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Health insurance tax credit applications halted

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Health insurance tax credit applications halted

Without congressional action, thousands of individuals who have lost their jobs due to foreign competition, as well as retirees in failed pension plans, will pay more for health coverage when a law that provides federal health insurance premium subsidies expires Dec. 31.

The subsidy, known as the Health Coverage Tax Credit, is so generous that more than two-thirds of those now receiving the credit will pay more for coverage even though many will be eligible for health care reform law premium subsidies set to begin Jan. 1, 2014, concluded a Government Accountability Office report released earlier this year.

In a sign that the end of the program is near, the Pension Benefit Guaranty Corp. said Wednesday that the Internal Revenue Service, as of Oct. 1, stopped accepting new applications for the monthly HCTC program.

The subsidy, established under a 2002 law and renewed several times, pays 72.5% of health care premiums for eligible beneficiaries — people who have lost their jobs due to foreign competition and retirees at least age 55 whose pension plans have been taken over by the PBGC.

The subsidy can be used to offset the cost of a variety of health plans, including COBRA continuation coverage and individual coverage offered by health insurers.

In addition, a 2009 law expanded eligibility to people covered through special trusts, known as voluntary employees' beneficiary associations, whose formation was authorized by a bankruptcy court.

In the earlier analysis, the GAO found that 37% of HCTC beneficiaries will not be eligible for health reform law premium subsidies or Medicaid because their incomes are too high. In addition, while 32% of HCTC beneficiaries will be eligible for a Patient Protection and Affordable Care Act premium subsidy, the subsidy will be less generous than the HCTC, the GAO found.

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Under the PPACA, premium subsidies, whose amount declines with income, are available to eligible individuals earning up to 400% of the federal poverty level, which is, for example, $45,940 for an individual and $94,200 for a family of four. By contrast, the full HCTC is available to eligible beneficiaries regardless of their income.

The current number of individuals receiving the subsidy isn't known. However, the PBGC said about 11,000 participants in pension plans that the agency has taken over now receive the HCTC to offset health plan premiums they pay.

In August, Sen. John D. Rockefeller IV, D-W.Va., introduced legislation, S. 1446, to boost the amount of the tax credit to 80% from 72.5% and to make the HCTC permanent, but no action has been taken on the proposal.