SEC. 341. EXEMPTION FROM INCOME TAX FOR STATE-SPONSORED ORGANIZATIONS PROVIDING
HEALTH COVERAGE FOR HIGH-RISK INDIVIDUALS.
Title[ Title III\Subtitle E Contents
Subtitle E--State Insurance Pools
(a) In General.--Subsection (c) of section 501 (relating to list of
exempt organizations) is amended by adding at the end the following new
paragraph:
``(26) Any membership organization if--
``(A) such organization is established by a State
exclusively to provide coverage for medical care (as
defined in section 213(d)) on a not-for-profit basis to
individuals described in subparagraph (B) through--
``(i) insurance issued by the organization, or
``(ii) a health maintenance organization under
an arrangement with the organization,
``(B) the only individuals receiving such coverage
through the organization are individuals--
``(i) who are residents of such State, and
``(ii) who, by reason of the existence or
history of a medical condition--
``(I) are unable to acquire medical
care coverage for such condition through
insurance or from a health maintenance
organization, or
``(II) are able to acquire such
coverage only at a rate which is
substantially in excess of the rate for
such coverage through the membership
organization,
``(C) the composition of the membership in such
organization is specified by such State, and
``(D) no part of the net earnings of the
organization inures to the benefit of any private
shareholder or indi-
vidual.''.
(b) Effective <<NOTE: 26 USC 501 note.>> Date.--The amendment made
by this section shall apply to taxable years beginning after December
31, 1996.
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