[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 2510 Introduced in Senate (IS)]
109th CONGRESS
2d Session
S. 2510
To establish a national health program administered by the Office of
Personnel Management to offer health benefits plans to individuals who
are not Federal employees, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 5, 2006
Mr. Durbin (for himself, Mrs. Lincoln, Mr. Reid, Mr. Baucus, Mr.
Kennedy, Mr. Kerry, Mr. Bingaman, Mr. Carper, Mr. Dayton, Mr. Harkin,
Mr. Kohl, Mr. Nelson of Florida, Ms. Cantwell, Mrs. Clinton, Mr. Dodd,
Mr. Leahy, Ms. Mikulski, Mr. Pryor, Mr. Lieberman, Mr. Lautenberg, Mr.
Johnson, Mr. Menendez, Mr. Rockefeller, and Mrs. Boxer) introduced the
following bill; which was read twice and referred to the Committee on
Finance
_______________________________________________________________________
A BILL
To establish a national health program administered by the Office of
Personnel Management to offer health benefits plans to individuals who
are not Federal employees, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Employers Health Benefits
Program Act of 2006''.
SEC. 2. DEFINITIONS.
(a) In General.--In this Act, the terms ``member of family'',
``health benefits plan'', ``carrier'', ``employee organizations'', and
``dependent'' have the meanings given such terms in section 8901 of
title 5, United States Code.
(b) Other Terms.--In this Act:
(1) Employee.--The term ``employee'' has the meaning given
such term under section 3(6) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(6)). Such term shall not
include an employee of the Federal Government.
(2) Employer.--The term ``employer'' has the meaning given
such term under section 3(5) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(5)), except that such term
shall include only employers who employed an average of at
least 1 but not more than 100 employees on business days during
the year preceding the date of application. Such term shall not
include the Federal Government.
(3) Health status-related factor.--The term ``health
status-related factor'' has the meaning given such term in
section 2791(d)(9) of the Public Health Service Act (42 U.S.C.
300gg-91(d)(9)).
(4) Office.--The term ``Office'' means the Office of
Personnel Management.
(5) Participating employer.--The term ``participating
employer'' means an employer that--
(A) elects to provide health insurance coverage
under this Act to its employees; and
(B) is not offering other comprehensive health
insurance coverage to such employees.
(c) Application of Certain Rules in Determination of Employer
Size.--For purposes of subsection (b)(2):
(1) Application of aggregation rule for employers.--All
persons treated as a single employer under subsection (b), (c),
(m), or (o) of section 414 of the Internal Revenue Code of 1986
shall be treated as 1 employer.
(2) Employers not in existence in preceding year.--In the
case of an employer which was not in existence for the full
year prior to the date on which the employer applies to
participate, the determination of whether such employer meets
the requirements of subsection (b)(2) shall be based on the
average number of employees that it is reasonably expected such
employer will employ on business days in the employer's first
full year.
(3) Predecessors.--Any reference in this subsection to an
employer shall include a reference to any predecessor of such
employer.
(d) Waiver and Continuation of Participation.--
(1) Waiver.--The Office may waive the limitations relating
to the size of an employer which may participate in the health
insurance program established under this Act on a case by case
basis if the Office determines that such employer makes a
compelling case for such a waiver. In making determinations
under this paragraph, the Office may consider the effects of
the employment of temporary and seasonal workers and other
factors.
(2) Continuation of participation.--An employer
participating in the program under this Act that experiences an
increase in the number of employees so that such employer has
in excess of 100 employees, may not be excluded from
participation solely as a result of such increase in employees.
(e) Treatment of Health Benefits Plan as Group Health Plan.--A
health benefits plan offered under this Act shall be treated as a group
health plan for purposes of applying the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1001 et seq.) except to the extent that
a provision of this Act expressly provides otherwise.
SEC. 3. HEALTH INSURANCE COVERAGE FOR NON-FEDERAL EMPLOYEES.
(a) Administration.--The Office shall administer a health insurance
program for non-Federal employees and employers in accordance with this
Act.
(b) Regulations.--Except as provided under this Act, the Office
shall prescribe regulations to apply the provisions of chapter 89 of
title 5, United States Code, to the greatest extent practicable to
participating carriers, employers, and employees covered under this
Act.
(c) Limitations.--In no event shall the enactment of this Act
result in--
(1) any increase in the level of individual or Federal
Government contributions required under chapter 89 of title 5,
United States Code, including copayments or deductibles;
(2) any decrease in the types of benefits offered under
such chapter 89; or
(3) any other change that would adversely affect the
coverage afforded under such chapter 89 to employees and
annuitants and members of family under that chapter.
(d) Enrollment.--The Office shall develop methods to facilitate
enrollment under this Act, including the use of the Internet.
(e) Contracts for Administration.--The Office may enter into
contracts for the performance of appropriate administrative functions
under this Act.
(f) Separate Risk Pool.--In the administration of this Act, the
Office shall ensure that covered employees under this Act are in a risk
pool that is separate from the risk pool maintained for covered
individuals under chapter 89 of title 5, United States Code.
(g) Rule of Construction.--Nothing in this Act shall be construed
to require a carrier that is participating in the program under chapter
89 of title 5, United States Code, to provide health benefits plan
coverage under this Act.
SEC. 4. CONTRACT REQUIREMENT.
(a) In General.--The Office may enter into contracts with qualified
carriers offering health benefits plans of the type described in
section 8903 or 8903a of title 5, United States Code, without regard to
section 5 of title 41, United States Code, or other statutes requiring
competitive bidding, to provide health insurance coverage to employees
of participating employers under this Act. Each contract shall be for a
uniform term of at least 1 year, but may be made automatically
renewable from term to term in the absence of notice of termination by
either party. In entering into such contracts, the Office shall ensure
that health benefits coverage is provided for individuals only,
individuals with one or more children, married individuals without
children, and married individuals with one or more children.
(b) Eligibility.--A carrier shall be eligible to enter into a
contract under subsection (a) if such carrier--
(1) is licensed to offer health benefits plan coverage in
each State in which the plan is offered; and
(2) meets such other requirements as determined appropriate
by the Office.
(c) Statement of Benefits.--
(1) In general.--Each contract under this Act shall contain
a detailed statement of benefits offered and shall include
information concerning such maximums, limitations, exclusions,
and other definitions of benefits as the Office considers
necessary or desirable.
(2) Ensuring a range of plans.--The Office shall ensure
that a range of health benefits plans are available to
participating employers under this Act.
(3) Participating plans.--The Office shall not prohibit the
offering of any health benefits plan to a participating
employer if such plan is eligible to participate in the Federal
Employees Health Benefits Program.
(4) Nationwide plan.--With respect to all nationwide plans,
the Office shall develop a benefit package that shall be
offered in the case of a contract for a health benefit plan
that is to be offered on a nationwide basis that meets all
State benefit mandates.
(d) Standards.--The minimum standards prescribed for health
benefits plans under section 8902(e) of title 5, United States Code,
and for carriers offering plans, shall apply to plans and carriers
under this Act. Approval of a plan may be withdrawn by the Office only
after notice and opportunity for hearing to the carrier concerned
without regard to subchapter II of chapter 5 and chapter 7 of title 5,
United States Code.
(e) Conversion.--
(1) In general.--A contract may not be made or a plan
approved under this section if the carrier under such contract
or plan does not offer to each enrollee whose enrollment in the
plan is ended, except by a cancellation of enrollment, a
temporary extension of coverage during which the individual may
exercise the option to convert, without evidence of good
health, to a nongroup contract providing health benefits. An
enrollee who exercises this option shall pay the full periodic
charges of the nongroup contract.
(2) Noncancellable.--The benefits and coverage made
available under paragraph (1) may not be canceled by the
carrier except for fraud, over-insurance, or nonpayment of
periodic charges.
(f) Requirement of Payment for or Provision of Health Service.--
Each contract entered into under this Act shall require the carrier to
agree to pay for or provide a health service or supply in an individual
case if the Office finds that the employee, annuitant, family member,
former spouse, or person having continued coverage under section 8905a
of title 5, United States Code, is entitled thereto under the terms of
the contract.
SEC. 5. ELIGIBILITY.
An individual shall be eligible to enroll in a plan under this Act
if such individual--
(1) is an employee of an employer described in section
2(b)(2), or is a self employed individual as defined in section
401(c)(1)(B) of the Internal Revenue Code of 1986; and
(2) is not otherwise enrolled or eligible for enrollment in
a plan under chapter 89 of title 5, United States Code.
SEC. 6. ALTERNATIVE CONDITIONS TO FEDERAL EMPLOYEE PLANS.
(a) Treatment of Employee.--For purposes of enrollment in a health
benefits plan under this Act, an individual who had coverage under a
health insurance plan and is not a qualified beneficiary as defined
under section 4980B(g)(1) of the Internal Revenue Code of 1986 shall be
treated in a similar manner as an individual who begins employment as
an employee under chapter 89 of title 5, United States Code.
(b) Preexisting Condition Exclusions.--
(1) In general.--Each contract under this Act may include a
preexisting condition exclusion as defined under section
9801(b)(1) of the Internal Revenue Code of 1986.
(2) Exclusion period.--A preexisting condition exclusion
under this subsection shall provide for coverage of a
preexisting condition to begin not later than 6 months after
the date on which the coverage of the individual under a health
benefits plan commences, reduced by the aggregate 1 day for
each day that the individual was covered under a health
insurance plan immediately preceding the date the individual
submitted an application for coverage under this Act. This
provision shall be applied notwithstanding the applicable
provision for the reduction of the exclusion period provided
for in section 701(a)(3) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1181(a)(3)).
(c) Rates and Premiums.--
(1) In general.--Rates charged and premiums paid for a
health benefits plan under this Act--
(A) shall be determined in accordance with this
subsection;
(B) may be annually adjusted subject to paragraph
(3);
(C) shall be negotiated in the same manner as rates
and premiums are negotiated under such chapter 89; and
(D) shall be adjusted to cover the administrative
costs of the Office under this Act.
(2) Determinations.--In determining rates and premiums
under this Act, the following provisions shall apply:
(A) In general.--A carrier that enters into a
contract under this Act shall determine that amount of
premiums to assess for coverage under a health benefits
plan based on an community rate that may be annually
adjusted--
(i) for the geographic area involved if the
adjustment is based on geographical divisions
that are not smaller than a metropolitan
statistical area and the carrier provides
evidence of geographic variation in cost of
services;
(ii) based on whether such coverage is for
an individual, two adults, one adult and one or
more children, or a family; and
(iii) based on the age of covered
individuals (subject to subparagraph (C)).
(B) Limitation.--Premium rates charged for coverage
under this Act shall not vary based on health-status
related factors, gender, class of business, or claims
experience
(C) Age adjustments.--
(i) In general.--With respect to
subparagraph (A)(iii), in making adjustments
based on age, the Office shall establish no
more than 5 age brackets to be used by the
carrier in establishing rates. The rates for
any age bracket may not vary by more than 50
percent above or below the community rate on
the basis of attained age. Age-related premiums
may not vary within age brackets.
(ii) Age 65 and older.--With respect to
subparagraph (A)(iii), a carrier may develop
separate rates for covered individuals who are
65 years of age or older for whom medicare is
the primary payor for health benefits coverage
which is not covered under medicare.
``(3) Readjustments.--Any readjustment in rates charged or
premiums paid for a health benefits plan under this Act shall
be made in advance of the contract term in which they will
apply and on a basis which, in the judgment of the Office, is
consistent with the practice of the Office for the Federal
Employees Health Benefits Program.
(d) Termination and Reenrollment.--If an individual who is enrolled
in a health benefits plan under this Act terminates the enrollment, the
individual shall not be eligible for reenrollment until the first open
enrollment period following the expiration of 6 months after the date
of such termination.
(e) Continued Applicability of State Law.--
(1) Health insurance or plans.--
(A) Plans.--With respect to a contract entered into
under this Act under which a carrier will offer health
benefits plan coverage, State mandated benefit laws in
effect in the State in which the plan is offered shall
continue to apply.
(B) Rating rules.--The rating requirements under
subparagraphs (A) and (B) of subsection (c)(2) shall
supercede State rating rules for qualified plans under
this Act, except with respect to States that provide a
rating variance with respect to age that is less than
the Federal limit or that provide for some form of
community rating.
(2) Limitation.--Nothing in this subsection shall be
construed to preempt--
(A) any State or local law or regulation except
those laws and regulations described in subparagraph
(B) of paragraph (1);
(B) any State grievance, claims, and appeals
procedure law, except to the extent that such law is
preempted under section 514 of the Employee Retirement
Income Security Act of 1974; and
(C) State network adequacy laws.
(f) Rule of Construction.--Nothing in this Act shall be construed
to limit the application of the service-charge system used by the
Office for determining profits for participating carriers under chapter
89 of title 5, United States Code.
SEC. 7. ENCOURAGING PARTICIPATION BY CARRIERS THROUGH ADJUSTMENTS FOR
RISK.
(a) Application of Risk Corridors.--
(1) In general.--This section shall only apply to carriers
with respect to health benefits plans offered under this Act
during any of calendar years 2007 through 2009.
(2) Notification of costs under the plan.--In the case of a
carrier that offers a health benefits plan under this Act in
any of calendar years 2007 through 2009, the carrier shall
notify the Office, before such date in the succeeding year as
the Office specifies, of the total amount of costs incurred in
providing benefits under the health benefits plan for the year
involved and the portion of such costs that is attributable to
administrative expenses.
(3) Allowable costs defined.--For purposes of this section,
the term ``allowable costs'' means, with respect to a health
benefits plan offered by a carrier under this Act, for a year,
the total amount of costs described in paragraph (2) for the
plan and year, reduced by the portion of such costs
attributable to administrative expenses incurred in providing
the benefits described in such paragraph.
(b) Adjustment of Payment.--
(1) No adjustment if allowable costs within 3 percent of
target amount.--If the allowable costs for the carrier with
respect to the health benefits plan involved for a calendar
year are at least 97 percent, but do not exceed 103 percent, of
the target amount for the plan and year involved, there shall
be no payment adjustment under this section for the plan and
year.
(2) Increase in payment if allowable costs above 103
percent of target amount.--
(A) Costs between 103 and 108 percent of target
amount.--If the allowable costs for the carrier with
respect to the health benefits plan involved for the
year are greater than 103 percent, but not greater than
108 percent, of the target amount for the plan and
year, the Office shall reimburse the carrier for such
excess costs through payment to the carrier of an
amount equal to 75 percent of the difference between
such allowable costs and 103 percent of such target
amount.
(B) Costs above 108 percent of target amount.--If
the allowable costs for the carrier with respect to the
health benefits plan involved for the year are greater
than 108 percent of the target amount for the plan and
year, the Office shall reimburse the carrier for such
excess costs through payment to the carrier in an
amount equal to the sum of--
(i) 3.75 percent of such target amount; and
(ii) 90 percent of the difference between
such allowable costs and 108 percent of such
target amount.
(3) Reduction in payment if allowable costs below 97
percent of target amount.--
(A) Costs between 92 and 97 percent of target
amount.--If the allowable costs for the carrier with
respect to the health benefits plan involved for the
year are less than 97 percent, but greater than or
equal to 92 percent, of the target amount for the plan
and year, the carrier shall be required to pay into the
contingency reserve fund maintained under section
8909(b)(2) of title 5, United States Code, an amount
equal to 75 percent of the difference between 97
percent of the target amount and such allowable costs.
(B) Costs below 92 percent of target amount.--If
the allowable costs for the carrier with respect to the
health benefits plan involved for the year are less
than 92 percent of the target amount for the plan and
year, the carrier shall be required to pay into the
stabilization fund under section 8909(b)(2) of title 5,
United States Code, an amount equal to the sum of--
(i) 3.75 percent of such target amount; and
(ii) 90 percent of the difference between
92 percent of such target amount and such
allowable costs.
(4) Target amount described.--
(A) In general.--For purposes of this subsection,
the term ``target amount'' means, with respect to a
health benefits plan offered by a carrier under this
Act in any of calendar years 2007 through 2011, an
amount equal to--
(i) the total of the monthly premiums
estimated by the carrier and approved by the
Office to be paid for enrollees in the plan
under this Act for the calendar year involved;
reduced by
(ii) the amount of administrative expenses
that the carrier estimates, and the Office
approves, will be incurred by the carrier with
respect to the plan for such calendar year.
(B) Submission of target amount.--Not later than
December 31, 2006, and each December 31 thereafter
through calendar year 2010, a carrier shall submit to
the Office a description of the target amount for such
carrier with respect to health benefits plans provided
by the carrier under this Act.
(c) Disclosure of Information.--
(1) In general.--Each contract under this Act shall
provide--
(A) that a carrier offering a health benefits plan
under this Act shall provide the Office with such
information as the Office determines is necessary to
carry out this subsection including the notification of
costs under subsection (a)(2) and the target amount
under subsection (b)(4)(B); and
(B) that the Office has the right to inspect and
audit any books and records of the organization that
pertain to the information regarding costs provided to
the Office under such subsections.
(2) Restriction on use of information.--Information
disclosed or obtained pursuant to the provisions of this
subsection may be used by officers, employees, and contractors
of the Office only for the purposes of, and to the extent
necessary in, carrying out this section.
SEC. 8. ENCOURAGING PARTICIPATION BY CARRIERS THROUGH REINSURANCE.
(a) Establishment.--The Office shall establish a reinsurance fund
to provide payments to carriers that experience one or more
catastrophic claims during a year for health benefits provided to
individuals enrolled in a health benefits plan under this Act.
(b) Eligibility for Payments.--To be eligible for a payment from
the reinsurance fund for a plan year, a carrier under this Act shall
submit to the Office an application that contains--
(1) a certification by the carrier that the carrier paid
for at least one episode of care during the year for covered
health benefits for an individual in an amount that is in
excess of $50,000; and
(2) such other information determined appropriate by the
Office.
(c) Payment.--
(1) In general.--The amount of a payment from the
reinsurance fund to a carrier under this section for a
catastrophic episode of care shall be determined by the Office
but shall not exceed an amount equal to 80 percent of the
applicable catastrophic claim amount.
(2) Applicable catastrophic claim amount.--For purposes of
paragraph (1), the applicable catastrophic episode of care
amount shall be equal to the difference between--
(A) the amount of the catastrophic claim; and
(B) $50,000.
(3) Limitation.--In determining the amount of a payment
under paragraph (1), if the amount of the catastrophic claim
exceeds the amount that would be paid for the healthcare items
or services involved under title XVIII of the Social Security
Act (42 U.S.C. 1395 et seq.), the Office shall use the amount
that would be paid under such title XVIII for purposes of
paragraph (2)(A).
(d) Definition.--In this section, the term ``catastrophic claim''
means a claim submitted to a carrier, by or on behalf of an enrollee in
a health benefits plan under this Act, that is in excess of $50,000.
(e) Termination of Fund.--The reinsurance fund established under
subsection (a) shall terminate on the date that is 2 years after the
date on which the first contract period becomes effective under this
Act.
SEC. 9. CONTINGENCY RESERVE FUND.
Beginning on October 1, 2010, the Office may use amounts
appropriated under section 14(a) that remain unobligated to establish a
contingency reserve fund to provide assistance to carriers offering
health benefits plans under this Act that experience unanticipated
financial hardships (as determined by the Office).
SEC. 10. EMPLOYER PARTICIPATION.
(a) Regulations.--The Office shall prescribe regulations providing
for employer participation under this Act, including the offering of
health benefits plans under this Act to employees.
(b) Enrollment and Offering of Other Coverage.--
(1) Enrollment.--A participating employer shall ensure that
each eligible employee has an opportunity to enroll in a plan
under this Act.
(2) Prohibition on offering other comprehensive health
benefit coverage.--A participating employer may not offer a
health insurance plan providing comprehensive health benefit
coverage to employees other than a health benefits plan that--
(A) meets the requirements described in section
4(a); and
(B) is offered only through the enrollment process
established by the Office under section 3.
(3) Offer of supplemental coverage options.--
(A) In general.--A participating employer may offer
supplementary coverage options to employees.
(B) Definition.--In subparagraph (A), the term
``supplementary coverage'' means benefits described as
``excepted benefits'' under section 2791(c) of the
Public Health Service Act (42 U.S.C. 300gg-91(c)).
(c) Rule of Construction.--Except as provided in section 15,
nothing in this Act shall be construed to require that an employer make
premium contributions on behalf of employees.
SEC. 11. ADMINISTRATION THROUGH REGIONAL ADMINISTRATIVE ENTITIES.
(a) In General.--In order to provide for the administration of the
benefits under this Act with maximum efficiency and convenience for
participating employers and health care providers and other individuals
and entities providing services to such employers, the Office is
authorized to enter into contracts with eligible entities to perform,
on a regional basis, one or more of the following:
(1) Collect and maintain all information relating to
individuals, families, and employers participating in the
program under this Act in the region served.
(2) Receive, disburse, and account for payments of premiums
to participating employers by individuals in the region served,
and for payments by participating employers to carriers.
(3) Serve as a channel of communication between carriers,
participating employers, and individuals relating to the
administration of this Act.
(4) Otherwise carry out such activities for the
administration of this Act, in such manner, as may be provided
for in the contract entered into under this section.
(5) The processing of grievances and appeals.
(b) Application.--To be eligible to receive a contract under
subsection (a), an entity shall prepare and submit to the Office an
application at such time, in such manner, and containing such
information as the Office may require.
(c) Process.--
(1) Competitive bidding.--All contracts under this section
shall be awarded through a competitive bidding process on a bi-
annual basis.
(2) Requirement.--No contract shall be entered into with
any entity under this section unless the Office finds that such
entity will perform its obligations under the contract
efficiently and effectively and will meet such requirements as
to financial responsibility, legal authority, and other matters
as the Office finds pertinent.
(3) Publication of standards and criteria.--The Office
shall publish in the Federal Register standards and criteria
for the efficient and effective performance of contract
obligations under this section, and opportunity shall be
provided for public comment prior to implementation. In
establishing such standards and criteria, the Office shall
provide for a system to measure an entity's performance of
responsibilities.
(4) Term.--Each contract under this section shall be for a
term of at least 1 year, and may be made automatically
renewable from term to term in the absence of notice by either
party of intention to terminate at the end of the current term,
except that the Office may terminate any such contract at any
time (after such reasonable notice and opportunity for hearing
to the entity involved as the Office may provide in
regulations) if the Office finds that the entity has failed
substantially to carry out the contract or is carrying out the
contract in a manner inconsistent with the efficient and
effective administration of the program established by this
Act.
(d) Terms of Contract.--A contract entered into under this section
shall include--
(1) a description of the duties of the contracting entity;
(2) an assurance that the entity will furnish to the Office
such timely information and reports as the Office determines
appropriate;
(3) an assurance that the entity will maintain such records
and afford such access thereto as the Office finds necessary to
assure the correctness and verification of the information and
reports under paragraph (2) and otherwise to carry out the
purposes of this Act;
(4) an assurance that the entity shall comply with such
confidentiality and privacy protection guidelines and
procedures as the Office may require; and
(5) such other terms and conditions not inconsistent with
this section as the Office may find necessary or appropriate.
SEC. 12. COORDINATION WITH SOCIAL SECURITY BENEFITS.
Benefits under this Act shall, with respect to an individual who is
entitled to benefits under part A of title XVIII of the Social Security
Act, be offered (for use in coordination with those medicare benefits)
to the same extent and in the same manner as if coverage were under
chapter 89 of title 5, United States Code.
SEC. 13. PUBLIC EDUCATION CAMPAIGN.
(a) In General.--In carrying out this Act, the Office shall develop
and implement an educational campaign to provide information to
employers and the general public concerning the health insurance
program developed under this Act.
(b) Annual Progress Reports.--Not later than 1 year and 2 years
after the implementation of the campaign under subsection (a), the
Office shall submit to the appropriate committees of Congress a report
that describes the activities of the Office under subsection (a),
including a determination by the office of the percentage of employers
with knowledge of the health benefits programs provided for under this
Act.
(c) Public Education Campaign.--There is authorized to be
appropriated to carry out this section, such sums as may be necessary
for each of fiscal years 2007 and 2008.
SEC. 14. APPROPRIATIONS.
There are authorized to be appropriated to the Office, such sums as
may be necessary in each fiscal year for the development and
administration of the program under this Act.
SEC. 15. REFUNDABLE CREDIT FOR SMALL BUSINESS EMPLOYEE HEALTH INSURANCE
EXPENSES.
(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 inserting
after section 35 the following new section:
``SEC. 36. SMALL BUSINESS EMPLOYEE HEALTH INSURANCE EXPENSES.
``(a) Determination of Amount.--In the case of a qualified small
employer, there shall be allowed as a credit against the tax imposed by
this subtitle for the taxable year an amount equal to the sum of--
``(1) the expense amount described in subsection (b), and
``(2) the expense amount described in subsection (c), paid
by the taxpayer during the taxable year.
``(b) Subsection (b) Expense Amount.--For purposes of this
section--
``(1) In general.--The expense amount described in this
subsection is the applicable percentage of the amount of
qualified employee health insurance expenses of each qualified
employee.
``(2) Applicable percentage.--For purposes of paragraph
(1)--
``(A) In general.--The applicable percentage is
equal to--
``(i) 25 percent in the case of self-only
coverage,
``(ii) 35 percent in the case of family
coverage (as defined in section 220(c)(5)), and
``(iii) 30 percent in the case of coverage
for two adults or one adult and one or more
children.
``(B) Bonus for payment of greater percentage of
premiums.--The applicable percentage otherwise
specified in subparagraph (A) shall be increased by 5
percentage points for each additional 10 percent of the
qualified employee health insurance expenses of each
qualified employee exceeding 60 percent which are paid
by the qualified small employer.
``(c) Subsection (c) Expense Amount.--For purposes of this
section--
``(1) In general.--The expense amount described in this
subsection is, with respect to the first credit year of a
qualified small employer which is an eligible employer, 10
percent of the qualified employee health insurance expenses of
each qualified employee.
``(2) First credit year.--For purposes of paragraph (1),
the term `first credit year' means the taxable year which
includes the date that the health insurance coverage to which
the qualified employee health insurance expenses relate becomes
effective.
``(d) Limitation Based on Wages.-- With respect to a qualified
employee whose wages at an annual rate during the taxable year exceed
$25,000, the percentage which would (but for this section) be taken
into account as the percentage for purposes of subsection (b)(2) or
(c)(1) for the taxable year shall be reduced by an amount equal to the
product of such percentage and the percentage that such qualified
employee's wages in excess of $25,000 bears to $5,000.
``(e) Definitions.--For purposes of this section--
``(1) Qualified small employer.--The term `qualified small
employer' means any employer (as defined in section 2(b)(2) of
the Small Employers Health Benefits Program Act of 2006)
which--
``(A) is a participating employer (as defined in
section 2(b)(5) of such Act),
``(B) pays or incurs at least 60 percent of the
qualified employee health insurance expenses of each
qualified employee for self-only coverage, and
``(C) pays or incurs at least 50 percent of the
qualified employee health insurance expenses of each
qualified employee for all other categories of
coverage.
``(2) Qualified employee health insurance expenses.--
``(A) In general.--The term `qualified employee
health insurance expenses' means any amount paid by an
employer for health insurance coverage under such Act
to the extent such amount is attributable to coverage
provided to any employee while such employee is a
qualified employee.
``(B) Exception for amounts paid under salary
reduction arrangements.--No amount paid or incurred for
health insurance coverage pursuant to a salary
reduction arrangement shall be taken into account under
subparagraph (A).
``(3) Qualified employee.--
``(A) Definition.--
``(i) In general.--The term `qualified
employee' means, with respect to any period, an
employee (as defined in section 2(b)(1) of such
Act) of an employer if the total amount of
wages paid or incurred by such employer to such
employee at an annual rate during the taxable
year exceeds $5,000 but does not exceed
$30,000.
``(ii) Annual adjustment.--For each taxable
year after 2007, the dollar amounts specified
for the preceding taxable year (after the
application of this subparagraph) shall be
increased by the same percentage as the average
percentage increase in premiums under the
Federal Employees Health Benefits Program under
chapter 89 of title 5, United States Code for
the calendar year in which such taxable year
begins over the preceding calendar year.
``(B) Wages.--The term `wages' has the meaning
given such term by section 3121(a) (determined without
regard to any dollar limitation contained in such
section).
``(f) Certain Rules Made Applicable.--For purposes of this section,
rules similar to the rules of section 52 shall apply.
``(g) Credits for Nonprofit Organizations.--Any credit which would
be allowable under subsection (a) with respect to a qualified small
business if such qualified small business were not exempt from tax
under this chapter shall be treated as a credit allowable under this
subpart to such qualified small business.''.
(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. Small business employee health insurance expenses.
``Sec. 37. Overpayments of tax.''.
(c) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred in taxable years beginning after
December 31, 2006.
SEC. 16. EFFECTIVE DATE.
Except as provided in section 10(e), this Act shall take effect on
the date of enactment of this Act and shall apply to contracts that
take effect with respect to calendar year 2007 and each calendar year
thereafter.
<all>