SEC. 2. APPLICATION OF ACCIDENT AND HEALTH PLANS 
TO ELIGIBLE BENEFICIARIES. 
(a) EXCLUSION OF CONTRIBUTIONS.—Section 106 of 
the Internal Revenue Code of 1986 (relating to contribu-
tions by employer to accident and health plans) is amend-
ed by adding at the end the following new subsection: 
‘‘(f) COVERAGE PROVIDED
FOR ELIGIBLE BENE-
FICIARIES OF EMPLOYEES.— 
‘‘(1) IN GENERAL.—Subsection (a) shall apply 
with respect to any eligible beneficiary of the em-
ployee. 
‘‘(2) ELIGIBLE BENEFICIARY.—For purposes of 
this subsection, the term ‘eligible beneficiary’ means 
any individual who is eligible to receive benefits or 
coverage under an accident or health plan.’’. 
(b) EXCLUSION OF AMOUNTS EXPENDED FOR MED-
ICAL CARE.—The first sentence of section 105(b) of such 
Code (relating to amounts expended for medical care) is 
amended— 
(1) by striking ‘‘and his dependents’’ and in-
serting ‘‘his dependents’’, and 
(2) by inserting before the period the following: 
‘‘and any eligible beneficiary (within the meaning of 
section 106(f)) with respect to the taxpayer’’. 
(c) PAYROLL TAXES.— 
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(1) Section 3121(a)(2) of such Code is amend-
ed— 
(A) by striking ‘‘or any of his dependents’’ 
in the matter preceding subparagraph (A) and 
inserting ‘‘, any of his dependents, or any eligi-
ble beneficiary (within the meaning of section 
106(f)) with respect to the employee’’, 
(B) by striking ‘‘or any of his dependents,’’ 
in subparagraph (A) and inserting ‘‘, any of his 
dependents, or any eligible beneficiary (within 
the meaning of section 106(f)) with respect to 
the employee,’’, and 
(C) by striking ‘‘and their dependents’’ 
both places it appears and inserting ‘‘and such 
employees’ dependents and eligible beneficiaries 
(within the meaning of section 106(f))’’. 
(2) Section 3231(e)(1) of such Code is amend-
ed— 
(A) by striking ‘‘or any of his dependents’’ 
and inserting ‘‘, any of his dependents, or any 
eligible beneficiary (within the meaning of sec-
tion 106(f)) with respect to the employee,’’, and 
(B) by striking ‘‘and their dependents’’ 
both places it appears and inserting ‘‘and such 
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employees’ dependents and eligible beneficiaries 
(within the meaning of section 106(f))’’. 
(3) Section 3306(b)(2) of such Code is amend-
ed— 
(A) by striking ‘‘or any of his dependents’’ 
in the matter preceding subparagraph (A) and 
inserting ‘‘, any of his dependents, or any eligi-
ble beneficiary (within the meaning of section 
106(f)) with respect to the employee,’’, 
(B) by striking ‘‘or any of his dependents’’ 
in subparagraph (A) and inserting ‘‘, any of his 
dependents, or any eligible beneficiary (within 
the meaning of section 106(f)) with respect to 
the employee’’, and 
(C) by striking ‘‘and their dependents’’ 
both places it appears and inserting ‘‘and such 
employees’ dependents and eligible beneficiaries 
(within the meaning of section 106(f))’’. 
(4) Section 3401(a) of such Code is amended 
by striking ‘‘or’’ at the end of paragraph (22), by 
striking the period at the end of paragraph (23) and 
inserting ‘‘; or’’, and by inserting after paragraph 
(23) the following new paragraph: 
‘‘(24) for any payment made to or for the ben-
efit of an employee or any eligible beneficiary (within 
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the meaning of section 106(f)) if at the time of such 
payment it is reasonable to believe that the employee 
will be able to exclude such payment from income 
under section 106 or under section 105 by reference 
in section 105(b) to section 106(f).’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2009. 
SEC. 3. EXPANSION OF DEPENDENCY FOR PURPOSES OF 
DEDUCTION FOR HEALTH INSURANCE COSTS 
OF SELF-EMPLOYED INDIVIDUALS. 
(a) IN GENERAL.—Paragraph (1) of section 162(l) 
of the Internal Revenue Code of 1986 (relating to special 
rules for health insurance costs of self-employed individ-
uals) is amended to read as follows: 
‘‘(1) ALLOWANCE OF DEDUCTION.—In the case 
of a taxpayer who is an employee within the mean-
ing of section 401(c)(1), there shall be allowed as a 
deduction under this section an amount equal to the 
amount paid during the taxable year for insurance 
which constitutes medical care for— 
‘‘(A) the taxpayer, 
‘‘(B) the taxpayer’s spouse, 
‘‘(C) the taxpayer’s dependents, and 
‘‘(D) any individual who— 
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