(B) the plan specifies the range of benefits to
which the beneficiary may elect to have the amount
applied, which—
(i) includes, at a minimum, payment of ex-
penses countable towards the qualified cata-
strophic deductible and payment of premiums
towards a long-term care insurance plan, and
(ii) does not include the purchase of any
supplemental insurance for acute care benefits;
(C) any such amount of benefits not used shall
be accumulated (with a rate of return specified in
the plan), shall remain available to be applied
against such range of benefits, shall be nonforfeit-
able, and, upon the death of all beneficiaries under
the account, shall be payable in cash to the estate
of the beneficiary who dies last; and
(D) the plan meets the portability rules estab-
lished under subsection (c).
(b) QUALIFIED CATASTROPHIC HEALTH PLAN DE-
FINED.—In this section—
(1) QUALIFIED CATASTROPHIC HEALTH PLAN
DEFINED.—The term ‘‘qualified catastrophic health
plan’’ means any health plan provided to an em-
ployee which is certified by the Secretary of Health
and Human Services as a plan—
(A) which provides no compensation for
medical expenses not exceeding the qualified
catastrophic deductible (as defined in para-
graph (2)) in any year, and
(B) which provides full reimbursement for
medical expenses exceeding the qualified cata-
strophic deductible during any year.
(2) QUALIFIED
CATASTROPHIC
DEDUCTIBLE
DEFINED.—The term ‘‘qualified catastrophic deduct-
ible’’ means—
(A) $2,000, or
(B) $4,000 if the qualified catastrophic
health plan provides coverage for more than one
individual.
In the case of any calendar year after 1994, the dol-
lar amounts in subparagraphs (A) and (B) shall be
increased by an amount equal to such dollar
amount, multiplied by the cost-of-living adjustment
determined under section 1(f)(3) of the Internal
Revenue Code of 1986 for such calendar year. If any
increase under the preceding sentence is not a mul-
tiple of $50, such increase shall be rounded to the
nearest multiple of $50.
(3) 
QUALIFIED
MEDICAL
EXPENSES
DE-
FINED.—
(A) IN
GENERAL.—The term ‘‘qualified
medical expenses’’ means medical expenses of
an employee other than amounts paid for insur-
ance or for a health plan.
(B) MEDICAL EXPENSES DEFINED.—The
term ‘‘medical expenses’’ means amounts paid
by the employee for medical care (as defined in
section 213 of the Internal Revenue Code of
1986) of such individual, the spouse of such in-
dividual, and any dependent (as defined in sec-
tion 152 of such Code) of such individual, but
only to the extent such amounts are not com-
pensated for by insurance or otherwise.
(c) PORTABILITY RULES.—In the case of an individ-
ual who has medisave coverage described in subsection
(a)(2) under a health insurance plan in a year, who termi-
nates enrollment under the plan or terminates cata-
strophic coverage under the plan, and who has accumu-
lated an amount of benefits under such coverage, the plan
shall permit the individual (as elected by the individual)
and in accordance with standards established under sec-
tion 2—
(1) to have the plan pay an amount equal to all
or some of the amount of benefits accumulated
under such coverage towards the payment of pre-
miums under—
(A) any health insurance plan,
(B) any employee welfare benefit plan pro-
viding medical care (as defined in section
213(d) of the Internal Revenue Code of 1986)
to participants or beneficiaries directly or
through insurance, reimbursement, or other-
wise, (other than such a plan described in sec-
tion 13(10)(B)), or
(C) a long-term care insurance plan,
providing coverage for the individual; and
(2) to have the plan transfer an amount equal
to all or some of the remaining balance to another
health insurance plan that will provide medisave cov-
erage for that individual in accordance with the re-
quirements of this subsection (and such other plan
shall credit such amount transferred towards
medisave coverage under that plan).
SEC. 13. TAX TREATMENT OF MEDISAVE COVERAGE.
(a) GENERAL RULE.—For purposes of the Internal
Revenue Code of 1986—
(1) any health insurance plan which provides
Medisave coverage consistent with section 12 of this
Act shall be treated as an accident and health insur-
ance contract,
(2) amounts (other than policyholder dividends,
premium refunds, or amounts payable under section
12(a)(2)(C) of this Act) received under such cov-
erage shall be treated as amounts received for per-
sonal injuries and sicknesses and shall be treated as
reimbursement for expenses actually incurred for
medical care (as defined in section 213(d) of such
Code),
(3) any plan of an employer providing Medisave
coverage consistent with section 12 of this Act shall
be treated as an accident and health plan, and
(4) amounts paid for Medisave coverage consist-
ent with section 12 of this Act shall be treated as
medical expenses for purposes of section 213 of such
Code.
(b) USE OF FLEXIBLE SPENDING ACCOUNTS.—The
Secretary of the Treasury or his delegate shall revise the
regulations prescribed under section 125 of the Internal
Revenue Code of 1986 so as to permit the use of health-
related flexible spending accounts under such section in
a manner similar to that provided in subsection (a)(2) of
section 12 of this Act.
SEC. 14. DEFINITIONS.
In this Act:
(1) ACCOUNTABLE HEALTH PLAN.—The term
‘‘Accountable Health Plan’’ means a carrier is des-
ignated under section 6(a) by a State insurance
commissioner.
(2) CARRIER.—The term ‘‘carrier’’ means a li-
censed insurance company, a prepaid hospital or
medical service plan, and a health maintenance orga-
nization offering such a plan, and includes a similar
organization regulated under State law for solvency.
(3) 
DEPENDENT.—The 
term 
‘‘dependent’’
means, with respect to a person—
(A) the spouse of the person, and
(B) a child (including an adopted child) of
the person who—
(i) is under 19 years of age,
(ii) is under 25 years of age and a
full-time student, or
(iii) regardless of age is incapable of
self-support because of mental or physical
disability.
(4) ELIGIBLE EMPLOYEE.—The term ‘‘eligible
employee’’ means, with respect to an employer, an
employee who normally performs on a monthly basis
at least 30 hours of service per week for that
employer.
(5) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible
individual’’ means an individual residing in the Unit-
ed States who is a citizen or national of the United
States or an alien lawfully residing permanently in
the United States, if the individual is not an eligible
employee or otherwise eligible for health insurance
coverage under an employment-based health insur-
ance or under a Federal or State health program.
(6) EMPLOYER.—The term ‘‘employer’’ shall
have the meaning applicable under section 3(5) of
the Employee Retirement Income Security Act of
1974.
(7) HEALTH
PLAN
PURCHASING
COOPERA-
TIVE.—The term ‘‘Health Plan Purchasing Coopera-
tive’’ means a State-chartered, nonprofit organiza-
tion that provides health coverage purchasing serv-
ices to members in a health plan purchasing cooper-
ative area regarding qualified health benefit plans
offered by Accountable Health Plans and that is es-
tablished under section 4.
(8) HEALTH PLAN PURCHASING COOPERATIVE
AREA.—The term ‘‘health plan purchasing coopera-
tive area’’ means an area designated under section
3.
(9) HEALTH PLAN PURCHASING COOPERATIVE
BOARD.—The term ‘‘Health Plan Purchasing Coop-
erative board’’ means the board of directors of a
Health Plan Purchasing Cooperative.
(10) HEALTH INSURANCE PLAN.—
(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘‘health insurance
plan’’ means any hospital or medical service
policy or certificate, hospital or medical service
plan contract, or health maintenance organiza-
tion group or individual contract offered by an
insurer.
(B) EXCEPTION.—Such term does not in-
clude any of the following—
(i) coverage only for accident, dental,
vision, disability income, or long-term care
insurance, or any combination thereof,
(ii) medicare supplemental health in-
surance,
(iii) coverage issued as a supplement
to liability insurance,
(iv) worker’s compensation or similar
insurance, or
(v) automobile medical-payment insur-
ance,
or any combination thereof.
(11) HEALTH MAINTENANCE ORGANIZATION.—
The term ‘‘health maintenance organization’’ in-
cludes, as determined under standards established
by the Secretary, a health insurance plan that meets
specified standards and that offers to provide health
services on a prepaid, at-risk basis primarily through
a defined set of providers.
(12) MEMBER.—The term ‘‘member’’ means,
with respect to a Health Care Purchasing Coopera-
tive, a small employer or eligible individual that
meets membership requirements for the Cooperative
under section 5(b).
(13) 
SECRETARY.—The 
term 
‘‘Secretary’’
means the Secretary of Health and Human Services.
(14) SERVICE AREA.—The term ‘‘service area’’
means a geographic region in which a carrier is li-
censed to operate.
(15) SMALL EMPLOYER.—The term ‘‘small em-
ployer’’ means, with respect to a calendar year, an
employer that normally employs more than 1 but
less than 101 eligible employees on a typical busi-
ness day in any 3-consecutive-month-period in the
year. For the purposes of this paragraph, the term
‘‘employee’’ includes a self-employed individual. For
purposes of determining if an employer is a small
employer, rules similar to the rules of subsection (b)
and (c) of section 414 of the Internal Revenue Code
of 1986 shall apply.
(16) SMALL
EMPLOYER
MEMBER.—The term
‘‘small employer member’’ means, with respect to a
Health Plan Purchasing Cooperative, a small em-
ployer that is a member of the Cooperative.
(17) STATE.—The term ‘‘State’’ means the 50
States, the District of Columbia, Puerto Rico, the
Virgin Islands, Guam, and American Samoa.
(18) STATE INSURANCE COMMISSIONER.—The
term ‘‘State insurance commissioner’’ includes a
State superintendent of insurance and includes, with
respect to a health maintenance organization or
other carrier not regulated by such an official, such
State official as is responsible for regulation of the
organization or carrier.
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