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SECTION 1. SHORT TITLE.

This Act may be cited as the ''Medicaid Health Allowance Act of
1993''.

SEC. 2. ESTABLISHMENT OF PROGRAM.

(a) In general.--Title XIX of the Social Security Act (42 U.S.C.
1396 et seq.) is amended by adding at the end the following new
section:

''state health allowance programs

''Sec. 1931. (a) treatment of Expenditures Under Health Allowance
Programs as Medical Assistance Under State Plan.--
''(1) In General.--Notwithstanding any other provision of
this title, for purposes of determining the amount to be paid
to a State under section 1903(a)(1) for quarters in any fiscal
year, amounts expended by an eligible State (as described in
subsection (b)) during the fiscal year under a State health
allowance program (as described in subsection (c)) shall be
included in the total amount expended during the fiscal year as
medical assistance under the State plan (except as provided
under paragraph (2) or under subsection (d)(1)(C)).
''(2) Federal payment restricted to acute care services.--
No amounts expended under a State health allowance program that
are attributable to medical assistance described in paragraphs
(4), (14), (15), (23), or (24) of section 1905(a) shall be
included in the total amount expended as medical assistance
under the State plan.
''(b) Eligibility of State.--
''(1) In general.--A State is eligible for purposes of
subsection (a) if the State submits (at such time and in such
form as the Secretary may require) an application to the
Secretary containing the following information and assurances:
''(A) Assurances that the State laws governing the
sale and marketing of health plans reflect standards
established by the National Association of Insurance
Commissioners (or by the Secretary in accordance with
paragraph (3)) relating to community rating of premiums
that meet the requirements of paragraph (2).
''(B) Assurances that the State laws governing the
sale and marketing of health insurance plans reflect
standards established by the National Association of
Insurance Commissioners (or by the Secretary in
accordance with paragraph (3)) relating to pre-existing
conditions and guaranteed renewability.
''(C) Assurances that the State has adopted and is
enforced standards regarding quality assurance for
health benefit plans participating in the State health
allowance program, including standards regarding--
''(i) uniform reporting requirements for
such plans relating to a minimum set of
clinical data, patient satisfaction data, and
other information that may be used by
individuals to compare the quality of various
plans; and
''(ii) the establishment or designation of
an entity of the State government to collect
the data described in clause (i) and to
regularly report such data to the Secretary.
''(D) Such other information and assurances as the
Secretary may require.
''(2) Requirements for rating bands for premiums.--
''(A) In general.--Under the standards relating to
community rating of premiums established by the
National Association of Insurance Commissioners or by
the Secretary, for a class of business of a carrier,
the premium rates charged during a rating period to
employers with similar demographic or other objective
characteristics (not relating to claims experience,
health status, or duration of coverage) for the same or
similar coverage, or the rates which could be charged
to such employers under the rating system for that
class of business, shall not vary from the index rate
by more than 15 percent of the index rate.
''(B) Definitions.--In this paragraph:
''(i) Base premium rate.--The term 'base
premium rate' means, for each class of business
for each rating period, the lowest premium rate
charged or which could have charged under a
rating system for that class of business by the
carrier to employers with similar demographic
or other objective characteristics (not
relating to claims experience, health status,
or duration of coverage) for health benefit
plans with the same or similar coverage.
''(ii) Carrier.--The term 'carrier' means
any entity which provides health insurance or
health benefits in a State, and includes a
licensed insurance company, a prepaid hospital
or medical service plan, a health maintenance
organization, the plan sponsor of a multiple
employer welfare arrangement or an employee
benefit plan (as defined under the Employee
Retirement Income Security Act of 1974), or any
other entity providing a plan of health
insurance subject to State insurance
regulation.
''(iii) Class of business.--The term 'class
of business' means, with respect to a carrier,
all (or a distinct group of) small employers as
shown on the records of the carrier. For
purposes of the preceding sentence--
''(I) a carrier may establish,
subject to subclause (II), a distinct
group of employers on the basis that
the applicable health benefit plans
either--
''(aa) are marketed and
sold through individuals and
organizations which are not
participating in the marketing
or sale of other distinct
groups of employers for the
carrier,
''(bb) have been acquired
from another carrier as a
distinct group, or
''(cc) are provided through
an association that has a
membership of not less than 100
employers and that has been
formed for purposes other than
obtaining health coverage;
''(II) a carrier may not establish
more than 2 groupings under each class
of business based on the carrier's use
of managed-care techniques if the
techniques are expected to produce
substantial variation in health care
costs; and
''(III) notwithstanding subclauses
(I) and (II), a State commissioner of
Insurance of a State, upon application
and if authorized under State law, may
approve additional distinct groups upon
a finding that such approval would
enhance the efficiency and fairness of
the employer marketplace.
''(iv) Demographic characteristics.--The
term 'demographic characteristics' means age,
gender, industry, geographic area, family
composition, and group size.
''(v) Index rate.--The term ''index rate''
means, with respect to a class of business, the
arithmetic average of the applicable base
premium rate and the corresponding highest
premium rate for the class.
''(3) Establishment of standards by secretary.--If, after
the expiration of the 9-month period that begins on the date of
the enactment of this Act, the National Association of
Insurance Commissioners has not established the standards
described in paragraph (1), the Secretary shall establish such
standards not later than 1 year after the date of the enactment
of this Act.
''(c) State Health Allowance Program Described.--
''(1) Enrollment of participating individuals in approved
health benefit plans.--In this section, a State health
allowance program is a program in effect in all the political
subdivisions of the State (except as provided in (c)) under
which the State makes payments to the individual's insurer as
an allowance towards the costs of providing the individual with
benefits under an approved health benefit plan.
''(2) Approved plans described.--For purposes of paragraph
(1), a State shall approve health benefit plans in accordance
with such standards as the State may establish, except that--
''(A) the State may not approve a plan for a year
unless the actuarial value of the benefits provided by
and the cost-sharing associated with the plan for the
year--
''(i) with respect to the first year for
which the plan is approved for purposes of this
subsection, is not less than the actuarial
value of the medical assistance provided under
the State plan under this title for the year
(as determined by the Secretary without regard
to medical assistance described in paragraphs
(4), (14), (15), (23), or (24) of section
1905(a)); and
''(ii) with respect to any subsequent year,
is not greater than the amount determined under
this subparagraph for the preceding year,
increased by the amount (expressed as a
percentage) by which the actuarial value of the
medical assistance described in clause (i) for
the year exceeds or is less than the actuarial
value of such medical assistance for the
preceding year;
''(B) at least one of the plans approved by the
State shall be a health maintenance organization or
other plan under which payments are otherwise made on a
capitated basis for providing medical assistance to
individuals enrolled in the State plan under this
title; and
''(C) in the case of an individual who is entitled
to benefits under the State plan under this title as of
the first month during which the State health allowance
program is in effect, an approved plan may not require
the individual to contribute a greater amount of cost-
sharing than the individual would have been required to
contribute under the State plan (except as may be
imposed on an individual described in subparagraph (B)
or subparagraph (C) of subsection (d)(1)).
''(3) Waiver of statewideness requirement.--At the request
of a State, the Secretary may waive for a period not to exceed
3 years (subject to one 3-year extension) the requirement under
paragraph (1) that the State health allowance program be in
effect in all political subdivisions of the State.
''(d) Eligibility of Individuals to Participate in Allowance
Program.--
''(1) In general.--An individual is eligible to participate
in a State health allowance program described in subsection (c)
if the individual meets such criteria as the State may impose,
except that--
''(A) the State shall enroll the individual in the
program if the individual's income is equal to or less
than 100 percent of the 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 1991)
applicable to a family of the size involved;
''(B) the State may enroll the individual in the
program if the individual's income is greater than 100
percent of such official poverty line, except that the
State may require such an individual to contribute
additional cost-sharing towards the health benefit plan
if such cost-sharing is determined in accordance with a
sliding scale based on the individual's income;
''(C) the State may enroll an individual who is
described in subparagraph (B) and whose income is equal
to or greater than 200 percent of such official poverty
line in the program, except that no amounts expended by
the State during a fiscal year on behalf of such an
individual may be included in the total amount expended
during the fiscal year as medical assistance under the
State plan; and
''(D) no individual shall be eligible to
participate in the program if the individual is
entitled to benefits under title XVIII of the Social
Security Act pursuant to section 226 of such Act.
''(2) Automatic eligibility of medicaid categorically
eligible individuals.--Under the criteria imposed by a State
under paragraph (1), any individual to whom the State makes
medical assistance available under the State plan under this
title pursuant to clause (i) of section 1902(a)(10)(A) shall be
eligible to participate in the State health allowance program.
''(3) Use of resource standard.--Under the criteria imposed
by a State under paragraph (1), a State may not require an
individual to meet any resource standard unless the Secretary
approves the State's use of such a standard.
''(e) Evaluations and Reports.--
''(1) Evaluations.--Not later than 3 years after the date
of the enactment of this section (and at such subsequent
intervals as the Secretary considers appropriate), the
Secretary shall evaluate the effectiveness of the State health
allowance programs for which Federal financial participation is
provided under this section, and the impact of such programs on
increasing the number of individuals with health insurance
coverage in participating States and in controlling the costs
of health care in such States.
''(2) Reports.--Not later than 3 years after the date of
the enactment of this section (and at such subsequent intervals
as the Secretary considers appropriate), the Secretary shall
submit a report on the program to Congress.''.
(b) Ensuring Budget Neutrality Through Reduction in
Disproportionate Share Hospital Payments for Participating States.--
Section 1923 of the Social Security Act (42 U.S.C. 1396r-4) is amended
by adding at the end the following new subsection:
''(g) Reduction in Payment Adjustments for States With Health
Allowance Programs.--In the case of a State operating a State health
allowance program under section 1931 in a fiscal year, the Secretary
shall reduce the total payment adjustments made under this section for
hospitals in the State for quarters in the year by such amount as the
Secretary determines to be necessary to ensure that the total amount
paid to the State under section 1903(a)(1) for the year does not exceed
the amount that would have been paid to the State under such section
for the year if the State did not operate such a program.

SEC. 3. EFFECTIVE DATE.

The amendments made by section 2 shall apply to calendar quarters
beginning on or after January 1, 1994.
Medicaid Health Allowance Act of 1993 - Amends title XIX (Medicaid) of the Social Security Act to create State health allowance programs under which the State makes payments to an insurer of an eligible individual as an allowance towards the cost of providing the individual with benefits under an approved health benefit plan.