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108TH CONGRESS 
2D SESSION 
H. R. 3748
To amend the Internal Revenue Code of 1986 to allow individuals a refund-
able and advanceable credit against income tax for health insurance 
costs. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 28, 2004
Mr. SHADEGG introduced the following bill; which was referred to the 
Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to allow indi-
viduals a refundable and advanceable credit against in-
come tax for health insurance costs.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; CONSTITUTIONAL AUTHORITY. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Health Care Cost Integrity and Fairness Act of 2004’’. 
(b) CONSTITUTIONAL AUTHORITY TO ENACT THIS 
LEGISLATION.—The constitutional authority upon which 
this Act rests is the power of Congress to regulate com-
merce with foreign nations and among the several States,
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set forth in article I, section 8 of the United States Con-
stitution. 
SEC. 2. REFUNDABLE AND ADVANCEABLE CREDIT FOR 
HEALTH INSURANCE COSTS. 
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to refundable credits) is amended by redes-
ignating section 36 as section 37 and by inserting after 
section 35 the following new section: 
‘‘SEC. 36. HEALTH INSURANCE COSTS. 
‘‘(a) IN GENERAL.—In the case of an individual, 
there shall be allowed as a credit against the tax imposed 
by this subtitle an amount equal to the amount paid dur-
ing the taxable year for qualified health insurance for cov-
erage of the taxpayer, his spouse, and dependents. 
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM CREDIT.—
‘‘(A) IN GENERAL.—The amount allowed 
as a credit under subsection (a) to the taxpayer 
for the taxable year shall not exceed the sum of 
the monthly limitations for months during such 
taxable year. 
‘‘(B) MONTHLY LIMITATION.—The month-
ly limitation for any month is the amount equal 
to 1⁄12 of the lesser of—
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‘‘(i) the product of $1,000 multiplied 
by the number of individuals taken into ac-
count under subsection (a) who are covered 
under qualified health insurance as of the 
first day of such month, or 
‘‘(ii) $3,000. 
‘‘(2) EMPLOYER SUBSIDIZED COVERAGE.—Sub-
section (a) shall not apply to amounts paid for cov-
erage of any individual for any month for which 
such individual participates in any subsidized health 
plan maintained by any employer of the taxpayer or 
of the spouse of the taxpayer. The rule of the last 
sentence of section 162(l)(2)(B) shall apply for pur-
poses of the preceding sentence. 
‘‘(c) QUALIFIED HEALTH INSURANCE.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—The term ‘qualified health 
insurance’ means insurance which constitutes med-
ical care if—
‘‘(A) such insurance meets the require-
ments of section 223(c)(2)(A)(ii), 
‘‘(B) there is no exclusion from, or limita-
tion on, coverage for any preexisting medical 
condition of any applicant who, on the date the 
application is made, has been continuously in-
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sured during the 1-year period ending on the 
date of the application under—
‘‘(i) qualified health insurance (deter-
mined without regard to this subpara-
graph), or 
‘‘(ii) a program described in—
‘‘(I) title XVIII or XIX of the 
Social Security Act, 
‘‘(II) chapter 55 of title 10, 
United States Code, 
‘‘(III) chapter 17 of title 38, 
United States Code, 
‘‘(IV) chapter 89 of title 5, 
United States Code, or 
‘‘(V) the Indian Health Care Im-
provement Act, and 
‘‘(C) in the case of each applicant who has 
not been continuously so insured during the 1-
year period ending on the date the application 
is made, the exclusion from, or limitation on, 
coverage for any preexisting medical condition 
does not extend beyond the period after such 
date equal to the lesser of—
‘‘(i) the number of months imme-
diately prior to such date during which the
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individual was not so insured since the ill-
ness or condition in question was first di-
agnosed, or 
‘‘(ii) 1 year. 
‘‘(2) EXCLUSION
OF
CERTAIN
PLANS.—Such 
term does not include—
‘‘(A) insurance if substantially all of its 
coverage is coverage described in section 
223(c)(1)(B), 
‘‘(B) insurance under a program described 
in paragraph (1)(B)(ii). 
‘‘(3) TRANSITION RULE FOR 2004.—In the case 
of applications made during 2004, the requirements 
of subparagraphs (C) and (D) of paragraph (1) are 
met only if the insurance does not exclude from cov-
erage, or limit coverage for, any preexisting medical 
condition of any applicant. 
‘‘(d) SPECIAL RULES.—
‘‘(1) COORDINATION
WITH
MEDICAL
DEDUC-
TION, ETC.—Any amount paid by a taxpayer for in-
surance to which subsection (a) applies shall not be 
taken into account in computing the amount allow-
able to the taxpayer as a credit under section 35 or 
as a deduction under section 162(l) or 213(a).
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‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.—No 
credit shall be allowed under this section to any indi-
vidual with respect to whom a deduction under sec-
tion 151 is allowable to another taxpayer for a tax-
able year beginning in the calendar year in which 
such individual’s taxable year begins. 
‘‘(3) MARRIED COUPLES MUST FILE JOINT RE-
TURN.—
‘‘(A) IN
GENERAL.—If the taxpayer is 
married at the close of the taxable year, the 
credit shall be allowed under subsection (a) only 
if the taxpayer and his spouse file a joint return 
for the taxable year. 
‘‘(B) MARITAL STATUS; CERTAIN MARRIED 
INDIVIDUALS LIVING APART.—Rules similar to 
the rules of paragraphs (3) and (4) of section 
21(e) shall apply for purposes of this para-
graph. 
‘‘(4) VERIFICATION
OF
COVERAGE, ETC.—No 
credit shall be allowed under this section to any indi-
vidual unless such individual’s coverage under quali-
fied health insurance, and the amount paid for such 
coverage, are verified in such manner as the Sec-
retary may prescribe.
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‘‘(5) COORDINATION WITH ADVANCE PAYMENTS 
OF CREDIT.—With respect to any taxable year, the 
amount which would (but for this subsection) be al-
lowed as a credit to the taxpayer under subsection 
(a) shall be reduced (but not below zero) by the ag-
gregate amount paid on behalf of such taxpayer 
under section 7528 for months beginning in such 
taxable year. 
‘‘(6) COST-OF-LIVING
ADJUSTMENT.—In the 
case of any taxable year beginning in a calendar 
year after 2004, each dollar amount contained in 
subsection (b)(1)(B) shall be increased by an 
amount equal to—
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year in which the taxable year begins by sub-
stituting ‘calendar year 2003’ for ‘calendar year 
1992’ in subparagraph (B) thereof. 
Any increase determined under the preceding sen-
tence shall be rounded to the nearest multiple of 
$10.’’. 
(b) ADVANCE PAYMENT OF CREDIT.—Chapter 77 of 
such Code (relating to miscellaneous provisions) is amend-
ed by adding at the end the following new section:
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‘‘SEC. 7528. ADVANCE PAYMENT OF CREDIT FOR HEALTH 
INSURANCE COSTS. 
‘‘(a) GENERAL RULE.—The Secretary shall establish 
a program for making payments on behalf of individuals 
to providers of qualified health insurance (as defined in 
section 36(c)) for such individuals. 
‘‘(b) LIMITATION ON ADVANCE PAYMENTS DURING 
ANY TAXABLE YEAR.—The Secretary may make pay-
ments under subsection (a) only to the extent that the 
total amount of such payments made on behalf of any indi-
vidual during the taxable year does not exceed the amount 
allowable as a credit to such individual for such year under 
section 36 (determined without regard to subsection (d)(5) 
thereof).’’. 
(c) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 1324(b) of title 
31, United States Code, is amended by inserting ‘‘or 
36’’ after ‘‘section 35’’. 
(2) The table of sections for subpart C of part 
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by striking the item 
relating to section 36 and inserting the following 
new items:
‘‘Sec. 36. Health insurance costs. 
‘‘Sec. 37. Overpayments of tax.’’.
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(3) The table of sections for chapter 77 of such 
Code is amended by adding at the end the following 
new item:
‘‘Sec. 7528. Advance payment of credit for health insurance costs.’’.
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2003.
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