text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Health Insurance Affordability and 
  Equity Act of 2001''.
  
  SEC. 2. CREDIT FOR HEALTH INSURANCE COSTS OF PREVIOUSLY UNINSURED 
                INDIVIDUALS.
  
      (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
  of the Internal Revenue Code of 1986 (relating to nonrefundable 
  personal credits) is amended by inserting after section 25A the 
  following new section:
  
  ``SEC. 25B. HEALTH INSURANCE COSTS OF PREVIOUSLY UNINSURED INDIVIDUALS.
  
      ``(a) In General.--In the case of an individual, there shall be 
  allowed as a credit against the tax imposed by this chapter for the 
  taxable year an amount equal to the amount paid during the taxable year 
  for coverage for the taxpayer, his spouse, and dependents under 
  qualified health insurance.
      ``(b) Limitations.--
              ``(1) In general.--The amount allowed as a credit under 
          subsection (a) to the taxpayer for the taxable year shall not 
          exceed the sum of the monthly limitations for eligible coverage 
          months during such taxable year for each individual referred to 
          in subsection (a).
              ``(2) Monthly limitation.--
                      ``(A) In general.--The monthly limitation for an 
                  individual for each eligible coverage month of such 
                  individual during the taxable year is the amount equal 
                  to \1/12\ of $1,500.
                      ``(B) Limitation to 2 individuals.--Not more than 2 
                  individuals may be taken into account by the taxpayer 
                  under this subsection.
                      ``(C) Special rule for married individuals.--In the 
                  case of an individual--
                              ``(i) who is married (within the meaning of 
                          section 7703) as of the close of the taxable 
                          year but does not file a joint return for such 
                          year, and
                              ``(ii) who does not live apart from such 
                          individual's spouse at all times during the 
                          taxable year,
                  only such individual may be taken into account under 
                  this subsection.
              ``(3) Eligible coverage month.--For purposes of this 
          subsection, the term `eligible coverage month' means, with 
          respect to an individual, any month if--
                      ``(A) as of the first day of such month such 
                  individual is covered by qualified health insurance the 
                  premium for which was paid by the taxpayer, and
                      ``(B) there was at least a 12-month period 
                  beginning after December 31, 2001, and ending before 
                  such month throughout which the individual--
                              ``(i) was not covered by qualified health 
                          insurance, and
                              ``(ii) was not eligible to participate in 
                          any employer-provided group health plan.
      ``(c) Limitation Based on Adjusted Gross Income.--
              ``(1) In general.--The aggregate amount which would (but 
          for this subsection) be allowed as a credit under this section 
          shall be reduced (but not below zero) by the amount determined 
          under paragraph (2).
              ``(2) Amount of reduction.--
                      ``(A) In general.--The amount determined under this 
                  paragraph shall be the amount which bears the same 
                  ratio to such aggregate amount as--
                              ``(i) the excess of--
                                      ``(I) the taxpayer's modified 
                                  adjusted gross income for such taxable 
                                  year, over
                                      ``(II) the applicable dollar 
                                  amount, bears to
                              ``(ii) $10,000.
                      ``(B) Modified adjusted gross income.--For purposes 
                  of this paragraph, the term `modified adjusted gross 
                  income' means adjusted gross income increased by any 
                  amount excluded from gross income under section 911, 
                  931, or 933.
                      ``(C) Rounding.--Any amount determined under 
                  subparagraph (A) which is not a multiple of $10 shall 
                  be rounded to the next lowest $10.
              ``(3) Applicable dollar amount.--For purposes of paragraph 
          (2), the term `applicable dollar amount' means--
                      ``(A) $60,000 in the case of a taxpayer whose 
                  qualified health insurance coverage covers more than 1 
                  individual referred to in subsection (a), and
                      ``(B) $30,000--
                              ``(i) in any case not described in 
                          subparagraph (A), and
                              ``(ii) in the case of a married individual 
                          filing a separate return.
          For purposes of this paragraph, marital status shall be 
          determined under section 7703.
      ``(d) Qualified Health Insurance.--For purposes of this section--
              ``(1) In general.--The term `qualified health insurance' 
          means insurance which constitutes medical care; except that 
          such term shall not include any insurance if substantially all 
          of its coverage is of excepted benefits described in section 
          9832(c).
              ``(2) Credit not allowable for certain subsidized 
          coverage.--Except for purposes of subsection (b)(3)(B), the 
          term `qualified health insurance' shall not include any 
          coverage less than 50 percent of the cost of which is borne by 
          the taxpayer.
      ``(e) Denial of Credit for Amounts Paid Under Certain Government-
  Provided Programs.--
              ``(1) In general.--No credit shall be allowed under this 
          section for amounts paid under--
                      ``(A) title XVIII, XIX, or XXI of the Social 
                  Security Act,
                      ``(B) chapter 55 of title 10, United States Code,
                      ``(C) chapter 17 of title 38, United States Code, 
                  or
                      ``(D) the Indian Health Care Improvement Act.
              ``(2) Coverage under program included in determining 
          eligibility.--Coverage under any of the provisions referred to 
          in paragraph (1) shall be treated as coverage under qualified 
          health insurance for purposes of subsection (b)(3)(B).
      ``(g) Special Rules.--
              ``(1) Coordination with other deductions.--No credit shall 
          be allowed under this section for the taxable year if any 
          amount paid for qualified health insurance is taken into 
          account in determining any deduction allowed for such year 
          under sections 162(l), 213, or 222.
              ``(2) Denial of credit to dependents.--No credit shall be 
          allowed under this section to any individual with respect to 
          whom a deduction under section 151 is allowable to another 
          taxpayer for a taxable year beginning in the calendar year in 
          which such individual's taxable year begins.
              ``(3) Inflation adjustment.--
                      ``(A) In general.--In the case of a taxable year 
                  beginning after 2002, the dollar amount in subsection 
                  (b)(2)(A) and each dollar amount in subsection (c)(3) 
                  shall be increased by an amount equal to--
                              ``(i) such dollar amount, multiplied by
                              ``(ii) the cost-of-living adjustment 
                          determined under section 1(f)(3) for the 
                          calendar year in which the taxable year begins, 
                          determined by substituting `calendar year 2001' 
                          for `calendar year 1992' in subparagraph (B) 
                          thereof.
                      ``(B) Rounding.--If any amount as adjusted under 
                  subparagraph (A) is not a multiple of $100, such amount 
                  shall be rounded to the next lowest multiple of $100.''
      (b) Clerical Amendment.--The table of sections for subpart A of 
  part IV of subchapter A of chapter 1 of such Code is amended by 
  inserting after the item relating to section 25A the following new 
  item:
  
                                ``Sec. 25B. Health insurance costs of 
                                          previously uninsured 
                                          individuals.''
      (c) Effective Date.--The amendments made by this section shall 
  apply to taxable years beginning after December 31, 2001.
  
  SEC. 3. DEDUCTION FOR QUALIFIED HEALTH INSURANCE COSTS OF EMPLOYEES AND 
                SELF-EMPLOYED INDIVIDUALS.
  
      (a) In General.--Part VII of subchapter B of chapter 1 of the 
  Internal Revenue Code of 1986 (relating to additional itemized 
  deductions) is amended by redesignating section 222 as section 223 and 
  by inserting after section 221 the following new section:
  
  ``SEC. 222. COSTS OF QUALIFIED HEALTH INSURANCE.
  
      ``(a) In General.--In the case of an individual, there shall be 
  allowed as a deduction an amount equal to the amount paid during the 
  taxable year for coverage for the taxpayer, his spouse, and dependents 
  under qualified health insurance (as defined in section 25B(d)).
      ``(b) Special Rules.--
              ``(1) Coordination with medical deduction, etc.--Any amount 
          paid by a taxpayer for insurance to which subsection (a) 
          applies shall not be taken into account in computing the amount 
          allowable to the taxpayer as a deduction under section 162(l) 
          or 213(a).
              ``(2) Deduction not allowed for self-employment tax 
          purposes.--The deduction allowable by reason of this section 
          shall not be taken into account in determining an individual's 
          net earnings from self-employment (within the meaning of 
          section 1402(a)) for purposes of chapter 2.''
      (b) Conforming Amendments.--
              (1) Subsection (a) of section 62 of such Code is amended by 
          inserting after paragraph (17) the following new item:
              ``(18) Costs of qualified health insurance.--The deduction 
          allowed by section 222.''
              (3) The table of sections for part VII of subchapter B of 
          chapter 1 of such Code is amended by striking the last item and 
          inserting the following new items:
  
                                ``Sec. 222. Costs of qualified health 
                                          insurance.
                                ``Sec. 223. Cross reference.''
      (c) Effective Date.--The amendments made by this section shall 
  apply to taxable years beginning after December 31, 2001.
target: Health Insurance Affordability and Equity Act of 2001 - Amends the Internal Revenue Code to allow a limited credit for qualified health insurance costs paid for by an individual during a period when the individual was not covered by qualified health insurance and was not eligible to participate in any employer provided group health plan.Provides for the deduction of the qualified health insurance costs of employees and the self-employed.
feat_title: To amend the Internal Revenue Code of 1986 to provide incentives for private health coverage for the previously uninsured, and for other purposes.