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 last week in the 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% tax credit--that eligible individuals could apply toward their health insurance premiums.

The current requirement that eligible individuals pay 35% of the health insurance premium is the key reason few use the tax credit, Sen. Baucus said.

In a typical month, less than 10% of the 250,000 individuals potentially eligible for the health coverage tax credit use it.

"Since folks who are out of work cannot afford to pay more for health coverage, that means most are going without" insurance, Sen. Baucus said in introducing the bill. By boosting the government's share of participants' premiums to 85%, employees would have a "real shot at keeping their health care coverage," he said.

Other changes the legislation would make could increase the number of people eligible for the tax credit. Under current law, the primary beneficiary loses the tax credit when he or she becomes eligible for Medicare. If the primary beneficiary has a younger spouse, the spouse cannot take advantage of the credit even though he or she is not yet eligible for Medicare The Baucus-Snowe bill would end this problem by allowing employees' dependents to retain eligibility for the HCTC.

The tax credit, created under a 2002 trade law and set to expire Sept. 30, is available to employees who have lost their jobs due to foreign competition and those aged 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 credit 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.

Nearly 60% of beneficiaries use the HCTC 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. Then, the IRS 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.

The likelihood of Congress passing the Baucus-Snowe measure isn't known. But observers say if a trade bill passes, it is likely to include provisions boosting the size of the health coverage tax credit.

"There is near-unanimity that the tax credit is not working well because it is not high enough," said Howard Rosen, executive director of the Washington-based Tax Adjustment Assistance Coalition, which works on behalf of employers, employees and others who are affected by globalization.