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Congress could revive Health Coverage Tax Credit

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A year and a half after Congress let a federal law expire that provided rich federal health insurance premium subsidies to workers who lost their jobs due to foreign competition or were enrolled in pension plans that failed, lawmakers are moving to renew the tax break.

Last week as part of a broader trade bill, H.R. 1314, the Senate agreed to renew the Health Coverage Tax Credit through the end of 2019. The subsidy expired at the end of 2013.

Until its expiration, the HCTC paid 72.5% of health care premiums for eligible beneficiaries: individuals who lost their jobs due to foreign competition, and retirees age 55 through 64 whose pension plans were taken over by the Pension Benefit Guaranty Corp.

Those subsidies could be used to offset premium payments for a variety of health care plans, such as COBRA coverage, and special trusts — known as voluntary employee beneficiary associations — that were organized for employees who lost their jobs in a variety of industries, including steel and auto parts, after their employers failed and went of business.

But Congress let the HCTC subsidies lapse at the end of 2013. Lawmakers saw less need for the subsidies with the 2014 start of health care reform law-created public exchanges and federal subsidies to eligible individuals to offset premiums they paid for exchange coverage.

But observers noted that the HCTC subsidies were, in many cases, more generous than the subsidies created by the Affordable Care Act.

Indeed, a 2013 Government Accountability Office report that found that the majority of individuals who had been receiving the HCTC would pay more for coverage in the public exchanges.

Under the Patient Protection and Affordable Care Act, premium subsidies, whose amounts decline with income, are available to eligible individuals earning up to 400% of the federal poverty level, which is set at $11,770 for an individual in 2015. By contrast, the full HCTC 72.5% premium subsidy had been available to eligible individuals regardless of their income.

“Two-thirds of the people who received the HCTC would receive either no subsidies or smaller subsidies under the Affordable Care Act,” said Alan Reuther, former legislative director for the United Automobile Workers union and now a consultant in Washington, referring to the appeal of the HCTC.

“For certain individuals, qualifying for the generous HCTC can be a better deal than purchasing through the public exchanges where they may or may not be subsidized and where they may be able to obtain coverage through a plan outside of the federal/state exchange,” added Frank McArdle, an independent benefits consultant in Bethesda, Maryland.

The House of Representatives is expected next week to begin consideration of the trade bill to which the renewal of the HCTC is attached.