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Tens of thousands of individuals who have lost their jobs due to foreign competition, as well as retirees in failed pension plans, face higher health care costs when a federal law that now provides federal health insurance premium subsidies expires Dec. 31.
The subsidy — known as the Health Coverage Tax Credit — is so generous that well over a majority 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 kick in on Jan. 1, 2014, according to a Government Accountability Office report.
The HCTC, created under a 2002 law and renewed several times since, pays 72.5% of health care premiums for eligible beneficiaries. Eligible beneficiaries include those who have lost their jobs due to foreign competition and retirees at least age 55 who worked for companies whose pension plans were taken over by the Pension Benefit Guaranty Corp. The subsides can be used to offset the premiums of a variety of health insurance plans, including COBRA continuation coverage and individual policies offered by commercial insurers.
In addition, a 2009 law expanded the situations in which the tax credit would be available to include those in which coverage is offered through special trusts — known as voluntary employee beneficiary associations — whose formation was authorized by a bankruptcy court.
Last year, for example, such a VEBA was formed to provide coverage to thousands of retirees ages 55 through 64 and their dependents who once worked for steel companies that later failed and whose pension plans were taken over by the PBGC.
In an analysis, the GAO found the 37% of HCTC beneficiaries will not be eligible for health reform law premium subsidies or for 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.
Under the PPACA, premium subsidies, whose amount declines with income, are available to eligible individuals earning up to 400% of the federal poverty level. By contrast, the full HCTC is available to eligible beneficiaries regardless of their income.