I 
109TH CONGRESS 
1ST SESSION H. R. 1399 
To expand the number of individuals and families with health insurance 
coverage, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 17, 2005 
Ms. KAPTUR (for herself and Mr. LATOURETTE) introduced the following bill; 
which was referred to the Committee on Energy and Commerce, and in 
addition to the Committees on Ways and Means, Education and the 
Workforce, and Rules, for a period to be subsequently determined by the 
Speaker, in each case for consideration of such provisions as fall within 
the jurisdiction of the committee concerned 
A BILL 
To expand the number of individuals and families with health 
insurance coverage, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Health Coverage, Affordability, Responsibility, and Eq-
uity Act of 2005’’ or the ‘‘HealthCARE Act of 2005’’. 
(b) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows:
Sec. 1. Short title; table of contents. 
TITLE I—INCREASING HEALTH CARE COVERAGE 
Subtitle A—Medicaid and SCHIP 
Sec. 101. State option to offer medicaid coverage based on need. 
Sec. 102. State option to provide coverage of children under SCHIP in excess 
of the State’s allotment. 
Subtitle B—Refundable Tax Credit for Health Insurance Costs of Low- 
Income Individuals and Families 
Sec. 111. Credit for health insurance costs of certain low-income individuals. 
Sec. 112. Advance payment of credit for health insurance costs of eligible low- 
income individuals. 
TITLE II—IMPROVING ACCESS TO HEALTH PLANS 
Sec. 201. Definitions. 
Sec. 202. Establishment of health insurance purchasing pools. 
Sec. 203. Purchasing pools. 
Sec. 204. Purchasing pool operators. 
Sec. 205. Contracts with participating insurers. 
Sec. 206. Options for health benefits coverage. 
Sec. 207. Enrollment process for eligible individuals. 
Sec. 208. Plan premiums. 
Sec. 209. Enrollee premium share. 
Sec. 210. Payments to purchasing pool operators and payments to participating 
insurers. 
Sec. 211. State-based reinsurance programs. 
Sec. 212. Coverage under individual health insurance. 
Sec. 213. Use of premium subsidies to unify family coverage with members en-
rolled in medicaid and SCHIP. 
Sec. 214. Coverage through employer-sponsored health insurance. 
Sec. 215. Participation by small employers. 
Sec. 216. Report. 
Sec. 217. Authorization of appropriations. 
TITLE III—NATIONAL ADVISORY COMMISSION ON EXPANDED 
ACCESS TO HEALTH CARE 
Sec. 301. National Advisory Commission on Expanded Access to Health Care. 
Sec. 302. Congressional action. 
TITLE IV—STATE WAIVERS 
Sec. 401. State waivers.
TITLE I—INCREASING HEALTH 
CARE COVERAGE 
Subtitle A—Medicaid and SCHIP 
SEC. 101. STATE OPTION TO OFFER MEDICAID COVERAGE 
BASED ON NEED. 
(a) STATE OPTION.—Section 1902(a)(10)(A)(ii) of 
the Social Security Act (42 U.S.C. 1396a) is amended— 
(1) by striking ‘‘or’’ at the end of subclause 
(XVII); 
(2) by adding ‘‘or’’ at the end of subclause 
(XVIII); and 
(3) by adding at the end the following: 
‘‘(XIX) who are not otherwise el-
igible for medical assistance under 
this title and whose income does not 
exceed such income level as the State 
may establish, expressed as a percent-
age (not to exceed 100) of the income 
official poverty line (as defined by the 
Office of Management and Budget, 
and revised annually in accordance 
with section 673(2) of the Omnibus 
Budget Reconciliation Act of 1981) 
applicable to a family of the size in-
volved;’’.
(b) INCREASED FMAP.—Section 1905 of the Social 
Security Act (42 U.S.C. 1396d) is amended— 
(1) in the first sentence of subsection (b)— 
(A) by striking ‘‘and (4)’’ and inserting 
‘‘(4)’’; and 
(B) by inserting before the period the fol-
lowing: ‘‘, and (5) in the case of a State that 
meets the conditions described in paragraph (1) 
of subsection (y), the Federal medical assist-
ance percentage shall be equal to the need- 
based enhanced FMAP described in paragraph 
(2) of subsection (y)’’; and 
(2) by adding at the end the following: 
‘‘(y)(1) For purposes of clause (5) of the first sen-
tence of subsection (b), the conditions described in this 
subsection are the following: 
‘‘(A) The State provides medical assistance to 
individuals 
described 
in 
subsection 
(a)(10)(A)(ii)(XIX). 
‘‘(B) The State uses streamlined enrollment 
and outreach measures to all individuals described in 
subparagraph (A) including— 
‘‘(i) the same application and retention 
procedures (such as 1-page enrollment forms 
and enrollment by mail) used by the majority of
State programs under title XXI during the pre-
ceding year; and 
‘‘(ii) outreach efforts proportional in scope 
and reasonably expected effectiveness to those 
employed by the State during a comparable 
stage of implementation of the State’s program 
under title XXI. 
‘‘(C) The State applies eligibility standards and 
methodologies under this title with respect to indi-
viduals residing in the State who have not attained 
age 65 that are not more restrictive (as determined 
under section 1902(a)(10)(C)(i)(III)) than the 
standards and methodologies that applied under this 
title with respect to such individuals as of July 1, 
2005. 
‘‘(2)(A) For purposes of clause (5) of the first sen-
tence of subsection (b), the need-based enhanced FMAP 
for a State for a fiscal year, is equal to the Federal med-
ical assistance percentage (as defined in the first sentence 
of subsection (b)) for the State increased, subject to sub-
paragraph (B), by such percentage increase as would com-
pensate all States for the additional expenditures that 
would be incurred by all States if the States were to pro-
vide medical assistance to all individuals whose income 
does not exceed 100 percent of the income official poverty
line (as defined by the Office of Management and Budget, 
and revised annually in accordance with section 673(2) of 
the Omnibus Budget Reconciliation Act of 1981) applica-
ble to a family of the size involved and who are eligible 
for such assistance only on the basis of section 
1902(a)(10)(A)(ii)(XIX). 
‘‘(B) In the case of a State that provides medical as-
sistance 
to 
individuals 
described 
in 
section 
1902(a)(10)(A)(ii)(XIX) but limits such assistance to in-
dividuals with income at or below a percentage of the in-
come official poverty line (as defined by the Office of Man-
agement and Budget, and revised annually in accordance 
with section 673(2) of the Omnibus Budget Reconciliation 
Act of 1981) applicable to a family of the size involved 
that is less than 100, the Secretary shall reduce the need- 
based enhanced FMAP otherwise determined for the State 
under subparagraph (A) by a proportion based on the na-
tional income distribution of all individuals in all States 
who are (regardless of whether such individuals are en-
rolled under this title) eligible for medical assistance only 
on the basis of section 1902(a)(10)(A)(ii)(XIX).’’. 
(c) CONFORMING AMENDMENTS.—Section 1905(a) of 
the Social Security Act (42 U.S.C. 1396d(a)) is amended 
in the matter preceding paragraph (1)— 
(1) by striking ‘‘or’’ at the end of clause (xii);
(2) by adding ‘‘or’’ at the end of clause (xiii); 
and 
(3) by inserting after clause (xiii) the following: 
‘‘(xiv) individuals who are eligible for medical 
assistance 
on 
the 
basis 
of 
section 
1902(a)(10)(A)(ii)(XIX);’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section take effect on October 1, 2006, and apply to 
medical assistance provided on or after that date, without 
regard to whether final regulations to carry out such 
amendments have been promulgated by such date. 
SEC. 102. STATE OPTION TO PROVIDE COVERAGE OF CHIL-
DREN UNDER SCHIP IN EXCESS OF THE 
STATE’S ALLOTMENT. 
(a) IN GENERAL.—Title XXI of the Social Security 
Act (42 U.S.C. 1397aa et seq.) is amended by adding at 
the end the following: 
‘‘SEC. 2111. STATE OPTION TO PROVIDE COVERAGE OF 
CHILDREN IN EXCESS OF THE STATE’S AL-
LOTMENT. 
‘‘(a) STATE OPTION.—In the case of a State that 
meets the condition described in subsection (b), the fol-
lowing shall apply: 
‘‘(1) Notwithstanding section 2105 and without 
regard to the State’s allotment under section 2104,
the Secretary shall pay the State an amount for 
each quarter equal to the enhanced FMAP of ex-
penditures incurred in the quarter that are described 
in section 2105(a)(1). 
‘‘(2) The Secretary shall reduce the State’s al-
lotment under section 2104, for the first fiscal year 
for which the State amendment described in sub-
section (b) applies, and for each fiscal year there-
after, by an amount equal to the amount that the 
Secretary determines the State would have expended 
to provide child health assistance to targeted low-in-
come children during that fiscal year if that State 
had not elected the State option to provide such as-
sistance in accordance with this section. 
‘‘(3) Subsections (f) and (g) of section 2104 
shall not apply to the State’s reduced allotment 
(after the application of paragraph (2)). 
‘‘(b) CONDITION DESCRIBED.—For purposes of sub-
section (a), the condition described in this subsection is 
that the State has made an irrevocable election, through 
a plan amendment, to provide child health assistance to 
all targeted low-income children residing in the State 
(without regard to date of application for assistance) and 
to cover health services listed in the State plan whenever 
medically necessary.’’.
(b) EFFECTIVE DATE.—The amendment made by 
this section takes effect on October 1, 2006, and applies 
to child health assistance provided on or after that date, 
without regard to whether final regulations to carry out 
such amendment have been promulgated by such date. 
Subtitle B—Refundable Tax Credit 
for Health Insurance Costs of 
Low-income 
Individuals 
and 
Families 
SEC. 111. CREDIT FOR HEALTH INSURANCE COSTS OF CER-
TAIN LOW-INCOME INDIVIDUALS. 
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to refundable credits) is amended by redes-
ignating section 36 as section 37 and inserting after sec-
tion 35 the following new section: 
‘‘SEC. 36. HEALTH INSURANCE COSTS OF ELIGIBLE LOW-IN-
COME INDIVIDUALS. 
‘‘(a) IN GENERAL.—In the case of an individual, 
there shall be allowed as a credit against the tax imposed 
by this subtitle for the taxable year an amount equal to 
the applicable percentage of the amount paid by the tax-
payer (or on behalf of the taxpayer) for coverage of the 
taxpayer or qualifying family members under qualified
health insurance for eligible coverage months beginning in 
such taxable year. 
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—Subject to paragraph (2), 
the term ‘applicable percentage’ means the standard 
Government contribution (determined for full-time 
Federal employees enrolling in coverage for which 
such 
contribution 
is 
not 
limited 
by 
section 
8906(b)(1) of title 5, United States Code) for an 
employee enrolled in a health benefits plan under 
chapter 89 of title 5, United States Code, for the 
calendar year in which the taxable year begins, ex-
pressed as a percentage of the total premium for 
such plan. 
‘‘(2) INCREASED
PERCENTAGE
FOR
CERTAIN 
TAXPAYERS.— 
‘‘(A) IN GENERAL.—In the case of a tax-
payer whose adjusted gross income for the pre-
ceding taxable year does not exceed 150 percent 
of the poverty level, the applicable percentage 
determined under paragraph (1) shall be in-
creased by such percentage points as the Sec-
retary determines will fully compensate such an 
individual for the individual’s limited pur-
chasing power in comparison to individuals 
whose adjusted gross income equals the average 
adjusted gross income for all Federal employ-
ees, to the extent that the amount of the result-
ing increase in the credit amount for all such 
eligible low-income individuals for the taxable 
year is not reasonably expected to exceed the 5 
percentage point dollar amount for that year, as 
determined under subparagraph (B). 
‘‘(B) DETERMINATION OF 5 PERCENTAGE 
POINT DOLLAR AMOUNT.—For purposes of sub-
paragraph (A), the 5 percentage point dollar 
amount for any taxable year is the product of— 
‘‘(i) the total number of individuals 
receiving credits under this section for 
such year; and 
‘‘(ii) the amount equal to 5 percent of 
the average health insurance premium 
amount to which such credits are applied. 
‘‘(C) RULE OF CONSTRUCTION.—Nothing 
in this paragraph shall be construed to prevent 
the Secretary from establishing more than 1 
level of supplemental assistance that provides 
greater assistance to individuals with lower in-
come, determined as a percentage of poverty.
‘‘(3) APPLICATION OF FEHBP COVERAGE CAT-
EGORIES TO DETERMINATION OF CREDIT.—The per-
centages described in paragraphs (1) and (2) shall 
be applied to a taxpayer consistent with the coverage 
categories (such as self or family coverage) applied 
with respect to a health benefits plan under chapter 
89 of title 5, United States Code. 
‘‘(c) MAXIMUM PREMIUM AMOUNT.—The amount 
paid for qualified health insurance taken into account 
under subsection (a) for any taxable year shall not exceed 
an amount equal to the capped premium established for 
the applicable State under section 204(c)(10) of the 
Health Coverage, Affordability, Responsibility, and Equity 
Act of 2005 for the calendar year in which the such tax-
able year begins. 
‘‘(d) ELIGIBLE COVERAGE MONTH.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The term ‘eligible coverage 
month’ means any month if during such month the 
taxpayer or a qualifying family member— 
‘‘(A) is an eligible low-income individual; 
‘‘(B) is covered by qualified health insur-
ance, the premium for which is paid by the tax-
payer (or on behalf of the taxpayer);
‘‘(C) does not have other specified cov-
erage; and 
‘‘(D) is not imprisoned under Federal, 
State, or local authority. 
‘‘(2) JOINT RETURNS.—In the case of a joint 
return, the requirement of paragraph (1)(A) shall be 
treated as met with respect to any month if at least 
1 spouse satisfies such requirement. 
‘‘(e) ELIGIBLE LOW-INCOME INDIVIDUAL.—For pur-
poses of this section— 
‘‘(1) IN GENERAL.—The term ‘eligible low-in-
come individual’ means an individual— 
‘‘(A) who has not attained age 65; 
‘‘(B) whose adjusted gross income does not 
exceed 200 percent of the poverty level; 
‘‘(C) who is ineligible for the medicaid pro-
gram or the State children’s health insurance 
program under title XIX or XXI of the Social 
Security Act (other than under section 1928 of 
such Act); 
‘‘(D) who has limited access to health in-
surance coverage through the employer of the 
individual or a member of the individual’s fam-
ily (either because the employer does not offer 
such coverage to the individual or because the
employee contribution for such coverage would 
exceed an amount equal to 5 percent of the 
household income of such individual, as deter-
mined in accordance with paragraph (2)); 
‘‘(E) who applies for a credit under this 
section not later than 60 days after receiving 
notice of potential eligibility for such credit, 
under procedures established by the Secretary; 
and 
‘‘(F) who resides in a State where the eli-
gibility standards and methodologies applied 
under the medicaid and State children’s health 
insurance programs with respect to individuals 
residing in the State who have not attained age 
65 are not more restrictive (as determined 
under section 1902(a)(10)(C)(i)(III) of the So-
cial Security Act) than the standards and meth-
odologies that applied under such programs 
with respect to such individuals as of July 1, 
2005. 
‘‘(2) DETERMINATION OF ELIGIBILITY.— 
‘‘(A) SCHIP AGENCY.— 
‘‘(i) IN GENERAL.—The determination 
of whether an individual is an eligible low- 
income individual for purposes of this sec-
tion shall be made by the State agency 
with responsibility for determining the eli-
gibility of individuals for assistance under 
the State children’s health insurance pro-
gram under title XXI of the Social Secu-
rity Act. 
‘‘(ii) APPLICATION
OF
SCREEN
AND 
ENROLL REQUIREMENTS.— 
‘‘(I) IN
GENERAL.—The State 
agency referred to in clause (i) shall 
ensure that individuals applying for a 
certificate of eligibility are screened 
for potential eligibility under the med-
icaid and State children’s health in-
surance programs and that individuals 
found through screening to be eligible 
for assistance under such a program 
are enrolled for assistance under the 
appropriate program. To the max-
imum extent possible pursuant to 
State options under title XIX of the 
Social Security Act, and notwith-
standing any otherwise applicable pro-
vision of, or State plan provision 
under, such title, screening and enroll-
ment activities described in the pre-
vious sentence shall use the proce-
dures employed by the State chil-
dren’s health insurance program oper-
ated under title XXI of the Social Se-
curity Act, if such procedures differ 
from those ordinarily employed by the 
State program operated under title 
XIX of such Act. 
‘‘(II) NO DELAY OF ISSUANCE OF 
CERTIFICATE.—The application of the 
screen and enroll requirements of 
clause (i) shall not delay the issuance 
of a certificate of eligibility to an indi-
vidual for purposes of this section. 
The State agency referred to in clause 
(i) shall adopt procedures to ensure 
that an individual issued a certificate 
of eligibility under this paragraph who 
is subsequently determined to be eligi-
ble for the State medicaid program 
under title XIX of the Social Security 
Act or the State children’s health in-
surance program under XXI of such 
Act shall be enrolled in the appro-
priate program without an interrup-
tion in the individual’s health insur-
ance coverage. 
‘‘(B) STANDARDS.— 
‘‘(i) IN
GENERAL.—An individual is 
an eligible low-income individual for pur-
poses of this section if— 
‘‘(I) on the basis of the individ-
ual’s tax return for the preceding tax-
able year, the individual meets the re-
quirements of paragraph (1)(B), and 
the individual otherwise satisfies the 
requirements of paragraph (1), or 
‘‘(II) the individual is determined 
to satisfy the requirements of para-
graph (1) after the application of the 
same 
eligibility 
methodologies 
as 
would apply for purposes of deter-
mining the eligibility of an individual 
for assistance under the State chil-
dren’s 
health 
insurance 
program 
under title XXI of the Social Security 
Act. 
‘‘(ii) APPLICATION OF SCHIP INCOME 
DETERMINATION
METHODOLOGIES.—For
purposes of clause (i)(II), determinations 
of income levels shall be made using the 
methodologies described in that clause, to 
the 
extent 
such 
methodologies 
for 
ascertaining household income differ from 
any otherwise applicable method for deter-
mining adjusted gross income or the defini-
tion of adjusted gross income. 
‘‘(C) CERTIFICATE OF ELIGIBILITY.— 
‘‘(i) IN GENERAL.—An individual who 
is determined to be an eligible low-income 
individual shall be issued a certificate of 
eligibility by the State agency referred to 
in subparagraph (A). 
‘‘(ii) CERTIFICATE
AMOUNT.—Such 
certificate shall indicate the applicable per-
centage of the amount paid for coverage 
under qualified health insurance that the 
individual is eligible for under this section 
(including any supplemental assistance 
which the individual may be eligible for 
under subsection (b)(2), unless the indi-
vidual elects to not receive such supple-
mental assistance).
‘‘(iii) 12-MONTH PERIOD OF ISSUE.— 
The certificate of eligibility shall apply for 
a 12-month period from the date of issue, 
notwithstanding any changes in household 
circumstances following the individual’s ap-
plication for a credit under this section or 
supplemental assistance. 
‘‘(D) SUPPLEMENTAL
ASSISTANCE.—The 
State agency described in subparagraph (A) 
shall determine an individual’s eligibility for 
supplemental assistance under subsection (b)(2) 
based on the methodologies referred to in sub-
paragraph (B)(ii). 
‘‘(f) QUALIFYING FAMILY MEMBER.—For purposes 
of this section— 
‘‘(1) IN GENERAL.—The term ‘qualifying family 
member’ means the taxpayer’s spouse and any de-
pendent of the taxpayer. Such term does not include 
any individual who is not an eligible low-income indi-
vidual under subsection (e)(1). 
‘‘(2) SPECIAL DEPENDENCY TEST IN CASE OF 
DIVORCED PARENTS, ETC.—If paragraph (2) of sec-
tion 152(e) applies to any child with respect to any 
calendar year, in the case of any taxable year begin-
ning in such calendar year, such child shall be treat-
ed as described in paragraph (1)(B) with respect to 
the custodial parent (within the meaning of section 
152(e)(3)) and not with respect to the noncustodial 
parent. 
‘‘(g) QUALIFIED HEALTH INSURANCE.—For pur-
poses of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified health 
insurance’ means any of the following: 
‘‘(A) Coverage under an insurance plan 
participating in a purchasing pool established 
pursuant to section 203 of the Health Cov-
erage, Affordability, Responsibility, and Equity 
Act of 2005. 
‘‘(B) Coverage under individual health in-
surance pursuant to section 212 of such Act. 
‘‘(C) Coverage, pursuant to section 213 of 
such Act, under the medicaid program or the 
State children’s health insurance program if 1 
or more family members qualifies for coverage 
under such program. 
‘‘(D) Coverage, pursuant to section 214 of 
such Act, under an employer-sponsored insur-
ance plan, including—
‘‘(i) coverage under a COBRA con-
tinuation provision (as defined in section 
9832(d)(1)); 
‘‘(ii) State-based continuation cov-
erage provided under a State law that re-
quires such coverage; 
‘‘(iii) coverage voluntarily offered by a 
former employer of the individual or family 
member; or 
‘‘(iv) coverage under a group health 
plan that is available through the employ-
ment of the individual or a family member. 
‘‘(2) EXCEPTION.—The term ‘qualified health 
insurance’ shall not include— 
‘‘(A) a flexible spending or similar ar-
rangement; and 
‘‘(B) any insurance if substantially all of 
its coverage is of excepted benefits described in 
section 9832(c). 
‘‘(3) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) 
EMPLOYER-SPONSORED
INSUR-
ANCE.— 
‘‘(i) IN
GENERAL.—The term ‘em-
ployer-sponsored insurance’ means any in-
surance which covers medical care under 
any health plan maintained by any em-
ployer (or former employer) of the tax-
payer or the taxpayer’s spouse. 
‘‘(ii) 
TREATMENT
OF
CAFETERIA 
PLANS.—For purposes of clause (i), the 
cost of coverage shall be treated as paid or 
incurred by an employer to the extent the 
coverage is in lieu of a right to receive cash 
or other qualified benefits under a cafe-
teria plan (as defined in section 125(d)). 
‘‘(B) INDIVIDUAL HEALTH INSURANCE.— 
The term ‘individual health insurance’ means 
any insurance which constitutes medical care 
offered to individuals other than in connection 
with a group health plan and does not include 
Federal- or State-based health insurance cov-
erage. 
‘‘(h) OTHER SPECIFIED COVERAGE.—For purposes 
of this section, an individual has other specified coverage 
for any month if, as of the first day of such month— 
‘‘(1) COVERAGE UNDER MEDICARE.—Such indi-
vidual is entitled to benefits under part A of title 
XVIII of the Social Security Act or is enrolled under 
part B of such title.
‘‘(2) CERTAIN OTHER COVERAGE.—Such indi-
vidual— 
‘‘(A) is enrolled in a health benefits plan 
under chapter 89 of title 5, United States Code; 
or 
‘‘(B) is entitled to receive benefits under 
chapter 55 of title 10, United States Code. 
‘‘(i) FEDERAL POVERTY LEVEL; POVERTY LEVEL; 
POVERTY.—For purposes of this section, the terms ‘Fed-
eral poverty level’, ‘poverty level’, and ‘poverty’ mean the 
income official poverty line (as defined by the Office of 
Management and Budget, and revised annually in accord-
ance with section 673(2) of the Omnibus Budget Rec-
onciliation Act of 1981) applicable to a family of the size 
involved. 
‘‘(j) SPECIAL RULES.— 
‘‘(1) COORDINATION WITH ADVANCE PAYMENTS 
OF CREDIT.—With respect to any taxable year, the 
amount which would (but for this subsection) be al-
lowed as a credit to the taxpayer under subsection 
(a) shall be reduced (but not below zero) by the ag-
gregate amount paid on behalf of such taxpayer 
under section 7527A for months beginning in such 
taxable year.
‘‘(2) COORDINATION WITH OTHER DEDUCTIONS 
AND CREDITS.—Amounts taken into account under 
subsection (a) shall not be taken into account in de-
termining any deduction allowed under section 
162(l) or 213. The amount of any credit otherwise 
allowed under this section shall be reduced by the 
amount of any credit allowed under section 35. 
‘‘(3) HEALTH
SAVINGS
ACCOUNT
DISTRIBU-
TIONS.—Amounts distributed from a health savings 
account (as defined in section 223(d)) or an Archer 
MSA (as defined in section 220(d)) shall not be 
taken into account under subsection (a). 
‘‘(4) DENIAL OF CREDIT TO DEPENDENTS.—No 
credit shall be allowed under this section to any indi-
vidual with respect to whom a deduction under sec-
tion 151 is allowable to another taxpayer for a tax-
able year beginning in the calendar year in which 
such individual’s taxable year begins. 
‘‘(5) BOTH SPOUSES ELIGIBLE LOW-INCOME IN-
DIVIDUALS.—The spouse of the taxpayer shall not 
be treated as a qualifying family member for pur-
poses of subsection (a), if— 
‘‘(A) the taxpayer is married at the close 
of the taxable year;
‘‘(B) the taxpayer and the taxpayer’s 
spouse are both eligible low-income individuals 
during the taxable year; and 
‘‘(C) the taxpayer files a separate return 
for the taxable year. 
‘‘(6) MARITAL STATUS; CERTAIN MARRIED IN-
DIVIDUALS
LIVING
APART.—Rules similar to the 
rules of paragraphs (3) and (4) of section 21(e) 
shall apply for purposes of this section. 
‘‘(7) INSURANCE WHICH COVERS OTHER INDI-
VIDUALS.—For purposes of this section, rules simi-
lar to the rules of section 213(d)(6) shall apply with 
respect to any contract for qualified health insurance 
under which amounts are payable for coverage of an 
individual other than the taxpayer and qualifying 
family members. 
‘‘(8) TREATMENT
OF
PAYMENTS.—For pur-
poses of this section: 
‘‘(A) PAYMENTS
BY
SECRETARY.—Any 
payment made by the Secretary on behalf of 
any individual under section 7527A (relating to 
advance payment of credit for health insurance 
costs of eligible low-income individuals) shall be 
treated as having been made by the taxpayer 
(or on behalf of the taxpayer) on the first day
of the month for which such payment was 
made. 
‘‘(B) PAYMENTS BY TAXPAYER.—Any pay-
ment made by the taxpayer (or on behalf of the 
taxpayer) for eligible coverage months shall be 
treated as having been so made on the first day 
of the month for which such payment was 
made. 
‘‘(9) REGULATIONS.— 
‘‘(A) IN GENERAL.—The Secretary, in con-
sultation with the Secretary of Health and 
Human Services, shall administer the credit al-
lowed under this section and shall prescribe 
such regulations and other guidance as may be 
necessary or appropriate to carry out this sec-
tion, section 6050U, and section 7527A. 
‘‘(B) 
ELIGIBILITY
DETERMINATIONS.— 
Such regulations shall include such standards 
as the Secretary of Health and Human Services 
may specify with respect to the requirements 
for eligibility determinations under subsection 
(e)(2). 
‘‘(C) MEASURES TO COMBAT FRAUD AND 
ABUSE.—Such regulations shall include appro-
priate procedures to deter, detect, and penalize
fraudulent efforts to obtain a credit under this 
section by individuals, providers of qualified 
health insurance, and others.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 1324(b) of title 
31, United States Code, is amended by inserting ‘‘or 
section 36’’ after ‘‘section 35’’. 
(2) The table of sections for subpart C of part 
IV of chapter 1 of the Internal Revenue Code of 
1986 is amended by redesignating the item relating 
to section 36 as an item relating to section 37 and 
by inserting before such item the following new item: 
‘‘Sec. 36. Health insurance costs of eligible low-income individuals.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2007. 
(d) REIMBURSEMENT FOR ADMINISTRATIVE COSTS 
INCURRED IN DETERMINING ELIGIBILITY FOR CREDIT.— 
(1) IN GENERAL.—The Secretary of Health and 
Human Services shall reimburse States for the rea-
sonable administrative costs incurred in making eli-
gibility determinations in accordance with section 
36(e) of the Internal Revenue Code of 1986 (as 
added by subsection (a)). Such reimbursement shall 
not apply to State costs required under the medicaid 
or State children’s health insurance programs.
(2) APPLICATION.—A State desiring reimburse-
ment under this subsection shall submit an applica-
tion to the Secretary of Health and Human Services 
in such manner, at such time, and containing such 
information as the Secretary may require. 
(3) APPROPRIATION.—Out of any money in the 
Treasury of the United States not otherwise appro-
priated, there are appropriated such sums as may be 
necessary to carry out this subsection. 
SEC. 112. ADVANCE PAYMENT OF CREDIT FOR HEALTH IN-
SURANCE COSTS OF ELIGIBLE LOW-INCOME 
INDIVIDUALS. 
(a) IN GENERAL.—Chapter 77 of the Internal Rev-
enue Code of 1986 (relating to miscellaneous provisions) 
is amended by inserting after section 7527 the following 
new section: 
‘‘SEC. 7527A. ADVANCE PAYMENT OF CREDIT FOR HEALTH 
INSURANCE COSTS OF ELIGIBLE LOW-IN-
COME INDIVIDUALS. 
‘‘(a) GENERAL RULE.—Not later than August 1, 
2007, the Secretary shall establish a program for making 
payments on behalf of certified individuals to providers of 
qualified health insurance (as defined in section 36(g)) for 
such individuals.
‘‘(b) LIMITATION ON ADVANCE PAYMENTS DURING 
ANY TAXABLE YEAR.—The Secretary may make pay-
ments under subsection (a) only to the extent that the 
total amount of such payments made on behalf of any indi-
vidual during the taxable year is not reasonably expected 
to exceed the applicable percentage (as defined in section 
36(b)) of the amount paid by the taxpayer (or on behalf 
of the taxpayer) for coverage of the taxpayer and quali-
fying family members under qualified health insurance for 
eligible coverage months beginning in the taxable year. 
‘‘(c) CERTIFIED INDIVIDUAL.—For purposes of this 
section, the term ‘certified individual’ means any indi-
vidual for whom a health coverage eligibility certificate is 
in effect. 
‘‘(d) HEALTH
COVERAGE
ELIGIBILITY
CERTIFI-
CATE.—For purposes of this section, the term ‘health cov-
erage eligibility certificate’ means any written statement 
that an individual is an eligible low-income individual (as 
defined in section 36(e)) if such statement provides such 
information as the Secretary may require for purposes of 
this section and is issued by the State agency responsible 
for administering the State children’s health insurance 
program under title XXI of the Social Security Act.’’. 
(b) DISCLOSURE
OF RETURN INFORMATION
FOR 
PURPOSES OF CARRYING OUT A PROGRAM FOR ADVANCE
PAYMENT OF CREDIT FOR HEALTH INSURANCE COSTS OF 
ELIGIBLE LOW-INCOME INDIVIDUALS.— 
(1) IN
GENERAL.—Subsection (l) of section 
6103 of the Internal Revenue Code of 1986 (relating 
to disclosure of returns and return information for 
purposes other than tax administration) is amended 
by adding at the end the following new paragraph: 
‘‘(21) DISCLOSURE OF RETURN INFORMATION 
FOR PURPOSES OF CARRYING OUT A PROGRAM FOR 
ADVANCE PAYMENT OF CREDIT FOR HEALTH INSUR-
ANCE
COSTS
OF
ELIGIBLE
LOW-INCOME
INDIVID-
UALS.—The Secretary may disclose to providers of 
health insurance for any certified individual (as de-
fined in section 7527A(c)) return information with 
respect to such certified individual only to the extent 
necessary to carry out the program established by 
section 7527A (relating to advance payment of cred-
it for health insurance costs of eligible low-income 
individuals).’’. 
(2) PROCEDURES
AND
RECORDKEEPING
RE-
LATED TO DISCLOSURES.—Paragraph (4) of section 
6103(p) of such Code is amended by striking ‘‘or 
(20)’’ each place it appears and inserting ‘‘(20), or 
(21)’’.
(3) UNAUTHORIZED
INSPECTION
OR
DISCLO-
SURE OF RETURNS OR RETURN INFORMATION.—Sec-
tion 7213(a)(2) of such Code is amended by striking 
‘‘or (20)’’ and inserting ‘‘(20), or (21)’’. 
(c) INFORMATION REPORTING.— 
(1) IN GENERAL.—Subpart B of part III of 
subchapter A of chapter 61 of the Internal Revenue 
Code of 1986 (relating to information concerning 
transactions with other persons) is amended by in-
serting after section 6050T the following new sec-
tion: 
‘‘SEC. 6050U. RETURNS RELATING TO CREDIT FOR HEALTH 
INSURANCE COSTS OF ELIGIBLE LOW-IN-
COME INDIVIDUALS. 
‘‘(a) REQUIREMENT OF REPORTING.—Every person 
who is entitled to receive payments for any month of any 
calendar year under section 7527A (relating to advance 
payment of credit for health insurance costs of eligible 
low-income individuals) with respect to any certified indi-
vidual (as defined in section 7527A(c)) shall, at such time 
as the Secretary may prescribe, make the return described 
in subsection (b) with respect to each such individual. 
‘‘(b) FORM AND MANNER OF RETURNS.—A return 
is described in this subsection if such return—
‘‘(1) is in such form as the Secretary may pre-
scribe; and 
‘‘(2) contains— 
‘‘(A) the name, address, and TIN of each 
individual referred to in subsection (a); 
‘‘(B) the number of months for which 
amounts were entitled to be received with re-
spect to such individual under section 7527A 
(relating to advance payment of credit for 
health insurance costs of eligible low-income in-
dividuals); 
‘‘(C) the amount entitled to be received for 
each such month; and 
‘‘(D) such other information as the Sec-
retary may prescribe. 
‘‘(c) STATEMENTS TO BE FURNISHED TO INDIVID-
UALS WITH RESPECT TO WHOM INFORMATION IS RE-
QUIRED.—Every person required to make a return under 
subsection (a) shall furnish to each individual whose name 
is required to be set forth in such return a written state-
ment showing— 
‘‘(1) the name and address of the person re-
quired to make such return and the phone number 
of the information contact for such person; and
‘‘(2) the information required to be shown on 
the return with respect to such individual. 
The written statement required under the preceding sen-
tence shall be furnished on or before January 31 of the 
year following the calendar year for which the return 
under subsection (a) is required to be made.’’. 
(2) ASSESSABLE PENALTIES.— 
(A) 
Subparagraph 
(B) 
of 
section 
6724(d)(1) of such Code (relating to defini-
tions) is amended by redesignating clauses (xiii) 
through (xviii) as clauses (xiv) through (xix), 
respectively, and by inserting after clause (xii) 
the following new clause: 
‘‘(xiii) section 6050U (relating to re-
turns relating to credit for health insur-
ance costs of eligible low-income individ-
uals),’’. 
(B) Paragraph (2) of section 6724(d) of 
such Code is amended by striking ‘‘or’’ at the 
end of subparagraph (AA), by striking the pe-
riod at the end of subparagraph (BB) and in-
serting ‘‘, or’’, and by adding after subpara-
graph (BB) the following new subparagraph:
‘‘(CC) section 6050U (relating to returns 
relating to credit for health insurance costs of 
eligible low-income individuals).’’. 
(d) CLERICAL AMENDMENTS.— 
(1) ADVANCE PAYMENT.—The table of sections 
for chapter 77 of the Internal Revenue Code of 1986 
is amended by inserting after the item relating to 
section 7527 the following new item: 
‘‘Sec. 7527A. Advance payment of credit for health insurance costs of eligible 
low-income individuals.’’. 
(2) INFORMATION
REPORTING.—The table of 
sections for subpart B of part III of subchapter A 
of chapter 61 of such Code is amended by inserting 
after the item relating to section 6050T the fol-
lowing new item: 
‘‘Sec. 6050U. Returns relating to credit for health insurance costs of eligible 
low-income individuals.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on January 1, 2008. 
TITLE II—IMPROVING ACCESS 
TO HEALTH PLANS 
SEC. 201. DEFINITIONS. 
In this title: 
(1) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible 
individual’’ means an individual with respect to 
whom a tax credit is allowed under section 36 of the
Internal Revenue Code of 1986 (as added by section 
111). 
(2) PARTICIPATING INSURER.—The term ‘‘par-
ticipating insurer’’ means an entity with a contract 
under section 205(a). 
(3) 
PRIVATE
GROUP
HEALTH
INSURANCE 
PLAN.—The term ‘‘private group health insurance 
plan’’ means a plan offered by a participating in-
surer that provides health benefits coverage to eligi-
ble individuals and that meets the requirements of 
this title. 
(4) PURCHASING POOL OPERATOR.—The term 
‘‘purchasing pool operator’’ means the entity des-
ignated by the State under section 204. 
(5) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of Health and Human Services. 
(6) SMALL EMPLOYER.—The term ‘‘small em-
ployer’’ means an employer with not less than 2 and 
not more than 100 employees. 
SEC. 202. ESTABLISHMENT OF HEALTH INSURANCE PUR-
CHASING POOLS. 
There is established a program under which the Sec-
retary shall ensure that each eligible individual has the 
opportunity to enroll, through a purchasing pool operator,
in a private group health insurance plan offered by a par-
ticipating insurer under this title. 
SEC. 203. PURCHASING POOLS. 
(a) ESTABLISHMENT OF PURCHASING POOLS.—Each 
State participating in the program under this title shall 
establish a purchasing pool that is available to each eligi-
ble individual who resides in the State. 
(b) TYPES OF PURCHASING POOLS.— 
(1) IN
GENERAL.—A purchasing pool estab-
lished under subsection (a) shall be 1 of the fol-
lowing: 
(A) A statewide purchasing pool operated 
by the State. 
(B) A statewide purchasing pool operated 
on behalf of the State by the Director of the 
Office of Personnel Management, or the des-
ignee of such Director. 
(2) OPM OPERATED POOL.—In the case of a 
statewide purchasing pool described in paragraph 
(1)(B), the Director of the Office of Personnel Man-
agement or the Director’s designee, may limit par-
ticipating insurers in such pool to those described in 
section 205(e), except that the Director or such des-
ignee shall ensure that additional private group 
health insurance plans participate in such a pool to
the extent necessary to meet the requirements of 
section 204(c)(9). 
(c) STATE ELECTION PROCESS.— 
(1) IN GENERAL.—Each State participating in 
the program under this title shall notify the Sec-
retary, not later than January 4, 2007, of the type 
of purchasing pool that applies to residents of the 
State. 
(2) DEFAULT CHOICE.—If a State participating 
in the program under this title fails to notify the 
Secretary of the type of purchasing pool elected by 
the State by the date described in paragraph (1), 
the State shall be deemed to have elected the type 
of purchasing pool described in subsection (b)(1)(B). 
(3) CHANGE
OF
ELECTION.—The Secretary 
shall establish procedures under which a State par-
ticipating in the program under this title may 
change the election of the type of purchasing pool 
applicable to residents of the State. 
SEC. 204. PURCHASING POOL OPERATORS. 
(a) DESIGNATION.—Each State shall designate a 
purchasing pool operator that shall be responsible for op-
erating the purchasing pool established under section 
203(a). A purchasing pool operator may be (or, to have 
1 or more of its functions performed, may contract with)
a private entity that has entered into a contract with the 
State if such entity meets requirements established by the 
Secretary for purposes of the program under this title. 
(b) OPERATION SIMILAR TO FEHBP.—Each pur-
chasing pool operator shall operate the purchasing pool 
established under section 203(a) in a manner that is simi-
lar to the manner in which the Director of the Office of 
Personnel Management operates the Federal employees’ 
health benefits program under chapter 89 of title 5, 
United States Code, including (but not limited to) the per-
formance of the specific functions described in subsection 
(c). 
(c) SPECIFIC FUNCTIONS DESCRIBED.—The specific 
functions described in this subsection include the fol-
lowing: 
(1) Each purchasing pool operator shall offer 
one-stop shopping for eligible individuals to enroll 
for health benefits coverage under private, group 
health insurance plans offered by participating in-
surers. 
(2) Each purchasing pool operator shall limit 
participating insurers to those that meet the condi-
tions for participation described in this title. 
(3) Each purchasing pool operator shall nego-
tiate (or, in the case of a purchasing pool described
in section 203(b)(1)(B), shall negotiate or otherwise 
determine) bids and terms of coverage with insurers. 
(4) Each purchasing pool operator shall provide 
eligible individuals with comparative information on 
private group health insurance plans offered by par-
ticipating insurers. 
(5) Each purchasing pool operator shall assist 
eligible individuals in enrolling with a private group 
health insurance plan offered by a participating in-
surer. 
(6) Each purchasing pool operator shall collect 
private group health insurance plan premium pay-
ments for participating insurers and process such 
premium payments. 
(7) Each purchasing pool operator shall rec-
oncile from year to year aggregate premium pay-
ments and claims costs of private group health in-
surance plans consistent with practices under the 
Federal employees’ health benefits program under 
chapter 89 of title 5, United States Code. 
(8) Each purchasing pool operator shall offer 
customer service to eligible individuals enrolled for 
health benefits coverage under a private group 
health insurance plan offered by a participating in-
surer.
(9) Each purchasing pool operator shall ensure 
that each eligible individual has the option of enroll-
ing in either of at least 2 benchmark or benchmark- 
equivalent plans with— 
(A) a premium at or below a cap estab-
lished by the pool operator for purposes of this 
title; and 
(B) coverage of essential services included 
in the report required under section 301(e)(2), 
with cost-sharing consistent with such report. 
(10) Each purchasing pool operator shall estab-
lish a premium cap for purposes of determining the 
credit limitation under section 36(c) of the Internal 
Revenue Code of 1986, as added by section 111(a). 
The cap required under this paragraph may not be 
less than the premium charged to Federal employees 
by the most highly-enrolled health plan under the 
Federal employees’ health benefits program under 
chapter 89 of title 5, United States Code. If the 
most highly-enrolled plan in that program differs for 
Federal enrollees in the State and all Federal enroll-
ees nationally in such plan, the minimum permitted 
premium cap shall be the lower of such premiums.
SEC. 205. CONTRACTS WITH PARTICIPATING INSURERS. 
(a) IN GENERAL.—Each purchasing pool operator 
shall negotiate and enter into contracts for the provision 
of health benefits coverage under the program under this 
title with entities that meet the conditions of participation 
described in subsection (b) and other applicable require-
ments of this Act. 
(b) CONSUMER INFORMATION.—In carrying out its 
duty under section 204(c)(4) to inform eligible individuals 
about private group health plans, the purchasing pool op-
erator shall provide information that meets the require-
ments of section 212(b)(2). 
(c) STATE LICENSURE.— 
(1) IN GENERAL.—Subject to paragraph (2), a 
health plan shall not be a participating insurer un-
less the plan has a State license to provide State 
residents with the private group coverage health in-
surance plans that it offers through the pool. 
(2) EXCEPTION.—A pool operator may enter 
into a contract under subsection (a) to cover pool 
participants through a health plan without a State 
license described in paragraph (1) if such plan is of-
fered to Federal employees nationwide and, with re-
spect to such employees, is exempt from State health 
insurance regulation. Nothing in this paragraph 
shall be construed to permit coverage of pool partici-
pants through such a plan except with groups, con-
tracts, and premium rates that are entirely distinct 
from those used for individuals covered under the 
Federal employee’s health benefits program under 
chapter 89 of title 5, United States Code. 
(d) ADDITIONAL STOP-LOSS COVERAGE AND REIN-
SURANCE.—Purchasing pool operators are authorized to 
encourage participation in the program under this title, 
improve covered benefits, reduce out-of-pocket cost-shar-
ing, limit premiums, or achieve other objectives of this Act 
by— 
(1) funding stop-loss coverage above levels oth-
erwise offered in the purchasing pool; or 
(2) providing or subsidizing reinsurance in ad-
dition to that provided under section 211. 
(e) PARTICIPATION OF FEHBP PLANS.— 
(1) IN GENERAL.—Each entity with a contract 
under section 8902 of title 5, United States Code, 
shall be a participating insurer unless such entity 
notifies the Secretary in writing of its intention not 
to participate in the program under this title prior 
to such time as is designated by the Secretary so as 
to allow such decisions to be taken into account with 
respect to eligible individuals’ choice of a private 
group health insurance plan under such program.
Such participation in the program under this title 
shall include at least the covered benefits and pro-
vider networks available through such an entity and 
shall not involve greater out-of-pocket cost-sharing 
than the plan offered by such entity pursuant to its 
contract under section 8902 of title 5, United States 
Code. 
(2) NO EFFECT ON FEHBP COVERAGE.—The 
Director of Office of Personnel Management shall 
take such steps as are necessary to ensure that each 
individual enrolled for health benefits coverage under 
the program under chapter 89 of title 5, United 
States Code, is not adversely affected by eligible in-
dividuals or others enrolled for coverage under the 
program under this title. Such steps shall include 
(but need not be limited to) the establishment of 
separate risk pools, separate contracts with partici-
pating insurers, and separately negotiated pre-
miums. 
SEC. 206. OPTIONS FOR HEALTH BENEFITS COVERAGE. 
(a) SCOPE OF HEALTH BENEFITS COVERAGE.—The 
health benefits coverage provided to an eligible individual 
under a private group health insurance plan offered by 
a participating insurer shall consist of any of the fol-
lowing:
(1) BENCHMARK COVERAGE.—Health benefits 
coverage that is equivalent to the benefits coverage 
in a benchmark benefit package described in sub-
section (b). 
(2) 
BENCHMARK-EQUIVALENT
COVERAGE.— 
Health benefits coverage that meets the following re-
quirements: 
(A) INCLUSION
OF
ESSENTIAL
SERV-
ICES.—The coverage includes each of the essen-
tial services identified by the National Advisory 
Commission on Expanded Access to Health 
Care and adopted by Congress under title III. 
(B) AGGREGATE ACTUARIAL VALUE EQUIV-
ALENT
TO
BENCHMARK
PACKAGE.—The cov-
erage has an aggregate actuarial value that is 
equal to or greater than the actuarial value of 
one of the benchmark benefit packages. 
(3) 
ALTERNATIVE
COVERAGE.—Any 
other 
health benefits coverage that the Secretary deter-
mines, upon application by a State, offers health 
benefits coverage equivalent to or greater than a 
plan described in and offered under section 8903(1) 
of title 5, United States Code. 
(b) BENCHMARK BENEFIT PACKAGES.—The bench-
mark benefit packages are as follows:
(1) FEHBP-EQUIVALENT
HEALTH
BENEFITS 
COVERAGE.—The plan described in and offered 
under chapter 89 of title 5, United States Code with 
the highest number of enrollees under such section 
for the year preceding the year in which the private 
group health insurance plan is proposed to be of-
fered. 
(2) PUBLIC
PROGRAM-EQUIVALENT
HEALTH 
BENEFITS COVERAGE.—Coverage provided under the 
State plan approved under the medicaid program 
under title XIX of the Social Security Act or the 
State children’s health insurance program under 
title XXI of such Act (42 U.S.C. 1396 et seq., 
1397aa et seq.) (without regard to coverage provided 
under a waiver of the requirements of either such 
program). 
(3) COVERAGE OFFERED THROUGH HMO.—The 
health insurance coverage plan that— 
(A) is offered by a health maintenance or-
ganization (as defined in section 2791(b)(3) of 
the Public Health Service Act (42 U.S.C. 33gg– 
91(b)(3))); and 
(B) has the largest insured commercial, 
nonmedicaid enrollment of covered lives of such
coverage plans offered by such a health mainte-
nance organization in the State. 
(4) STATE EMPLOYEE COVERAGE.—The health 
insurance plan that is offered to State employees 
and has the largest enrollment of covered lives of 
any such plan. 
(5) APPLICATION
OF
BENCHMARK
STAND-
ARDS.—A private group health plan offers bench-
mark benefits if, with respect to a benchmark plan 
described in paragraph (1), (2), (3), or (4), the pri-
vate group health plan covers all items and services 
offered by the benchmark plan, with out-of-pocket 
cost-sharing for such items and services that is not 
greater than under the benchmark plan. Nothing in 
this title shall be construed to forbid a private group 
health plan from offering additional items and serv-
ices not covered by such a benchmark plan or reduc-
ing out-of-pocket cost-sharing below levels applicable 
under such plan. 
SEC. 207. ENROLLMENT PROCESS FOR ELIGIBLE INDIVID-
UALS. 
(a) IN GENERAL.—The Secretary shall establish a 
process through which an eligible individual— 
(1) may make an annual election to enroll in 
any private group health insurance plan offered by
a participating insurer that has been awarded a con-
tract under section 205(a) and serves the geographic 
area in which the individual resides, provided that 
such insurer’s geographic area of service and guar-
anteed issuance under this section is conterminous 
with, or includes all of, a geographic area served 
pursuant to an entity’s contact under section 8902 
of title 5, United States Code; and 
(2) may make an annual election to change the 
election under this clause. 
(b) RULES.—In establishing the process under sub-
section (a), the Secretary shall use rules similar to the 
rules for enrollment, disenrollment, and termination of en-
rollment under the Federal employees health benefits pro-
gram under chapter 89 of title 5, United States Code, in-
cluding the application of the guaranteed issuance provi-
sion described in subsection (c). 
(c) GUARANTEED ISSUANCE.—An eligible individual 
who is eligible to enroll for health benefits coverage under 
a private group health insurance plan that has been 
awarded a contract under section 205(a) at a time during 
which elections are accepted under this title with respect 
to the plan shall not be denied enrollment based on any 
health 
status-related 
factor 
(described 
in 
section
2702(a)(1) of the Public Health Service Act (42 U.S.C. 
300gg–1(a)(1))) or any other factor. 
SEC. 208. PLAN PREMIUMS. 
(a) IN GENERAL.—Each purchasing pool operator 
shall negotiate (or, in the case of a purchasing pool oper-
ated pursuant to section 203(b)(1)(B), shall otherwise de-
termine) a premium for each private group health insur-
ance plan offered by a participating insurer. 
(b) PERMITTED PROFIT MARGINS.— 
(1) IN
GENERAL.—Each premium negotiated 
under subsection (a) may not permit a profit margin 
that exceeds the applicable percentage (as defined in 
paragraph (2)). 
(2) APPLICABLE
PERCENTAGE
DEFINED.—In 
this subsection, the term ‘‘applicable percentage’’ 
means— 
(A) for the first 3 years that a purchasing 
pool is operated, 2 percent; 
(B) for any subsequent year, the percent-
age determined by the purchasing pool oper-
ator, which may not be— 
(i) less than the profit margin per-
mitted under the Federal employees health 
benefits program under chapter 89 of title 
5, United States Code; or
(ii) more than a multiple, established 
by the Secretary for purposes of this sub-
section, of profit margins permitted under 
such program. 
SEC. 209. ENROLLEE PREMIUM SHARE. 
(a) IN GENERAL.—A participating insurer offering a 
private group health insurance plan that has been awarded 
a contract under section 205(a) in which the eligible indi-
vidual is enrolled may not deny, limit, or condition the 
coverage (including out-of-pocket cost-sharing) or provi-
sion of health benefits coverage or vary or increase the 
enrollee premium share under the plan based on any 
health 
status-related 
factor 
described 
in 
section 
2702(a)(1) of the Public Health Service Act (42 U.S.C. 
300gg–1(a)(1)) or any other factor. 
(b) RISK-ADJUSTED PLAN PAYMENTS
AND PRE-
MIUMS CHARGED TO ENROLLEES.— 
(1) IN
GENERAL.—For each private group 
health insurance plan operated by a participating in-
surer, the pool operator shall adjust premium pay-
ments to compensate for the difference in health risk 
factors between plan enrollees and State residents as 
a whole (including residents who are not eligible in-
dividuals). Such adjustments shall employ risk-ad-
justment mechanisms promulgated by the Secretary.
(2) ADDITIONAL ADJUSTMENTS.—The pool op-
erator shall also provide additional adjustments to 
premium payments that compensate participating in-
surers for the cost of keeping out-of-pocket cost- 
sharing 
amounts 
consistent 
with 
section 
204(c)(9)(B). 
(3) ENROLLEE PREMIUM COSTS.—The adjust-
ments described in this subsection shall not affect 
enrollee premium shares, which shall be based on the 
premium that would be charged for enrollees with 
health risk factors for State residents as a whole (as 
described in paragraph (1)), without taking into ac-
count 
cost-sharing 
adjustments 
under 
section 
204(c)(9)(B). 
(c) AMOUNT OF PREMIUM.—The amount of the en-
rollee premium share shall be equal to premium amounts 
(if any) above the applicable cap set pursuant to section 
204(c)(10), plus 100 percent of the remainder minus the 
applicable percentage (as defined in section 36(b) of the 
Internal Revenue Code of 1986, as added by section 111). 
SEC. 210. PAYMENTS TO PURCHASING POOL OPERATORS 
AND PAYMENTS TO PARTICIPATING INSUR-
ERS. 
The Secretary shall establish procedures for making 
payments to each purchasing pool operator as follows:
(1) RISK-ADJUSTMENT
PAYMENT.—The Sec-
retary shall pay each purchasing pool operator for 
the net costs of risk-adjusted payments to plans 
under section 209(b), to the extent the sum of up-
ward adjustments exceeds the sum of downward ad-
justments for the pool operator. 
(2) 
STOP-LOSS
AND
REINSURANCE
PAY-
MENTS.— 
(A) IN GENERAL.—The Secretary shall pay 
each purchasing pool operator for the applicable 
percentage (as defined in subparagraph (B)) 
of— 
(i) the costs of any stop-loss coverage 
funded by the purchasing pool operator 
under section 205(d)(1); and 
(ii) any reinsurance provided in ac-
cordance with section 205(d)(2). 
(B) 
APPLICABLE
PERCENTAGE
DE-
FINED.—In this paragraph, the term ‘‘applica-
ble percentage’’ means— 
(i) for the first 3 years that a pur-
chasing pool is operated, 100 percent; 
(ii) for the next 2 years that such 
purchasing pool is operated, 50 percent; 
and
(iii) for any subsequent year, 0 per-
cent. 
(3) PAYMENTS
NECESSARY
TO
KEEP
COST- 
SHARING
WITHIN
APPLICABLE
LIMITS.—The Sec-
retary shall make payments to purchasing pool oper-
ators to reimburse purchasing pool operators for the 
amount paid by such operators to participating in-
surers necessary to keep out-of-pocket cost-sharing 
for individuals with limited ability to pay within ap-
plicable limits. 
(4) PAYMENT FOR ADMINISTRATIVE COSTS.— 
The Secretary shall make payments to each pur-
chasing pool operator for necessary pool administra-
tive expenses. 
(5) PAYMENTS TO OPM.—In the case of a pur-
chasing pool described in section 203(b)(1)(B), pay-
ments under this section shall be made to the Direc-
tor of the Office of Personnel Management. 
SEC. 211. STATE-BASED REINSURANCE PROGRAMS. 
(a) ESTABLISHMENT.—The Secretary shall establish 
standards for State-based reinsurance programs for eligi-
ble individuals to guard against adverse selection and to 
improve the functioning of the individual health insurance 
market.
(b) GRANTS FOR STATEWIDE REINSURANCE PRO-
GRAMS.— 
(1) IN GENERAL.—The Secretary may award 
grants to States for the reasonable costs incurred in 
providing reinsurance under this section, consistent 
with standards developed by the Secretary, for cov-
erage offered in the individual health insurance mar-
ket and through State-based purchasing pools de-
scribed in section 203. 
(2) LIMITATION.—Such grants may not pay for 
reinsurance extending beyond individuals in the top 
3 percent of the national health care spending dis-
tribution, as determined by the Secretary. 
(3) APPLICATION.—A State desiring a grant 
under this section shall submit an application to the 
Secretary in such manner, at such time, and con-
taining such information as the Secretary may re-
quire. 
(4) AUTHORIZATION
OF
APPROPRIATIONS.— 
There are authorized to be appropriated to the Sec-
retary such sums as may be necessary for making 
grants under this section.
SEC. 212. COVERAGE UNDER INDIVIDUAL HEALTH INSUR-
ANCE. 
(a) IN GENERAL.—Eligible individuals may use cred-
its allowed under the Internal Revenue Code of 1986 (in-
cluding supplemental assistance provided under such 
Code) for the purchase of health insurance coverage to en-
roll in State-licensed individual health insurance meeting 
the conditions of participation described in subsection (b). 
(b) CONDITIONS OF PARTICIPATION.—The Secretary 
shall promulgate regulations that establish the terms and 
conditions under which an entity may participate in the 
program under this section and that include the following: 
(1) PLAN MARKETING.—Conditions of partici-
pation for plans in the individual market (as devel-
oped by the Secretary) that— 
(A) ensure that consumers receive the con-
sumer information described in paragraph (2) 
before selecting a plan; and 
(B) detect, deter, and penalize marketing 
fraud by entities offering or purporting to offer 
individual insurance. 
(2) CONSUMER
INFORMATION.—Requirements 
for each entity offering individual insurance to pro-
vide eligible individuals with information in a uni-
form and easily comprehensible manner that allows 
for informed comparisons by eligible individuals and
that includes information regarding the health bene-
fits coverage, costs, provider networks, quality, the 
amount and proportion of health insurance premium 
payments that go directly to patient care, and the 
plan’s coverage rules (including amount, duration, 
and scope limits) and out-of-pocket cost-sharing 
(both inside and outside plan networks) for each es-
sential service recommended by the National Advi-
sory Commission on Expanded Access to Health 
Care and adopted by Congress under title III (which 
shall be prominently identified as an essential serv-
ice, including by reference to the Commission rec-
ommendation denoting the service as essential). To 
the maximum extent feasible, such requirements 
shall specify that the content and presentation of the 
information shall be provided in the same manner as 
similar information is presented to enrollees in the 
Federal employees health benefits program under 
chapter 89 of title 5, United States Code. 
(3) OTHER
CONDITIONS, 
INCLUDING
THE 
ELIMINATION OF BARRIERS TO AFFORDABLE COV-
ERAGE.— 
(A) IN GENERAL.—Requirements for each 
entity offering individual insurance to abide by 
conditions of participation that the Secretary
believes are reasonable and appropriate meas-
ures to address barriers to affordable health in-
surance coverage. 
(B) SPECIFIC CONDITIONS.—The require-
ments developed by the Secretary under sub-
paragraph (A) shall include (but need not be 
limited to)— 
(i) guaranteed renewability, without 
premium increases based on changed indi-
vidual risk; and 
(ii) limits on risk rating. 
(4) RULE OF CONSTRUCTION.—Nothing in this 
section shall be construed to authorize the Secretary 
to impose any requirements on individual insurance, 
except with respect to eligible individuals purchasing 
individual insurance using advance payment of a tax 
credit provided under section 36 of the Internal Rev-
enue Code of 1986. 
SEC. 213. USE OF PREMIUM SUBSIDIES TO UNIFY FAMILY 
COVERAGE WITH MEMBERS ENROLLED IN 
MEDICAID AND SCHIP. 
Notwithstanding any other provision of law, the Sec-
retary shall establish procedures under which, in the case 
of a family with 1 or more members enrolled in with a 
managed care entity under the State medicaid program
under title XIX of the Social Security Act or the State 
children’s health insurance program under title XXI of 
such Act (42 U.S.C. 1396 et seq., 1397aa et seq.) and 
1 or more members who are an eligible individual under 
this title, the family shall have the option to enroll all fam-
ily members with the managed care entity under either 
or both such State programs. The procedures established 
by the Secretary shall provide that premiums charged to 
eligible individuals for enrollment with such an entity shall 
be based on the capitated payments established for adults 
or children, excluding adults and children who are known 
to be pregnant, blind, disabled, or (in the case of adults) 
elderly, under the applicable State program (except that, 
in the case of an eligible individual known to be pregnant, 
premiums shall reflect capitated payments established 
under such State program for individuals known to be 
pregnant) plus reasonable administrative costs. 
SEC. 214. COVERAGE THROUGH EMPLOYER-SPONSORED 
HEALTH INSURANCE. 
(a) IN GENERAL.—Eligible individuals may use cred-
its allowed under the Internal Revenue Code of 1986 and 
supplemental assistance to enroll in coverage offered by 
eligible employers.
(b) ELIGIBLE EMPLOYERS.—For purposes of this 
section, the term ‘‘eligible employers’’ includes the fol-
lowing: 
(1) The current employer of the eligible indi-
vidual or a member of such individual’s family. 
(2) A former employer required to offer cov-
erage of the eligible individual under a COBRA con-
tinuation provision (as defined in section 9832(d)(1) 
of the Internal Revenue Code) or a State law requir-
ing continuation coverage; and 
(3) A former employer voluntarily offering cov-
erage of the eligible individual. 
(c) APPLICATION OF DISREGARD OF PREEXISTING 
CONDITIONS EXCLUSIONS.—Notwithstanding any other 
provision of law, in the case of an individual who experi-
ences a qualifying event (as defined in section 603 of the 
Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1163) and who, not later than 6 months after such 
event, is determined to be an eligible individual under this 
title, the same rules with respect to preexisting conditions 
as apply to a nonelecting TAA-eligible individual under 
section 605(b) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1165(b)) shall apply with re-
spect to such individual, regardless of which type of quali-
fied coverage the individual purchases.
(d) EXTENSION OF COBRA ELECTION PERIOD.— 
Notwithstanding any other provision of law, in the case 
of an individual who experiences a qualifying event (as de-
fined in section 603 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1163) and who, not later 
than 6 months after such event, is determined to be an 
eligible individual under this title, the same rules with re-
spect to the temporary extension of a COBRA election pe-
riod as apply to a nonelecting TAA-eligible individual 
under section 605(b) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1165(b)) shall apply with 
respect to such individual. 
(e) CURRENT EMPLOYER COVERAGE.—If an eligible 
individual uses the credits allowed under the Internal Rev-
enue Code of 1986 and supplemental assistance to pur-
chase coverage from an employer described in subsection 
(b), such credits and assistance shall apply as a percent-
age, not of the total premium amount for the eligible indi-
vidual, but of the employee’s or former employee’s share 
of premium payments. 
SEC. 215. PARTICIPATION BY SMALL EMPLOYERS. 
(a) IN GENERAL.—Notwithstanding any other provi-
sion of this title, the Secretary shall establish procedures 
under which, during annual open enrollment periods, a 
small employer shall have the option of purchasing group
coverage for employees and dependents of employees, in-
cluding individuals who are not otherwise eligible individ-
uals under this title, through a purchasing pool established 
under section 203(a). 
(b) CONDITIONS OF PARTICIPATION.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the same requirements that 
apply with respect to participating insurers covering 
eligible low-income individuals under section 203 
shall apply with respect to coverage offered by such 
insurers through a small employer. 
(2) RISK ADJUSTMENT.— 
(A) INCREASED PAYMENTS.—If employees 
of a small employer who are not otherwise eligi-
ble individuals under this title enroll in a pri-
vate group health insurance plan under this 
title and have a collective risk level that exceeds 
the statewide average (as determined pursuant 
to risk adjustment mechanisms developed by 
the 
Secretary 
consistent 
with 
section 
209(b)(1)), the Secretary (through a pool oper-
ator) shall provide participating insurers with 
such small employer enrollment bonus payments 
as are necessary to compensate the insurers for 
such increased risk. The premium charged to
enrollees under this section shall be the same 
premium that is the basis of premium charges 
to enrollees who are eligible low-income individ-
uals. 
(B) REDUCED PAYMENTS.—A pool oper-
ator shall reduce payments to any plan with a 
risk level that falls below the statewide average 
(as so determined). 
(3) ADMINISTRATIVE
GUIDELINES.—The Sec-
retary shall develop guidelines for pool operators to 
use in serving small employers, which shall be mod-
eled after existing, successful, longstanding small 
business purchasing cooperatives, and shall include 
administratively simple methods for small employers 
and licensed insurance brokers to participate in the 
program established under this title. 
(c) INFORMATION CAMPAIGN.— 
(1) IN
GENERAL.—The pool operator for a 
State shall establish and conduct, directly or 
through 1 or more public or private entities (which 
may include licensed insurance brokers), a health in-
surance information program to inform small em-
ployers about health coverage for employees. 
(2) REQUIREMENTS.—The program established 
under paragraph (1) shall educate small employers
with respect to matters that include (but are not 
limited to) the following: 
(A) The benefits of providing health insur-
ance to employees, including tax benefits to 
both the employer and employees, increased 
productivity, and decreased employee turnover. 
(B) The rights of small employers under 
Federal and State health insurance reform 
laws. 
(C) Options for purchasing coverage, in-
cluding (but not limited to) through the State’s 
purchasing pool operated pursuant to section 
203. 
(d) GRANTS TO HELP STATE-BASED POOLS PRO-
MOTE SMALL BUSINESS COVERAGE.— 
(1) IN GENERAL.—The Secretary may award 
grants to a pool operator for the following: 
(A) The net costs of risk-adjusted pay-
ments under paragraph (b)(2), to the extent the 
sum of upward adjustments exceeds the sum of 
downward adjustments for the pool operator. 
(B) The reasonable cost of the information 
campaign under subsection (c). 
(C) The pool operator’s reasonable admin-
istrative costs to implement this section.
(2) LIMITATION.—This section shall not apply 
to a State’s pool unless sufficient grant funds have 
been received under this subsection to implement 
this section on a fiscally sound basis and such re-
ceipt is certified by the pool operator. 
(3) APPLICATION.—A pool operator desiring a 
grant under this section shall submit an application 
to the Secretary in such manner, at such time, and 
containing such information as the Secretary may 
require. 
(4) AUTHORIZATION
OF
APPROPRIATIONS.— 
There are authorized to be appropriated to the Sec-
retary such sums as may be necessary for making 
grants under this section. 
SEC. 216. REPORT. 
Not later than 1 year after the date of enactment 
of this Act, the Secretary shall submit to Congress a re-
port containing recommendations for such legislative and 
administrative changes as the Secretary determines are 
appropriate to permit affinity groups related for reasons 
other than a common employer to participate in pur-
chasing pools established under section 203.
SEC. 217. AUTHORIZATION OF APPROPRIATIONS. 
(a) IN GENERAL.—There are authorized to be appro-
priated, such sums as may be necessary to carry out this 
title for fiscal year 2008 and each fiscal year thereafter. 
(b) RULE
OF
CONSTRUCTION.—Amounts appro-
priated in accordance with subsection (a) shall be in addi-
tion to other amounts appropriated directly under this 
title and nothing in subsection (a) shall be construed to 
relieve the Secretary of mandatory payment obligations re-
quired under this title. 
TITLE III—NATIONAL ADVISORY 
COMMISSION ON EXPANDED 
ACCESS TO HEALTH CARE 
SEC. 301. NATIONAL ADVISORY COMMISSION ON EXPANDED 
ACCESS TO HEALTH CARE. 
(a) ESTABLISHMENT.—Not later than October 1, 
2005, the Secretary of Health and Human Services (re-
ferred to in this section as the ‘‘Secretary’’), shall estab-
lish an entity to be known as the National Advisory Com-
mission on Expanded Access to Health Care (referred to 
in this section as the ‘‘Commission’’). 
(b) APPOINTMENT OF MEMBERS.— 
(1) IN GENERAL.—Not later than 45 days after 
the date of enactment of this Act, the House and 
Senate Majority and Minority Leaders shall each ap-