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WASHINGTON--Employees who lose their jobs due to foreign competition and older pension plan participants whose pension plans fail would be eligible for bigger federal health insurance premium subsidies under bipartisan trade legislation introduced in the U.S. Senate.
The legislation, S. 1848, sponsored by Senate Finance Committee Chairman Max Baucus, D-Mont., and Sen. Olympia Snowe, R-Maine, would provide an 85% tax credit--up from the current 65%--that eligible individuals could apply toward their health insurance premiums.
Under current law, the requirement that eligible individuals pay 35% of the premium is the main reason few use the health coverage tax credit, Sen. Baucus said. In a typical month, less than 10% of the 250,000 individuals eligible for the HCTC use it.
The HCTC, created under a 2002 law and set to expire Sept. 30 this year, is available to people who have lost their jobs due to foreign competition and those ages 55 through 64 whose pension plans have been taken over by the Pension Benefit Guaranty Corp. The latter group comprises about two-thirds of those eligible for the credit.
The HCTC can be used to offset the cost of a variety of health insurance plans, including COBRA continuation coverage, individual plans offered by commercial insurers and state pools that meet certain standards. The Baucus-Snowe bill also would allow beneficiaries to use the tax credit for coverage available through a voluntary employee beneficiary association.
Nearly 60% of those who do use the HCTC do so to pay COBRA premiums, according to the Internal Revenue Service.
Under a system implemented by the IRS, the beneficiary pays his or her share of the premium to the government. The IRS then remits the full amount to the health plan or administrator.
The legislation, the Trade and Globalization Adjustment Assistance Act of 2007, is expected to be considered by the Finance Committee after the August congressional recess.