How Well Do Health Coverage Tax Credits Help Displaced Workers Obtain Health Care?

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Stan Dorn is a Senior Research Associate at the Urban Institute.

Abstract

This testimony addresses three topics: health coverage challenges facing displaced workers; the strengths and weaknesses of the HCTC program in helping these workers retain health coverage; and policy options to improve the HCTC program so it can be more effective in meeting the health coverage needs of workers who lose their jobs because of international trade.

The text below is an excerpt from the complete document. Read the full testimony in PDF format.

Summary of Testimony

Despite important accomplishments, Health Coverage Tax Credits (HCTCs) have been generally ineffective in providing health care to displaced workers for several reasons:

• The credits are used by only 11 percent of eligible workers.
• The coverage for which credits may be used often leaves out the health care that workers need. When job loss is followed by a gap in coverage of 63 days or longer, plans can deny treatment of the worker's known health problems. Moreover, many states offer only plans with high deductibles that make care unaffordable for workers with limited incomes. Also, such plans often exclude or severely limit such basic services as prescription drugs, maternity care, and treatment of mental illness.
• In some states, HCTC plans increase their premiums substantially for enrollees who are older, female, or have health problems.
• When a displaced worker turns 65 and qualifies for Medicare, the worker's spouse loses HCTC, even if that spouse is too young for Medicare and has no other coverage.

Fortunately, older health coverage programs like Medicare, Medicaid, and the State Children's Health Insurance Program have already prevented or solved similar problems. This suggests that HCTC's shortcomings can likewise be addressed successfully through program changes like the following:

• Increase the size of HCTCs to pay at least 75 percent of premiums.
• When beneficiaries have low household income, provide supplemental credits that lower worker costs to no more than 10 percent of premiums. For administrative feasibility, certify low income based on prior-year tax data, current-year earnings data, recent income determinations by public assistance programs, or (as a last resort) applications by HCTC beneficiaries to Social Security offices, which already determine income for the Supplemental Security Income (SSI) program. 
• Eliminate the requirement that workers must enroll in qualified coverage and pay full monthly premiums before the Internal Revenue Service (IRS) will rule on their eligibility for HCTC.
• Allow workers to apply by filing one form with one agency. Direct the IRS to share information with workers' authorized representatives who are helping with HCTC.
• In determining whether workers experience coverage gaps that permit health plans to deny treatment of known health problems, disregard periods of time during which workers are unable to access HCTC, either because they have not been sent notice of potential eligibility or because they are waiting for the IRS to rule on their application. 
• Ask each state to arrange at least one qualified plan offering comprehensive benefits to HCTC beneficiaries, without large premium variations based on age, gender, and health status. If a state does not wish to assume this role, the federal government would arrange such coverage in the state.
• Continue HCTCs for otherwise eligible younger spouses when displaced workers enter Medicare. 

Introduction

Good afternoon Chairman Miller, Representative McKeon, and distinguished members of the Committee. Thank you for the opportunity to speak with you today about health coverage for workers displaced by international trade, with a particular focus on the effectiveness of Health Coverage Tax Credits (HCTC).

I plan to address three topics: health coverage challenges facing displaced workers; the strengths and weaknesses of the HCTC program in helping these workers retain health coverage; and policy options to improve the HCTC program so it can be more effective in meeting the health coverage needs of workers who lose their jobs because of international trade.

I have two preliminary comments. First, I would like to thank the Nathan Cummings Foundation, the California HealthCare Foundation, and, above all, the Commonwealth Fund for generously supporting our several years of research into HCTC. Much of my testimony reflects information and insights gleaned through these philanthropies' investment in learning about this important program.

Second, the views I express today are mine alone and should not be attributed to the Urban Institute, any of its sponsors, or any of the above-described funders of our prior HCTC research.

The complete testimony is available in PDF format.

The views expressed are those of the author and should not be attributed to the Urban Institute, its trustees, or its funders.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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