The Alliance for Health Reform and The Robert Wood Johnson Foundation co-hosted a briefing Friday afternoon to explore the possibility of expanding the tax credits in the Trade Act of 2002 to a broader population. The Trade Act allows for a refundable tax credit worth 65% of the premium cost of qualified health insurance for trade-related displaced workers and recipients of benefits from the Pension Benefit Guaranty Corporation. Friday marked the first official day of payment of the credits, although some states were allowed to enroll eligible recipients early.

Janet Trautwein of the National Association of Health Underwriters presented an overview of eligibility and coverage options in the Trade Act and gave an update of the states? progress in qualifying additional coverage options. She explained the difference between eligible individuals who may or may not have prior coverage and special ?qualified? individuals who have additional rights by virtue of having at least three months of prior creditable coverage. These ?qualified? individuals are eligible to purchase state-approved coverage options on a guaranteed issue basis with no pre-existing condition limitation.

Trautwein discussed in more detail the qualified health insurance for which eligible recipients can use their tax credits. The Trade Act has three automatic options including COBRA continuation coverage, coverage through the group health plan of an individual?s spouse, and individual coverage if the person had individual coverage for at least 30 days before separation of employment. Trautwein said while it first appeared that not many people would qualify for the individual coverage option, there are more individuals working for smaller employers in southern states that qualify than first thought.

Regarding the progress of states in designating their own coverage options, Trautwein said 17 states are completely finished and ready to implement the credits. Coverage through a state high-risk pool and coverage arranged between a state and a group health plan, an issuer of health insurance, an administrator, or an employer are the most common options selected by states. She predicted that over half the states would have options elected by Labor Day. ?Unless a state makes a qualified option available, an eligible individual may have a 65% tax credit, but no place to spend it,? said Trautwein.

Richard Popper, executive director of the Maryland Health Insurance Plan (MHIP), described the progress in Maryland, the first state to receive Trade Act seed money to establish coverage options. Maryland already had the platform in place because of the creation of a high-risk pool in 2002. Participants in MHIP can choose between PPO and Exclusive Provider Organization (EPO) options, each offering comprehensive coverage. With the 65% Trade Act tax credit, a retiree and spouse age 55-65 can expect to pay about $100 per month for the MHIP PPO option and $183 per month for the MHIP EPO. In comparison, COBRA coverage would cost $200 or more per month with the tax credit. Popper said enrollment in the tax credit program is easy because the state already has a list of eligible persons, and recipients only have to show a driver?s license to enroll.

JoAnn Volk of the AFL-CIO discussed some of the positive aspects of the tax credit program but concluded changes would be necessary before expanding it to additional populations. She identified the group-based options, proportionality of the credit, and extended eligibility for COBRA as positive aspects of the program. But Volk said problems with the program include the requirement for continuous coverage, delays in notification of eligibility of up to six months, delays and variation in and among states, underwriting practices in the individual market, and spousal eligibility. According to Volk, some people have to pay 100% of the first month?s premium because of the requirement of continuous coverage. She said that is a barrier to participation in the program for many people.

Lynn Etheredge, an independent consultant, said Congress should expand the Trade Act tax credit program to all laid-off workers as soon as it comes back from August recess. Etheredge argued that the Trade Act offers a legislative and administrative model for such an expansion, and that Congress has already set aside $50 billion in the budget resolution for the uninsured. With more than nine million unemployed people in the United States, Etheredge said the need was large and growing. In addition to making all the Trade Act coverage options available to laid-off workers, Etheredge also suggested making a FEHBP-style model available in 2004 or 2005. Etheredge also said uninsured workers were another population worth exploring for eventual Trade Act tax credit expansion. But as a general approach to covering the uninsured, Etheredge advocated expansions in tax credits and Medicaid, with Medicaid wrapping around coverage bought with tax credits.

Stan Dorn of the Economic and Social Research Institute said there are two strategies when considering expanding the tax credits in the Trade Act. In the first, we would wait and see how the program works, fix it, and then expand it, hoping the money will be there. In the second, we would use the money now, help as many people as possible, and then fix it down the road. Dorn said there is $50 billion on the table right now, and it will probably go away if tax credit legislation isn?t enacted.

–Joe Moser
Galen Institute

The Alliance for Health Reform and The Robert Wood Johnson Foundation co-hosted a briefing Friday afternoon to explore the possibility of expanding the tax credits in the Trade Act of 2002 to a broader population. The Trade Act allows for a refundable tax credit worth 65% of the premium cost of qualified health insurance for trade-related displaced workers and recipients of benefits from the Pension Benefit Guaranty Corporation. Friday marked the first official day of payment of the credits, although some states were allowed to enroll eligible recipients early.

Janet Trautwein of the National Association of Health Underwriters presented an overview of eligibility and coverage options in the Trade Act and gave an update of the states? progress in qualifying additional coverage options. She explained the difference between eligible individuals who may or may not have prior coverage and special ?qualified? individuals who have additional rights by virtue of having at least three months of prior creditable coverage. These ?qualified? individuals are eligible to purchase state-approved coverage options on a guaranteed issue basis with no pre-existing condition limitation.

Trautwein discussed in more detail the qualified health insurance for which eligible recipients can use their tax credits. The Trade Act has three automatic options including COBRA continuation coverage, coverage through the group health plan of an individual?s spouse, and individual coverage if the person had individual coverage for at least 30 days before separation of employment. Trautwein said while it first appeared that not many people would qualify for the individual coverage option, there are more individuals working for smaller employers in southern states that qualify than first thought.

Regarding the progress of states in designating their own coverage options, Trautwein said 17 states are completely finished and ready to implement the credits. Coverage through a state high-risk pool and coverage arranged between a state and a group health plan, an issuer of health insurance, an administrator, or an employer are the most common options selected by states. She predicted that over half the states would have options elected by Labor Day. ?Unless a state makes a qualified option available, an eligible individual may have a 65% tax credit, but no place to spend it,? said Trautwein.

Richard Popper, executive director of the Maryland Health Insurance Plan (MHIP), described the progress in Maryland, the first state to receive Trade Act seed money to establish coverage options. Maryland already had the platform in place because of the creation of a high-risk pool in 2002. Participants in MHIP can choose between PPO and Exclusive Provider Organization (EPO) options, each offering comprehensive coverage. With the 65% Trade Act tax credit, a retiree and spouse age 55-65 can expect to pay about $100 per month for the MHIP PPO option and $183 per month for the MHIP EPO. In comparison, COBRA coverage would cost $200 or more per month with the tax credit. Popper said enrollment in the tax credit program is easy because the state already has a list of eligible persons, and recipients only have to show a driver?s license to enroll.

JoAnn Volk of the AFL-CIO discussed some of the positive aspects of the tax credit program but concluded changes would be necessary before expanding it to additional populations. She identified the group-based options, proportionality of the credit, and extended eligibility for COBRA as positive aspects of the program. But Volk said problems with the program include the requirement for continuous coverage, delays in notification of eligibility of up to six months, delays and variation in and among states, underwriting practices in the individual market, and spousal eligibility. According to Volk, some people have to pay 100% of the first month?s premium because of the requirement of continuous coverage. She said that is a barrier to participation in the program for many people.

Lynn Etheredge, an independent consultant, said Congress should expand the Trade Act tax credit program to all laid-off workers as soon as it comes back from August recess. Etheredge argued that the Trade Act offers a legislative and administrative model for such an expansion, and that Congress has already set aside $50 billion in the budget resolution for the uninsured. With more than nine million unemployed people in the United States, Etheredge said the need was large and growing. In addition to making all the Trade Act coverage options available to laid-off workers, Etheredge also suggested making a FEHBP-style model available in 2004 or 2005. Etheredge also said uninsured workers were another population worth exploring for eventual Trade Act tax credit expansion. But as a general approach to covering the uninsured, Etheredge advocated expansions in tax credits and Medicaid, with Medicaid wrapping around coverage bought with tax credits.

Stan Dorn of the Economic and Social Research Institute said there are two strategies when considering expanding the tax credits in the Trade Act. In the first, we would wait and see how the program works, fix it, and then expand it, hoping the money will be there. In the second, we would use the money now, help as many people as possible, and then fix it down the road. Dorn said there is $50 billion on the table right now, and it will probably go away if tax credit legislation isn?t enacted.

–Joe Moser
Galen Institute