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S 1783 IS

To provide 10 steps to transform health care in America.

July 12, 2007

Mr. ENZI introduced the following bill; which was read twice and referred to the Committee on Finance

To provide 10 steps to transform health care in America.

Be it enacted by the Senate and House of Representatives 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 `Ten Steps to Transform Health Care in America Act'.

(b) Table of Contents- The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Purposes.

Sec. 3. Definitions.

TITLE I--AFFORDABLE HEALTH INSURANCE COVERAGE

Subtitle A--Individual Coverage Responsibility and Availability of Core Plan Options

Sec. 101. Coverage responsibility.

Sec. 102. Qualified core plans.

Sec. 103. Qualified core compatible plans.

Sec. 104. Certification.

Sec. 105. State-based risk adjustments.

Sec. 106. Relation to self-insured plans.

Sec. 107. State flexibility and enforcement.

Subtitle B--Standard Deduction for Health Insurance and Related Provisions

Sec. 121. Amendment of 1986 Code.

Sec. 122. Standard deduction for health insurance.

Sec. 123. Changes to existing tax preferences for medical coverage and costs for individuals eligible for standard deduction for health insurance.

Sec. 124. Exclusion of standard deduction for health insurance from employment taxes.

Sec. 125. Information reporting.

Sec. 126. Reduction of phaseout for earned income credit.

Subtitle C--Health Insurance Tax Credit for the Purchase of Health Insurance

Part I--Refundable Health Insurance Tax Credit

Sec. 131. Refundable credit for health insurance coverage.

Sec. 132. Advance payment of credit for purchasers of qualified health insurance.

Sec. 133. Designation of health insurance status required by individuals on Federal income tax returns.

Subtitle D--Education and Outreach

Sec. 141. Notice to taxpayers of availability of standard deduction for health insurance and refundable health insurance credit.

Sec. 142. Optional enrollment and outreach.

TITLE II--INCREASING INSURANCE MARKET PORTABILITY AND AFFORDABILITY

Subtitle A--Merging and Improving Insurance Markets

Sec. 201. Development of merged and improved State insurance market standards.

Sec. 202. Modifications relating to self-funded group health plans.

Sec. 203. Legislative proposals.

Sec. 204. Enforcement.

Subtitle B--Reduction in Premium Variation and Health Status Discrimination

Sec. 211. Development of standards for reduction in premium variation and health status discrimination among enrollees.

Sec. 212. Enforcement.

Subtitle C--Enhanced Marketplace Pooling and Related Market Rating

Part I--Enhanced Marketplace Pools

Sec. 245. Rules governing enhanced marketplace pools.

Sec. 246. Cooperation between Federal and State authorities.

Sec. 247. Effective date and transitional and other rules.

Part II--Market Relief

Sec. 251. Market relief.

Part III--Harmonization of Health Insurance Standards

Sec. 261. Health Insurance Standards Harmonization.

TITLE III--AFFORDABLE ACCESS TO HEALTH CARE FOR ALL AMERICANS

Subtitle A--Improving the Quality of Health Care by More Effectively Using Health Information Technology

Sec. 300. Short title.

Part I--Health Information Technology

SUBPART A--IMPROVING THE INTEROPERABILITY OF HEALTH INFORMATION TECHNOLOGY

Sec. 301. Improving health care quality, safety, and efficiency.

SUBPART B--FACILITATING THE WIDESPREAD ADOPTION OF INTEROPERABLE HEALTH INFORMATION TECHNOLOGY

Sec. 305. Facilitating the widespread adoption of interoperable health information technology.

SUBPART C--IMPROVING THE QUALITY OF HEALTH CARE

Sec. 311. Consensus process for the adoption of quality measures for use in the nationwide interoperable health information technology infrastructure.

SUBPART D--PRIVACY AND SECURITY

Sec. 321. Privacy and security.

SUBPART E--MISCELLANEOUS PROVISIONS

Sec. 331. GAO study.

Sec. 332. Health information technology resource center.

Sec. 333. Facilitating the provision of telehealth services across State lines.

Part II--Making Health Care More Accessible for All Americans

Sec. 341. Reauthorization of certain telehealth programs.

Sec. 342. Quality improvement activities.

Sec. 343. Sense of the senate regarding physician payments under medicare.

Subtitle B--Increasing Access to Physicians and Nurses

Sec. 351. Reauthorization of programs and miscellaneous amendments.

Sec. 352. Nurse workforce enhancement.

Sec. 353. Visas for registered nurses.

Sec. 354. MedPAC study and report on the impact of payment caps for IME and GME.

Subtitle C--Increasing Access to Primary Care

Sec. 361. Reauthorization of the community health center programs.

Sec. 362. Reauthorization of loan repayment programs of the National Health Service Corps.

Sec. 363. Clarification of authority for convenient care clinics to participate in Medicaid and SCHIP.

Subtitle D--Rural Health Care

Sec. 371. Reathorization of rural health care programs.

Subtitle E--Long Term Care

Sec. 381. Sense of the Senate.

Sec. 382. Living wills.

Sec. 383. Increasing Senior Choice and Access to Community-Based Long Term Care.

Subtitle F--Fair and Reliable Medical Justice

Sec. 391. Short title.

Sec. 392. Purposes.

Sec. 393. State demonstration programs to evaluate alternatives to current medical tort litigation.

SEC. 2. PURPOSES.

It is the purpose of this Act to--

(1) eliminate unfair tax treatment of health insurance thereby expanding choices, coverage, and control over health care for all Americans;

(2) increase affordable options for working families to purchase health insurance through a standard tax deduction;

(3) ensure that affordable health insurance is available to low-income individuals through the provision of a refundable, advanceable, assignable tax-based subsidy;

(4) provide cross-State pooling to reduce health care costs and increase accessibility for small business owners, unions, associations, and their workers, members, and families;

(5) blend the individual and group health insurance markets to extend important Health Insurance Portability and Accountability Act portability protections to the individual market so that insurance security can better move with an individual from job to job;

(6) emphasize preventive health care and help individuals with chronic diseases better manage their health so America will finally have health care and not sick care;

(7) give individuals the choice to convert the value of Medicaid and SCHIP program benefits into private health insurance, putting Americans in control of their health care, not the Federal government;

(8) save lives and money by better coordinating health information technology to improve health care delivery;

(9) increase access to primary care in rural and frontier areas by helping future providers and nurses pay for their education, and giving seniors more options to receive care in their homes and communities; and

(10) decrease the sky-rocketing cost of health care by restoring reliability in our medical justice system through State-based solutions.

SEC. 3. DEFINITIONS.

Except as otherwise provided, in this Act:

(1) ADULT INDIVIDUAL- The term `adult individual' means an individual who--

(A) is--

(i) age 19 or older;

(ii) a resident of a State;

(iii)(I) a United States citizen; or

(II) an alien with permanent residence; and

(iv) not a dependent child; and

(B) in the case of an incarcerated individual, such an individual who is incarcerated for less than 1 month.

(2) ALIEN WITH PERMANENT RESIDENCE- The term `alien with permanent residence' has the meaning given the term `qualified alien' in section 431 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1641).

(3) APPLICABLE STATE LAW- The term `applicable State law' means the health insurance and related laws and regulations of a State.

(4) DEPENDENT CHILD- The term `dependent child' has the meaning given the term `qualifying child' in section 152(c) of the Internal Revenue Code of 1986.

(5) HEALTH INSURANCE ISSUER- The term `health insurance issuer' means an insurance company, insurance service, or insurance organization (including a health maintenance organization, as defined in paragraph (6)) which is licensed to engage in the business of insurance in a State and which is subject to State law which regulates insurance (within the meaning of section 514(b)(2) of the Employee Retirement Income Security Act of 1974).

(6) HEALTH MAINTENANCE ORGANIZATION- The term `health maintenance organization' means--

(A) a federally qualified health maintenance organization (as defined in section 1301(a) of the Public Health Service Act);

(B) an organization recognized under State law as a health maintenance organization; or

(C) a similar organization regulated under State law for solvency in the same manner and to the same extent as such a health maintenance organization.

(7) QUALIFIED CORE COMPATIBLE PLAN- The term `qualified core compatible plan' means a compatible qualified core plan that meets the requirements of section 103.

(8) QUALIFIED CORE PLAN- The term `qualified core plan' means a qualified core plan described under section 102.

(9) SECRETARY- The term `Secretary' means the Secretary of Health and Human Services, unless expressly provided for otherwise in this Act.

(10) STATE- The term `State' means each of the several States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and other territories of the United States.

(11) STATE OF RESIDENCE- The term `State of residence', with respect to an individual, means the State in which the individual has primary residence.

TITLE I--AFFORDABLE HEALTH INSURANCE COVERAGE

Subtitle A--Individual Coverage Responsibility and Availability of Core Plan Options

SEC. 101. COVERAGE RESPONSIBILITY.

(a) Individual Responsibility-

(1) ADULT INDIVIDUALS- Not later than 3 years after the date of enactment of this Act, each adult individual shall be encouraged to enroll in a qualified health plan that meets at least the requirements applied under section 224(d)(2) of the Internal Revenue Code of 1986.

(2) DEPENDENT CHILDREN- Each adult individual enrolled in a health plan described in paragraph (1) shall have the responsibility to enroll (or provide evidence of enrollment of) each dependent child of the adult individual in such a health plan, or in a Federal or State governmental health coverage program for which such dependent child is eligible and which does not otherwise qualify as a health plan for purposes of paragraph (1).

(3) DETERMINATIONS OF ENROLLMENT- An individual may demonstrate compliance with this subsection through--

(A) proof of enrollment of such individual and dependent children of such individual (if any) provided on the individual Federal tax return of the individual pursuant to regulations developed by the Secretary of the Treasury; or

(B) proof of such enrollment obtained pursuant to automatic enrollment as provided for in subsection (d).

(b) Eligibility for Health Insurance Assistance- Subject to this subsection and subsection (c), an individual and such dependent children of such individual who is enrolled in a health plan described in subsection (a)(1) shall be eligible to elect to receive--

(1) a standard Federal income tax deduction for health insurance; or

(2) an income-based tax credit subsidy.

(c) Encouragement- Each State shall determine appropriate mechanisms, which may not include revocation or ineligibility for coverage under a qualified core plan or qualified core compatible plan, to encourage each adult individual to demonstrate coverage under a health plan described in subsection (a)(1) for such individual and compliance by such individual with the terms of paragraph (2) with respect to any dependent children of such individual.

(d) Automatic Enrollment-

(1) IN GENERAL- Each State shall implement mechanisms to automatically enroll an uninsured individual for health coverage if--

(A) such individual presents for treatment to a licensed health care facility or provider without health coverage under a health plan described in subsection (a)(1) or otherwise under a Federal or State government health coverage program; or

(B) such individual designates the lack of such coverage on the Federal tax return filed by such individual.

(2) TYPE OF PLAN- The mechanisms implemented under paragraph (1) shall ensure that an individual is automatically enrolled, on a randomized basis, in a qualified core plan offered in the State of residence of the individual, or in any Federal or State government health program if the individual is eligible for such enrollment.

(3) COORDINATION- The Secretary shall coordinate with the Secretary of the Treasury and the State insurance commissioners to develop procedures for providing notification to relevant entities regarding individuals who have indicated a lack of health coverage on Federal tax returns, or who have presented to a licensed healthcare entity or provider as provided for in paragraph (1)(A).

SEC. 102. QUALIFIED CORE PLANS.

(a) Offering of Coverage- Each health insurance issuer offering health insurance coverage in a State shall offer at least one certified qualified core plan to individuals residing in that State and shall market such plans in a manner that is substantially similar to the manner in which such issuer markets coverage or other health insurance plans such issuer offers in the State. If a State determines that a health insurance issuer is failing to offer (or market) such coverage in the State as provided for in this subsection, the State shall not license such issuer to offer health insurance coverage in such State (or revoke any existing license of such issuer effective upon the expiration of the subsequent plan year).

(b) Certification- Each State shall certify a plan as a qualified core plan if the plan meets the requirements of subsection (c).

(c) Requirements-

(1) IN GENERAL- To be certified as a qualified core plan, the plan shall--

(A) provide coverage for benefits, items, or services as required by the State;

(B) provide coverage for basic preventive items or services, as the State may define such items or services, in accordance with paragraph (2);

(C) provide coverage for medical self-management and for items or services needed for such self-management, as the State may define such items or services;

(D) require payment of the applicable standard premium for coverage under the plan (as determined in accordance with subsection (d));

(E) adhere to the cost sharing limitations prescribed under subsection (e);

(F) provide for the submission of data as required under subsection (f); and

(G) comply with any other requirements applicable under State law.

(2) BASIC PREVENTIVE ITEMS OR SERVICES- The basic preventive items or services for which coverage shall be provided under a qualified core plan shall be determined--

(A) pursuant to applicable State law; or

(B) if no such State law is in effect, based on standards and guidelines issued by the Secretary (in consultation with the National Association of Insurance Commissioners).

(d) Standard Premium Amount-

(1) IN GENERAL- Except as provided for in this subsection, the standard premium for coverage under a qualified core plan for the initial plan year following the date on which the requirement under section 101(a) applies shall be--

(A) $2,500 for individual coverage; and

(B) $5,000 for family coverage.

(2) CPI ADJUSTMENT- Each of the amounts provided for under paragraph (1) shall be annually increased, beginning in the second plan year following the date on which the requirement under section 101(a) applies, by the percentage increase in the Consumer Price Index for the previous plan year. As used in the preceding sentence, the term `Consumer Price Index' means the last Consumer Price Index for all-urban consumers published by the Department of Labor.

(e) Cost Sharing Limitations-

(1) IN GENERAL- A qualified core plan shall comply with the following cost sharing limitations:

(A) DEDUCTIBLES- The amount of any deductible shall not exceed $2,500 for a plan year.

(B) COPAYMENTS- The amount of any copayments shall not exceed 20 percent.

(C) ANNUAL LIMITS- The annual limit on cost sharing payment shall not exceed $5,000.

(2) ADJUSTMENT FOR INFLATION- Each of the amounts provided for under paragraph (1) shall be annually increased, beginning in the second plan year following the date on which the requirement under section 101(a) applies, by the percentage increase in the Consumer Price Index for the previous plan year. As used in the preceding sentence, the term `Consumer Price Index' means the last Consumer Price Index for all-urban consumers published by the Department of Labor.

(3) NO APPLICATION OF COST SHARING FOR PREVENTION AND MEDICAL SELF-MANAGEMENT- A qualified core plan may not impose cost sharing requirements on--

(A) basic preventive items or services; or

(B) medical self-management items or services.

(4) DECERTIFICATION- A State shall suspend or revoke the certification of any qualified core plan if the State determines that any policy or procedure implemented with respect to the plan has the effect, or likely effect, of materially altering the overall level of cost sharing obligations that may be required of enrollees under the plan. Notwithstanding the previous sentence, an individual covered under such a plan may continue coverage under such plan through the expiration of the current plan year, or if such expiration date is less than 6 months from the date of decertification, for an additional plan year.

(f) Actuarial Value Data and Application-

(1) IN GENERAL- A health insurance issuer shall annually submit to the State insurance commissioner and the Secretary a determination as to the aggregate actuarial value of each qualified core plan and qualified core compatible plan offered by the issuer in the State. In developing and submitting such data, the issuer shall utilize actuarial standards established by the National Association of Insurance Commissioners.

(2) PUBLICATION AND SUBMISSION TO SECRETARY- A State insurance commissioner shall--

(A) compile all data received under paragraph (1) with respect to the State;

(B) publish such data in a manner that enables individuals in the State to use such data in making health insurance decisions; and

(C) submit such data in report form to the Secretary.

(3) USE OF DATA-

(A) IN GENERAL- The Secretary shall, using the data provided under paragraph (2)(C), annually publish a national standard qualified core plan actuarial value (referred to as the `National actuarial value').

(B) QUALIFIED CORE COMPATIBLE PLANS- For provisions relating to the use of the National actuarial value with respect to qualified core compatible plans, see section 103(c)(1)(D).

(4) SUSPENSION OR REVOCATION OF CERTIFICATION- The State shall suspend or revoke the certification of any qualified core plan or qualified core compatible plan, upon the expiration of the subsequent plan year, for which a health insurance issuer has failed to submit data as required under paragraph (1).

(g) Application to State Law- Unless provided otherwise in this Act, nothing in this Act shall be construed to preempt State laws relating to health insurance, including State benefit mandate laws, consumer protection requirements, solvency and related fiscal requirements for qualified core plans.

(h) Market Availability Study-

(1) ASSESSMENT- Prior to the implementation of regulations relating to the certification of qualified core plans under this Act, the Secretary, in consultation with the National Association of Insurance Commissioners, shall conduct an assessment of the effect of the application of the National actuarial value as a requirement for certification of qualified core compatible plans under section103(c)(1)(D), including the effect of such application on the affordability of qualified core compatible plans, the entry of health insurance issuers into the qualified core plan and qualified core compatible plan market, and on health insurance market access, affordability, and competition.

(2) REPORT- The Secretary shall submit to Congress a report concerning the results of the assessment conducted under paragraph (1).

SEC. 103. QUALIFIED CORE COMPATIBLE PLANS.

(a) Offering of Coverage- A health insurance issuer offering health insurance coverage in a State may offer one or more certified qualified core compatible plans to individuals residing in that State.

(b) Certification- Each State shall certify a plan as a qualified core compatible plan if the plan meets the requirements of subsection (c).

(c) Requirements-

(1) IN GENERAL- To be certified as a qualified core compatible plan, the plan shall--

(A) provide coverage for benefits, items, or services as required by the State;

(B) provide coverage for basic preventive items or services;

(C) provide coverage for medical self-management and for items or services needed for such self-management, as the State may define such items or services;

(D) have an actuarial value that is not less than the national standard actuarial value determined under section 102(f)(3)(A); and

(E) comply with any other requirements imposed by the State.

(2) BASIC PREVENTIVE ITEMS OR SERVICES- The basic preventive items or services for which coverage shall be provided under a qualified core compatible plan shall be determined is the same manner as provided for under section 102(c)(2).

(3) PREMIUMS AND COST SHARING- Except as provided in this Act, premium and cost sharing requirements applicable to qualified core compatible plans shall be determined in accordance with applicable State law.

(d) Application of State Law- Unless specifically provided otherwise in this Act, nothing in this Act shall be construed to preempt State laws relating to health insurance, including State benefit mandate laws, consumer protection requirements, and solvency and related fiscal requirements for qualified core compatible plans.

SEC. 104. CERTIFICATION.

(a) In General- A health insurance issuer shall submit an application to the State insurance commissioner for the certification of a health plan as a qualified core plan or a qualified core compatible plan for purposes of offering coverage under such plan in the State.

(b) Regulations- The Secretary, in consultation with the National Association of Insurance Commissioners, shall promulgate regulations that provide standards and procedures for the certification, and suspension or revocation of the certification, of qualified core plans and qualified core compatible plans to ensure that such plans comply, and maintain such compliance, with the requirements and standards applicable to such plans under this title.

SEC. 105. STATE-BASED RISK ADJUSTMENTS.

(a) In General- The State shall seek to lessen such material risk selection as may occur among qualified core plans, qualified compatible core plans, and other licensed health insurance products (not including self-insured plans) through the application of State risk adjustment requirements that are certified by the Secretary as meeting standards established by the Secretary (in consultation with the National Association of Insurance Commissioners).

(b) Assessment and Report-

(1) IN GENERAL- Prior to the development of standards under subsection (a), the Secretary, in consultation with the National Association of Insurance Commissioners, shall conduct an assessment of--

(A) the degree of the actual or actuarially anticipated material adverse selection among qualified core plans, qualified core compatible plans, and other insured health plans; and

(B) the comparative efficiency of State risk adjustment requirement options to minimize such hazards.

(2) REPORT- The Secretary shall submit a report to Congress concerning the results of the assessment conducted under paragraph (1). Such report shall include such recommendations as the Secretary may include for additional or future legislation to adjust the standards developed under subsection (a) if the Secretary determines that such legislation is reasonably necessary to provide for the effective application of the requirements of subsection (a).

SEC. 106. RELATION TO SELF-INSURED PLANS.

(a) In General- An individual who is enrolled in health care coverage under a self-insured health plan (as defined for purposes of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.)) shall be deemed to be in compliance with the requirements of section 101(a), and other than as expressly provided for otherwise in this Act, current law with respect to such plans shall remain in effect.

(b) Demonstration of Actuarial Value- The health insurance issuer of a plan described in subsection (a), shall submit to the Secretary of Labor evidence demonstrating that the coverage alternative involved meets the requirements of such subsection.

(c) Certification Process- Certification, or suspension or revocation of certification, of health plans under this section shall be administered by the Secretary of Labor in consultation with the State insurance commissioner.

SEC. 107. STATE FLEXIBILITY AND ENFORCEMENT.

(a) In General-

(1) STATE AUTHORITY- Subject to subsection (d), each State shall require that health insurance issuers that issue, sell, renew, or offer health insurance coverage in the State meet the requirements established under this subtitle with respect to such issuers and with respect to qualified core plans and qualified core compatible plans.

(2) FAILURE TO IMPLEMENT REQUIREMENTS- In the case of a State that fails to substantially implement and enforce the requirements set forth in this subtitle with respect to health insurance issuers in the State, the Secretary shall implement and enforce the requirements of this subtitle under subsection (c) insofar as they relate to the issuance, sale, renewal, and offering of qualified core plans and qualified core compatible plans in such State.

(b) Procedure-

(1) PRESUMPTION-

(A) IN GENERAL- Subject to the succeeding provisions of this subsection, a State is presumed to be implementing and enforcing this subtitle if, by not later than the date that is 6 months after the date of enactment of this Act, the chief executive officer of the State--

(i) notifies the Secretary that the State has enacted or intends to enact (by not later than January 1, 2009, or July 1, 2009 in the case of a State described in subparagraph (B)(ii)) any necessary legislation to provide for the implementation and enforcement of such subtitle; and

(ii) provides the Secretary with such information as the Secretary may require to review the legislation and its implementation (or proposed implementation) under this subsection.

(B) DELAY PERMITTED FOR CERTAIN STATES-

(i) EFFECT OF DELAY- In the case of a State described in clause (ii) that provides notice under subparagraph (A)(i), for the presumption to continue on and after July 1, 2009, the chief executive officer of the State by April 1, 2009--

(I) must notify the Secretary that the State has enacted any necessary legislation to provide for the implementation and enforcement of this subtitle as of July 1, 2009; and

(II) must provide the Secretary with such information as the Secretary may require to review the legislation and its implementation (or proposed implementation) under this subsection.

(ii) STATES DESCRIBED- A State described in this clause is a State that has a legislature that does not meet within the 12-month period beginning on the date of enactment of this Act.

(C) CONTINUED APPLICATION- In order for a State to continue to be presumed to be implementing and enforcing the requirements of this subtitle, the State shall provide the Secretary every 3 years with information described in subparagraph (A)(ii) or (B)(i)(II) (as the case may be).

(2) NOTICE- If the Secretary finds, after review of information provided under paragraph (1) and in consultation with the chief executive officer of the State and the insurance commissioner of the State, that the State is not implementing and enforcing the requirements of this subtitle, the Secretary--

(A) shall notify the State of--

(i) such preliminary determination, and

(ii) the consequences under paragraph (3) of a failure to carry out such implementation and enforcement; and

(B) shall permit the State a reasonable opportunity in which to modify State law in a manner so that may be acceptable implementation and enforcement.

(3) FINAL DETERMINATION- If, after providing notice and opportunity under paragraph (2), the Secretary finds that the State is not implementing or enforcing the requirements of this subtitle, the Secretary shall notify the State of such fact and that the Secretary shall be responsible for enforcing such requirements in the State.

(4) FUTURE ADOPTION OF MECHANISMS- If a State, after the Secretary makes a notification described in paragraph (3), submits the notice and information described in paragraph (1), unless the Secretary makes a finding described in paragraph (3) within the 90-day period beginning on the date of submission of the notice and information, the mechanism shall be considered to be an acceptable alternative mechanism for purposes of this section, effective 90 days after the end of such period, subject to the second sentence of paragraph (1).

(c) Secretarial Enforcement Authority-

(1) LIMITATION- The provisions of this subsection shall apply with respect to the enforcement of a provision (or provisions) of this subtitle only--

(A) as provided under subsection (a)(2); and

(B) with respect to health insurance issuers and qualified core plans and qualified core compatible plans.

(2) IMPOSITION OF PENALTIES- In the cases described in paragraph (1):

(A) IN GENERAL- Subject to the succeeding provisions of this subsection, any health insurance issuer that fails to comply with a provision of this subtitle applicable to such issuer with respect to a qualified core plan or qualified core compatible plan is subject to a civil money penalty under this subsection.

(B) AMOUNT OF PENALTY-

(i) IN GENERAL- The maximum amount of penalty imposed under this paragraph is $100 for each day for each individual with respect to which such a failure occurs.

(ii) CONSIDERATIONS IN IMPOSITION- In determining the amount of any penalty to be assessed under this paragraph, the Secretary shall take into account the previous record of compliance of the issuer being assessed with the applicable provisions of this subtitle and the gravity of the violation.

(iii) LIMITATIONS-

(I) PENALTY NOT TO APPLY WHERE FAILURE NOT DISCOVERED EXERCISING REASONABLE DILIGENCE- No civil money penalty shall be imposed under this paragraph on any failure during any period for which it is established to the satisfaction of the Secretary that none of the entities against whom the penalty would be imposed knew, or exercising reasonable diligence would have known, that such failure existed.

(II) PENALTY NOT TO APPLY TO FAILURES CORRECTED WITHIN 30 DAYS- No civil money penalty shall be imposed under this paragraph on any failure if such failure was due to reasonable cause and not to willful neglect, and such failure is corrected during the 30-day period beginning on the first day any of the entities against whom the penalty would be imposed knew, or exercising reasonable diligence would have known, that such failure existed.

(C) ADMINISTRATIVE REVIEW-

(i) OPPORTUNITY FOR HEARING- The entity assessed shall be afforded an opportunity for hearing by the Secretary upon request made within 30 days after the date of the issuance of a notice of assessment. In such hearing the decision shall be made on the record pursuant to section 554 of title 5, United States Code. If no hearing is requested, the assessment shall constitute a final and unappealable order.

(ii) HEARING PROCEDURE- If a hearing is requested, the initial agency decision shall be made by an administrative law judge, and such decision shall become the final order unless the Secretary modifies or vacates the decision. Notice of intent to modify or vacate the decision of the administrative law judge shall be issued to the parties within 30 days after the date of the decision of the judge. A final order which takes effect under this paragraph shall be subject to review only as provided under subparagraph (D).

(D) JUDICIAL REVIEW-

(i) FILING OF ACTION FOR REVIEW- Any entity against whom an order imposing a civil money penalty has been entered after an agency hearing under this paragraph may obtain review by the United States district court for any district in which such entity is located or the United States District Court for the District of Columbia by filing a notice of appeal in such court within 30 days from the date of such order, and simultaneously sending a copy of such notice by registered mail to the Secretary.

(ii) CERTIFICATION OF ADMINISTRATIVE RECORD- The Secretary shall promptly certify and file in such court the record upon which the penalty was imposed.

(iii) STANDARD FOR REVIEW- The findings of the Secretary shall be set aside only if found to be unsupported by substantial evidence as provided by section 706(2)(E) of title 5, United States Code.

(iv) APPEAL- Any final decision, order, or judgment of the district court concerning such review shall be subject to appeal as provided in chapter 83 of title 28 of such Code.

(E) FAILURE TO PAY ASSESSMENT; MAINTENANCE OF ACTION-

(i) FAILURE TO PAY ASSESSMENT- If any entity fails to pay an assessment after it has become a final and unappealable order, or after the court has entered final judgment in favor of the Secretary, the Secretary shall refer the matter to the Attorney General who shall recover the amount assessed by action in the appropriate United States district court.

(ii) NONREVIEWABILITY- In such action the validity and appropriateness of the final order imposing the penalty shall not be subject to review.

(F) PAYMENT OF PENALTIES- Except as otherwise provided, penalties collected under this paragraph shall be paid to the Secretary (or other officer) imposing the penalty and shall be available without appropriation and until expended for the purpose of enforcing the provisions with respect to which the penalty was imposed.

(d) Preemption-

(1) IN GENERAL- Subject to subsection (b), nothing in this subtitle shall be construed to prevent a State from establishing, implementing, or continuing in effect standards and requirements unless such standards and requirements prevent the application of a requirement of this subtitle.

(2) RULES OF CONSTRUCTION- Except as otherwise provided for in this Act, nothing in this subtitle shall be construed to affect or modify the provisions of section 514 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1144).

Subtitle B--Standard Deduction for Health Insurance and Related Provisions

SEC. 121. AMENDMENT OF 1986 CODE.

Except as otherwise expressly provided, whenever in this subtitle an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

SEC. 122. STANDARD DEDUCTION FOR HEALTH INSURANCE.

(a) In General- Part VII of subchapter B of chapter 1 (relating to additional itemized deductions for individuals) is amended by redesignating section 224 as section 225 and by inserting after section 223 the following new section:

`SEC. 224. STANDARD DEDUCTION FOR HEALTH INSURANCE.

`(a) Deduction Allowed- In the case of an individual, there shall be allowed as a deduction to the taxpayer for the taxable year the standard deduction for health insurance.

`(b) Standard Deduction for Health Insurance- For purposes of this section--

`(1) IN GENERAL- The term `standard deduction for health insurance' means the sum of the amounts determined under paragraph (2) with respect to each individual for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year.

`(2) ALLOWANCE FOR EACH INDIVIDUAL- The amount determined under this paragraph with respect to any individual is the sum of the monthly limitations for months during the taxable year that the individual is an eligible individual.

`(3) MONTHLY LIMITATION-

`(A) IN GENERAL- The monthly limitation for any month is 1/12 of $7,500.

`(B) COST-OF-LIVING ADJUSTMENT-

`(i) IN GENERAL- In the case of taxable years beginning in calendar years after the first calendar year to which this section applies, the $7,500 amount under subparagraph (A) 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 such taxable year begins, determined by substituting `the calendar year preceding the first calendar year to which section 224 applies' for `calendar year 1992' in subparagraph (B) thereof.

`(ii) ROUNDING- If any increase under clause (i) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.

`(c) Limitations and Special Rules Relating to Standard Deduction- For purposes of this section--

`(1) ONLY 2 ELIGIBLE INDIVIDUALS TAKEN INTO ACCOUNT- A taxpayer shall not take into account more than 2 eligible individuals for any month in computing the standard deduction for health insurance for purposes of subsection (a).

`(2) SPECIAL RULE FOR MARRIED INDIVIDUALS FILING SEPARATELY- In the case of a married individual who files a separate return for the taxable year, the deduction allowed under subsection (a) shall be equal to one-half of the amount which would otherwise be determined under subsection (a) if such individual filed a joint return for the taxable year.

`(3) DENIAL OF DEDUCTION TO DEPENDENTS- No deduction 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.

`(4) COORDINATION WITH OTHER HEALTH TAX INCENTIVES-

`(A) DENIAL OF DEDUCTION IF HEALTH INSURANCE COSTS CREDIT ALLOWED- No deduction shall be allowed under this section to any taxpayer if a credit is allowed to the taxpayer under section 35 or 36 for the taxable year.

`(B) REDUCTION FOR INSURANCE PURCHASED WITH MSA OR HSA FUNDS- The amount allowed as a deduction under subsection (a) for the taxable year shall be reduced by the aggregate amount--

`(i) paid during the taxable year from an Archer MSA to which section 220(d)(2)(B)(ii) (other than subclause (II) thereof) applies, and

`(ii) paid during the taxable year from a health savings account to which section 223(d)(2)(C) (other than clause (ii) thereof) applies.

`(5) SPECIAL RULE FOR DIVORCED PARENTS, ETC- Notwithstanding subsection (b)(1), an individual who is a child may be taken into account on the return of the parent other than the parent for whom a deduction with respect to the child is allowed under section 151 for a taxable year beginning in a calendar year if--

`(A) the parent for whom the deduction under section 151 is allowed for a taxable year beginning in such calendar year signs a written declaration (in such manner and form as the Secretary may by regulations prescribe) that such parent will not claim the deduction allowable under this section with respect to the child for taxable years beginning in such calendar year, and

`(B) the parent for whom the deduction under section 151 is not allowed attaches such written declaration to the parent's return for the taxable year beginning in such calendar year.

`(d) Other Definitions- For purposes of this section--

`(1) ELIGIBLE INDIVIDUAL-

`(A) IN GENERAL- The term `eligible individual' means, with respect to any month, an individual who is covered under a qualified health plan as of the 1st day of such month.

`(B) COVERAGE UNDER MEDICARE, MEDICAID, OR SCHIP AND GRANDFATHERED EMPLOYER COVERAGE- The term `eligible individual' shall not include any individual who for any month is--

`(i) entitled to benefits under part A of title XVIII of the Social Security Act or enrolled under part B of such title,

`(ii) enrolled in the program under title XIX or XXI of such Act (other than under section 1928 of such Act), or

`(iii) receiving benefits (other than under continuation coverage under section 4980B) which constitute medical care from an employer--

`(I) from whom such individual is separated from service at the time of receipt of such benefits, and

`(II) after such separation, if such benefits began before January 1, 2010,

unless such individual is also covered by a qualified health plan as of the 1st day of such month.

`(C) IDENTIFICATION REQUIREMENTS- The term `eligible individual' shall not include any individual for any month unless the policy number associated with coverage under the qualified health plan and the TIN of each eligible individual covered under such coverage for such month is included on the return for the taxable year in which such month occurs.

`(2) QUALIFIED HEALTH PLAN-

`(A) IN GENERAL- The term `qualified health plan' means a health plan (within the meaning of section 223(c)(2), without regard to subparagraph (A)(i) thereof) which, under regulations prescribed by the Secretary, meets the following requirements:

`(i) The plan has a reasonable annual or lifetime benefit maximum.

`(ii) The plan has coverage for inpatient and outpatient care, emergency benefits, and physician care.

`(iii) No pre-existing condition limitations are imposed with respect to any eligible individual.

`(iv) The plan has coverage which meaningfully limits individual economic exposure to extraordinary medical expenses

`(B) EXCLUSION OF CERTAIN PLANS- The term `qualified health plan' does not include--

`(i) a health plan if substantially all of its coverage is coverage described in section 223(c)(1)(B),

`(ii) any program or benefits referred to in clause (i), (ii), or (iii) of paragraph (1)(B), and

`(iii) a medicare supplemental policy (as defined in section 1882 of the Social Security Act).

`(e) Regulations- The Secretary may prescribe such regulations as may be necessary to carry out this section.'.

(b) Deduction Allowed Whether or Not Individual Itemizes Other Deductions- Subsection (a) of section 62 is amended by inserting before the last sentence at the end the following new paragraph:

`(22) STANDARD DEDUCTION FOR HEALTH INSURANCE- The deduction allowed by section 224.'.

(c) Election to Take Health Insurance Costs Credit- Section 35(g) (relating to special rules for credit for health insurance costs of eligible individuals) is amended by redesignating paragraph (9) as paragraph (10) and by inserting after paragraph (8) the following new paragraph:

`(9) ELECTION NOT TO CLAIM CREDIT- This section shall not apply to a taxpayer for any taxable year if such taxpayer elects to have this section not apply for such taxable year.'.

(d) Clerical Amendment- The table of sections for part VII of subchapter B of chapter 1 is amended by striking the item relating to section 224 and adding at the end the following new items:

`Sec. 224. Standard deduction for health insurance.

`Sec. 225. Cross reference.'.

(e) Effective Date- The amendments made by this section shall apply to taxable years beginning on or after the first day of the first calendar year in which occurs the first date on which the requirement of section 101(a) of this Act applies.

SEC. 123. CHANGES TO EXISTING TAX PREFERENCES FOR MEDICAL COVERAGE AND COSTS FOR INDIVIDUALS ELIGIBLE FOR STANDARD DEDUCTION FOR HEALTH INSURANCE.

(a) Deduction for Medical, Dental, etc., Expenses- Section 213 (relating to medical, dental, etc., expenses) is amended by adding at the end the following new subsection:

`(f) Termination of Deduction for Individuals Not Covered by Medicare, Medicaid, SCHIP, or Grandfathered Employer Plans-

`(1) IN GENERAL- Except as provided in paragraph (2), no deduction shall be allowed under subsection (a) for any taxable year with respect to which a deduction under section 224 is allowable.

`(2) EXCEPTION FOR INDIVIDUALS COVERED BY MEDICARE, MEDICAID, SCHIP, OR GRANDFATHERED EMPLOYER PLANS- Paragraph (1) shall not apply to an individual for any taxable year if such individual is not an eligible individual (as defined in section 224(d)(1)) for any month during such taxable year by reason of coverage described in section 224(d)(1)(B).'.

(b) Exclusion for Contributions by Employer to Accident and Health Plans-

(1) IN GENERAL- Section 106 (relating to contributions by employer to accident and health plans) is amended by adding at the end the following new subsection:

`(f) Subsections (a) and (c) Apply Only to Individuals Covered by Medicare, Medicaid, SCHIP, or Grandfathered Employer Plans-

`(1) IN GENERAL- Except as provided in paragraph (2), subsections (a) and (c) shall not apply for any taxable year with respect to which a deduction under section 224 is allowable.

`(2) EXCEPTION FOR INDIVIDUALS COVERED BY MEDICARE, MEDICAID, SCHIP, OR GRANDFATHERED EMPLOYER PLANS- Paragraph (1) shall not apply to an individual for any taxable year if such individual is not an eligible individual (as defined in section 224(d)(1)) for any month during such taxable year by reason of coverage described in section 224(d)(1)(B).'.

(2) CONFORMING AMENDMENTS-

(A) Section 106(b)(1) is amended--

(i) by inserting `gross income does not include' before `amounts contributed', and

(ii) by striking `shall be treated as employer-provided coverage for medical expenses under an accident or health plan'.

(B) Section 106(d)(1) is amended--

(i) by inserting `gross income does not include' before `amounts contributed', and

(ii) by striking `shall be treated as employer-provided coverage for medical expenses under an accident or health plan'.

(c) Amounts Received Under Accident and Health Plans-

(1) IN GENERAL- Section 105 (relating to amounts received under accident and health plans) is amended by adding at the end the following new subsection:

`(j) Section Only To Apply to Individuals Covered by Medicare, Medicaid, SCHIP, or Grandfathered Employer Plans-

`(1) IN GENERAL- Except as provided in paragraph (2), subsection (b) shall not apply for any taxable year with respect to which a deduction under section 224 is allowable.

`(2) EXCEPTION FOR INDIVIDUALS COVERED BY MEDICARE, MEDICAID, SCHIP, OR GRANDFATHERED EMPLOYER PLANS- Paragraph (1) shall not apply to an individual for any taxable year if such individual is not an eligible individual (as defined in section 224(d)(1)) for any month during such taxable year by reason of coverage described in section 224(d)(1)(B).'.

(d) Termination of Deduction for Health Insurance Costs of Self-Employed Individuals- Subsection (l) of section 162 (relating to special rules for health insurance costs of self-employed individuals) is amended by adding at the end the following new paragraph:

`(6) TERMINATION- This subsection shall not apply to taxable years with respect to which a deduction under section 224 is allowable.'.

(e) Effective Date- The amendments made by this section shall apply to taxable years beginning on or after the first day of the first calendar year in which occurs the first date on which the requirement of section 101(a) of this Act applies.

SEC. 124. EXCLUSION OF STANDARD DEDUCTION FOR HEALTH INSURANCE FROM EMPLOYMENT TAXES.

(a) In General- Chapter 25 (relating to general provisions relating to employment taxes) is amended by adding at the end the following new section:

`SEC. 3511. EXCLUSION OF STANDARD DEDUCTION FROM EMPLOYMENT TAXES.

`(a) In General- For purposes of chapters 21, 22, and 23, each of the following amounts for any period (determined without regard to this section) shall be reduced by the portion of the standard deduction for health insurance (as defined in section 224) allocable to the period:

`(1) The amount of wages determined under section 3121(a).

`(2) The amount of compensation determined under section 3231(e).

`(3) The amount of wages determined under section 3306(b).

`(b) Determination of Standard Deduction Allocable to a Period- For purposes of subsection (a)--

`(1) IN GENERAL- The determination of the portion of the standard deduction for health insurance allocable to a period shall be made on the basis of a qualified certificate of eligible coverage furnished by the employee to the employer.

`(2) QUALIFIED CERTIFICATE OF ELIGIBLE COVERAGE- The term `qualified certificate of eligible coverage' means a statement of eligibility for the deduction allowable under section 224 which contains such information, is in such form, and is provided at such times, as the Secretary may prescribe.

`(3) ONLY 1 CERTIFICATE IN EFFECT AT A TIME- Except as provided by the Secretary, an employee may have only 1 qualified certificate of eligible coverage in effect for any period.

`(4) ELECTION- An employee may elect not to have this section apply for any period for purposes of chapter 21 or 22.

`(c) Reconciliation of Erroneous Payments To Be Made at Employee Level-

`(1) IN GENERAL- If the application of this subsection results in an incorrect amount being treated as wages or compensation for purposes of chapter 21, 22, or 23, whichever is applicable, with respect to any employee for 1 or more periods ending within a taxable year of the employee--

`(A) in the case of an aggregate overpayment of the taxes imposed by any such chapter for all such periods, there shall be allowed as a credit against the tax imposed by chapter 1 for such taxable year on such employee an amount equal to the amount of such overpayment, and

`(B) in the case of an aggregate underpayment of the taxes imposed by any such chapter for all such periods, the employee shall be liable for payment of the entire amount of such underpayment.

`(2) CREDITS TREATED AS REFUNDABLE- For purposes of this title, any credit determined under paragraph (1)(A) or subsection (d)(2) shall be treated as if it were a credit allowed under subpart C of part IV of subchapter A of chapter 1.

`(3) RULES FOR REPORTING AND COLLECTION OF TAX- Any tax required to be paid by an employee under paragraph (1)(B) shall be included with the employee's return of Federal income tax for the taxable year.

`(4) SECRETARIAL AUTHORITY- The Secretary shall prescribe such rules as may be necessary to carry out the provisions of this subsection.

`(d) Phase in-

`(1) IN GENERAL- In the case of the first 3 calendar years to which this section applies, subsection (a) shall apply to wages and compensation of an employee only for purposes of section 3101, 3201, 3211, or 3301, whichever is applicable.

`(2) CREDIT- In the case of any taxable year beginning in a calendar year to which paragraph (1) applies, there shall be allowed as a credit against the tax imposed by chapter 1 for such taxable year on an employee an amount equal to the excess of--

`(A) the tax imposed under section 3111 or 3231, whichever is applicable, on the wages of the employee for the part of such calendar year in such taxable year, over

`(B) the tax which would have been imposed under section 3111 or 3231, whichever is applicable, on the wages of the employee for the part of such calendar year in such taxable year if subsection (a) had applied for purposes of section 3111 or 3231.'.

(b) Self-Employment Income- Section 1402 (defining net earnings from self-employment) is amended by adding at the end the following:

`(l) Standard Deduction for Health Insurance- For purposes of this chapter--

`(1) IN GENERAL- The self-employment income of a taxpayer for any period (determined without regard to this subsection) shall be reduced by the excess (if any) of--

`(A) the portion of the standard deduction for health insurance (as defined in section 224) allocable to the period, over

`(B) the amount of any reduction in wages or compensation for such period under section 3511.

`(2) DETERMINATION OF STANDARD DEDUCTION ALLOCABLE TO A PERIOD- For purposes of paragraph (1), the portion of the standard deduction allocable to any period shall be determined in a manner similar to the manner under section 3511.'.

(c) Conforming Amendments-

(1) Section 3121(a)(2) is amended by inserting `which is excludable from gross income under section 105 or 106' after `such payment)'.

(2) Subsection (a) of section 209 of the Social Security Act (42 U.S.C. 409) is amended by striking `or' at the end of paragraph (18), by striking the period at the end of paragraph (19) and inserting `; or', and by inserting after paragraph (19) the following new paragraph:

`(20) any amount excluded from wages under section 3511(a) of the Internal Revenue Code of 1986 (relating to exclusion of standard deduction from employment taxes).'.

(3) Section 1324(b)(2) of title 31, United States Code, is amended by inserting `, or the credit under section 3511(c)(2) of such Code' before the period at the end.

(4) Section 209(k)(2) of the Social Security Act is amended by redesignating subparagraphs (C) and (D) as subparagraphs (D) and (E), respectively, and by inserting after subparagraph (B) the following new subparagraph:

`(C) by disregarding the exclusion from wages in subsection (a)(20),'.

(5) The table of sections for chapter 25 is amended by adding at the end the following new item:

`Sec. 3511. Exclusion of standard deduction from employment taxes.'.

(d) Effective Dates-

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to remuneration paid or accrued for periods on or after the first day of the first calendar year in which occurs the first date on which the requirement of section 101(a) of this Act applies.

(2) RECONCILIATION AND SELF-EMPLOYED- Sections 3511(c) and (d)(2) of the Internal Revenue Code of 1986 (as added by subsection (a)), and the amendments made by subsection (b), shall apply to taxable years beginning on or after the first day described in paragraph (1).

SEC. 125. INFORMATION REPORTING.

(a) Health Plan Providers- Subpart B of part III of subchapter A of chapter 61 (relating to information concerning transactions with other persons) is amended by adding at the end the following new section:

`SEC. 6050W. COVERAGE UNDER QUALIFIED HEALTH PLAN.

`(a) In General- Every person providing coverage under a qualified health plan (as defined in section 224(d)(2)) during a calendar year shall, on or before January 31 of the succeeding year, make a return described in subsection (b) with respect to each individual who is covered by such person under a qualified health plan for any month during the calendar year.

`(b) Return- A return is described in this subsection if such return--

`(1) is in such form as the Secretary prescribes, and

`(2) contains--

`(A) the name of the person providing coverage under the qualified health plan,

`(B) the name, address, and TIN of the individual covered by the plan,

`(C) if such individual is the owner of the policy under which such plan is provided, the name, address, and TIN of each other individual covered by such policy and the relationship of each such individual to such owner, and

`(D) the specific months of the year for which each individual referred to in subparagraph (B) is, as of the first day of each such month, covered by such plan.

`(c) Statement To Be Furnished With Respect to Whom Information Is Required- 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 under subsection (b)(2)(A) a written statement showing--

`(1) the name, address, and phone number of the information contact of the person required to make such return, and

`(2) the information described in subsection (b)(2).

The written statement required under the preceding sentence shall be furnished on or before January 31 of the year following the calendar year for which the return under subsection (a) was required to be made.'.

(b) Employers- Subsection (a) of section 6051 (relating to requirement for employers to provide W-2 information) is amended by striking `and' at the end of paragraph (12), by striking the period at the end of paragraph (13) and inserting `, and', and by inserting after paragraph (13) the following new paragraph:

`(14) the value (determined under section 4980B(f)(4)) of employer-provided coverage for each month under an accident or health plan and the category of such coverage for purposes of section 6116.'.

(c) Application to Retirees- Subsection (a) of section 6051 is amended by adding at the end the following: `In the case of a retiree, this section shall (to the extent established by the Secretary by regulation) apply only with respect to paragraph (14).'.

(d) Assessable Penalties-

(1) Subparagraph (B) of section 6724(d)(1) of such Code (relating to definitions) is amended by redesignating clauses (xv) through (xx) as clauses (xvi) through (xxi), respectively, and by inserting after clause (xi) the following new clause:

`(xv) section 6050W (relating to returns relating to payments for qualified health insurance),'.

(2) Paragraph (2) of section 6724(d) of such Code is amended by striking the period at the end of subparagraph (CC) and inserting `, or' and by adding at the end the following new subparagraph:

`(DD) section 6050W(d) (relating to returns relating to payments for qualified health insurance).'.

(e) Clerical Amendment- The table of sections for such subpart B is amended by adding at the end the following new item:

`Sec. 6050W. Coverage under qualified health plan.'.

(f) Effective Date- The amendments made by this section shall apply to years beginning on or after the first day of the first calendar year in which occurs the first date on which the requirement of section 101(a) of this Act applies.

SEC. 126. REDUCTION OF PHASEOUT FOR EARNED INCOME CREDIT.

(a) In General- Paragraph (1) of section 32(b) (relating to percentages) is amended--

(1) in subparagraph (A)--

(A) by striking `15.98' and inserting `15', and

(B) by striking `21.06' and inserting `15',

(2) in subparagraph (B)--

(A) by striking `15.98' and inserting `15', and

(B) by striking `20.22' and inserting `15', and

(3) in subparagraph (C)--

(A) by striking `15.98' and inserting `15', and

(B) by striking `17.68' and inserting `15'.

(b) Effective Date- The amendments made by subsection (a) shall apply to taxable years beginning on or after the first day of the first calendar year in which occurs the first date on which the requirement of section 101(a) of this Act applies.

Subtitle C--Health Insurance Tax Credit for the Purchase of Health Insurance

PART I--REFUNDABLE HEALTH INSURANCE TAX CREDIT

SEC. 131. REFUNDABLE CREDIT FOR HEALTH INSURANCE COVERAGE.

(a) In General- Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by redesignating section 36 as section 37 and by inserting after section 35 the following new section:

`SEC. 36. REFUNDABLE CREDIT FOR HEALTH INSURANCE COVERAGE.

`(a) In General- In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle an amount equal to the health insurance credit amount of the taxpayer for the taxable year.

`(b) Health Insurance Credit Amount- For purposes of this section--

`(1) IN GENERAL- The term `health insurance credit amount' means, with respect to any taxable year, the lesser of--

`(A) the sum of the amounts determined under paragraph (2) with respect to each individual for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year, or

`(B) an amount equal to twice the individual annual limit in effect for the taxable year under paragraph (3).

`(2) ALLOWANCE FOR EACH INDIVIDUAL- The amount determined under this paragraph with respect to any individual is the sum of the monthly limitations for coverage months of the individual occurring during the taxable year.

`(3) MONTHLY LIMITATION-

`(A) IN GENERAL- The monthly limitation for any month is 1/12 of the individual annual limit for the taxable year.

`(B) INDIVIDUAL ANNUAL LIMIT- The individual annual limit is $2,500.

`(C) COST-OF-LIVING ADJUSTMENT-

`(i) IN GENERAL- In the case of taxable years beginning in calendar years after the first calendar year to which this section applies, the $2,500 amount under subparagraph (B) 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 such taxable year begins, determined by substituting `the calendar year preceding the first calendar year to which section 36 applies' for `calendar year 1992' in subparagraph (B) thereof.

`(ii) ROUNDING- If any increase under clause (i) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.

`(4) COVERAGE MONTH- For purposes of this subsection--

`(A) IN GENERAL- The term `coverage month' means, with respect to an individual, any month if--

`(i) as of the first day of such month such individual is covered by qualified health insurance, and

`(ii) the premium for coverage under such insurance for such month is paid by the taxpayer.

`(B) EXCEPTION FOR EMPLOYER-SUBSIDIZED COVERAGE- If an individual is eligible to participate for any month in any subsidized health plan maintained by any employer of the taxpayer or the taxpayer's spouse, such month shall not be treated as a coverage month with respect to the individual.

`(C) EXCEPTION FOR CERTAIN GOVERNMENTAL COVERAGE- The term `coverage month' shall not include any month with respect to an individual if for such month the individual is--

`(i) entitled to benefits under part A of title XVIII of the Social Security Act or enrolled under part B of such title,

`(ii) enrolled in the program under title XIX or XXI of such Act (other than under section 1928 of such Act), unless the individual has elected under such program to be enrolled for coverage under qualified health insurance for the month in lieu of coverage under such program, or

`(iii) is entitled to any benefit under--

`(I) chapter 55 of title 10, United States Code,

`(II) chapter 17 of title 38, United States Code, or

`(III) any medical care program under the Indian Health Care Improvement Act.

`(D) PRISONERS- The term `coverage month' shall not include any month with respect to an individual if for such month the individual is imprisoned under Federal, State, or local authority for a period of at least 1 month.

`(E) INSUFFICIENT PRESENCE IN UNITED STATES- The term `coverage month' shall not include any month during a taxable year with respect to an individual if such individual is present in the United States on fewer than 183 days during such year (determined in accordance with section 7701(b)(7)).

`(c) Limitations-

`(1) PHASEOUT OF CREDIT BASED ON ADJUSTED GROSS INCOME-

`(A) IN GENERAL- If the taxpayer's modified adjusted gross income exceeds the applicable threshold amount for any taxable year, the amount allowed as a credit under subsection (a) (determined without regard to this paragraph) shall be reduced (but not below zero) by the amount which bears the same ratio to such amount as such excess bears to an amount equal to the difference between the applicable threshold amount and 300 percent of the applicable threshold amount.

`(B) APPLICABLE THRESHOLD AMOUNT- For purposes of subparagraph (A), the applicable threshold amount for a taxable year shall be determined in accordance with the following table:

------------------------------------------------------------------------------

`If the number of personal exemptions is: The applicable threshold amount is: 

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1                                                                     $10,210 

2                                                                     $13,690 

3                                                                     $17,170 

4 or more                                                             $20,650 

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`(C) PERSONAL EXEMPTIONS- For purposes of subparagraph (B), the number of personal exemptions of a taxpayer is equal to the number of individuals for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year.

`(D) COST-OF-LIVING ADJUSTMENT-

`(i) IN GENERAL- In the case of taxable years beginning in calendar years after the first calendar year to which this section applies, each of the dollar amounts in the table under subparagraph (B) 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 such taxable year begins, determined by substituting `the calendar year preceding the first calendar year to which section 36 applies' for `calendar year 1992' in subparagraph (B) thereof.

`(ii) ROUNDING- If any increase under clause (i) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.

`(E) MODIFIED ADJUSTED GROSS INCOME- The term `modified adjusted gross income' means adjusted gross income determined--

`(i) without regard to sections 911, 931, and 933, and

`(ii) after application of sections 86, 135, 137, 219, 221, and 469.

`(2) IDENTIFICATION REQUIREMENTS- No credit shall be allowed under subsection (a) for any coverage month with respect to an individual unless the policy number associated with coverage under the qualified health plan and the TIN of the individual covered under such coverage for such month is included on the return for the taxable year in which such month occurs.

`(d) Qualified Health Insurance- For purposes of this section, the term `qualified health insurance' means coverage under--

`(1) a qualified core plan certified under section 102 of the Ten Steps to Transform Health Care in America Act , and

`(2) any plan certified under section 103 of such Act as a qualified core compatible plan with respect to a qualified core plan.

`(e) Archer MSA and Health Savings Account Contributions-

`(1) IN GENERAL- If a deduction would (but for paragraph (2)) be allowed under section 220 or 223 to the taxpayer for a payment for the taxable year to the Archer MSA or health savings account of an individual established in connection with qualified health insurance, subsection (a) shall be applied by treating such payment as a payment for qualified health insurance for such individual.

`(2) DENIAL OF DOUBLE BENEFIT- No deduction shall be allowed under section 220 or 223 for that portion of the payments otherwise allowable as a deduction under section 220 or 223 for the taxable year which is equal to the amount of credit allowed for such taxable year by reason of this subsection.

`(f) Special Rules- For purposes of this section--

`(1) MARRIED COUPLES MUST FILE JOINT RETURN- If the taxpayer is married at the close of the taxable year, the credit shall be allowed under subsection (a) only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year.

`(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) DENIAL OF DOUBLE BENEFIT- No credit shall be allowed under subsection (a) if the credit under section 35 is allowed and no credit shall be allowed under 35 if a credit is allowed under this section.

`(4) SPECIAL RULE FOR DIVORCED PARENTS, ETC- A rule similar to the rule of section 224(c)(5) shall apply for purposes of this section.

`(5) ELECTION NOT TO CLAIM CREDIT- This section shall not apply to a taxpayer for any taxable year if such taxpayer elects to have this section not apply for such taxable year.'.

(b) Conforming Amendments-

(1) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting before the period `, or from section 36 of such Code'.

(2) The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by striking the last item and inserting the following new items:

`Sec. 36. Refundable credit for health insurance coverage.

`Sec. 37. Overpayments of tax.'.

(c) Effective Date- The amendments made by this section shall apply to taxable years beginning on or after the first day of the first calendar year in which occurs the first date on which the requirement of section 101(a) of this Act applies.

SEC. 132. ADVANCE PAYMENT OF CREDIT FOR PURCHASERS OF QUALIFIED HEALTH INSURANCE.

(a) In General- Chapter 77 of the Internal Revenue Code of 1986 (relating to miscellaneous provisions) is amended by adding at the end the following new section:

`SEC. 7529. ADVANCE PAYMENT OF CREDIT FOR PURCHASERS OF QUALIFIED HEALTH INSURANCE.

`(a) General Rule- In the case of an eligible individual, the Secretary shall make payments to the provider of such individual's qualified health insurance equal to such individual's qualified health insurance credit advance amount with respect to such provider.

`(b) Eligible Individual- For purposes of this section, the term `eligible individual' means any individual--

`(1) who purchases qualified health insurance (as defined in section 36(d)), and

`(2) for whom a qualified health insurance credit eligibility certificate is in effect.

`(c) Qualified Health Insurance Credit Eligibility Certificate- For purposes of this section, a qualified health insurance credit eligibility certificate is a statement furnished by an individual to the Secretary which--

`(1) certifies that the individual will be eligible to receive the credit provided by section 36 for the taxable year,

`(2) estimates the amount of such credit for such taxable year, and

`(3) provides such other information as the Secretary may require for purposes of this section.

`(d) Qualified Health Insurance Credit Advance Amount- For purposes of this section, the term `qualified health insurance credit advance amount' means, with respect to any provider of qualified health insurance, the lesser of--

`(1) the Secretary's estimate of the amount of credit allowable under section 36 to the individual for the taxable year which is attributable to the insurance provided to the individual by such provider, or

`(2) the aggregate premiums with respect to such insurance for months occurring during such taxable year.

`(e) Regulations- The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.'.

(b) Clerical Amendment- The table of sections for chapter 77 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

`Sec. 7529. Advance payment of credit for purchasers of qualified health insurance.'.

(c) Effective Date- The amendments made by this section shall apply to taxable years beginning on or after the first day of the first calendar year in which occurs the first date on which the requirement of section 101(a) of this Act applies.

SEC. 133. DESIGNATION OF HEALTH INSURANCE STATUS REQUIRED BY INDIVIDUALS ON FEDERAL INCOME TAX RETURNS.

(a) In General- Subchapter B of chapter 61 of the Internal Revenue Code of 1986 (relating to miscellaneous provisions involving information and returns) is amended by redesignating section 6116 as section 6117 and by inserting after section 6115 the following new section:

`SEC. 6116. DESIGNATION OF HEALTH INSURANCE STATUS REQUIRED BY INDIVIDUALS ON FEDERAL INCOME TAX RETURNS.

`(a) General Rule- In the case of an individual, if a taxpayer is required to file a return of tax imposed by chapter 1 for such taxable year, the taxpayer shall include with such return the designation described in subsection (b) with respect to the taxpayer and the spouse or any dependent of the taxpayer with respect to whom a deduction under section 151 is allowed to the taxpayer for the taxable year.

`(b) Designation-

`(1) IN GENERAL- The taxpayer shall designate with respect to each individual described in subsection (a) which of the following categories of health insurance coverage is applicable to the individual as of the close of the taxable year for which the return is being filed:

`(A) Coverage under a qualified health plan (as defined in section 224(d)(2).

`(B) Coverage under qualified health insurance (as defined in section 36(d)).

`(C) Coverage under an employer-sponsored health plan which is licensed and regulated by the State in which the individual resides.

`(D) Coverage under an employer-sponsored, self-insured health plan which meets the requirements of the Employee Retirement Income Security Act of 1974 and any other applicable law.

`(E) Coverage described in clause (i), (ii), or (iii) of section 224(d)(1)(B) (relating to coverage under medicare, medicaid, schip or grandfathered employer coverage).

`(F) Coverage not described in any of the preceding subparagraphs.

`(G) No coverage.

`(2) FORM AND MANNER- The Secretary shall prescribe the form and manner of making the designation under this section.'.

(b) Conforming Amendments- The table of sections for subchapter B of chapter 61 of such Code is amended by striking the item relating to section 6116 and inserting the following new items:

`Sec. 6116. Designation of health insurance status required by individuals on Federal income tax returns.

`Sec. 6117. Cross reference.'.

(c) Effective Date- The amendments made by this section shall apply to taxable years beginning in--

(1) the calendar year preceding the first calendar year in which occurs the first date on which the requirement of section 101(a) of this Act applies, and

(2) any calendar year following the calendar year described in paragraph (1).

Subtitle D--Education and Outreach

SEC. 141. NOTICE TO TAXPAYERS OF AVAILABILITY OF STANDARD DEDUCTION FOR HEALTH INSURANCE AND REFUNDABLE HEALTH INSURANCE CREDIT.

The Secretary of the Treasury or the Secretary's delegate shall ensure that--

(1) any instructions booklet accompanying an individual Federal income tax return form (including forms 1040, 1040A, 1040EZ, and any similar or successor forms) , and

(2) any other publication, announcement, or website that the Secretary or the Secretary's delegate considers appropriate,

shall include, in clear language, in conspicuous print, and in a conspicuous place, information with respect to the availability of the standard deduction for health insurance or the health insurance tax credit for individuals enrolled in qualified core health plans and qualified core compatible plans certified as meeting the requirements of this Act. The requirement of this section shall apply with respect to booklets, publications, announcements, or information on websites made available on and after the date that is 1 year before the first date on which the coverage requirement under section 101(a) of this Act becomes effective.

SEC. 142. OPTIONAL ENROLLMENT AND OUTREACH.

(a) Option for Medicaid or SCHIP Eligible Individuals To Enroll in a Qualified Core Plan- The Secretary of Health and Human Services, in consultation with the Secretary of the Treasury and the States, shall establish a process for permitting an individual who is eligible for medical assistance under a State plan or waiver under title XIX of the Social Security Act, or for child health assistance or other health benefits coverage under a State child health plan or waiver under title XXI of such Act, to elect to enroll (or in the case of an individual who is a child under age 18, for the individual's family to elect to be enrolled) in a qualified core plan offered in the State of residence of the individual in lieu of being enrolled in such State plan or waiver for the year. The process established pursuant to this subsection shall--

(1) allow for such an election to be made on an annual basis;

(2) require the State of residence of the individual to notify the Secretary of Health and Human Services and the Secretary of the Treasury of the actuarial value of the benefits and cost-sharing protection that would have been provided to the individual under the State plan or waiver under title XIX or XXI of the Social Security Act for the year;

(3) allow for an increase in the refundable credit established under section 36 of the Internal Revenue Code of 1986 for the year in an amount equal to the actuarial value determined for purposes of paragraph (2); and

(4) require, as a condition of the continued approval of such State plans or waivers, for the Secretary of Health and Human Services to reduce the amount to be paid to the State of residence of the individual under section 1903(a) or 2105(a) of the Social Security Act (as appropriate) for each calendar quarter occurring during the year for which such credit applies by an amount equal to 1/4 of the State share of the amount described in paragraph (3).

(b) Additional Outreach-

(1) ESTABLISHMENT OF OUTREACH PROGRAM- Not later than 1 year after the date of enactment of this Act. the Secretary of Health and Human Services, in consultation with the Secretary of the Treasury, the States, and representatives of community health centers, hospitals, and other health care providers, shall establish a program under which the Secretary of Health and Human Services shall provide access to informational materials regarding the standard deduction for health insurance established under section 224 of the Internal Revenue Code of 1986 and the refundable credit established under section 36 of such Code, including State-specific contact information for more detailed information and assistance, through health care providers and a national Internet website that meets the requirements of paragraph (1).

(2) TARGETING OF HEALTH CARE PROVIDERS THAT SERVE THE UNINSURED AND THE UNDER INSURED- The program established under paragraph (1) shall give priority to disseminating such information through those health care providers that primarily serve uninsured or under insured individuals.

(3) NATIONAL INFORMATION WEBSITE- For purposes of paragraph (1), the requirements of this subparagraph are that the Secretary of Health and Human Services establishes a one-stop website that provides information on the standard deduction for health insurance established under section 224 of the Internal Revenue Code of 1986 and the health insurance tax credit established under section 36 of Code. The website shall--

(A) include significant timelines for action, a general description of enrollment processes, and links to State insurance commissioners' sites, which approve qualified core plans and shall provide a portal for comparison of such plans with respect to each State; and

(B) provide such information in a manner that--

(i) is concise, clear, and easy to understand;

(ii) allows the information to be accessed in a downloadable format;

(iii) provides appropriate links or contacts for further information; and

(iv) allows for use by providers in order to inform consumers at the point of delivery of health care items and services.

TITLE II--INCREASING INSURANCE MARKET PORTABILITY AND AFFORDABILITY

Subtitle A--Merging and Improving Insurance Markets

SEC. 201. DEVELOPMENT OF MERGED AND IMPROVED STATE INSURANCE MARKET STANDARDS.

(a) In General- The Secretary, in consultation with State insurance commissioners and the National Association of Insurance Commissioners, shall promulgate regulations providing for the establishment in each State of a single market for all health plans (other than self-funded plans or Federal or State governmental health coverage programs) offered in each State.

(b) Requirements- The regulations promulgated under subsection (a) shall, with respect to each State, require--

(1) that State health insurance laws applicable to the small group market in the State be modified, except as provided for otherwise in this Act, to apply to all health plans offered in the State regardless of whether such plans are being purchased for the coverage of individuals or for groups;

(2) that the provisions of part A of title XXVII of the Public Health Service Act (42 U.S.C. 300gg et seq.) (relating to group market rules) shall apply to all health plans offered in the State, subject to such modification as may be necessary to clarify and effectuate the application of such rules to all such health plans;

(3) that the provisions of part B of title XXVII of the Public Health Service Act (42 U.S.C. 300gg-41 et seq.) (relating to individual market rules), and any other provisions or definitions within such title XXVII that apply independent standards to individual insurance markets or that relate to the relationship between such markets and group markets, shall be superseded by the provisions of this Act and shall have no force or effect; and

(4) that each health plan offered in the State fully comply with all standards provided for in this subsection, and that such standards, if not provided for otherwise in this Act, shall include requirements that each health plan--

(A) must accept for enrollment under such plan every eligible individual who applies for enrollment during the period in which the individual first becomes eligible to enroll in such plan and may not place any restriction which is inconsistent with section 2702 or 2711 of the Public Health Service Act (42 U.S.C. 300gg-1 and 300gg-11) on an eligible individual enrolling in such plan;

(B) must renew or continue in force coverage under such plan at the option of the enrollee in accordance with section 2712 of such Act (42 U.S.C. 300gg-12);

(C) must ensure that there is no re-underwriting of such plan; and

(D) must comply with the portability requirements of section 2701 of such Act (42 U.S.C. 300gg);

(5) that the State comply with the regulations promulgated under section 211(d) with respect to reducing the effect of such material risk selection as may occur among health plans (including self-insured plans) through the establishment of State-based risk adjustment requirements.

SEC. 202. MODIFICATIONS RELATING TO SELF-FUNDED GROUP HEALTH PLANS.

(a) ERISA- Section 734 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1191c) is amended--

(1) by striking `The Secretary' and inserting the following:

`(a) In General- The Secretary'; and

(2) by adding at the end the following:

`(b) Modification Relating to the Elimination of the Individual Markets-

`(1) IN GENERAL- The Secretary shall promulgate regulations, or modify existing regulations, under this part as the Secretary determines necessary to reflect changes in State law pursuant to the Ten Steps to Transform Health Care in America Act (and the amendments made by that Act) with respect to the treatment of individual State health insurance markets and to ensure the continued application of this part to self-funded group health plans notwithstanding such changes.

`(2) CLARIFICATIONS- The regulations or modification promulgated under paragraph (1) shall not be construed as otherwise materially altering the provisions of this part as such provisions apply to self-funded group health plans. Nothing in this subsection shall be construed to preempt the application of State insurance laws with respect to State regulated health insurance products.'.

(b) Internal Revenue Code- Section 9833 of the Internal Revenue Code of 1986 is amended--

(1) by striking `The Secretary' and inserting the following:

`(a) In General- The Secretary'; and

(2) by adding at the end the following:

`(b) Modification Relating to the Elimination of the Individual Markets-

`(1) IN GENERAL- The Secretary shall promulgate regulations, or modify existing regulations, under this chapter as the Secretary determines necessary to reflect changes in State law pursuant to the Ten Steps to Transform Health Care in America Act (and the amendments made by that Act) with respect to the treatment of individual State health insurance markets and to ensure the continued application of this part to self-funded group health plans notwithstanding such changes.

`(2) CLARIFICATIONS- The regulations or modification promulgated under paragraph (1) shall not be construed as otherwise materially altering the provisions of this part as such provisions apply to self-funded group health plans. Nothing in this subsection shall be construed to preempt the application of State insurance laws with respect to State regulated health insurance products.'.

SEC. 203. LEGISLATIVE PROPOSALS.

Not later than 1 year after the date of enactment of this Act, and every 3 years thereafter, the Secretary of Health and Human Services, the Secretary of Labor, and the Secretary or the Treasury, in consultation with the National Association of Insurance Commissioners, shall jointly conduct a review of the effect of this subtitle (and the regulations promulgated thereunder) on health insurance access and affordability, particularly for individuals with chronic illness or catastrophic medical expenses, and on market competition, and shall submit a report concerning such review to the appropriate committees of Congress that contains proposals for such amendments as each such Secretary may determine would substantially improve the effectiveness and the implementation of this subtitle.

SEC. 204. ENFORCEMENT.

The provisions of section 106 shall apply with respect to the implementation and enforcement of the requirements of this subtitle in the same manner as such provisions apply to subtitle A of title I.

Subtitle B--Reduction in Premium Variation and Health Status Discrimination

SEC. 211. DEVELOPMENT OF STANDARDS FOR REDUCTION IN PREMIUM VARIATION AND HEALTH STATUS DISCRIMINATION AMON