SECTION 1. SHORT TITLE.

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

SEC. 2. ESTABLISHMENT OF PROGRAM.

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

                   ``state health allowance programs

    ``Sec. 1931. (a) treatment of Expenditures Under Health Allowance 
Programs as Medical Assistance Under State Plan.--
            ``(1) In General.--Notwithstanding any other provision of 
        this title, for purposes of determining the amount to be paid 
        to a State under section 1903(a)(1) for quarters in any fiscal 
        year, amounts expended by an eligible State (as described in 
        subsection (b)) during the fiscal year under a State health 
        allowance program (as described in subsection (c)) shall be 
        included in the total amount expended during the fiscal year as 
        medical assistance under the State plan (except as provided 
        under paragraph (2) or under subsection (d)(1)(C)).
            ``(2) Federal payment restricted to acute care services.--
        No amounts expended under a State health allowance program that 
        are attributable to medical assistance described in paragraphs 
        (4), (14), (15), (23), or (24) of section 1905(a) shall be 
        included in the total amount expended as medical assistance 
        under the State plan.
    ``(b) Eligibility of State.--
            ``(1) In general.--A State is eligible for purposes of 
        subsection (a) if the State submits (at such time and in such 
        form as the Secretary may require) an application to the 
        Secretary containing the following information and assurances:
                    ``(A) Assurances that the State laws governing the 
                sale and marketing of health plans reflect standards 
                established by the National Association of Insurance 
                Commissioners (or by the Secretary in accordance with 
                paragraph (3)) relating to community rating of premiums 
                that meet the requirements of paragraph (2).
                    ``(B) Assurances that the State laws governing the 
                sale and marketing of health insurance plans reflect 
                standards established by the National Association of 
                Insurance Commissioners (or by the Secretary in 
                accordance with paragraph (3)) relating to pre-existing 
                conditions and guaranteed renewability.
                    ``(C) Assurances that the State has adopted and is 
                enforced standards regarding quality assurance for 
                health benefit plans participating in the State health 
                allowance program, including standards regarding--
                            ``(i) uniform reporting requirements for 
                        such plans relating to a minimum set of 
                        clinical data, patient satisfaction data, and 
                        other information that may be used by 
                        individuals to compare the quality of various 
                        plans; and
                            ``(ii) the establishment or designation of 
                        an entity of the State government to collect 
                        the data described in clause (i) and to 
                        regularly report such data to the Secretary.
                    ``(D) Such other information and assurances as the 
                Secretary may require.
            ``(2) Requirements for rating bands for premiums.--
                    ``(A) In general.--Under the standards relating to 
                community rating of premiums established by the 
                National Association of Insurance Commissioners or by 
                the Secretary, for a class of business of a carrier, 
                the premium rates charged during a rating period to 
                employers with similar demographic or other objective 
                characteristics (not relating to claims experience, 
                health status, or duration of coverage) for the same or 
                similar coverage, or the rates which could be charged 
                to such employers under the rating system for that 
                class of business, shall not vary from the index rate 
                by more than 15 percent of the index rate.
                    ``(B) Definitions.--In this paragraph:
                            ``(i) Base premium rate.--The term `base 
                        premium rate' means, for each class of business 
                        for each rating period, the lowest premium rate 
                        charged or which could have charged under a 
                        rating system for that class of business by the 
                        carrier to employers with similar demographic 
                        or other objective characteristics (not 
                        relating to claims experience, health status, 
                        or duration of coverage) for health benefit 
                        plans with the same or similar coverage.
                            ``(ii) Carrier.--The term `carrier' means 
                        any entity which provides health insurance or 
                        health benefits in a State, and includes a 
                        licensed insurance company, a prepaid hospital 
                        or medical service plan, a health maintenance 
                        organization, the plan sponsor of a multiple 
                        employer welfare arrangement or an employee 
                        benefit plan (as defined under the Employee 
                        Retirement Income Security Act of 1974), or any 
                        other entity providing a plan of health 
                        insurance subject to State insurance 
                        regulation.
                            ``(iii) Class of business.--The term `class 
                        of business' means, with respect to a carrier, 
                        all (or a distinct group of) small employers as 
                        shown on the records of the carrier. For 
                        purposes of the preceding sentence--
                                    ``(I) a carrier may establish, 
                                subject to subclause (II), a distinct 
                                group of employers on the basis that 
                                the applicable health benefit plans 
                                either--
                                            ``(aa) are marketed and 
                                        sold through individuals and 
                                        organizations which are not 
                                        participating in the marketing 
                                        or sale of other distinct 
                                        groups of employers for the 
                                        carrier,
                                            ``(bb) have been acquired 
                                        from another carrier as a 
                                        distinct group, or
                                            ``(cc) are provided through 
                                        an association that has a 
                                        membership of not less than 100 
                                        employers and that has been 
                                        formed for purposes other than 
                                        obtaining health coverage;
                                    ``(II) a carrier may not establish 
                                more than 2 groupings under each class 
                                of business based on the carrier's use 
                                of managed-care techniques if the 
                                techniques are expected to produce 
                                substantial variation in health care 
                                costs; and
                                    ``(III) notwithstanding subclauses 
                                (I) and (II), a State commissioner of 
                                Insurance of a State, upon application 
                                and if authorized under State law, may 
                                approve additional distinct groups upon 
                                a finding that such approval would 
                                enhance the efficiency and fairness of 
                                the employer marketplace.
                            ``(iv) Demographic characteristics.--The 
                        term `demographic characteristics' means age, 
                        gender, industry, geographic area, family 
                        composition, and group size.
                            ``(v) Index rate.--The term ``index rate'' 
                        means, with respect to a class of business, the 
                        arithmetic average of the applicable base 
                        premium rate and the corresponding highest 
                        premium rate for the class.
            ``(3) Establishment of standards by secretary.--If, after 
        the expiration of the 9-month period that begins on the date of 
        the enactment of this Act, the National Association of 
        Insurance Commissioners has not established the standards 
        described in paragraph (1), the Secretary shall establish such 
        standards not later than 1 year after the date of the enactment 
        of this Act.
    ``(c) State Health Allowance Program Described.--
            ``(1) Enrollment of participating individuals in approved 
        health benefit plans.--In this section, a State health 
        allowance program is a program in effect in all the political 
        subdivisions of the State (except as provided in (c)) under 
        which the State makes payments to the individual's insurer as 
        an allowance towards the costs of providing the individual with 
        benefits under an approved health benefit plan.
            ``(2) Approved plans described.--For purposes of paragraph 
        (1), a State shall approve health benefit plans in accordance 
        with such standards as the State may establish, except that--
                    ``(A) the State may not approve a plan for a year 
                unless the actuarial value of the benefits provided by 
                and the cost-sharing associated with the plan for the 
                year--
                            ``(i) with respect to the first year for 
                        which the plan is approved for purposes of this 
                        subsection, is not less than the actuarial 
                        value of the medical assistance provided under 
                        the State plan under this title for the year 
                        (as determined by the Secretary without regard 
                        to medical assistance described in paragraphs 
                        (4), (14), (15), (23), or (24) of section 
                        1905(a)); and
                            ``(ii) with respect to any subsequent year, 
                        is not greater than the amount determined under 
                        this subparagraph for the preceding year, 
                        increased by the amount (expressed as a 
                        percentage) by which the actuarial value of the 
                        medical assistance described in clause (i) for 
                        the year exceeds or is less than the actuarial 
                        value of such medical assistance for the 
                        preceding year;
                    ``(B) at least one of the plans approved by the 
                State shall be a health maintenance organization or 
                other plan under which payments are otherwise made on a 
                capitated basis for providing medical assistance to 
                individuals enrolled in the State plan under this 
                title; and
                    ``(C) in the case of an individual who is entitled 
                to benefits under the State plan under this title as of 
                the first month during which the State health allowance 
                program is in effect, an approved plan may not require 
                the individual to contribute a greater amount of cost-
                sharing than the individual would have been required to 
                contribute under the State plan (except as may be 
                imposed on an individual described in subparagraph (B) 
                or subparagraph (C) of subsection (d)(1)).
            ``(3) Waiver of statewideness requirement.--At the request 
        of a State, the Secretary may waive for a period not to exceed 
        3 years (subject to one 3-year extension) the requirement under 
        paragraph (1) that the State health allowance program be in 
        effect in all political subdivisions of the State.
    ``(d) Eligibility of Individuals to Participate in Allowance 
Program.--
            ``(1) In general.--An individual is eligible to participate 
        in a State health allowance program described in subsection (c) 
        if the individual meets such criteria as the State may impose, 
        except that--
                    ``(A) the State shall enroll the individual in the 
                program if the individual's income is equal to or less 
                than 100 percent of the official poverty line (as 
                defined by the Office of Management and Budget, and 
                revised annually in accordance with section 673(2) of 
                the Omnibus Budget Reconciliation Act of 1991) 
                applicable to a family of the size involved;
                    ``(B) the State may enroll the individual in the 
                program if the individual's income is greater than 100 
                percent of such official poverty line, except that the 
                State may require such an individual to contribute 
                additional cost-sharing towards the health benefit plan 
                if such cost-sharing is determined in accordance with a 
                sliding scale based on the individual's income;
                    ``(C) the State may enroll an individual who is 
                described in subparagraph (B) and whose income is equal 
                to or greater than 200 percent of such official poverty 
                line in the program, except that no amounts expended by 
                the State during a fiscal year on behalf of such an 
                individual may be included in the total amount expended 
                during the fiscal year as medical assistance under the 
                State plan; and
                    ``(D) no individual shall be eligible to 
                participate in the program if the individual is 
                entitled to benefits under title XVIII of the Social 
                Security Act pursuant to section 226 of such Act.
            ``(2) Automatic eligibility of medicaid categorically 
        eligible individuals.--Under the criteria imposed by a State 
        under paragraph (1), any individual to whom the State makes 
        medical assistance available under the State plan under this 
        title pursuant to clause (i) of section 1902(a)(10)(A) shall be 
        eligible to participate in the State health allowance program.
            ``(3) Use of resource standard.--Under the criteria imposed 
        by a State under paragraph (1), a State may not require an 
        individual to meet any resource standard unless the Secretary 
        approves the State's use of such a standard.
    ``(e) Evaluations and Reports.--
            ``(1) Evaluations.--Not later than 3 years after the date 
        of the enactment of this section (and at such subsequent 
        intervals as the Secretary considers appropriate), the 
        Secretary shall evaluate the effectiveness of the State health 
        allowance programs for which Federal financial participation is 
        provided under this section, and the impact of such programs on 
        increasing the number of individuals with health insurance 
        coverage in participating States and in controlling the costs 
        of health care in such States.
            ``(2) Reports.--Not later than 3 years after the date of 
        the enactment of this section (and at such subsequent intervals 
        as the Secretary considers appropriate), the Secretary shall 
        submit a report on the program to Congress.''.
    (b) Ensuring Budget Neutrality Through Reduction in 
Disproportionate Share Hospital Payments for Participating States.--
Section 1923 of the Social Security Act (42 U.S.C. 1396r-4) is amended 
by adding at the end the following new subsection:
    ``(g) Reduction in Payment Adjustments for States With Health 
Allowance Programs.--In the case of a State operating a State health 
allowance program under section 1931 in a fiscal year, the Secretary 
shall reduce the total payment adjustments made under this section for 
hospitals in the State for quarters in the year by such amount as the 
Secretary determines to be necessary to ensure that the total amount 
paid to the State under section 1903(a)(1) for the year does not exceed 
the amount that would have been paid to the State under such section 
for the year if the State did not operate such a program.

SEC. 3. EFFECTIVE DATE.

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