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House bill would renew premium health insurance subsidy for unemployed

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Hundreds of thousands of employees who lost their jobs to foreign competition or worked for companies whose pension plans failed once again would be eligible for federal health insurance premium subsidies under legislation headed for a vote this month by the House of Representatives.

However, the legislation could increase costs for some employers, though only modestly.

Included in H.R. 1314, which is trade legislation the Senate approved 62-38 last month, are provisions to renew the health insurance subsidy, known as the health coverage tax credit, through 2019.

Until it expired in 2013, the subsidy paid 72.5% of health insurance premiums for people who lost their jobs to foreign competition and for retirees age 55 through 64 whose pension plans were taken over by the Pension Benefit Guaranty Corp.

Like the expired law, the subsidies could be used to offset premiums for a variety of health plans, such as COBRA coverage and plans offered through voluntary employees' beneficiary associations set up for those who worked for employers in such industries as steel and auto parts manufacturing that failed and went out of business.

However, the subsidies could not be used to offset health insurance premiums for plans offered in the public exchanges authorized by the 2010 health care reform law.

Unlike the health care reform law that ties separate federal premium subsidies to beneficiaries' income, the health coverage tax credit is 72.5% regardless of an individual's income.

“This makes health insurance a lot more affordable,” said Ken Garber, Bradenton, Florida co-chair of the Delphi Salaried Retiree Association Benefit Trust, a VEBA that provides coverage of former salaried and hourly employees of Delphi Corp., a Troy Michigan-based auto parts manufacturer that filed for bankruptcy reorganization in 2005 and whose massively underfunded pension plans the PBGC took over in 2009.

Subsidies to buy health insurance would be smaller and cost-sharing requirements would be higher to buy the same coverage through a public exchange, Mr. Garber said.

Buying coverage using the health care tax credit “could be a much better deal” for eligible participants, said Frank McArdle, who is an independent benefits consultant in Bethesda, Maryland.

There is another advantage to the health coverage tax credit compared with public exchange coverage, observers say.

In the case of individuals able to use the subsidy to offset premiums for COBRA coverage from their former employers, they would be able to continue with the same health care plan and provider network they had when they were employed rather than moving over to a new health care plan and possibly different providers.

That “could drive more people to stick with COBRA,” said Ann Marie Breheny, a senior legislative adviser at Towers Watson & Co. in Arlington, Virginia.

While COBRA enrollees traditionally use more health care services than other health plan enrollees, the additional employer cost is likely to be low because of the small number of people likely to opt for the health coverage tax credit.

“This would not overwhelm employers,” said Steve Wojcik, vice president of public policy at the National Business Group on Health in Washington.

Indeed, a 2010 Government Accountability Office report found that of the “hundreds of thousands of potentially eligible individuals,” less than 30,000 a year used the tax credit.