
graph (1) may be made on the basis of reasonable
estimates.
‘‘(d) POTENTIAL CASH PAYMENT NOT TO AFFECT
EXCLUSION.—No amount shall be included in the gross
income of an employee solely because the employee may
select coverage under an accident or health plan which re-
sults in a cash payment referred to in section 1607 of the
Health Security Act.’’
1138
Title VII, Subtitle B
(b) EMPLOYMENT TAX TREATMENT.—
(1) SOCIAL SECURITY TAX.—
(A) Subsection (a) of section 3121 is
amended by inserting after paragraph (21) the
following new sentence:
‘‘Nothing in paragraph (2) shall exclude from the term
‘wages’ any amount which is required to be included in
gross income under section 106(b).’’
(B) Subsection (a) of section 209 of the
Social Security Act is amended by inserting
after paragraph (21) the following new sen-
tence:
‘‘Nothing in paragraph (2) shall exclude from the term
‘wages’ any amount which is required to be included in
gross income under section 106(b) of the Internal Revenue
Code of 1986.’’
(2) RAILROAD RETIREMENT TAX.—Paragraph
(1) of section 3231(e) is amended by adding at the
end thereof the following new sentence: ‘‘Nothing in
clause (i) of the second sentence of this paragraph
shall exclude from the term ‘compensation’ any
amount which is required to be included in gross in-
come under section 106(b).’’
1139
Title VII, Subtitle B
(3) UNEMPLOYMENT TAX.—Subsection (b) of
section 3306 is amended by inserting after para-
graph (16) the following new sentence:
‘‘Nothing in paragraph (2) shall exclude from the term
‘wages’ any amount which is required to be included in
gross income under section 106(b).’’
(4) WAGE
WITHHOLDING.—Subsection (a) of
section 3401 is amended by adding at the end there-
of the following new sentence:
‘‘Nothing in the preceding provisions of this subsection
shall exclude from the term ‘wages’ any amount which is
required to be included in gross income under section
106(b).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1997.
SEC. 7202. HEALTH BENEFITS MAY NOT BE PROVIDED
UNDER CAFETERIA PLANS.
(a) GENERAL RULE.—Subsection (f) of section 125
(defining qualified benefits) is amended by adding at the
end thereof the following new sentence: ‘‘Such term shall
not include any benefits or coverage (other than coverage
described in section 106(b)(2)(A)) under an accident or
health plan.’’
(b) CONFORMING AMENDMENT.—Subsection (g) of
section 125 is amended by striking paragraph (2) and re-
1140
Title VII, Subtitle B
designating paragraphs (3) and (4) as paragraphs (2) and
(3), respectively.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1997.
SEC. 7203. INCREASE IN DEDUCTION FOR HEALTH INSUR-
ANCE COSTS OF SELF-EMPLOYED INDIVID-
UALS.
(a) PROVISION MADE PERMANENT.—
(1) IN GENERAL.—Subsection (l) of section 162
(relating to special rules for health insurance costs
of self-employed individuals) is amended by striking
paragraph (6).
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to taxable years begin-
ning after December 31, 1993.
(b) DEDUCTION LIMITED TO BASIC COVERAGE PUR-
CHASED FROM HEALTH ALLIANCE.—
(1) IN GENERAL.—Paragraphs (1) and (2) of
section 162(l) are amended to read as follows:
‘‘(1) IN GENERAL.—In the case of an individual
who is an employee within the meaning of section
401(c), there shall be allowed as a deduction under
this section an amount equal to 100 percent of the
amount paid during the taxable year for insurance
which constitutes medical care for the taxpayer, his
1141
Title VII, Subtitle B
spouse, and dependents; but only to the extent such
insurance is comprehensive health coverage de-
scribed in section 1101 of the Health Security Act
purchased from a qualified alliance described in sec-
tion 1311 of such Act.
‘‘(2) LIMITATIONS.—
‘‘(A) LOWER
PERCENTAGE
IN
CERTAIN
CASES.—If—
‘‘(i) the taxpayer has 1 or more em-
ployees in a trade or business with respect
to which such taxpayer is treated as an
employee within the meaning of section
401(c), and
‘‘(ii) the taxpayer does not pay at
least 100 percent of the weighted average
premium applicable under the Health Se-
curity Act for each of such employees,
paragraph (1) shall be applied by substituting
for ‘100 percent’ the lowest percentage of such
weighted average premium paid by the taxpayer
for any of such employees.
‘‘(B) DEDUCTION LIMITED TO EARNED IN-
COME.—No deduction shall be allowed under
paragraph (1) to the extent that the amount of
1142
Title VII, Subtitle B
such deduction exceeds the taxpayer’s earned
income (within the meaning of section 401(c)).
‘‘(C) OTHER
COVERAGE.—Paragraph (1)
shall not apply to amounts paid for coverage for
any individual for any calendar month if such
individual is employed on a full-time basis
(within the meaning of section 1901 of the
Health Security Act) by an employer during
such month.’’
(2) CONFORMING AMENDMENT.—Subparagraph
(A) of section 162(l)(5) is amended by striking
‘‘shall be treated as such individual’s earned in-
come’’ and inserting ‘‘shall be included in such indi-
vidual’s earned income’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall take effect on the earlier
of—
(A) January 1, 1997, or
(B) the first day on which the taxpayer
could purchase comprehensive health coverage
from a qualified alliance.
1143
Title VII, Subtitle B
SEC. 7204. LIMITATION ON PREPAYMENT OF MEDICAL IN-
SURANCE PREMIUMS.
(a) GENERAL RULE.—Subsection (d) of section 213
is amended by adding at the end thereof the following new
paragraph:
‘‘(10) LIMITATION ON PREPAYMENTS.—If the
taxpayer pays a premium or other amount which
constitutes medical care under paragraph (1), to the
extent such premium or other amount is properly al-
locable to insurance coverage or care to be provided
during periods more than 12 months after the
month in which such payment is made, such pre-
mium shall be treated as paid ratably over the pe-
riod during which such insurance coverage or care is
to be provided. The preceding sentence shall not
apply to any premium to which paragraph (7) ap-
plies nor to any premium paid under a qualified
long-term care insurance policy.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to amounts paid after December
31, 1996.
1144
Title VII, Subtitle C
Subtitle C—Employment Status
Provisions
SEC. 7301. ANTI-ABUSE REGULATIONS RELATING TO EM-
PLOYMENT STATUS.
(a) 
GENERAL
RULE.—In 
order 
to 
prevent
misclassification of workers so as to minimize payments
under this Act, chapter 25 (relating to general provisions
applicable to employment taxes) is amended by adding at
the end thereof the following new section:
‘‘SEC. 3510. DEFINITION OF EMPLOYEE.
‘‘(a) REGULATIONS.—The Secretary shall prescribe
regulations setting forth rules for determining whether an
individual is an employee for purposes of—
‘‘(1) the employment taxes imposed under this
subtitle, and
‘‘(2) to the extent provided in such regulations,
subtitle A.
‘‘(b) SCOPE
OF REGULATIONS.—Such regulations
may modify the rules otherwise applicable for the deter-
minations referred to in paragraphs (1) and (2) of sub-
section (a); except that—
‘‘(1) such regulations shall give significant
weight to the common law applicable in determining
the employer-employee relationship, and
1145
Title VII, Subtitle C
‘‘(2) nothing in such regulations shall modify
the provisions of paragraph (1), (3), or (4) of sec-
tion 3121(d), section 3506, section 3508, or section
3511.’’
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 25 is amended by adding at the end thereof
the following new item:
‘‘Sec. 3510. Definition of employee.’’
(c) EFFECTIVE DATE.—The regulations described in
section 3510 of the Internal Revenue Code of 1986 (as
added by this section) shall be effective for periods begin-
ning no earlier than the date which is 6 months after the
date such regulations are promulgated as final regula-
tions.
(d) REPORT TO CONGRESS.—Upon issuance of the
regulations described in section 3510 of the Internal Rev-
enue Code of 1986 (as added by this section) as final regu-
lations, the Secretary of the Treasury shall submit a re-
port to Congress relating to such regulations, including
an explanation of their purposes and the issues they are
designed to address.
SEC. 7302. INCREASE IN SERVICES REPORTING PENALTIES.
(a) INCREASE IN PENALTY.—Section 6721(a) (relat-
ing to imposition of penalty) is amended by adding at the
end the following new paragraph:
1146
Title VII, Subtitle C
‘‘(3) INCREASED PENALTY FOR RETURNS IN-
VOLVING PAYMENTS FOR SERVICES.—
‘‘(A) IN GENERAL.—Subject to the overall
limitation of paragraph (1), the amount of the
penalty under paragraph (1) for any failure
with respect to any applicable return shall be
equal to the greater of $50 or 5 percent of the
amount required to be reported correctly but
not so reported.
‘‘(B) EXCEPTION
WHERE
SUBSTANTIAL
COMPLIANCE.—Subparagraph (A) shall not
apply to failures with respect to applicable re-
turns required to be filed by a person during
any calendar year if the aggregate amount
which is timely and correctly reported on appli-
cable returns filed by the person for the cal-
endar year is at least 97 percent of the aggre-
gate amount which is required to be reported
on applicable returns by the person for the cal-
endar year.
‘‘(C) APPLICABLE RETURN.—For purposes
of this paragraph, the term ‘applicable return’
means any information return required to be
filed under—
1147
Title VII, Subtitle C
‘‘(i) section 6041(a) which relates to
payments to any person for services per-
formed by such person (other than as an
employee), or
‘‘(ii) section 6041A(a).’’
(b) CONFORMING AMENDMENT.—Section 6721(a)(1)
is amended by striking ‘‘In’’ and inserting ‘‘Except as pro-
vided in paragraph (3), in’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to returns the due date for which
(without regard to extensions) is more than 30 days after
the date of the enactment of this Act.
SEC. 7303. REVISION OF SECTION 530 SAFE HARBOR RULES.
(a) GENERAL RULE.—Chapter 25 (relating to gen-
eral provisions applicable to employment taxes) is amend-
ed by adding at the end thereof the following new section:
‘‘SEC. 3511. PROTECTION AGAINST RETROACTIVE EMPLOY-
MENT TAX RECLASSIFICATIONS.
‘‘(a) GENERAL RULE.—If—
‘‘(1) for purposes of employment taxes, the tax-
payer treats an individual as not being an employee
for any period,
‘‘(2) for such period, the taxpayer meets—
‘‘(A) the consistency requirements of sub-
section (b),
1148
Title VII, Subtitle C
‘‘(B) the return filing requirements of sub-
section (c), and
‘‘(C) the safe harbor requirement of sub-
section (d), and
‘‘(3) the Secretary has not notified the taxpayer
in writing before the beginning of such period that
the Secretary has determined that the taxpayer
should treat such individual (or any individual hold-
ing a substantially similar position) as an employee,
then, for purposes of applying this subtitle for such period,
the individual shall be deemed not to be an employee of
the taxpayer.
‘‘(b) CONSISTENCY
REQUIREMENTS.—A taxpayer
meets the consistency requirements of this subsection with
respect to any individual for any period if the taxpayer
treats such individual (and all other individuals holding
substantially similar positions) as not being an employee
for purposes of the employment taxes for such period and
all prior periods.
‘‘(c) RETURN FILING REQUIREMENTS.—
‘‘(1) IN GENERAL.—The taxpayer meets the re-
turn filing requirements of this subsection with re-
spect to any individual for any period if all Federal
tax returns (including information returns) required
to be filed by the taxpayer for such period with re-
1149
Title VII, Subtitle C
spect to such individual (and all other individuals
holding substantially similar positions) are timely
filed on a basis consistent with the taxpayer’s treat-
ment of such individuals as not being employees.
‘‘(2) SPECIAL RULES.—For purposes of para-
graph (1)—
‘‘(A) any return filed for which the penalty
under section 6721(a) is reduced or waived pur-
suant to subsection (b) or (c) of section 6721
shall be considered timely filed, and
‘‘(B) a taxpayer shall not be considered as
failing to meet the requirements of paragraph
(1) solely because the taxpayer failed to timely
file accurate information returns in respect of
payments to individuals holding substantially
similar positions if the taxpayer satisfies the re-
quirements of section 6721(a)(3)(B) for such
period.
‘‘(d) SAFE HARBORS.—
‘‘(1) IN
GENERAL.—The taxpayer meets the
safe harbor requirement of this subsection with re-
spect to any individual for any period if the tax-
payer’s treatment of such individual as not being an
employee for such period was—
1150
Title VII, Subtitle C
‘‘(A) in reasonable reliance on a written
determination 
(as 
defined 
in 
section
6110(b)(1)) issued to or in respect of the tax-
payer that addressed the employment status of
the individual or an individual holding a sub-
stantially similar position;
‘‘(B) in reasonable reliance on a concluded
Internal 
Revenue 
Service 
audit 
of 
the
taxpayer—
‘‘(i) which was for a period in which
the rules for determining employment sta-
tus were the same as for the period in
question, and
‘‘(ii) in which the employment status
of the individual or any individual holding
a substantially similar position was exam-
ined without change to any such individ-
ual’s status;
‘‘(C) in reasonable reliance on a long-
standing recognized practice of a significant
segment of the industry in which the individual
is engaged; or
‘‘(D) supported by substantial authority.
For purposes of subparagraph (D), the term ‘sub-
stantial authority’ has the same meaning as when
1152
Title VII, Subtitle C
inconsistent with any regulation, Revenue
Ruling, Revenue Procedure, or other au-
thority published by the Secretary before
the beginning of such period.
‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) EMPLOYMENT
TAX.—The term ‘employ-
ment tax’ means any tax imposed by this subtitle.
‘‘(2) TAXPAYER.—The term ‘taxpayer’ includes
any person or entity (including a governmental enti-
ty) which is (or would be but for this section) liable
for any employment tax. Such term includes any
predecessor or successor to the taxpayer.
‘‘(f) REGULATIONS.—The Secretary shall prescribe
such regulations as may be appropriate to carry out the
purposes of this section.’’
(b) RULES TO APPLY
FOR INCOME TAX PUR-
POSES.—Part I of subchapter B of chapter 1 is amended
by adding at the end thereof the following new section:
‘‘SEC. 69. DETERMINATION OF EMPLOYMENT STATUS.
‘‘For purposes of this subtitle, an individual shall be
treated as a self-employed individual with respect to any
services performed by such individual for another person
if, under the rules of section 3511, such individual is treat-
1153
Title VII, Subtitle C
ed as not being an employee of such other person with
respect to such services.’’
(c) CONFORMING AMENDMENT.—Section 530 of the
Revenue Act of 1978 is hereby repealed.
(d) CLERICAL AMENDMENTS.—
(1) The table of sections for chapter 25 is
amended by adding at the end thereof the following
new item:
‘‘Sec. 3511. Protection against retroactive employment tax reclas-
sifications.’’
(2) The table of sections for part I of sub-
chapter B of chapter 1 is amended by adding at the
end thereof the following new item:
‘‘Sec. 69. Determination of employment status.’’
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to all periods beginning after December
31, 1995.
(2) REPEAL OF LIMITATIONS ON REGULATIONS
AND RULINGS.—The repeal made by subsection (c),
insofar as it relates to section 530(b) of the Revenue
Act of 1978, shall take effect on the date of the en-
actment of this Act.
1154
Title VII, Subtitle D
Subtitle D—Tax Treatment of
Funding of Retiree Health Benefits
SEC. 7401. POST-RETIREMENT MEDICAL AND LIFE INSUR-
ANCE RESERVES.
(a) MINIMUM PERIOD FOR WORKING LIVES.—Sec-
tion 419A(c)(2) (relating to additional reserves for post-
retirement medical and life insurance benefits) is amended
by inserting ‘‘(but not less than 10 years)’’ after ‘‘working
lives of the covered employees’’.
(b) SEPARATE ACCOUNTING.—
(1) REQUIREMENT.—Section 419A(c)(2) is
amended by adding at the end the following new
flush sentence:
‘‘Such reserve shall be maintained as a separate account.’’
(2) USE OF RESERVE FOR OTHER PURPOSES.—
Paragraph (1) of section 4976(b) (defining disquali-
fied benefit) is amended by striking ‘‘and’’ at the
end of subparagraph (B), by striking the period at
the end of subparagraph (C) and inserting ‘‘, and’’,
and by adding after subparagraph (C) the following
new subparagraph:
‘‘(D) any payment to which subparagraph
(C) does not apply which is out of an account
described in section 419A(c)(2) and which is
1155
Title VII, Subtitle D
not used to provide a post-retirement medical
benefit or life insurance benefit.’’
(c) SPECIAL LIMITATIONS.—Section 419A(e) (relat-
ing to special limitations on reserves) is amended by add-
ing at the end the following new paragraph:
‘‘(3) BENEFITS MUST BE EXCLUDABLE.—Post-
retirement medical benefits and life insurance bene-
fits shall not be taken into account under subsection
(c)(2) to the extent it may be reasonably anticipated
that such benefits will be required to be included in
gross income when provided.’’
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to contributions paid or accrued after
December 31, 1994, in taxable years ending after
such date.
(2) SEPARATE ACCOUNTING.—The amendments
made by subsection (b) shall apply to contributions
paid or accrued after the date of the enactment of
this Act, in taxable years ending after such date.
SEC. 7402. HEALTH BENEFITS ACCOUNTS MAINTAINED BY
PENSION PLANS.
(a) TERMINATION OF ACCOUNTS.—
1156
Title VII, Subtitle D
(1) IN GENERAL.—Section 401(h) (relating to
medical, etc., benefits for retired employees and
their spouses and dependents) is amended by adding
at the end the following new paragraph:
‘‘(2) TERMINATION.—
‘‘(A) IN GENERAL.—In the case of a pen-
sion or annuity plan to which paragraph (1)
applies—
‘‘(i) no contributions may be made to
the separate account described in para-
graph (1)(C) other than allowable con-
tributions, and
‘‘(ii) such plan may pay benefits de-
scribed in paragraph (1) only from funds
attributable to allowable contributions and
earnings allocable to such contributions.
‘‘(B) ALLOWABLE
CONTRIBUTION.—For
purposes of subparagraph (A), the term ‘allow-
able contribution’ means—
‘‘(i) any contribution made before
January 1, 1995,
‘‘(ii) in the case of a plan maintained
pursuant to 1 or more collective bargaining
agreements between employee representa-
tives and 1 or more employees ratified on
1157
Title VII, Subtitle D
or before October 29, 1993, any contribu-
tion under such plan made before the ear-
lier of—
‘‘(I) the date on which the last of
such agreements terminates (deter-
mined without regard to any extension
after October 29, 1993), or, if later,
January 1, 1995, or
‘‘(II) January 1, 1998, or
‘‘(iii) any qualified transfer under sec-
tion 420.’’
(2) 
CONFORMING
AMENDMENTS.—Section
401(h) is amended—
(A) by striking ‘‘Under’’ and inserting:
‘‘(1) IN GENERAL.—Under’’,
(B) 
by 
redesignating 
paragraphs 
(1)
through (6) as subparagraphs (A) through (F),
respectively,
(C) by striking ‘‘paragraph (6)’’ and in-
serting ‘‘subparagraph (F)’’, and
(D) by striking ‘‘paragraph (1)’’ and in-
serting ‘‘subparagraph (A)’’.
(b) MINIMUM
COST
REQUIREMENTS
OF
EM-
PLOYER.—Paragraph (3) of section 420(c) (relating to
1158
Title VII, Subtitle E
minimum cost requirements) is amended by adding at the
end the following new subparagraph:
‘‘(E) ADJUSTMENT
FOR
COST
SAVINGS
UNDER HEALTH SECURITY ACT.—To the extent
provided by the Secretary, a plan shall not be
treated as failing to meet the requirements of
this section to the extent such failure is attrib-
utable to a reduction in qualified current retiree
health liabilities by reason of the enactment of
the Health Security Act.’’
Subtitle 
E—Coordination 
With
COBRA Continuing Care Provi-
sions
SEC. 7501. COORDINATION WITH COBRA CONTINUING CARE
PROVISIONS.
(a) PERIOD OF COVERAGE.—Clause (iv) of section
4980B(f)(2)(B) 
(defining 
period 
of 
coverage) 
is
amended—
(1) by striking ‘‘or’’ at the end of subclause (I),
by striking the period at the end of subclause (II)
and inserting ‘‘, or’’, and by adding at the end the
following new subclause:
‘‘(III) eligible for comprehensive health cov-
erage described in section 1101 of the Health Secu-
rity Act.’’, and