Health Insurance Affordability and Equity Act of 1999

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Health Insurance Affordability and 
Equity Act of 1999''.

SEC. 2. CREDIT FOR HEALTH INSURANCE COSTS OF PREVIOUSLY UNINSURED 
              INDIVIDUALS AND INDIVIDUALS WITH COBRA COVERAGE.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25A the 
following new section:

``SEC. 25B. HEALTH INSURANCE COSTS OF PREVIOUSLY UNINSURED INDIVIDUALS 
              AND INDIVIDUALS WITH COBRA COVERAGE.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this chapter for the 
taxable year an amount equal to 60 percent of the amount paid during 
the taxable year for coverage for the taxpayer, his spouse, and 
dependents under qualified health insurance.
    ``(b) Dollar Limitation.--
            ``(1) 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 eligible months 
        during such taxable year.
            ``(2) Monthly limitation.--The monthly limitation for any 
        eligible month is the amount equal to \1/12\ of--
                    ``(A) $1,200 if, as of the first day of such month, 
                the taxpayer has self-only coverage under qualified 
                health insurance, and
                    ``(B) $2,400 if, as of the first day of such month, 
                the taxpayer has family coverage under qualified health 
                insurance.
            ``(3) Eligible month.--For purposes of this subsection--
                    ``(A) In general.--The term `eligible month' means 
                any month which begins at least 1 year after the most 
                recent month that the individual--
                            ``(i) was eligible to participate in any 
                        group health plan of an employer which provided 
                        qualified health insurance (determined without 
                        regard to subsection (d)(2)), or
                            ``(ii) participated in any group health 
                        plan of any other entity which provided such 
                        insurance.
                    ``(B) Joint returns.--In the case of a joint 
                return, a month shall be treated as an eligible month 
                only if it is an eligible month of each spouse, 
                determined by applying this paragraph separately to 
                each spouse.
            ``(4) Certain other coverage.--Amounts paid for coverage of 
        an individual for any month shall not be taken into account 
        under subsection (a) if, as of the first day of such month, 
        such individual is covered under any medical care program 
        described in--
                    ``(A) title XVIII, XIX, or XXI of the Social 
                Security Act,
                    ``(B) chapter 55 of title 10, United States Code,
                    ``(C) chapter 17 of title 38, United States Code,
                    ``(D) chapter 89 of title 5, United States Code, or
                    ``(E) the Indian Health Care Improvement Act.
            ``(5) Special rule for married individuals.--In the case of 
        an individual--
                    ``(A) who is married (within the meaning of section 
                7703) as of the close of the taxable year but does not 
                file a joint return for such year, and
                    ``(B) who does not live apart from such 
                individual's spouse at all times during the taxable 
                year,
        the limitation under paragraph (2)(A) (and not the limitation 
        under paragraph (2)(B)) shall apply to such individual.
    ``(c) Limitation Based on Adjusted Gross Income.--
            ``(1) In general.--The aggregate amount which would (but 
        for this subsection) be allowed as a credit under this section 
        shall be reduced (but not below zero) by the amount determined 
        under paragraph (2).
            ``(2) Amount of reduction.--
                    ``(A) In general.--The amount determined under this 
                paragraph shall be the amount which bears the same 
                ratio to such aggregate amount as--
                            ``(i) the excess of--
                                    ``(I) the taxpayer's modified 
                                adjusted gross income for such taxable 
                                year, over
                                    ``(II) the applicable dollar 
                                amount, bears to
                            ``(ii) $10,000.
                    ``(B) Modified adjusted gross income.--For purposes 
                of this paragraph, the term `modified adjusted gross 
                income' means adjusted gross income increased by any 
                amount excluded from gross income under section 911, 
                931, or 933.
                    ``(C) Rounding.--Any amount determined under 
                subparagraph (A) which is not a multiple of $10 shall 
                be rounded to the next lowest $10.
            ``(3) Applicable dollar amount.--For purposes of paragraph 
        (2), the term `applicable dollar amount' means--
                    ``(A) $60,000 in the case of a taxpayer whose 
                qualified health insurance coverage covers more than 1 
                individual referred to in subsection (a), and
                    ``(B) $30,000--
                            ``(i) in any case not described in 
                        subparagraph (A), and
                            ``(ii) in the case of a married individual 
                        filing a separate return.
        For purposes of this paragraph, marital status shall be 
        determined under section 7703.
    ``(d) Qualified Health Insurance.--For purposes of this section--
            ``(1) In general.--Except as otherwise provided in this 
        paragraph, the term `qualified health insurance' means 
        insurance which constitutes medical care, as defined in section 
        213(d) without regard to--
                    ``(A) paragraph (1)(C) thereof, and
                    ``(B) so much of paragraph (1)(D) thereof as 
                relates to qualified long-term care insurance 
                contracts.
            ``(2) Exclusion of coverage provided under group health 
        plans, etc.--Such term shall not include insurance provided 
        through any group health plan of an employer or any other 
        entity.
            ``(3) Exclusion of certain other contracts.--Such term 
        shall not include insurance if a substantial portion of its 
        benefits are excepted benefits (as defined in section 9832(c)).
    ``(e) Individuals With COBRA Coverage.--In the case of continuation 
coverage under a group health plan which is required to be provided by 
Federal law for an individual during the period specified in section 
4980B(f)(2)(B), notwithstanding subsection (d)--
            ``(1) such coverage shall be treated as qualified health 
        insurance, and
            ``(2) the term `eligible month' includes months of such 
        coverage.
    ``(f) Special Rules.--
            ``(1) Coordination with other deductions.--No credit shall 
        be allowed under this section for the taxable year if any 
        amount paid for qualified health insurance is taken into 
        account in determining the deduction allowed for such year 
        under section 213 or 222.
            ``(2) Denial of credit to dependents.--No credit shall be 
        allowed under this section to any individual with respect to 
        whom a deduction under section 151 is allowable to another 
        taxpayer for a taxable year beginning in the calendar year in 
        which such individual's taxable year begins.
            ``(3) Inflation adjustment.--
                    ``(A) In general.--In the case of a taxable year 
                beginning after 2000, each dollar amount in subsection 
                (c)(3) shall be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 1999' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                    ``(B) Rounding.--If any amount as adjusted under 
                subparagraph (A) is not a multiple of $100, such amount 
                shall be rounded to the next lowest multiple of $100.''
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 25A the following new 
item:

                              ``Sec. 25B. Health insurance costs of 
                                        previously uninsured 
                                        individuals and individuals 
                                        with COBRA coverage.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 3. DEDUCTION FOR QUALIFIED HEALTH INSURANCE COSTS OF EMPLOYEES AND 
              SELF-EMPLOYED INDIVIDUALS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions) is amended by redesignating section 222 as section 223 and 
by inserting after section 221 the following new section:

``SEC. 222. COSTS OF QUALIFIED HEALTH INSURANCE.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a deduction an amount equal to the applicable percentage of 
the amount paid during the taxable year for coverage for the taxpayer, 
his spouse, and dependents under qualified health insurance.
    ``(b) Applicable Percentage.--For purposes of subsection (a)--
            ``(1) In general.--Except as provided in paragraph (2), the 
        applicable percentage shall be determined in accordance with 
        the following table:

                ``For taxable years beginning
                                                         The applicable
                  in calendar year--
                                                        percentage is--
                    2000...................................      60    
                    2001...................................      70    
                    2002...................................      80    
                    2003...................................      90    
                    2004 and thereafter....................    100.    
            ``(2) Special rule.--In the case of an individual who is an 
        employee within the meaning of section 401(c)(1) and whose 
        qualified health insurance is not provided through a group 
        health plan of an employer, paragraph (1) shall be applied by 
        substituting `100' for `90' but only with respect to the lesser 
        of the taxpayer's earned income (within the meaning of section 
        401(c)) or the payments referred to in subsection (a).
    ``(c) Exclusion of Subsidized Coverage.--Subsection (a) shall not 
apply to any taxpayer for any calendar month for which the taxpayer 
participates in any group health plan of an employer or any other 
entity if less than 50 percent of the cost of the taxpayer's coverage 
under such plan is borne by the taxpayer. A rule similar to the rule of 
the last sentence of section 162(l)(2)(B) shall apply for purposes of 
this subsection.
    ``(d) Qualified Health Insurance.--For purposes of this section--
            ``(1) In general.--The term `qualified health insurance' 
        has the meaning given such term by section 25B(d) determined 
        without regard to paragraph (2) thereof.
            ``(2) Special rule.--
                    ``(A) In general.--In the case of an individual who 
                is an employee within the meaning of section 401(c)(1) 
                and whose qualified health insurance (without regard to 
                this paragraph) is not provided through a group health 
                plan of an employer, paragraph (3) of section 25B(d) 
                shall not apply for purposes of this section.
                    ``(B) Limitation.--The amount taken into account 
                under subsection (a) by reason of subparagraph (A) 
                shall not exceed the excess of--
                            ``(i) the taxpayer's earned income (within 
                        the meaning of section 401(c)), over
                            ``(ii) the amount which would (without 
                        regard to this paragraph) be taken into account 
                        under subsection (a).
    ``(e) Special Rules.--
            ``(1) Coordination with medical deduction, etc.--Any amount 
        paid by a taxpayer for insurance to which subsection (a) 
        applies shall not be taken into account in computing the amount 
        allowable to the taxpayer as a deduction under section 213(a).
            ``(2) Deduction not allowed for self-employment tax 
        purposes.--The deduction allowable by reason of this section 
        shall not be taken into account in determining an individual's 
        net earnings from self-employment (within the meaning of 
        section 1402(a)) for purposes of chapter 2.''
    (b) Conforming Amendments.--
            (1)(A) Paragraph (1) of section 162(l) of such Code is 
        amended by striking ``the amount paid'' and all that follows 
        and inserting ``the eligible long-term care premiums (as 
        defined in section 213(d)(10)) paid during the taxable year for 
        any qualified long-term care insurance contract (as defined in 
        section 7702B(b)) covering the taxpayer, his spouse, and 
        dependents.''
            (B) Paragraph (2) of section 162(l) of such Code is amended 
        by striking subparagraph (C).
            (2) Subsection (a) of section 62 of such Code is amended by 
        inserting after paragraph (17) the following new item:
            ``(18) Costs of qualified health insurance.--The deduction 
        allowed by section 222.''
            (3) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by striking the last item and 
        inserting the following new items:

                              ``Sec. 222. Costs of qualified health 
                                        insurance.
                              ``Sec. 223. Cross reference.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

Summary: Allows as a deduction an amount equal to the applicable percentage of the amount paid for qualified health insurance coverage for a taxpayer, his spouse, and dependents. Increases, incrementally, the percentage from 60 percent in calendar year 2000 to 100 percent for calendar years 2004 and thereafter. Excludes coverage under which less than 50 percent of the cost of coverage is borne by the taxpayer.