Health Coverage Tax Credit
Simplified and More Timely Enrollment Process Could Increase Participation Gao ID: GAO-04-1029 September 30, 2004Congress enacted the health coverage tax credit (HCTC) in 2002 for certain displaced workers receiving income support through the Trade Adjustment Assistance (TAA) program and for certain retirees receiving pensions from the Pension Benefit Guaranty Corporation (PBGC). The HCTC equals 65 percent of the cost of qualified health coverage, which individuals can receive in advance--the Internal Revenue Service (IRS) pays the credit to the qualifying health plan and the individual pays the remaining 35 percent--or by filing for the credit in their federal tax return. GAO was asked to review the implementation of the HCTC and examined, among other issues, how many individuals received it and factors influencing participation, and the type and cost of coverage they purchased. GAO obtained data from federal and state agencies and private health plans.
For 2003, 19,410 individuals received about $37 million in benefits from IRS for the HCTC for themselves and dependents, with 12,594 (65 percent) claiming the credit on their tax returns rather than receiving it in advance. As of July 2004, about 13,200 individuals were enrolled for the advance HCTC, the majority of whom were PBGC beneficiaries. The number receiving the HCTC remains a small portion of the workers and retirees initially identified as potentially eligible. For example, some potentially eligible individuals may have other health coverage that would disqualify them from receiving the HCTC. Several additional factors may have limited participation to date. First, the advance credit only became available beginning in August 2003. Second, the enrollment process is fragmented and complex and requires individuals to meet tax, labor, and health coverage criteria before they can become eligible. Third, eligible individuals must pay the entire premium for about 3 to 6 months while completing eligibility and enrollment requirements and until IRS's first payment is made on behalf of these individuals. Fourth, the health coverage may not be affordable both in terms of an individual's ability to pay the entire premium amount while waiting to receive the advance HCTC and the ability to pay the 35 percent share once payment starts. Individuals can purchase one of several types of qualifying coverage for the HCTC: the coverage they had through their previous employer or insurance coverage options designated by states (primarily high-risk pools or arrangements with insurers). More than half of recipients chose coverage from their previous employer for the advance HCTC and another 40 percent of advance HCTC recipients enrolled in state-designated coverage options, which were available in 35 states and the District of Columbia as of July 2004. The average monthly premiums (representing both the individual and federal shares) for individuals receiving the advance HCTC were $480 for TAA recipients and $661 for PBGC beneficiaries as of April 2004. The tax credit resulted in an average monthly individual share of $168 for TAA recipients and $231 for PBGC beneficiaries. The premiums paid by advance credit recipients varied widely depending on the coverage purchased, including the type of health plan and the number of individuals covered. The cost of HCTC coverage also was affected by the premium-setting practices of qualified health plans.
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Director: Team: Phone:GAO-04-1029, Health Coverage Tax Credit: Simplified and More Timely Enrollment Process Could Increase Participation
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Report to the Committee on Finance, U.S. Senate:
United States Government Accountability Office:
GAO:
September 2004:
Health Coverage Tax Credit:
Simplified and More Timely Enrollment Process Could Increase
Participation:
GAO-04-1029:
GAO Highlights:
Highlights of GAO-04-1029, a report to the Committee on Finance, U.S.
Senate.
Why GAO Did This Study:
Congress enacted the health coverage tax credit (HCTC) in 2002 for
certain displaced workers receiving income support through the Trade
Adjustment Assistance (TAA) program and for certain retirees receiving
pensions from the Pension Benefit Guaranty Corporation (PBGC). The
HCTC equals 65 percent of the cost of qualified health coverage, which
individuals can receive in advance”the Internal Revenue Service (IRS)
pays the credit to the qualifying health plan and the individual pays
the remaining 35 percent”or by filing for the credit in their federal
tax return. GAO was asked to review the implementation of the HCTC and
examined, among other issues, how many individuals received it and
factors influencing participation, and the type and cost of coverage
they purchased. GAO obtained data from federal and state agencies and
private health plans.
What GAO Found:
For 2003, 19,410 individuals received about $37 million in benefits
from IRS for the HCTC for themselves and dependents, with 12,594 (65
percent) claiming the credit on their tax returns rather than receiving
it in advance. As of July 2004, about 13,200 individuals were enrolled
for the advance HCTC, the majority of whom were PBGC beneficiaries. The
number receiving the HCTC remains a small portion of the workers and
retirees initially identified as potentially eligible. For example,
some potentially eligible individuals may have other health coverage
that would disqualify them from receiving the HCTC. Several additional
factors may have limited participation to date:
* The advance credit only became available beginning in August 2003.
* The enrollment process is fragmented and complex and requires
individuals to meet tax, labor, and health coverage criteria before
they can become eligible.
* Eligible individuals must pay the entire premium for about 3 to 6
months while completing eligibility and enrollment requirements and
until IRS‘s first payment is made on behalf of these individuals.
* The health coverage may not be affordable both in terms of an
individual‘s ability to pay the entire premium amount while waiting to
receive the advance HCTC and the ability to pay the 35 percent share
once payment starts.
Individuals can purchase one of several types of qualifying coverage
for the HCTC: the coverage they had through their previous employer or
insurance coverage options designated by states (primarily high-risk
pools or arrangements with insurers). More than half of recipients
chose coverage from their previous employer for the advance HCTC and
another 40 percent of advance HCTC recipients enrolled in state-
designated coverage options, which were available in 35 states and the
District of Columbia as of July 2004. The average monthly premiums
(representing both the individual and federal shares) for individuals
receiving the advance HCTC were $480 for TAA recipients and $661 for
PBGC beneficiaries as of April 2004. The tax credit resulted in an
average monthly individual share of $168 for TAA recipients and $231
for PBGC beneficiaries. The premiums paid by advance credit recipients
varied widely depending on the coverage purchased, including the type
of health plan and the number of individuals covered. The cost of HCTC
coverage also was affected by the premium-setting practices of
qualified health plans.
What GAO Recommends:
GAO suggests that Congress consider amending certain statutory
enrollment requirements to expedite individuals‘ receipt of the HCTC.
GAO recommends that IRS, in coordination with other federal agencies,
take steps to improve the quality and clarity of enrollment information
and the timeliness of enrollment and payment processing. The agencies
either agreed with GAO‘s recommendations or deferred to IRS.
www.gao.gov/cgi-bin/getrpt?GAO-04-1029.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Kathryn G. Allen at (202)
512-7118.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
More Than 19,000 Individuals Received HCTC for 2003, but Participation
May Have Been Limited by Several Factors:
Majority of Advance HCTC Enrollees Purchased COBRA; Benefits and Costs
Varied with Type of Qualified Coverage:
IRS Implemented the HCTC on Time and Is Addressing Some Early
Implementation Issues:
45 States Received National Emergency Infrastructure Grants; Fewer
States Received National Emergency Bridge or High-Risk Pool Grants:
Conclusions:
Matters for Congressional Consideration:
Recommendations for Executive Action:
Agency and State Comments and Our Evaluation:
Appendix I: Advance Health Coverage Tax Credit Enrollees, by State,
July 2004:
Appendix II: State-Qualified Coverage Options:
Appendix III: Variation in Benefits Across State-Qualified Health Plans
in Seven States:
Appendix IV: Premiums Paid by Advance HCTC Enrollees:
Appendix V: Amount Awarded for National Emergency Grants and High-Risk
Pool Grants, by State, August 2004:
Appendix VI: Comments from the Department of Labor:
Appendix VII: Comments from the Internal Revenue Service:
Appendix VIII: Comments from the Centers for Medicare & Medicaid
Services:
Appendix IX: Comments from the Pension Benefit Guaranty Corporation:
Appendix X: GAO Contact and Staff Acknowledgments:
GAO Contact:
Acknowledgments:
Tables:
Table 1: Overview of Federal, State, and Private Entities' Involvement
with the HCTC:
Table 2: Monthly HCTC Potentially Eligible Population and Enrollment
for the Advance HCTC, September 2003 through July 2004:
Table 3: Demographic Characteristics of the Advance HCTC Potentially
Eligible Population, October 2003:
Table 4: Benefits Most Commonly Included in Employer-Sponsored Group
Market PPO Coverage, 2003:
Table 5: State-Qualified Coverage Types for HCTC Recipients in Seven
States:
Table 6: Deductible Amounts in Selected Plans in Six States with State-
Qualified Arrangements with One or More Insurers:
Table 7: Deductible Amounts in Selected Plans in Three States with
State-Qualified High-Risk Pools:
Table 8: Summary of IRS's Incurred and Expected HCTC Administration
Costs, February 2003 through June 2005:
Table 9: Reasons States Did Not Apply for National Emergency Grants:
Table 10: Types of State-Qualified HCTC Plans Available, by State, July
2004:
Table 11: Annual Deductibles across Selected State-Qualified Health
Plans in Seven States:
Table 12: Maternity Benefits across State-Qualified Health Plans in
Seven States:
Table 13: Mental Health Benefits across State-Qualified Health Plans in
Seven States:
Table 14: Prescription Drug Benefits across State-Qualified Health
Plans in Seven States:
Table 15: Average Total Monthly Premiums for Advance HCTC Enrollees, by
State, February 2004:
Figures:
Figure 1: Steps for TAA Recipients and PBGC Beneficiaries to Qualify
for, Enroll in, and Receive the Advance HCTC:
Figure 2: Number of Individuals Receiving the End-of-Year HCTC, Advance
HCTC, and Both Forms of the HCTC for Themselves and Dependents, 2003:
Figure 3: Estimated Typical Timeline for Trade-Affected Workers to
Receive Advance HCTC:
Figure 4: Percentage of Advance HCTC Enrollees with COBRA, Individual
Market, and State-Qualified Plans, through April 2004:
Figure 5: Percentage of Advance HCTC TAA Recipients and PBGC
Beneficiaries with COBRA, Individual Market, and State-Qualified Plans,
by Eligibility Type, through April 2004:
Figure 6: National Range of Monthly Advance HCTC Premium Costs for One-
Person Coverage, by Plan Type, May 2004:
Figure 7: State Workforce Agencies' Perspectives on Timeliness and
Adequacy of HCTC Program Office's and Labor's Assistance with
Implementing the Advance HCTC, March 2004:
Abbreviations:
ATAA: alternative trade adjustment assistance:
CCR: Central Contractor Registration:
CMS: Centers for Medicare & Medicaid Services:
COBRA: Consolidated Omnibus Budget Reconciliation Act of 1985:
EPO: exclusive provider organization:
FFS: fee for service:
HCTC: health coverage tax credit:
HHS: Department of Health and Human Services:
HIPAA: Health Insurance Portability and Accountability Act of 1996:
HMO: health maintenance organization:
IRS: Internal Revenue Service:
PBGC: Pension Benefit Guaranty Corporation:
POS: point of service:
PPO: preferred provider organization:
TAA: Trade Adjustment Assistance:
United States Government Accountability Office:
Washington, DC 20548:
September 30, 2004:
The Honorable Charles E. Grassley:
Chairman:
The Honorable Max Baucus:
Ranking Minority Member:
Committee on Finance:
United States Senate:
The Trade Adjustment Assistance (TAA) Reform Act of 2002 created a
health coverage tax credit (HCTC) for certain workers who are eligible
to receive income support benefits under the TAA program because their
jobs were lost due to foreign competition and for certain retirees
whose pensions from a former employer were terminated and are now paid
by the Pension Benefit Guaranty Corporation (PBGC).[Footnote
1],[Footnote 2] The HCTC equals 65 percent of the premium for qualified
health coverage. Several types of qualified health coverage were
specified in the TAA Reform Act, including federally guaranteed
continuation of coverage from a former employer, known as COBRA
continuation coverage,[Footnote 3] and several state-designated
options such as state-sponsored high-risk pools[Footnote 4] and state
arrangements with private insurers.
An important attribute of the HCTC is that it provides eligible
individuals with a tax credit that they can receive in advance of
filing their tax returns to help them reduce the cost of health
coverage. That is, instead of paying for health coverage up front and
having to wait until the end of the year to claim the credit on their
income taxes, individuals can choose to receive the HCTC at the time
their premium is due each month, thereby lowering the amount they have
to pay out of pocket for health coverage. This advance HCTC option is
intended to help make health coverage more affordable for eligible
individuals, many of whom have recently lost their primary source of
income and health coverage along with their jobs. Individuals also have
the alternative of paying the entire premium to the qualifying health
plan and claiming the credit when they file their income taxes for that
year.[Footnote 5] The end-of-year HCTC was first available to eligible
individuals for December 2002, and the advance HCTC was first made
available in August 2003.[Footnote 6]
The combination of tax, labor, and health coverage requirements for the
HCTC necessitates coordination among multiple federal agencies
(including the Department of the Treasury, the Department of Labor, the
Department of Health and Human Services (HHS), and PBGC); state
agencies (including state workforce agencies, which are responsible for
administering training and financial assistance benefits for trade-
displaced workers, and state departments of insurance); and private
health plans. At the federal level, an HCTC program office within the
Treasury's Internal Revenue Service (IRS) administers the HCTC with
assistance from private contractors. In addition, the TAA Reform Act
allowed states to apply to Labor for national emergency grants to help
implement the HCTC and created new grants from HHS for states to
establish and operate state high-risk pools.
You asked us to examine the early implementation of the HCTC,
particularly during the first year of the advance HCTC option. To do
so, we answered the following questions.
1. Of those eligible to receive the HCTC, how many received it and what
factors have influenced participation in the HCTC?
2. Which types of qualified coverage have HCTC recipients purchased,
how did benefits differ among these types of coverage, and how much did
this coverage cost?
3. What was IRS's experience in implementing the HCTC and how were
program responsibilities shared between federal and private sector
entities?
4. How many states received national emergency grants and high-risk
pool grants and why did some not apply for funds?
To identify the number of people potentially eligible for and the
number who received the HCTC, we obtained data from IRS's HCTC program
office for both the advance and end-of-year HCTC recipients in calendar
year 2003, the number of individuals receiving the end-of-year HCTC for
December 2002, and the number of individuals enrolled for the advance
HCTC monthly since August 2003.[Footnote 7] We also obtained
demographic data and information on why some potentially eligible
individuals were not receiving the advance HCTC from two HCTC program
office surveys, conducted in October 2003 and February 2004;[Footnote
8] surveyed officials in each state workforce agency;[Footnote
9],[Footnote 10] and interviewed officials from state workforce
agencies and qualified health plans in eight states. We selected
California, Illinois, Maryland, New York, North Carolina, Ohio,
Pennsylvania, and Texas because they had relatively large potentially
eligible populations; had designated different types of state-qualified
plans, such as high-risk pools or arrangements with private insurers;
and were in different geographic regions of the country. From IRS, we
obtained data on which types of plans states had designated as state-
qualified coverage options, which types of coverage advance HCTC
enrollees purchased, and the cost of coverage purchased by advance HCTC
enrollees. IRS provided these data on a monthly basis from August 2003
through June 2004 and on a cumulative basis from August 2003 through
April 2004.[Footnote 11] We obtained information about the benefits
available to HCTC recipients from officials at qualified health plans
in the eight states we reviewed, COBRA administrators, and the Henry J.
Kaiser Family Foundation and the Health Research and Educational
Trust's national survey of employers' health benefits. Data on
demographic characteristics, types of coverage purchased, premiums paid
for coverage, and information on why some potentially eligible
individuals did not claim the HCTC were not available for end-of-year
HCTC recipients in 2002 or 2003. We obtained information about IRS's
implementation of the HCTC from officials at IRS, Labor, HHS, and PBGC;
a survey we conducted of officials in each state workforce agency;
state workforce, department of insurance, and 10 health plan officials
in the eight states we reviewed; and COBRA administrators,
representatives from the Blue Cross and Blue Shield Association, and
representatives from the United Steelworkers of America, which had
members eligible to receive the HCTC. We also interviewed officials
from Accenture, the primary contractor responsible for implementing the
advance HCTC, and reviewed contract documents. Labor provided us with
information on the national emergency grant awards, and HHS's Centers
for Medicare & Medicaid Services (CMS) provided us with information on
high-risk pool grant awards. We obtained additional information about
these grants and why states did not apply for them from our survey of
state workforce agencies, officials in the states we reviewed, and
officials from the HCTC program office and CMS. We obtained information
from IRS officials regarding the data checks and edits they perform on
their data and any notable limitations, and determined that the data
used in this report were sufficiently reliable for our purposes. We
conducted our work from December 2003 through September 2004 in
accordance with generally accepted government auditing standards.
Results in Brief:
For 2003, 19,410 individuals received about $37 million in benefits for
themselves and dependents for the advance and end-of-year HCTC.
Specifically, 12,594 individuals received the end-of-year HCTC only,
3,120 individuals received the advance HCTC only, and 3,696 received
both forms of the HCTC. As of July 31, 2004, about 13,200 individuals
were enrolled for the advance HCTC, the majority of whom (60 percent)
were PBGC beneficiaries. The number of individuals receiving the HCTC
remains a small portion of those initially identified by states and
PBGC as potentially eligible for the HCTC, many of whom may not
ultimately meet all of the HCTC eligibility criteria. According to
federal, state, health plan, and union officials we interviewed,
participation to date in the advance and end-of year HCTC may be
limited by several factors. These factors include the newness of the
program; the fragmentation and complexity of the eligibility
determination and enrollment process, which requires individuals to
navigate steps that involve multiple federal and state agencies and to
meet specific tax, labor, and health coverage requirements before
becoming eligible for the HCTC; the gap of 3 to 6 months that it takes
for eligibility determination, enrollment for the HCTC, and IRS's first
payment on behalf of the eligible individual to be made, during which
time the individual must pay the entire premium; and the ongoing cost
to the individual of the 35 percent share of the premium once the
advance HCTC payments have begun. For a single person, the ongoing cost
for the 35 percent share of the premium represented about 13 percent,
and for two people about 25 percent, of the average monthly income
support benefits received by trade-displaced workers.
From the inception of the advance HCTC in August 2003 through April
2004, 56 percent of advance HCTC enrollees purchased COBRA coverage
through their former employer, 40 percent purchased state-qualified
coverage, and 4 percent continued to purchase the individual market
coverage they were enrolled in 30 days prior to the separation from
employment that resulted in their becoming eligible for TAA benefits or
PBGC payments. Comparable data on the coverage purchased by end-of-year
recipients were not available. As of July 2004, 36 states had made
state-qualified coverage available to HCTC recipients, primarily
through high-risk pools or arrangements with insurers. Although the
benefits available to HCTC recipients varied by plan, employer-based
COBRA plans generally had lower annual deductibles than state-sponsored
high-risk pools and arrangements with insurers, and provided more
comprehensive coverage for maternity care, mental health care, and
prescription drugs than state-qualified coverage offered through
arrangements with insurers in the 8 states we reviewed. The average
monthly premiums (representing both the individual and federal shares)
were $480 for TAA recipients and $661 for PBGC beneficiaries receiving
the advance HCTC; with the tax credit, the average share of the premium
that advance HCTC enrollees paid was $168 for TAA recipients and $231
for PBGC beneficiaries. The amount that advance HCTC enrollees paid for
coverage also varied depending on the number of people covered by the
plan and the type of coverage purchased. In the 8 states we reviewed,
the cost of HCTC coverage also was affected by the way in which
qualified health plans set premiums. For example, among plans we
reviewed, COBRA coverage charged group rates to HCTC recipients
regardless of their health status; high-risk pools charged premiums for
all HCTC recipients that were typically 150 or 200 percent of standard
premium rates for healthy individuals; and arrangements with insurers
charged premiums that varied on the basis of an individual's health and
other factors, with some unhealthy, high-risk HCTC recipients paying
500 percent or more of the rates that healthy, low-risk individuals
would pay. These premium-setting practices were similar to those used
by health plans to determine premiums for non-HCTC enrollees.
IRS's HCTC program office implemented the HCTC within the time frames
required by statute, enabling individuals to claim the end-of-year HCTC
on their 2002 income tax returns and making the advance credit
available on August 1, 2003. To do so, the HCTC program office
coordinated closely with other federal agencies, state agencies, and
private health plans and used private contractors extensively. These
stakeholders generally reported that the collaborative effort to
implement the HCTC went well and that the HCTC program office was
generally responsive to implementation issues that arose. For example,
after discovering that some ineligible individuals claimed and received
the end-of-year HCTC in tax year 2002, IRS began recovering these funds
and revised its forms and processes to reduce these problems for tax
year 2003. The HCTC program office also adapted its processes to
address implementation issues for the advance HCTC. For example,
certain health plans were unwilling to accept advance credit payments
because they did not want to receive electronic payments or because
they found the health plan registration process burdensome. The HCTC
program office responded by simplifying its registration process and
agreed to issue paper checks to health plans that would not accept
electronic payments. However, some implementation issues have not been
resolved, such as incomplete information from states that the HCTC
program office uses to verify the eligibility of advance HCTC
enrollees, and delays in health plans' receiving complete payments when
the plans' premiums changed during the year. The HCTC program office
reported that start-up costs for design, development, and
implementation of the HCTC were $69 million from the time work began in
February 2003 through April 2004. For the year starting July 2004,
operating costs for the HCTC are expected to be about $40 million.
These costs include anticipated costs for enhancements, such as updated
software, and reflect a reduction in contractor staff, although
contractors will continue to conduct the majority of the administrative
and operating tasks.
Most states obtained national emergency grants from Labor, while fewer
than half of the states received high-risk pool grants from CMS. As of
August 2004, 45 states had received $45 million of the available $90
million in national emergency grants available for infrastructure
grants (to help set up mechanisms for administering the HCTC) and for
bridge grants (to pay a portion of the HCTC premiums). Specifically, 45
states received about $7 million in infrastructure grants to help
establish mechanisms required for the HCTC, and 11 states also received
about $38 million in bridge grants to help pay a portion of enrollees'
premiums prior to availability of the advance HCTC. Most states that
did not apply for bridge grants said they did not have systems in place
to implement the grant. While bridge grants were originally used to
help individuals with premiums before implementation of the advance
HCTC, Labor has expanded the use of bridge grants to allow states to
cover the 65 percent share of premiums during the typically 1-to 3-
month gap between applicants' enrollment and IRS's payment of the first
month's advance HCTC. Twenty-one states received high-risk pool grants
from CMS as of August 2004. Specifically, as of August 2004, about $30
million of the $80 million available for operating grants (to offset
financial losses from operating a high-risk pool) had been awarded to
16 states, and about $4 million of $20 million available for seed
grants (to establish a new high-risk pool) had been awarded to 6
states. CMS officials reported that one reason seed grants were not
sought more often is that states were reluctant to take on the
continuing financial obligation of a high-risk pool.
We are suggesting that Congress consider amending certain statutory
HCTC enrollment requirements and time frames in order to simplify and
shorten the enrollment process for the advance HCTC. We are also
suggesting that Congress consider providing for retroactive payment of
the HCTC from the time that an individual is determined eligible until
the first advance payment is received. In addition, we are recommending
that the Secretary of Labor, Commissioner of Internal Revenue,
Administrator of CMS, and Executive Director of PBGC take various steps
to improve the quality and clarity of enrollment information and the
timeliness of enrollment and payment processing. We provided a draft of
this report to IRS, Labor, PBGC, CMS, and officials in the eight states
we reviewed. The federal agencies either concurred with our
recommendations or deferred to IRS as the lead agency in implementing
the recommendations. The state agencies that commented on our draft
generally concurred with our findings.
Background:
The TAA Reform Act established the HCTC to help certain individuals pay
for health coverage by establishing a tax credit for 65 percent of the
premium cost for qualified coverage. Individuals receive the HCTC in
two ways--either in advance on a monthly basis or after the end of the
year when they file their federal income taxes. Individuals are not
required to itemize deductions or to owe federal income taxes in order
to receive the HCTC. IRS provides the end-of-year HCTC to the
individual, while tax credits claimed in advance are paid to the health
plan in the form of a premium payment. For the advance credit, the HCTC
program remits payments directly to the health plan; however, the
individual must pay the full premium out of pocket until enrollment is
complete. Individuals receiving the HCTC in advance may claim the
credit at the end of the year for any months in which they were
eligible for the HCTC but did not receive it in advance.
Eligibility for the HCTC:
Three groups of individuals may be eligible to receive the HCTC for
themselves and their qualified family members:[Footnote 12]
5. TAA recipients. These are individuals who lost their jobs due to
imports from or a shift in production to certain foreign countries. For
workers to be eligible for TAA, Labor must certify petitions, filed by
or on behalf of an employee group, indicating that the workers lost
employment as a result of foreign competition.[Footnote 13] Once Labor
has certified the petition, state workforce agencies determine
individual worker eligibility for TAA benefits. To be eligible for the
HCTC, TAA-eligible workers must first be eligible for a trade
readjustment allowance, which extends income support after unemployment
insurance is exhausted, and as a condition of receiving this income
support must enroll in training to develop job skills for reemployment,
or must receive a waiver from training.[Footnote 14] Because the trade
readjustment allowance is not available to eligible workers until 60 or
more days after the employee group files a petition to receive TAA
certification from Labor, trade-affected workers cannot become eligible
for the HCTC until this time.[Footnote 15]
6. Alternative trade adjustment assistance (ATAA) recipients.
Individuals who qualify for this assistance have lost their jobs as a
result of trade-related layoffs and found new jobs within 26 weeks at
lower pay and earn $50,000 or less in their new jobs. The ATAA program,
initiated in August 2003, provides certain workers who are aged 50 and
over and lacking transferable job skills with a wage subsidy to help
offset this salary reduction. Labor must certify that an employee group
lost employment as a result of foreign competition and that ATAA
applicants are included in this group. State workforce agencies are
responsible for determining an individual's eligibility for ATAA
benefits.[Footnote 16]
7. PBGC beneficiaries. These individuals receive payments from PBGC
because their pension plan was terminated when their former employer
went bankrupt or experienced other severe financial
difficulties.[Footnote 17] To be eligible for the HCTC, PBGC
beneficiaries must be aged 55 or older and be either currently
receiving benefits or have received a lump sum payment from PBGC after
August 5, 2002.[Footnote 18] Unlike TAA-eligible individuals, PBGC
beneficiaries do not have to be associated with trade-affected
industries in order to receive the HCTC.
In order to be eligible for the HCTC, individuals in these three groups
must also be enrolled in qualified health coverage and meet certain
other criteria. These criteria include that the individual cannot be
eligible to be claimed as a dependent on someone else's tax return;
cannot be imprisoned on the first day of the month he or she seeks to
receive the HCTC; and cannot be enrolled in other, nonqualified health
coverage, such as Medicare or health coverage through the Department of
Defense health system.
HCTC Qualified Health Coverage:
The TAA Reform Act specifies 10 types of qualifying coverage that are
eligible for the HCTC, including 3 automatic options that do not
require any action on the part of the states and 7 options that only
meet the definition of qualified health plans if a state elects to make
them available and ensures that they meet certain criteria.
Automatically Qualified Coverage Options:
The TAA Reform Act designates the following three options that are
automatically qualified as coverage eligible for the HCTC:
* COBRA continuation plans. An eligible individual may use the HCTC for
COBRA coverage. Under COBRA, employers with 20 or more employees must
offer 18 to 36 months of continued health coverage to former employees
and their dependents who lose health coverage under certain
circumstances, such as when an employee is terminated or
retires.[Footnote 19] Generally, health plans may charge individuals
purchasing COBRA continuation coverage no more than 102 percent of the
total premium.
* Spousal coverage. An eligible individual may claim the end-of-year
HCTC for group market coverage obtained through a spouse's employer,
provided the employer contributed less than 50 percent toward the cost
of coverage. The advance HCTC cannot be used to purchase coverage
through a spouse's employer.
* Individual market plans. An eligible individual may use the HCTC for
individually purchased health coverage, provided that the coverage was
purchased at least 30 days prior to the separation from employment that
resulted in the individual becoming eligible to receive TAA benefits or
PBGC pension payments.
State-Qualified Coverage Options:
In addition to the three automatic options, the TAA Reform Act allows
states to designate seven other coverage alternatives for HCTC
recipients. Most states have chosen to designate one or more of the
following three state-qualified options:
* Arrangements with insurers or other plan administrators. States may
make arrangements with issuers of health insurance coverage (that is,
health insurers), group health plans, employers, or other plan
administrators to provide coverage eligible for the HCTC. States
electing to provide state-qualified HCTC coverage through an
arrangement with a health insurer may designate insurers offering
either individual market or group health plans.[Footnote 20]
* State high-risk pools. Some states have established high-risk pools
to provide health coverage to individuals unable to purchase coverage
elsewhere, typically because of a preexisting health condition. To
qualify for the HCTC, high-risk pools must (1) cover, without
preexisting condition limits, individuals leaving group coverage who
are eligible for guaranteed coverage under the Health Insurance
Portability and Accountability Act of 1996 (HIPAA); and (2) offer
premium rates and covered benefits consistent with the National
Association of Insurance Commissioners Model Health Plan for
Uninsurable Individuals Act in effect as of August 21, 1996.
* State-based continuation coverage, or mini-COBRA. Because the COBRA
provisions only apply to plans maintained by employers with 20 or more
workers, some states have enacted so-called mini-COBRA laws requiring
insurers providing coverage to plans maintained by employers with fewer
than 20 workers to offer continuation coverage to such plans.
The other four types of coverage that states can designate as qualified
plans are (1) a health coverage program for state employees, (2) a
state-based health coverage program comparable to that offered for
state employees, (3) an arrangement with a private-sector health care
coverage purchasing pool (that is, a cooperative of employers or other
groups or individuals that negotiate with one or more health plans),
and (4) a state-operated health plan that does not receive any federal
financial participation (thereby excluding Medicaid and the State
Children's Health Insurance Program).
These seven state-qualified coverage options must provide qualified
individuals--that is, individuals who have at least 3 months of prior
creditable coverage at the time they seek to enroll in a state-
qualified HCTC plan--four consumer protections.[Footnote 21] These
consumer protections are (1) guaranteed issue, whereby insurers must
guarantee enrollment and must permit the individual to remain enrolled
as long as he or she pays premiums;[Footnote 22] (2) the prohibition of
preexisting condition restrictions; (3) nondiscriminatory premiums,
such that the premiums charged to HCTC enrollees may not be greater
than the premiums for similar individuals not receiving the HCTC; and
(4) benefits that are substantially the same as coverage provided to
similar individuals who are not receiving the HCTC.[Footnote 23] While
the fourth consumer protection requires the benefits to be similar to
coverage offered to non-HCTC individuals, it does not specify what
benefits must be included.
State Grants:
The TAA Reform Act authorized states to use national emergency grants
to help with costs related to the implementation of the HCTC and
established grants to promote high-risk pools.
* National emergency grants. To help with HCTC expenses, states can
apply for two types of national emergency grants: bridge grants and
infrastructure grants.[Footnote 24] Bridge grants could be used to pay
for up to 65 percent of the cost of health coverage for eligible
individuals until the federal advance HCTC became available in August
2003. After August 2003, states were permitted to use remaining bridge
grant funds to assist eligible individuals with paying their premiums
during the HCTC enrollment process. Infrastructure grants were intended
to assist states with start-up and administrative costs related to the
HCTC.
* High-risk pool grants. To promote high-risk pools, states were
offered new grants, called seed grants, to provide funds for the
establishment of qualified high-risk pools, and operating grants, to
reimburse states for up to 50 percent of losses incurred by high-risk
pools meeting certain criteria.[Footnote 25] Seed grants also can be
used to convert an existing high-risk pool to a qualified high-risk
pool--that is, one that meets the requirements contained in the Public
Health Service Act for individuals eligible for protections under
HIPAA.[Footnote 26]
Federal, State, and Private Entity Roles in Implementing the HCTC:
Although IRS is responsible for administering the HCTC program, three
federal departments--Treasury, Labor, and HHS--share responsibility
for implementing the HCTC and grants to states contained in the TAA
Reform Act. (See table 1.) To implement and administer the HCTC,
Congress appropriated to IRS $70 million for fiscal year 2003, to
remain available through fiscal year 2004, and $35 million for fiscal
year 2004, to remain available through fiscal year 2005.[Footnote 27]
Separate funding was provided for HCTC payments. In addition, PBGC--a
federal corporation created by the Employee Retirement Income Security
Act of 1974--is responsible for submitting, on a monthly basis, the
names of PBGC beneficiaries potentially eligible for the HCTC to the
HCTC program office. State responsibilities include identifying TAA
individuals who are potentially eligible for the HCTC and, if the state
so chooses, making state-qualified health coverage options available.
Table 1: Overview of Federal, State, and Private Entities' Involvement
with the HCTC:
Entity: Federal agencies: Treasury;
Responsibility or action:
* Has primary responsibility for implementing the HCTC, with
assistance from private contractors;
* Created HCTC program office within IRS to implement and administer
the credit;
* Pays end-of-year HCTC to individuals and advance HCTC to health
plans;
* Reviews states' selection of qualified health plans.
Entity: Federal agencies: Labor;
Responsibility or action:
* Certifies trade-affected groups as meeting TAA criteria;
* Administers national emergency grants.
Entity: Federal agencies: PBGC;
Responsibility or action:
* Mails information about HCTC to PBGC beneficiaries;
* Submits names of potentially eligible individuals to HCTC program
monthly.
Entity: Federal agencies: HHS;
Responsibility or action:
* CMS administers the high-risk pool grants.
Entity: State agencies: State workforce agency;
Responsibility or action:
* Provides information about HCTC to trade-affected workers;
* Certifies workers for TAA benefits;
* Submits names of potentially eligible individuals to HCTC program
daily.
Entity: State agencies: State department of insurance;
Responsibility or action:
* Certifies state-qualified plans, if state elects to make additional
coverage options available;
* Submits list of state-qualified plans to HCTC program.
Entity: Private entities: Health plans, plan administrators;
Responsibility or action:
* Automatic options (COBRA, individual market coverage): accept advance
HCTC payments from IRS if the plan elects to participate;
* State- qualified options: meet consumer protection requirements and
accept advance HCTC payments from IRS.
Sources: HCTC program office documents and interviews with officials
from IRS's HCTC program office, Labor, PBGC, HHS, state agencies, and
health plans.
[End of table]
Process for Enrolling for Advance HCTC and Claiming End-of-Year HCTC:
Enrolling for the advance HCTC involves multiple entities, including
federal agencies, a state workforce agency, and health plans. Potential
eligibility begins with a qualifying event--either a worker loses
employment as a result of foreign competition or a retiree's pension
plan is terminated. These individuals must then undergo an eligibility
determination process for TAA or have PBGC assume payment of their
pension.
The enrollment process for HCTC can begin once a state sends to the
HCTC program office the names of individuals receiving or eligible for
income support through the trade readjustment allowance or PBGC sends a
list of names of beneficiaries aged 55 or older. The HCTC program
office mails an HCTC package to each of these individuals. Individuals
may enroll for the advance HCTC if they meet the eligibility criteria,
which include purchasing qualified health coverage. Once an individual
successfully enrolls for the advance HCTC, the HCTC program office
sends an invoice for the individual's 35 percent share of the premium,
and, when this payment is received, the remaining 65 percent is added
and the full premium amount is forwarded to the participating health
plan. Figure 1 provides an overview of the steps required for TAA
recipients and PBGC beneficiaries to enroll for the advance HCTC and to
have payments made to the qualifying health plan in which they enroll.
Figure 1: Steps for TAA Recipients and PBGC Beneficiaries to Qualify
for, Enroll in, and Receive the Advance HCTC:
[See PDF for image]
[A] Groups eligible to file a petition for TAA certification include
three or more workers, a labor union that represents the workers,
officials from the affected company, and the state dislocated workers
unit.
[End of figure]
End-of-year HCTC recipients must complete many, but not all, of the
steps outlined above for advance HCTC enrollees. They must experience a
qualifying event, be determined eligible for the trade readjustment
allowance or PBGC payments, have their names sent to the HCTC program
office by a state workforce agency or PBGC, and have qualified health
coverage. Instead of enrolling with the HCTC program office, however,
individuals claiming the end-of-year HCTC must submit required
documents, which include proof of premium payment and a form designed
for the HCTC, to the IRS along with their federal tax return. In
addition, individuals who receive the advance HCTC may also claim the
end-of-year HCTC for the months that they did not receive the advance
HCTC, including months prior to August 2003, when the advance credit
was first made available, and the months during the enrollment process
before advance payments are made to their health plans.
More Than 19,000 Individuals Received HCTC for 2003, but Participation
May Have Been Limited by Several Factors:
For 2003, 19,410 individuals received about $37 million in payments for
themselves and dependents for the advance and end-of-year HCTC, the
majority by filing for the credit on their end-of-year tax return. For
July 2004, enrollment for the advance HCTC was about 13,200, about 60
percent of whom were PBGC beneficiaries. An HCTC program office survey
in October 2003 (early in the implementation of the advance HCTC)
indicated that advance HCTC enrollees were, on average, older and had
lower incomes and educational attainment than nonenrollees, but both
groups reported similar health status. Comparable data for end-of-year
HCTC recipients and nonrecipients were not available. According to
officials from states, qualified health plans, and a union, several
factors may have limited the participation in the advance and end-of-
year HCTC to date. These factors include the newness of the program,
the fragmentation and complexity of the TAA certification and HCTC
eligibility determination and enrollment processes, the length of time-
-typically 3 to 6 months--that the individual must pay the full premium
while establishing eligibility for and enrolling in the advance
payment, and the ongoing cost of the individual's share of the premium
once the advance HCTC payments have begun.
More Than 19,000 Individuals Received HCTC Benefits Totaling $37
Million in 2003:
For 2003, about $37 million was paid on behalf of 19,410 HCTC
recipients, most of whom (12,594 individuals) claimed the HCTC solely
on their end-of-year tax return. Many of these individuals may have
received the HCTC to pay for qualified health insurance covering
dependents as well as themselves, but data were not available on the
number of dependents covered by the end-of-year HCTC. The advance HCTC
became available in August 2003, and 3,696 individuals received both
the advance HCTC--for the months beginning on or after August--and the
end-of-year HCTC--for the months they paid 100 percent of their
insurance premium. Another 3,120 individuals received the HCTC only in
the form of an advance payment.[Footnote 28] (See fig. 2.) Of the $37
million paid, about $23.8 million was paid on behalf of those who filed
solely for the end-of-year HCTC, $2.8 million for those receiving the
advance HCTC only, and $10.7 million for those who claimed both forms
of the credit. According to the HCTC program office, for 2003, about
24,000 taxpayers filed claims for the end-of-year HCTC, and about 8,000
of these claims were denied. Some of the individuals whose claims for
the end-of-year credit were denied were not on the list of potentially
eligible individuals prepared by the state workforce agencies and PBGC.
In addition, some of those denied were age 65 or older.
Figure 2: Number of Individuals Receiving the End-of-Year HCTC, Advance
HCTC, and Both Forms of the HCTC for Themselves and Dependents, 2003:
[See PDF for image]
Note: Data for tax year 2003 were reported by IRS as of May 2004 and
could change for later filers, amended returns, or further changes
resulting from ongoing audits. In addition, some individuals were
enrolled for advance payments and might have been sent an invoice for
their 35 percent premium share, but the payments had not yet been made.
Payments made after December 11, 2003 were considered to be credits for
January 2004 premiums and not included in the totals received for 2003.
[End of figure]
Enrollment for Advance HCTC Was 13,200 in the Month of July 2004:
Enrollment for the advance HCTC increased from about 4,000 individuals
at the start of the program to about 13,200 individuals in July
2004.[Footnote 29] (See table 2.) In this month, roughly 40 percent of
enrollees were TAA recipients, while the remaining 60 percent were PBGC
beneficiaries. Individuals also used the advance HCTC to cover their
qualified family members. In May 2004, approximately 12,900 individuals
were enrolled to receive the advance HCTC for themselves and about
7,800 family members.
Table 2: Monthly HCTC Potentially Eligible Population and Enrollment
for the Advance HCTC, September 2003 through July 2004:
September 2003[C];
Potentially eligible population[A]: TAA: 85,908;
Potentially eligible population[A]: PBGC: 113,666;
Potentially eligible population[A]: Total: 199,574;
Total enrollment[B]: 4,008.
October 2003;
Potentially eligible population[A]: TAA: 89,709;
Potentially eligible population[A]: PBGC: 139,210;
Potentially eligible population[A]: Total: 228,919;
Total enrollment[B]: 5,826.
November 2003;
Potentially eligible population[A]: TAA: 90,111;
Potentially eligible population[A]: PBGC: 142,057;
Potentially eligible population[A]: Total: 232,168;
Total enrollment[B]: 7,131.
December 2003;
Potentially eligible population[A]: TAA: 91,593;
Potentially eligible population[A]: PBGC: 143,149;
Potentially eligible population[A]: Total: 234,742;
Total enrollment[B]: 8,374.
January 2004;
Potentially eligible population[A]: TAA: 94,936;
Potentially eligible population[A]: PBGC: 154,399;
Potentially eligible population[A]: Total: 249,335;
Total enrollment[B]: 9,318.
February 2004;
Potentially eligible population[A]: TAA: 95,799;
Potentially eligible population[A]: PBGC: 154,181;
Potentially eligible population[A]: Total: 249,980;
Total enrollment[B]: 10,246.
March 2004;
Potentially eligible population[A]: TAA: 89,628;
Potentially eligible population[A]: PBGC: 158,662;
Potentially eligible population[A]: Total: 248,290;
Total enrollment[B]: 11,344.
April 2004;
Potentially eligible population[A]: TAA: 91,220;
Potentially eligible population[A]: PBGC: 155,182;
Potentially eligible population[A]: Total: 246,402;
Total enrollment[B]: 12,166.
May 2004;
Potentially eligible population[A]: TAA: 89,491;
Potentially eligible population[A]: PBGC: 146,443;
Potentially eligible population[A]: Total: 235,934;
Total enrollment[B]: 12,896.
June 2004;
Potentially eligible population[A]: TAA: 87,777;
Potentially eligible population[A]: PBGC: 147,452;
Potentially eligible population[A]: Total: 235,229;
Total enrollment[B]: 13,222.
July 2004;
Potentially eligible population[A]: TAA: 81,362;
Potentially eligible population[A]: PBGC: 147,682;
Potentially eligible population[A]: Total: 229,044;
Total enrollment[B]: 13,194.
Source: IRS's HCTC program office.
Note: Approximately 17,900 individuals had enrolled for the advance
HCTC at some time from August 2003 through July 2004.
[A] Not all individuals initially identified as potentially eligible
will meet all eligibility criteria for the HCTC.
[B] Includes individuals who have completed the advance HCTC enrollment
process but for whom advance payments have not started.
[C] The number of potential eligibles for September includes partial
data for the month of August--the first month the program was
operational--thereby overstating the number of potentially eligible
individuals in September by approximately 10 percent.
[End of table]
Nationwide, as of July 2004, Pennsylvania had the highest number of
individuals enrolled for the advance HCTC (2,265), followed by North
Carolina (1,636) and Ohio (1,090). Most individuals enrolled for the
advance HCTC were clustered in nine states--Illinois, Indiana,
Maryland, Michigan, North Carolina, Ohio, Pennsylvania, Virginia, and
West Virginia. These nine states accounted for two-thirds of all
individuals enrolled for the advance HCTC, although fewer than half of
all potentially eligible individuals resided in these states. Several
of these states recently experienced large trade-related layoffs at
steel and textile companies. For example, Pillowtex, a household
textile manufacturer headquartered in North Carolina, closed
manufacturing and distribution facilities in North Carolina and
Virginia and terminated more than 4,500 employees in July 2003. In
April 2003, PBGC assumed pension plan payments for 95,000 workers and
retirees from the Pennsylvania-headquartered Bethlehem Steel
Corporation. (See app. I for the number of individuals enrolled for the
advance HCTC by state.)
Determining the actual rate of participation in the HCTC is difficult
because reliable data on the total number of individuals actually
eligible for the HCTC are not available. States and PBGC are
responsible for identifying and reporting individuals who are eligible
for TAA and PBGC benefits, while the responsibility for assessing the
health coverage and tax eligibility HCTC criteria lies with the HCTC
program office. Therefore, individuals identified by states and PBGC
are considered only potentially eligible for the HCTC because IRS also
needs to determine that they meet health coverage and tax criteria
before receiving the HCTC. Some of the individuals identified by states
and PBGC as potentially eligible may have other health coverage that
would disqualify them from receiving the HCTC. For example, the October
2003 HCTC program office survey found that about half of those
identified as TAA recipients or PBGC beneficiaries, but who were not
enrolled for the advance HCTC, were in fact ineligible because they had
other coverage, such as Medicare or through a spouse's employer.
Similarly, in the HCTC program office's February 2004 survey, many
respondents reported multiple reasons that made them ineligible for the
HCTC, including being claimed as a dependent on someone else's tax
return, not meeting the age eligibility criteria, or having other
health coverage from sources such as the military or the Federal
Employees Health Benefits Program.
Advance HCTC Enrollees Were Older and Had Lower Income Than
Nonenrollees:
Based on an HCTC program office survey of 1,200 respondents conducted
in October 2003, advance HCTC enrollees were, on average, older, were
less likely to have children, and had lower income than potentially
eligible nonenrollees.[Footnote 30] Both groups, however, reported
similar health status. Specifically, advance HCTC enrollees were an
average of 4 years older than nonenrollees, had 12 percent lower
household pretax income, and lower educational attainment than
nonenrollees. There was no statistically significant difference in
self-reported health status between enrollees and nonenrollees in the
advance HCTC program. Seventy-four percent or more of enrollees and
nonenrollees reported being in good health, while 3 percent of
enrollees and 6 percent of nonenrollees rated their health as poor.
(See table 3.) Demographic data for those who received the end-of-year
HCTC were not available at the time of our analysis.
Table 3: Demographic Characteristics of the Advance HCTC Potentially
Eligible Population, October 2003:
Characteristic: Average age;
Enrolled individuals: 58;
Nonenrolled individuals[A]: 54.
Characteristic: Average age for PBGC;
Enrolled individuals: 60;
Nonenrolled individuals[A]: 59.
Characteristic: Average age for TAA;
Enrolled individuals: 51;
Nonenrolled individuals[A]: 47.
Characteristic: Average household size;
Enrolled individuals: 2;
Nonenrolled individuals[A]: 2.3.
Characteristic: Percentage with children in their household;
Enrolled individuals: 14%;
Nonenrolled individuals[A]: 30%.
Characteristic: Pretax median household income;
Enrolled individuals: $30,000;
Nonenrolled individuals[A]: $34,000.
Characteristic: Percent with at least some college education;
Enrolled individuals: 42%;
Nonenrolled individuals[A]: 48%.
Characteristic: Percentage employed;
Enrolled individuals: 17%;
Nonenrolled individuals[A]: 37%.
Characteristic: Self-reported health status (percentage): Good;
Enrolled individuals: 77%;
Nonenrolled individuals[A]: 74%.
Characteristic: Self-reported health status (percentage): Fair;
Enrolled individuals: 19%;
Nonenrolled individuals[A]: 20%.
Characteristic: Self-reported health status (percentage): Poor;
Enrolled individuals: 3%;
Nonenrolled individuals[A]: 6%.
Source: IRS's HCTC program office survey.
Note: In October 2003, the HCTC program office surveyed 603 individuals
enrolled for the advance HCTC and 604 individuals reported by the state
workforce agencies and PBGC as potentially eligible but not enrolled
for the advance HCTC. The survey response rate was 59 percent.
[A] In February 2004, the HCTC program office conducted a second survey
of 600 individuals who were potentially eligible, but not enrolled, for
the advance HCTC. Although the 2004 survey had a higher proportion of
PBGC beneficiaries, the demographic characteristics of those not
enrolled for the advance HCTC in 2003 and 2004 were similar in most
respects.
[End of table]
Several Factors May Limit the Number of Individuals Who Receive the
HCTC:
According to officials we interviewed from states, participating
qualified health plans, and a union representing affected workers, the
number of individuals receiving the HCTC was lower than expected. We
identified several factors that may help explain the limited number of
individuals receiving the advance and end-of-year HCTC to date. In
addition to the newness of the advance payment option, these factors
included the fragmentation and complexity of the eligibility and
enrollment process, the gap in time before the advance payments are
available, and the affordability of the individual's share of the
premiums.
State workforce agency and health plan officials reported that the
process for trade-displaced workers to become eligible and enroll for
the HCTC was fragmented and complex. Between the time workers lost
employment and the time they enrolled for the advance HCTC, they
interacted with two different federal agencies (Labor and IRS), their
state's workforce agency, and a health plan. Each entity performed a
discrete part of the eligibility determination and enrollment process,
without any single entity being responsible for overall coordination.
In four of the eight states we reviewed, workforce officials reported
that displaced workers seeking help with the advance HCTC often had to
make multiple calls to different federal and state agencies. For
example, a state workforce agency official reported that displaced
workers who called the HCTC program office about the advance HCTC--
prior to their name being sent from the state--were referred to Labor,
which in turn referred them back to the state workforce
agency.[Footnote 31] An official from another state workforce agency
reported that the state workforce agency does not deal with health
coverage issues, so displaced workers who called with questions or
difficulties about their health plan were referred to the HCTC program
office or the health plan. State and union officials reported that this
level of fragmentation could be difficult to navigate, especially for
individuals with limited education or those who worked in large
companies and were accustomed to centrally coordinated benefits
administration.
Currently, individuals must navigate the eligibility and enrollment
process largely on their own. State and health plan officials suggested
developing a coordinated outreach strategy to help individuals who have
difficulty with the advance HCTC enrollment process. For example,
officials reported that HCTC information sessions attended by
representatives from the PBGC, state workforce agencies, HCTC program,
and qualified health plans were held in some states that had
experienced large layoffs. According to officials, these information
sessions helped bring all the key players together in one location and
enabled individuals to walk from one station to the next and complete
the enrollment process on the same day, if they chose to.
State officials reported that the requirement that individuals first
qualify for the trade readjustment allowance--income support available
under the TAA program after unemployment insurance is exhausted--added
to the time and complexity of the advance HCTC eligibility and
enrollment process and could limit participation. Individuals cannot
qualify for the trade readjustment allowance until at least 60 days
after the petition for TAA certification has been filed with Labor. In
addition, in order to qualify for this benefit, individuals must be in
training or have a waiver from training, which must be recertified
monthly by the state workforce agency.[Footnote 32] State officials
said that removing the requirement to first qualify for the trade
readjustment allowance would expedite the enrollment process and could
enable additional dislocated workers to receive the advance HCTC.
Another factor that complicates and could limit participation in the
advance HCTC is the time required to enroll for the advance HCTC. In
our survey of state workforce agencies conducted in March 2004, 30
states responded that TAA recipients had difficulty receiving the HCTC,
and 17 of these 30 states reported that it took too long for eligible
individuals to receive the advance HCTC because of the way the
enrollment process was structured. The multiagency, multistep process
for eligibility determination and enrollment resulted in a significant
gap between the time individuals lost employment or their retirement
plan was terminated and the time they began receiving the advance HCTC.
It typically took from 4 to 6 months for newly displaced trade-affected
workers to become eligible for and receive the first advance payment.
(See fig. 3.) For new PBGC beneficiaries, the time required to become
eligible for and receive the first advance payment typically was 3 to 6
months.
Figure 3: Estimated Typical Timeline for Trade-Affected Workers to
Receive Advance HCTC:
[See PDF for image]
Note: The time frames for each step may vary beyond the estimates shown
above.
[A] Groups eligible to file a petition for TAA certification include
three or more workers, a labor union that represents the workers,
officials from the affected company, and the state dislocated workers
unit. Petitions for certification are not typically filed at the same
time individuals lose their jobs. In some cases, workers may already be
covered by a certification when they lose their jobs or the petition
may be filed weeks or months after their employment ends.
[B] Individuals do not qualify for the trade readjustment allowance
until at least 60 days after the petition for TAA certification has
been filed with Labor.
[C] The number of weeks it takes to receive the advance payment depends
in part on how quickly individuals provide the HCTC program office with
all information needed to enroll for advance payment and whether the
health plan is already registered to receive advance payments.
[End of figure]
The elapsed time in becoming eligible and enrolling for the advance
HCTC also meant that in some instances individuals potentially eligible
for the HCTC were required to make certain decisions that would affect
future health coverage for themselves or their spouse before they knew
whether they would be eligible to receive the advance HCTC. For
example, some displaced workers are offered the option of paying for
COBRA coverage at the time of separation from their employers, and
individuals who enroll in COBRA may use the advance HCTC to pay 65
percent of their COBRA premiums once they have completed the advance
HCTC enrollment process, which typically can take 3 to 6
months.[Footnote 33] Eligible individuals who decline COBRA coverage--
such as for affordability concerns--or do not have COBRA as an option
and become uninsured for more than 63 days risk losing guaranteed
access to state-qualified health coverage and other consumer
protections.[Footnote 34] Because it typically takes 3 to 6 months
after losing employment before beginning to receive the advance HCTC,
maintaining coverage for this 63-day period can be very expensive for
displaced workers, and some may opt not to pay for this coverage in
part because they have difficulty affording it. In our survey of state
workforce agencies, 20 of the 30 states that said that TAA recipients
had difficulty receiving the HCTC reported that breaks in coverage of
63 days or more are causing individuals to lose access to one or more
consumer protections, such as guaranteed access to coverage or no
preexisting condition exclusions. However, officials we interviewed
from five state-qualified HCTC health plans reported that they have
voluntarily extended one or more consumer protections to individuals
with more than a 63-day break in coverage, for example offering all
HCTC applicants guaranteed access to coverage and in some cases waiving
preexisting condition exclusions for enrollees. Some of these health
plan officials indicated that the decision to offer all HCTC applicants
the same consumer protections was made for ease of administration, and
this practice may be revoked in the future at the discretion of the
plan.
State, health plan, and union officials also expressed concern about
gaps in HCTC program eligibility rules that can affect the spouses and
other dependents of PBGC beneficiaries who enroll in Medicare.
Specifically, when a PBGC beneficiary enrolls in Medicare, the
beneficiary loses eligibility for the HCTC. According to current
eligibility rules, the spouses and other dependents of these
individuals also lose eligibility for the HCTC even if they are not yet
eligible for Medicare. A union official reported that when some PBGC
beneficiaries attended an HCTC information session and became aware of
this rule, they expressed reservations about enrolling in the HCTC,
stating that they needed more time to think about whether to apply.
According to state workforce officials, health plan officials, and
union representatives we contacted, the affordability of qualified HCTC
coverage was another factor affecting participation rates. HCTC-
eligible individuals have either lost employment, often involving a
reduction in income, or retired and are receiving a fixed pension from
PBGC. Research indicates that as premiums consume an increasing share
of income, participation rates decline. For example, one study found
that, among populations with incomes up to 300 percent of the federal
poverty level,[Footnote 35] more than half of the target population
would participate when premiums represent 1 percent of income, but only
one-sixth would participate when premiums represent 5 percent of
income.[Footnote 36]
The affordability of qualified health coverage options can be
problematic even with the HCTC. During the 1-to 3-month period before
the health plan receives the first premium payment from the HCTC
program, HCTC enrollees are required to pay 100 percent of the premium
out of pocket, which for a single person would represent 36 percent and
for two persons would represent 72 percent of the average monthly
unemployment insurance benefit of about $1,128.[Footnote 37] The
ongoing 35 percent share of the average HCTC premiums in mid-2004 for a
health plan covering a single individual and a plan covering a single
individual and one other family member would have required 13 percent
and 25 percent, respectively, of the average monthly unemployment
insurance benefit. In addition to these premium costs, HCTC enrollees
must pay any deductibles, coinsurance, or copayments that are required
by their health plan.[Footnote 38]
In our survey of state workforce agencies, 24 of 30 states reporting
that TAA recipients had difficulty receiving the HCTC said that the
ability to pay premiums while waiting to receive the advance HCTC was a
factor contributing to this difficulty. In addition, 22 of the 30
states indicated that the lack of affordable health coverage was a
reason individuals may be having difficulty participating in HCTC. The
state workforce, health plan, and union officials we interviewed
reported that, even with a 65 percent subsidy, the remaining 35 percent
share might cost too much to be affordable for many displaced workers
and retirees.
Majority of Advance HCTC Enrollees Purchased COBRA; Benefits and Costs
Varied with Type of Qualified Coverage:
From August 2003 through April 2004, 60 percent of advance HCTC
enrollees obtained coverage through automatically qualified health
plans, primarily COBRA, and 40 percent of individuals receiving the
advance HCTC purchased coverage through a state-qualified plan.
Comparable data on the coverage purchased by end-of-year recipients
were not available. More than two-thirds of the states designated
state-qualified plans, with most states choosing to provide coverage
through arrangements with insurers or high-risk pools. The types of
benefits available for purchase with the HCTC varied both within and
across the different automatic and state-qualified coverage options.
For example, COBRA plans, which were a continuation of employer-
sponsored group market coverage, tended to offer lower deductibles than
state-qualified high-risk pools and more comprehensive benefits than
the coverage provided through arrangements with insurers, most of which
were individual market plans. The cost of HCTC coverage for advance
credit enrollees varied widely depending on the number of people
covered, the type of coverage purchased, and whether the HCTC enrollee
was a TAA recipient or a PBGC beneficiary. The cost of HCTC coverage
was also affected by the different ways in which premiums are set in
the group and individual market.
Majority of Advance HCTC Enrollees Purchased Automatically Qualified
Coverage, and 40 Percent Enrolled in State-Qualified Plans:
Cumulatively, from the time the advance credit became available in
August 2003 through April 2004, the majority (60 percent) of advance
HCTC enrollees obtained coverage through one of the automatically
qualified coverage options specified in the TAA Reform Act. Most HCTC
enrollees (56 percent) used the advance HCTC to purchase COBRA
coverage, while 4 percent remained enrolled in the individual market
plans they held 30 days prior to the separation from employment that
resulted in their becoming eligible for TAA benefits or PBGC payments
(see fig. 4).
Figure 4: Percentage of Advance HCTC Enrollees with COBRA, Individual
Market, and State-Qualified Plans, through April 2004:
[See PDF for image]
Note: Percentages represent the cumulative number of individuals
enrolled for the advance HCTC from August 2003 through April 2004.
[A] IRS's HCTC program office could not provide data separately for
state-qualified high-risk pools, arrangements with insurers, or mini-
COBRA plans.
[B] Refers to automatically qualified individual market coverage.
[End of figure]
Nationwide, about two-thirds of TAA recipients enrolled for the advance
HCTC purchased COBRA coverage, whereas about one-half of PBGC
beneficiaries enrolled for the advance HCTC selected COBRA plans and
one-half selected state-qualified plans. Only a small percentage of
advance HCTC enrollees of either type purchased automatically qualified
individual market coverage. (See fig. 5.)
Figure 5: Percentage of Advance HCTC TAA Recipients and PBGC
Beneficiaries with COBRA, Individual Market, and State-Qualified Plans,
by Eligibility Type, through April 2004:
[See PDF for image]
Notes: Totals may not add to 100 percent because of rounding.
Percentages represent the cumulative number of individuals receiving
advance HCTC from August 2003 through April 2004.
[A] IRS's HCTC program office could not provide data separately for
state-qualified high-risk pools, arrangements with insurers, or mini-
COBRA plans.
[B] Refers to automatically qualified individual market coverage.
[End of figure]
More than Two-Thirds of States Designated State-Qualified HCTC Plans:
As of July 2004, 36 states had designated state-qualified HCTC coverage
options, and about 84 percent of all individuals identified as
potentially eligible to receive the HCTC lived in these states. Most
states providing state-qualified coverage did so through arrangements
with one or more insurers (18 states) or high-risk pools (17 states).
Three states (Indiana, Maryland, and Texas) designated both their high-
risk pool and an arrangement with an insurer as state-qualified HCTC
plans. Thirteen states designated mini-COBRA plans, and in 4 of these
13 states (Kentucky, Missouri, New Jersey, and Wisconsin) mini-COBRA
plans were the only state-qualified coverage option available. Federal
officials reported that few individuals eligible to receive the HCTC
had access to mini-COBRA coverage because the number of TAA recipients
and PBGC beneficiaries whose former employer had fewer than 20
employees--thereby making them eligible for mini-COBRA coverage--was
estimated to be very small. (See app. II for a list of state-qualified
HCTC coverage options by state.)
According to the HCTC program office, 15 states--whose combined
population represented less than one-fifth of all individuals
potentially eligible to receive the HCTC--had yet to make a state-
qualified HCTC plan available as of July 2004. Three of these states--
Arizona, Idaho, and Washington--have designated state-qualified plans,
but these plans were not open to enrollment as of July 2004. Among
states that have not designated a state-qualified plan, California had
the largest number of potentially eligible individuals. State workforce
and insurance department officials in California reported that because
no health plans in the state had agreed to participate in the HCTC
program, potentially eligible individuals without access to COBRA or
another automatically qualified coverage option were unable to use the
HCTC because they could not purchase qualified coverage.
In the 15 states that did not make a state-qualified HCTC plan
available, some potentially eligible individuals may not have been able
to use the HCTC to purchase automatically qualified coverage. Although
the extent to which this has occurred is unknown, there are several
reasons why potentially eligible individuals in these states may be
unable to receive the HCTC. First, if a former employer discontinued
its employee health coverage, individuals potentially eligible for the
HCTC would not likely have access to a COBRA plan. According to a
Commonwealth Fund study, federal officials estimate that between 40
percent and 60 percent of individuals eligible to receive the HCTC
likely do not have access to COBRA coverage.[Footnote 39] In addition,
individuals who have COBRA coverage and are eligible to receive the
HCTC for longer than the 18 to 36 months that COBRA is available will
also need to enroll in another form of qualified coverage when their
COBRA benefits expire in order to maintain the HCTC. Second,
individuals with coverage through their spouses' employer may not
qualify for the HCTC because many companies that offer health coverage
contribute more than 50 percent toward the cost of their workers'
health coverage premium--both for the cost of coverage for an
individual worker and for the cost of family coverage. In 2003, for
example, the average percentage of total premiums paid by employers for
family coverage was 73 percent.[Footnote 40] Third, HCTC program office
officials reported that only a small percentage of individuals were
likely to have purchased coverage in the individual market at least 30
days prior to the separation from employment that resulted in their
becoming eligible for TAA benefits or PBGC payments. While these
officials could not provide a precise estimate, a national survey
reported that fewer than 6 percent of all working Americans purchased
individual market coverage in 2002.[Footnote 41]
Benefits Varied Across and Within HCTC Coverage Options:
The benefits offered to HCTC recipients varied across coverage types
and from plan to plan. In the seven states we reviewed that designated
state-qualified health plans, we found that COBRA coverage generally
included lower deductibles than high-risk pools and offered more
comprehensive benefits than arrangements with insurers. When health
plans offered a choice among benefit packages or deductible amounts,
HCTC recipients typically selected more comprehensive benefits and
lower deductibles.
COBRA benefits are typically identical to the benefits provided to
working individuals covered by an employer's group market health plan.
The majority of health plans offered by employers in 2003 provided
coverage for mental health services and prescription drugs, with
preferred provider organization (PPO) health plans having an average
annual deductible of $275.[Footnote 42] (See table 4.) In addition, the
Pregnancy Discrimination Act requires employers with 15 or more
employees to cover expenses for maternity services on the same basis as
coverage for other medical conditions.[Footnote 43]
Table 4: Benefits Most Commonly Included in Employer-Sponsored Group
Market PPO Coverage, 2003:
Benefit: Annual deductible;
Description:
$275 average annual deductible for in-network services.[A];
* 79 percent had a deductible of $499 or less;
* 93 percent had a deductible of $999 or less.
Benefit: Mental health;
Description:
* 99 percent provided coverage for both inpatient and outpatient mental
health services;
* 72 percent covered at least 21 days of inpatient care per year;
* 65 percent covered at least 21 outpatient visits per year.
Benefit: Prescription drugs;
Description:
* 99 percent provided coverage for prescription drugs;
* 92 percent did not require a separate deductible for prescription
drugs.[B];
* Average copayments for prescription drugs were $9 for generic
products, $19 for preferred brand-name products, and $29 for
nonpreferred brand-name products.[B].
Source: Henry J. Kaiser Family Foundation and Health Research and
Educational Trust, Employer Health Benefits 2003 Annual Survey (Menlo
Park, Calif., and Chicago: 2003).
[A] Average deductible for one-person coverage.
[B] Information applies to all employer-sponsored health plans and is
not specific to PPO plans.
[End of table]
The majority of the 36 states that designated state-qualified health
plans did so through arrangements with one or more insurers selling
individual market coverage. Of the 7 states we reviewed with state-
qualified health plans, 6 provided state-qualified HCTC coverage
through an arrangement with one or more insurers, all of which sold
coverage in the individual market (see table 5).[Footnote 44]
Table 5: State-Qualified Coverage Types for HCTC Recipients in Seven
States:
State: Illinois;
High-risk pool: Yes;
Arrangement with one or more insurers: No;
Mini-COBRA[A]: No.
State: Maryland;
High-risk pool: Yes;
Arrangement with one or more insurers: Yes;
Mini-COBRA[A]: No.
State: New York;
High-risk pool: No;
Arrangement with one or more insurers: Yes;
Mini-COBRA[A]: Yes.
State: North Carolina;
High-risk pool: No;
Arrangement with one or more insurers: Yes;
Mini-COBRA[A]: No.
State: Ohio;
High-risk pool: No;
Arrangement with one or more insurers: Yes;
Mini-COBRA[A]: Yes.
State: Pennsylvania;
High-risk pool: No;
Arrangement with one or more insurers: Yes;
Mini-COBRA[A]: No.
State: Texas;
High-risk pool: Yes;
Arrangement with one or more insurers: Yes;
Mini-COBRA[A]: No.
Source: IRS's HCTC program office.
Note: The eighth state we reviewed, California, did not designate any
state-qualified coverage for HCTC recipients.
[A] According to federal officials, few individuals eligible to receive
the HCTC likely had access to mini-COBRA coverage.
[End of table]
Health coverage purchased in the individual market typically includes
more restrictions on covered benefits and higher deductibles than group
market coverage offered through an employer.[Footnote 45] In the six
states we reviewed that designated arrangements with insurers as state-
qualified plans, we typically found higher deductibles and one or more
restrictive benefit limitations for maternity care, mental health
coverage, and prescription drugs than would be typical for employer-
sponsored group market coverage, including COBRA plans. Limitations on
these benefits included lower maximums on annual or lifetime coverage,
higher cost sharing, or, in some cases, no coverage at all. For
example:
* One state-qualified HCTC health plan in Texas did not offer any
coverage for maternity care except for treatment of pregnancy-related
complications.
* One state-qualified HCTC plan in Ohio limited mental health coverage
to 10 days of inpatient coverage and 10 outpatient visits per year.
* State-qualified health plans in Maryland, New York, and Pennsylvania
required a separate deductible for prescription drug coverage, while
one state-qualified health plan in Ohio did not provide coverage for
brand name prescription drugs.
Appendix III provides more information on the variation in benefits
across state-qualified HCTC plans in the seven states we reviewed that
had state-qualified plans.
State-qualified HCTC plans provided through arrangements with insurers
in four of these six states offered HCTC recipients a choice of
deductibles--ranging from $250 to $5,000--while plans with no
deductible were available in New York and some counties in
Pennsylvania. When offered a choice among deductible amounts, the
majority of HCTC recipients in these four states generally purchased
coverage with the lowest deductibles available, typically $1,000 or
less. (See table 6.)
Table 6: Deductible Amounts in Selected Plans in Six States with State-
Qualified Arrangements with One or More Insurers:
State[A]: Maryland;
Minimum deductible offered: $800;
Maximum deductible offered: $800;
Deductible most commonly selected by HCTC recipients: [B].
State[A]: New York;
Minimum deductible offered: [C];
Maximum deductible offered: [C];
Deductible most commonly selected by HCTC recipients: [C].
State[A]: North Carolina[D];
Minimum deductible offered: $250;
Maximum deductible offered: $2,500;
Deductible most commonly selected by HCTC recipients: $250.
State[A]: Ohio;
Minimum deductible offered: $500;
Maximum deductible offered: $5,000;
Deductible most commonly selected by HCTC recipients: $500.
State[A]: Pennsylvania;
Minimum deductible offered: $750;
Maximum deductible offered: $1,500;
Deductible most commonly selected by HCTC recipients: $750.
State[A]: Texas;
Minimum deductible offered: $500;
Maximum deductible offered: $5,000;
Deductible most commonly selected by HCTC recipients: $1,000.
Sources: Interviews with health plan officials and reviews of health
plan Web sites, brochures, and benefit summaries.
Notes: Deductible options are for one-person coverage and apply to
services received within the health plan's network, if applicable. Of
the eight states we reviewed, California did not designate a state-
qualified plan and Illinois did not designate an arrangement with an
insurer as a state-qualified plan.
[A] Some states provided state-qualified HCTC coverage through
arrangements with more than one insurer. In these instances, we
selected the insurer with the highest HCTC enrollment, except in New
York. In New York, HCTC enrollment data were not available for each
insurer; we reviewed plans offered by an insurer that served areas in
which companies had closed and HCTC-eligible individuals would likely
have resided. The insurer with the largest HCTC enrollment in
Pennsylvania sold coverage in both the central and western regions of
the state. Only the coverage offered in the central region offered a
choice of deductibles.
[B] The selected state-qualified plan in this state did not offer a
choice in deductible amounts.
[C] None of the three state-qualified plans in New York that we
reviewed had annual deductibles for services received within the plan's
coverage network.
[D] North Carolina offered a choice between two different benefit
packages, each with differing deductible options, sold by the same
insurer. The data reported are for the benefit package most commonly
purchased by HCTC recipients.
[End of table]
Three of the seven states we reviewed that had state-qualified health
plans designated their high-risk pools as state-qualified plans. These
state-qualified high-risk pools generally offered benefits similar to
those offered in the employer-sponsored group market, but almost always
required higher deductibles. Compared with the average $275 deductible
for employer coverage in 2003, the high-risk pool deductibles available
to HCTC recipients in the states we reviewed generally ranged from $500
to $5,000. All of the qualified high-risk pools in these states
provided HCTC recipients with a choice of deductibles, with the
majority of HCTC recipients selecting the lowest option available in
two of the three states. (See table 7.)
Table 7: Deductible Amounts in Selected Plans in Three States with
State-Qualified High-Risk Pools:
State-qualified high-risk pool: Maryland: PPO option;
Minimum deductible offered: $1,000;
Maximum deductible offered: $1,000;
Deductible most commonly selected by HCTC recipients: [A].
State-qualified high-risk pool: Maryland: EPO option[B];
Minimum deductible offered: [B];
Maximum deductible offered: [B];
Deductible most commonly selected by HCTC recipients: [B].
State-qualified high-risk pool: Illinois;
Minimum deductible offered: $500;
Maximum deductible offered: $5,000;
Deductible most commonly selected by HCTC recipients: $500.
State-qualified high-risk pool: Texas;
Minimum deductible offered: $500;
Maximum deductible offered: $5,000;
Deductible most commonly selected by HCTC recipients: $2,500.
Sources: GAO interviews with health plan officials and reviews of
health plan Web sites and benefit summaries.
Note: Of the eight states we reviewed, California did not designate a
state-qualified plan and New York, North Carolina, Ohio, and
Pennsylvania designated an arrangement with one or more insurers rather
than a high-risk pool as the state-qualified plan.
[A] This plan option did not offer a choice in deductible amounts.
[B] Exclusive provider organizations (EPO), like HMOs, often use a
physician as a gate keeper and have a limited provider network. Members
of an EPO must typically remain within this network to receive
benefits. Maryland's EPO did not have a deductible.
[End of table]
In addition to a choice of deductibles, state-qualified HCTC plans in
three states (Maryland, North Carolina, and Pennsylvania) offered
enrollees a choice of benefit packages. HCTC recipients in these three
states typically selected the option providing more generous coverage,
as in the following examples:
* The Maryland high-risk pool offered two plan options--a PPO plan with
a $1,000 deductible and 20 percent coinsurance for most services, and
an exclusive provider organization (EPO) plan with no deductible and
$20, $30, and $250 copayments for physician visits, specialist visits,
and hospital admissions, respectively. The majority of HCTC recipients
(56 percent) selected the EPO plan.
* North Carolina provided state-qualified coverage through an
arrangement with an insurer, which offered a choice between two benefit
packages--one with more comprehensive coverage that included lower
copayments for physician and hospital care and no separate deductible
for prescription drugs, and a second option with higher copayments for
physician and hospital care and a separate $200 prescription drug
deductible. Most (80 percent) HCTC recipients selected the more
comprehensive coverage.
* In western Pennsylvania, the state-qualified plan provided coverage
for hospital and surgical expenses and certain preventive services with
no deductible and no coinsurance.[Footnote 46] HCTC recipients also had
the option to purchase a separate plan that added coverage for
prescription drugs and physician and specialist visits, with these
benefits subject to a $750 deductible and 20 percent coinsurance.
Almost 90 percent of HCTC recipients purchased the optional coverage.
Cost of HCTC Health Coverage Varied Depending on Coverage Purchased:
The cost of qualified coverage for advance HCTC enrollees varied
according to the number of individuals covered, whether the advance
HCTC enrollee was a TAA recipient or a PBGC beneficiary, and the type
of qualified coverage purchased. For example, in April 2004, the
average total monthly premium for advance HCTC coverage--representing
both the individual and federal share--was $404 for one person and $812
for two people. In the eight states that we reviewed, the cost of
coverage for HCTC recipients was partly determined by the premium-
setting practices of qualified health plans.
Cost of Advance HCTC Coverage Affected by Number of Individuals
Covered, Type of Enrollee, and Type of Coverage:
The amount paid for qualified coverage by advance HCTC enrollees
nationwide varied according to the number of individuals covered as
well as whether the enrollees were eligible for the HCTC because they
received TAA benefits or because they received PBGC payments. For
example, the national average total advance HCTC premium--representing
both the enrollee's 35 percent share and the government's 65 percent
contribution--for a qualified plan covering one individual in April
2004 was $404, versus $812 for a qualified plan that covered two
individuals. PBGC beneficiaries, who were on average older than TAA
recipients, typically paid more for advance HCTC coverage, both for
COBRA as well as state-qualified plans. The average total premium for
TAA recipients receiving the advance HCTC in April 2004 was $480,
compared to $661 for advance HCTC enrollees receiving PBGC pension
payments. Receipt of the advance HCTC reduced the share of the premium
paid by enrollees, on average, to $168 for TAA recipients and $231 for
PBGC beneficiaries. (App. IV provides average total monthly premiums by
state for TAA recipients and PBGC beneficiaries receiving the advance
HCTC.)
Monthly advance HCTC premium costs ranged widely nationwide, depending
on the type of qualified coverage purchased (see fig. 6). State-
qualified HCTC coverage was, on average, more expensive than COBRA for
plans that covered one individual or an individual and one other family
member.[Footnote 47] However, when more than three individuals were
covered on a plan, COBRA coverage was more expensive, on average, than
the state-qualified options. These premium comparisons do not reflect
differences in benefits among the different types of coverage.
Figure 6: National Range of Monthly Advance HCTC Premium Costs for One-
Person Coverage, by Plan Type, May 2004:
[See PDF for image]
Note: The most current data available from IRS on the range of monthly
advance HCTC premium costs were from May 2004.
[A] IRS's HCTC program office could not provide premium data separately
for state-qualified high-risk pools, arrangements with insurers, or
mini-COBRA plans.
[B] Refers to automatically qualified individual market coverage.
[End of figure]
Even with the tax credit, most advance HCTC enrollees paid more for
their 35 percent share of qualified coverage than individuals
purchasing health coverage through an employer. For instance, in July
2004, the average advance HCTC enrollee paid $137 for the 35 percent
monthly share of COBRA coverage for one person or contributed $293
toward family coverage. In comparison, according to a 2003 national
survey on employer benefits, the average employee paid $42 per month to
purchase one-person coverage or $201 per month for family coverage
purchased through their employer.[Footnote 48] However, without the 65
percent subsidy provided by the HCTC, the average advance HCTC enrollee
continuing COBRA coverage would likely have had to pay the entire $390
per month for one-person coverage or $837 per month for family
coverage.
Cost of State-Qualified HCTC Coverage Affected by Premium-Setting
Practices:
The cost of coverage for HCTC recipients within and across the eight
states we reviewed was partly determined by health plans' premium-
setting practices. As they do for non-HCTC applicants, state-qualified
health plans in the majority of states we reviewed that had designated
such plans adjusted premium rates to take into account enrollees'
demographic characteristics, including their health status. Other
premium-setting practices affecting the cost of state-qualified HCTC
coverage included raising premiums to compensate for offering coverage
on a guaranteed issue basis and, in some cases, automatically charging
HCTC recipients higher premiums than what would typically be charged
for healthy individuals for whom they are not required to offer
coverage on a guaranteed issue basis. Although most state-qualified
health plans had not analyzed the extent to which HCTC recipients
utilize services, preliminary evidence suggested that insurers have not
found the majority of these individuals to be in poor health.
Health plans' premium-setting practices depended on the type of state-
qualified coverage offered. In four of the six states we reviewed where
state-qualified HCTC coverage was provided through arrangements with
insurers offering individual market plans (Maryland, North Carolina,
Ohio, and Texas), insurers took each applicant's health status and
medical history into account when determining premiums, a process known
as medical underwriting.[Footnote 49] The other two states (New York
and Pennsylvania) charged the same rates for all enrollees. High-risk
pools in the states we reviewed generally charged enrollees different
rates based on their age (Illinois, Maryland, Texas), gender (Illinois,
Texas), or county of residence (Illinois, Texas). One high-risk pool
(Texas) also charged tobacco users higher premiums than nontobacco
users.
Unlike COBRA or other group market coverage, where premiums are based
on the history of medical costs and demographic characteristics
associated with a group of individuals who are employees of a company
or related companies, eligibility and premiums in the individual market
in many states are based largely on each individual's health status and
risk characteristics. Typically, the extent to which insurers selling
coverage in the individual market can raise premiums for older
individuals or those with existing health conditions is determined by
each state.[Footnote 50] While the premiums charged by insurers selling
coverage in the individual market may vary substantially, the premiums
charged by state high-risk pools are generally set between 125 percent
and 200 percent of the standard premium that an individual in good
health would typically pay for coverage in the individual market.
Regardless of health status, HCTC recipients purchasing COBRA coverage
would be charged the same rate as the rest of the employee group, while
those purchasing coverage through a high-risk pool would pay from 125
percent to 200 percent of the standard premium charged to healthy
individuals. HCTC recipients purchasing coverage through an arrangement
with an insurer would likely be charged varying premiums based on their
health status and other demographic characteristics, with some
unhealthy, high-risk individuals paying more, and in some cases
substantially more, than 200 percent of the rates charged to
individuals in good health. For example, in one state we reviewed, the
insurer offering qualifying coverage to HCTC recipients charged
individuals rated in their poorest health category 580 percent of the
premium charged to those rated in their healthiest category.
For state-qualified HCTC insurers, particularly those in the individual
market, having to provide guaranteed issue coverage to certain HCTC
recipients presents additional risk. For example, if an individual
applicant with 3 months of prior creditable coverage has a costly
chronic medical condition, such as juvenile-onset diabetes or heart
disease, which would otherwise typically result in that applicant being
denied coverage, the cost to the insurer may outweigh the premium paid,
resulting in a loss to the insurer. To compensate for this additional
risk posed by the guaranteed issue requirement, federal officials have
granted permission for state-qualified HCTC health plans to charge
higher premiums to individuals rated in the poorest health categories-
-individuals who would otherwise be turned down for coverage--as long
as the additional premiums are actuarially justified and pass state
insurance department review.
One insurer we interviewed that sold state-qualified coverage in
multiple states, including one of the states we reviewed, used
differing practices in setting premiums for HCTC recipients in these
states. In the state we reviewed, this insurer reported that it had
originally planned to offer coverage on a guaranteed issue basis to all
HCTC enrollees, regardless of whether they had 3 months of prior
creditable coverage, and to automatically charge them 200 percent of
the standard premium that it would typically charge a healthy
applicant.[Footnote 51] After the state department of insurance
rejected this premium-setting practice, the health plan set up a two-
tier pricing system whereby healthier individuals who passed medical
underwriting were charged the standard premium, while those who did not
pass underwriting were charged 200 percent of this rate. Although this
insurer modified its pricing method in the state we reviewed, the
insurer said that it continued to automatically charge all HCTC
recipients a higher-than-standard premium in two other states where it
sold state-qualified coverage. Thus, although the guaranteed issue
provision ensures that qualified individuals will have access to HCTC
coverage, regardless of age or health status, it also means that the
healthiest HCTC recipients may pay more for such coverage than they
otherwise would in the individual market without guaranteed issue.
Without this consumer protection, however, HCTC recipients with certain
preexisting medical conditions would likely be unable to purchase
coverage from state-qualified health insurers selling individual market
health plans.
Two states we reviewed (Maryland and Texas) offered state-qualified
HCTC coverage through both the state high-risk pool and through an
arrangement with an insurer. Because of the way health plans in these
states set premiums, less healthy HCTC recipients were likely to find
the high-risk pool coverage to be the less expensive of the two state-
qualified options, while healthier HCTC recipients were generally able
to purchase less expensive coverage through the arrangement with an
insurer. For example:
* In Maryland, the health plan offered through an arrangement with an
insurer charged less healthy HCTC recipients 200 percent of the
standard premium typically charged an applicant in good health, whereas
the state high-risk pool charged all applicants 150 percent of the
standard rate.
* In Texas, high-risk pool rates were set at 200 percent of the
standard premium, while the state-qualified HCTC plan offered through
an arrangement with an insurer charged HCTC recipients rated in the
poorest health category 4.7 times as much as those rated in the average
health category and 5.8 times as much as those rated in the healthiest
category.
Most of the state-qualified plans in the seven states we reviewed that
had such plans reported that they have not analyzed the extent to which
HCTC recipients utilize services, which would be one indicator of the
health status of the population receiving the HCTC. Officials from some
of these plans stated that they are collecting health service
utilization data for individuals receiving the HCTC but that they will
need at least a full year's worth of data before drawing any conclusion
as to the overall health status of the TAA and PBGC populations.
However, on the basis of preliminary medical underwriting data that
were provided by HCTC state-qualified plans in two of the states we
reviewed, more HCTC recipients have been placed into the healthy or
standard risk categories than into the poorest health categories
designated for this population. One health plan indicated that fewer
than half of its enrollees receiving the HCTC were placed in below-
average rating categories, while the other reported that one-fifth of
its HCTC enrollees were categorized as worse-than-average risks.
IRS Implemented the HCTC on Time and Is Addressing Some Early
Implementation Issues:
IRS's HCTC program office met the statutory time frames for
implementing the HCTC, enabling individuals to claim the end-of-year
HCTC for December 2002 on their income taxes and making the advance
HCTC available on August 1, 2003. To meet these time frames, the HCTC
program office coordinated closely with other federal agencies, state
agencies, and private health plans and used private contractors
extensively. These stakeholders generally reported that the
collaborative effort to implement the HCTC went well and that the HCTC
program office was responsive to implementation issues that arose. For
example, these implementation issues included instances where
individuals who were not eligible for the credit claimed and received
the end-of-year HCTC for 2002, while others who were eligible and
claimed it did not receive the payment. IRS has been recovering
payments made in error and revised its forms and processes to reduce
these problems for the end-of-year HCTC for 2003. Implementation issues
for the advance HCTC included the unwillingness of certain health plans
to accept advance credit payments; delays in health plans' receiving
correct payments when premiums changed; and inaccurate state
eligibility lists that jeopardized individuals' receipt of the advance
HCTC. The HCTC program office reported that, from February 2003, when
work began to set up the advance HCTC, through April 2004, start-up
costs for design, development, and implementation of the HCTC were
about $69 million. After restructuring the HCTC program office to
transition from implementation activities to operating activities,
costs for the HCTC were expected to be about $40 million for the year
starting July 1, 2004, and reflected a reduction in contractor staff,
although contractors will continue to perform the majority of the
administrative and operational work.
End-of-Year and Advance HCTC Available on Time:
According to federal officials, in order to implement the HCTC on time,
IRS's HCTC program office coordinated closely with federal agencies,
state agencies, and health plans and received extensive support from
private contractors. Implementation efforts for the end-of-year and
advance HCTC met the statutory deadlines contained in the TAA Reform
Act, making each form of the HCTC available for December 2002 and by
August 2003, respectively.[Footnote 52] While IRS's HCTC program office
had primary responsibility for implementing the HCTC, officials from
this and other federal agencies involved in its implementation--HHS,
Labor, and PBGC--reported that instituting the advance HCTC in
particular was a cooperative effort that went well. Officials from
workforce agencies and health plans in the states we reviewed largely
concurred, stating that the HCTC program office was helpful in
implementing the HCTC and addressing issues that have arisen. Meeting
the 1-year implementation time frame for the advance HCTC was
challenging for state workforce agencies, however. According to our
survey of state workforce agencies conducted in March 2004, 71 percent
reported that implementing the advance HCTC had been somewhat or very
difficult.[Footnote 53] For example, as figure 7 shows, state workforce
agency officials were less satisfied with the timeliness of the
information they received from the HCTC program and Labor to implement
the advance HCTC than they were with the assistance itself.
Figure 7: State Workforce Agencies' Perspectives on Timeliness and
Adequacy of HCTC Program Office's and Labor's Assistance with
Implementing the Advance HCTC, March 2004:
[See PDF for image]
Note: Puerto Rico's workforce agency was included in this survey; the
District of Columbia's workforce agency was not included.
[End of figure]
Ineligible Individuals Received End-of-Year HCTC for 2002, but New
Procedures to Reduce Errors Were Instituted for 2003 Filing:
HCTC program officials stated that, while individuals were able to
claim the end-of-year HCTC for premiums paid in December 2002, IRS was
unprepared to verify these claims and some credits were paid or denied
in error--that is, some individuals received the HCTC who should not
have and other individuals who were eligible for it did not. These
errors were the result of mistakes individuals made on their tax
returns--partly because of limited information in IRS's tax
publications and communications for 2002 about how to claim the HCTC--
and errors IRS staff made in processing each claim manually. Claims for
the end-of-year HCTC in 2002 were still undergoing review as of June
2004, and the HCTC program reported that of the $2.9 million disbursed,
about $465,000 had been improperly paid to ineligible individuals. More
than half of this amount (about $243,000) had been recovered, and IRS
continues to seek recovery of the rest. HCTC program officials stated
that for those who do not pay back the credit, future tax refunds would
be offset by the outstanding amount. Additionally, IRS is in the
process of auditing 577 claims (about 2 percent of the total) for 2002
that were for greater amounts than were expected. As of June 8, 2004,
about half of the audits had been completed, and about 85 percent of
the HCTC amounts claimed were disallowed.
To reduce the number of ineligible individuals receiving the end-of-
year HCTC for 2003, HCTC program officials instituted new procedures
and reporting requirements. For example, all tax records were
prescreened against state workforce agency and PBGC eligibility lists
to identify who was potentially eligible to receive the end-of-year
HCTC. As of May 2004, HCTC program officials reported that this
screening had prevented about 8,000 ineligible individuals from
improperly claiming the end-of-year HCTC on their 2003 tax returns.
However, this prescreening only identified whether an individual was
potentially eligible for the HCTC at any time during the year, not the
specific month or months in which he or she might have been eligible.
IRS provided tax professionals with information about the HCTC and
mailed each individual who was identified as potentially eligible for
the credit in 2003 information about how to claim the end-of-year HCTC.
Additionally, the IRS tax form used to claim the end-of-year HCTC was
revised to include clearer instructions to help filers determine
whether they were eligible for the credit, and individuals were
required to attach copies of invoices and payments for each month in
2003 for which they claimed the end-of-year HCTC. This procedure does
not, however, ensure that the individual purchased qualified health
coverage. Therefore, potentially eligible individuals could have
claimed the end-of-year HCTC in 2003 for more months than they should
have or for coverage that did not qualify for the credit.
HCTC Program Office Adapted Policies and Procedures to Resolve Some but
Not All Advance HCTC Implementation Issues:
Advance HCTC payment and implementation issues prompted the HCTC
program to change some of its procedures, but not all issues have been
resolved. One such payment issue for which the HCTC program adapted its
procedures was the refusal of some automatically qualified health plans
to accept the advance HCTC from IRS. HCTC program officials reported
that certain health plans refused to accept payments from IRS,
primarily because they found the process to register to receive advance
payments burdensome or they did not want to receive electronic
payments. According to these officials, health plans had to register in
the primary vendor database for the federal government--the Central
Contractor Registration (CCR)--and accept electronic payments in order
to receive advance HCTC payments. The CCR requirement was reported to
cause delays, and some plans, especially smaller ones, refused to
accept electronic payments or did not have the necessary systems to
process them. To encourage health plans to participate, the HCTC
program office changed its registration process for health plans--it no
longer requires plans to register with the CCR--and now issues paper
checks if a health plan will not accept electronic payments. HCTC
program officials reported that these changes have prompted some plans
to agree to participate. However, as of June 2004, 211 health plans
still refused to participate. Most of these were COBRA plans that
covered few HCTC-eligible individuals. Because these 211 plans refused
to accept payments, about 447 individuals who had tried to enroll for
the advance HCTC had to wait until the end of the year to claim the
HCTC. Officials from two COBRA plans told us why their plans did not
accept advance payments: an official from one plan stated that too few
individuals qualify for the HCTC for the plan to consider
participating, while an official from another plan was concerned that
the advance HCTC would encourage less healthy individuals to retain
coverage and that this would result in financial losses for the plan.
Nevertheless, a total of more than 600 health plans covering more than
13,000 individuals have agreed to receive the advance HCTC as of June
2004.
An unresolved payment issue identified by 3 of the 10 state-qualified
plans we contacted in the states we reviewed was the receipt of
incorrect advance HCTC payments from IRS when premiums change. While
officials from most of the state-qualified plans we interviewed (6 of
10) reported that either they did not experience any problems with
advance HCTC payments or that any problems they experienced had been
resolved, the most common unresolved issue, reported by officials from
three of the plans that identified ongoing issues, dealt with the
receipt of incorrect payments when premiums changed. This problem was
attributed largely to the time it takes for HCTC enrollees to notify
the HCTC program of the new premium and for the HCTC program to adjust
the allowable premium amount. For example, one plan reported that
payments from IRS are incorrect--usually less than the required amount-
-for a couple of months after a premium change. To mitigate this
problem, two officials from state-qualified plans suggested that the
health plan, rather than the HCTC enrollee, notify the HCTC program of
premium changes. Officials from two COBRA plan administrators that had
a large number of advance HCTC enrollees stated that they did report
premium changes directly to the HCTC program. However, HCTC program
officials reported that some plans prefer not to report the changes to
HCTC because it is outside their normal procedures or they have few
members receiving the advance HCTC.
An implementation issue affecting enrollees, for which the HCTC program
revised its procedures, concerned how the program office responded to
enrollees' payments that were less than the requested amount or late.
According to HCTC program officials, between August 2003 and February
2004, more than 1,700 individuals who had enrolled for the advance HCTC
were terminated temporarily from the advance HCTC because their
payments to IRS were less than their 35 percent share or they were
late. Approximately 55 percent of the individuals who were terminated
subsequently reenrolled for the advance HCTC. HCTC program officials
noted that the initial billing and payment procedures generated
numerous calls to the customer service center because individuals
received multiple invoices for their 35 percent premium amount, some of
which they received late because of mail delivery problems. To mitigate
this confusion and the burden of reenrolling individuals who had been
dropped, the HCTC program office changed its billing and payment
procedures in March 2004. Under the revised procedures, only one
invoice would be sent each month and, instead of terminating
individuals whose payments were less than the required amount, the HCTC
program office would add a 65 percent HCTC proportional to the payment
they receive and forward this amount to the health plan. The HCTC
enrollee would be responsible for paying any outstanding difference to
the health plan directly. HCTC program officials told us that since
making these changes, no advance HCTC enrollee has been terminated as a
result of payments that were less than the required amount or late.
Additionally, officials we interviewed from five of the health plans in
the states we reviewed reported that they were lenient in applying
their payment rules to ensure that plan members did not lose coverage
as a result of problems with the advance HCTC. For example, an official
from one health plan reported that the plan had extended from 30 to 90
days the grace period for advance HCTC members to pay their monthly
premiums.
The HCTC program office has also changed its procedures to address the
receipt of incomplete lists of potentially eligible individuals from
state workforce agencies. HCTC program officials reported that the
lists state workforce agencies provide on which the HCTC program office
relies to determine eligibility for the advance HCTC were incomplete
for many states and that verifying that individuals remained eligible
for the advance HCTC was time consuming. Some states also reported
problems with transmitting these data to IRS. Ohio, for example,
reported that the HCTC program office does not always receive all of
the names of potentially eligible individuals that it sends. HCTC
program officials reported that from October 2003 through March 2004,
the lists of TAA recipients potentially eligible to receive the HCTC
submitted by about one-third to more than one-half of states (16 states
to 28 states) failed to include the names of all eligible TAA
recipients. Since October 2003, the HCTC program office has audited
these states' lists and asked the workforce agencies to confirm that
their transmissions were correct if any of the individuals enrolled to
receive the advance HCTC from the previous month failed to reappear as
eligible. During the first 6 months in which the HCTC program office
performed these audits, it identified 2,984 individuals who were
enrolled to receive the advance HCTC in a previous month but whose
names dropped from the state lists in the current month. The state
workforce agencies determined that approximately 55 percent (or 1,648)
of these individuals were still eligible for the advance HCTC and that
their names should not have been dropped from the list. Thus, without
this audit process these individuals would have erroneously lost
eligibility for the advance HCTC. However, HCTC program and Labor
officials reported that this verification process is a burden on HCTC
program staff and the states.
HCTC program officials reported that they did not track advance payment
errors that occurred as a result of mistakes made by IRS. While these
officials acknowledged that some mistakes did occur, such as late
payments or accounting errors, they said that the majority of payments
were timely and accurate and that problems were resolved at the time
they occurred. Likewise, most officials from health plans we spoke with
reported few problems with IRS's payments; problems identified included
payments containing incorrect identification numbers or payments for
incorrect amounts.
HCTC Program Office Used Contractors to Implement and Perform Most
Program Functions:
IRS established the HCTC program office with primary responsibility for
overseeing and coordinating efforts for the HCTC. The HCTC program
office is responsible for resolving operational and legal issues and
monitoring the overall progress of the HCTC on a day-to-day basis. An
executive steering committee, composed of affected federal agencies and
contractors, also was established to provide guidance to the HCTC
program office. The majority of officials on the HCTC program's
executive steering committee are IRS or Treasury officials. High-level
officials from each of the other federal agencies involved with the
HCTC--Labor, HHS, and PBGC--as well as the IRS and Treasury officials
are voting members. Officials from IRS's primary private contractor and
a subcontractor--Accenture and The Lewin Group, respectively--are
nonvoting members of the committee.[Footnote 54] This committee meets
monthly to provide guidance on policy, legal, and programmatic issues.
To meet the implementation date for the advance HCTC, IRS relied on
contractors. According to HCTC program officials, IRS staff work
closely with contractor staff and oversee their work on an ongoing
basis. For example, within the HCTC program office are six project
teams, each of which is managed by a senior-level IRS staff person.
Paired with each senior-level IRS staff person is a senior contractor
staff person, and most of the staff performing specific operational
tasks for the HCTC are from the contractor. While the senior IRS and
contractor staff share responsibility for their project team's work,
the IRS staff person establishes the direction of the work on the basis
of the HCTC program's strategic plan, sets priorities, and brings
knowledge about IRS's processes to the team. IRS and contractor staff
responsibilities are also clarified in the contract documents. For
example, IRS contract documents state that the government
responsibilities include defining the rules under which the program
will function and that the primary contractor's responsibilities
include designing and administering the HCTC program according to these
rules. IRS officials in the HCTC program reported that close
collaboration between government and contractor staff helped them
implement the advance HCTC in a timely manner.
Officials from IRS's contracting office reported that oversight of the
primary HCTC contractor responsible for developing and maintaining much
of the HCTC program office's infrastructure is conducted in several
ways. IRS contracting officers include direction on how work is to be
completed in work requests, as well as reporting requirements and
deliverables. For example, one work request required the contractor to
report daily on the handling of calls received by the call center for a
few months in 2003. IRS staff in the specific area where the work is to
be done review and approve each work request under the contract,
monitor the contractor's work, and make recommendations to the
contracting official regarding whether the completed work is
acceptable. Additionally, IRS contracting officials reported that they
review monthly status reports, cost documents, and deliverables
submitted by the primary contractor. However, the HCTC program office
has not instituted performance measures and is currently working on
draft measures and preliminary goals for fiscal year 2005.
To implement and administer the advance HCTC, Congress appropriated $70
million to IRS for fiscal year 2003, which will remain available
through fiscal year 2004, and $35 million for fiscal year 2004,
available through fiscal year 2005.[Footnote 55] HCTC program officials
expected that costs to administer the HCTC program--from the time that
work by the primary contractor began in February 2003 through June
2005--would be about $116 million.[Footnote 56] These costs, broken
down by major activities, included about $33 million for design and
development work during February 2003 through April 2004.
Implementation costs to establish the systems that would be used on an
ongoing basis and costs to administer the advance HCTC for the first 9
months it was available were reported to be about $36 million for May
2003 through April 2004. In May and June 2004, the HCTC program office
engaged in a planning process during which it restructured its
operations and determined how it would transition from implementation
activities to operating activities. Costs to reorganize and administer
the HCTC during this 2-month transition period were expected to be
about $6 million. After transitioning to operating activity levels,
officials expected that costs for the HCTC would be about $40 million
for the year July 2004 through June 2005, and IRS officials reported
that they are identifying ways to further lower operating costs.
Included in this $40 million are about $32 million for operating costs
and about $8 million for program enhancements such as software updates.
In total, the majority (at least $97 million) of the approximately $116
million to administer the HCTC--from its early 2003 start-up through
mid-2005 operations--was expected to be paid to IRS's contractors. (See
table 8.)
Table 8: Summary of IRS's Incurred and Expected HCTC Administration
Costs, February 2003 through June 2005:
Dollars in millions:
Design and development of the HCTC (February 1, 2003, to April 30, 2004);
IRS: $3.8;
Primary contractor: $28.7;
Secondary contractors: $0.8;
Total: $33.3.
Implementation of the HCTC (May 1, 2003, to April 30, 2004);
IRS: $2.9;
Primary contractor: $32.1;
Secondary contractors: $1.2;
Total: $36.1.
Transition to operational level of service (May 1, 2004, to June 30,
2004);
IRS: $0.4;
Primary contractor: $5.8;
Secondary contractors: $0.3;
Total: $6.5.
Expected operating and enhancement costs (July 1, 2004, to June 30,
2005);
IRS: $3.6;
Primary contractor: $26.3;
Secondary contractors: $1.9;
Total: $40.0[A].
Total[B];
IRS: $10.6;
Primary contractor: $92.8;
Secondary contractors: $4.2;
Total: $115.9.
Source: IRS's HCTC program office.
[A] Included in the $40.0 million is $8.2 million for potential program
enhancement costs. IRS could not estimate how program enhancements
expenditures would be allocated between IRS and the contractors.
[B] Totals may not add because of rounding and are subject to change
for IRS and the contractors according to how program enhancement costs
are allocated.
[End of table]
From start-up through June 2004, IRS's primary contractor was
responsible for most of the work for the HCTC.[Footnote 57] The
contractor's responsibilities during this time included assisting in
the development of eligibility and payment processing policies and
procedures, maintaining and operating the program office, and
establishing a call center. While IRS had an average of 9 full-time-
equivalent staff assigned during this time to design, develop,
implement, and transition the HCTC program to ongoing operational
service levels, the primary contractor had an average of 243 full-time-
equivalent staff working on these activities.[Footnote 58]
Starting July 1, 2004, HCTC program officials expected that operating
and enhancement costs for the next 12 months would be about $40
million. This figure also reflects a decrease in contractor staff.
These costs reflect a reduction in service levels and IRS's assumption
of more of the administrative responsibilities for the HCTC. HCTC
program officials stated that reduced service levels means that, for
example, the HCTC program will focus on responding to issues raised by
health plans rather than providing as much individual-level outreach to
health plans as they had in the past. IRS's primary contractor is
expected to continue to perform the majority of work for the HCTC, and
officials reported that there would be a decrease in the amount of work
done by the contractor, with contractor staffing to decrease to 167
full-time-equivalents. There would be a slight increase in the amount
of work done by IRS, with no increase in the number of IRS staff
positions designated but with hiring done to fill vacant positions to
reach a total of 17 full-time equivalents.
45 States Received National Emergency Infrastructure Grants; Fewer
States Received National Emergency Bridge or High-Risk Pool Grants:
As of August 2004, 45 states received national emergency infrastructure
grants from Labor to help them set up mechanisms to administer the
HCTC, and 11 states received national emergency bridge grants to help
pay a portion of the premiums. In total, $45 million, or half of the
$90 million in available national emergency grant funds, was awarded.
In response to our survey of state workforce agencies, two-thirds of
the states that did not apply for the bridge grants said they did not
have systems in place to implement the grant. A total of 21 states
received high-risk pool grants from CMS as of August 2004. Sixteen
states received high-risk pool operating grants to offset losses in
state high-risk pools, and 6 states were awarded a seed grant for
establishing a new high-risk pool (1 state received both a seed and an
operating grant). As of August 2004, less than half of the $80 million
in funds available for high-risk pool operating grants had been
awarded, as well as less than one-fifth of available high-risk pool
seed grants. CMS officials reported that one reason seed grants were
not more popular is that states were reluctant to take on the ongoing
financial obligation of a high-risk pool. (App. V lists the states
awarded national emergency grants and high-risk pool grants and the
amounts awarded.)
Half of Available National Emergency Grant Funds Have Been Awarded:
As of August 2004, half ($45 million) of the $90 million available for
national emergency grants had been awarded--about $7 million for
infrastructure grants and about $38 million for bridge grants. Most
states received national emergency grants, with 45 states receiving
infrastructure grants and 11 receiving bridge grants. For fiscal year
2002, $60 million was appropriated for national emergency grants,
including $50 million for bridge grants and $10 million for
infrastructure grants. An additional $30 million was appropriated for
fiscal year 2003 for both bridge and infrastructure grants.
While bridge grants were originally awarded to provide individuals with
a 65 percent subsidy prior to the implementation of the advance HCTC in
August 2003, Labor has expanded the use of bridge grants to cover the
1-to 3-month gap period during the HCTC enrollment process when
individuals must pay 100 percent of their premiums out of
pocket.[Footnote 59] Five states--Maine, Maryland, North Carolina,
Ohio, and Virginia--are using bridge grant funds to cover this gap
period, and more states are in the process of seeking funds for this
purpose. State officials reported that these grants are important to
help individuals cover premiums during the advance HCTC enrollment
process and that the availability of these funds during this period
could increase eligible individuals' interest in and receipt of the
HCTC.
In March and April 2004, the HCTC program piloted an initiative called
"HCTC National Emergency Grant Bridge Support Activities" to support
states that received bridge grant funds. The pilot was tested in
Maryland and Virginia and involved three activities. First, the HCTC
program began asking individuals in these states when they applied for
the credit to consent to the HCTC program sharing certain private
enrollment information with state officials, such as names, addresses,
and enrollment status. According to the HCTC program, most individuals
(80 percent) in these states consented to this at the time of
enrollment. The HCTC program office then sent a report to states weekly
showing HCTC enrollment status, contact information, Social Security
number, and eligibility type for all TAA recipients and PBGC
beneficiaries who had consented to disclosure of this information.
Pilot states were encouraged to use this information as a tool for
outreach and for determining an individual's eligibility for bridge
grant payments. Second, the HCTC program office offered support to
states in promoting their bridge grant program to potentially eligible
individuals. Third, the HCTC program office provided ad hoc support to
bridge grant states on questions regarding HCTC eligibility and
enrollment. Virginia reported that it used the consent reports to
conduct outreach such as mailing application forms to potential
eligibles, as well as to monitor enrollment status to avoid potential
overpayments. Maryland used the consent reports to contact prescreened
PBGC beneficiaries and offered them bridge services, including mailing
out application packages, and Maryland officials said that the pilot
experience helped improve federal and state coordination. The HCTC
program and Labor have agreed to expand the bridge grant pilot to other
states.
In response to our survey of state workforce agencies in March 2004,
officials cited a variety of reasons to explain why they did not apply
for bridge or infrastructure national emergency grants.[Footnote 60]
For example, officials in two-thirds of the states that did not apply
for the bridge grants said that they did not have systems in place to
implement the grant. The rest of the states cited a variety of reasons
for not applying, including difficulty with the grant application
process, insufficient TAA workers or activity, no need for the funding,
and prohibitive administrative costs. One state indicated that it was
hesitant to assist individuals with obtaining health coverage because
it was unable to make decisions about health insurance coverage. Of the
five states that Labor reported had not received infrastructure grants,
two said that they did not require funding from the grant and another
said that it had to complete some system changes before applying for a
grant. One state said it would be applying for the grant in the future,
and another was not sure whether an application had been submitted.
(See table 9.)
Table 9: Reasons States Did Not Apply for National Emergency Grants:
Reason: Did not have systems in place;
Bridge grant: 24;
Infrastructure grant: [A].
Reason: Did not have enough TAA workers;
Bridge grant: 6;
Infrastructure grant: 0.
Reason: Application process was too difficult;
Bridge grant: 5;
Infrastructure grant: 0.
Reason: Did not require funding from the grant;
Bridge grant: 4;
Infrastructure grant: 2.
Reason: Other reasons;
Bridge grant: 6;
Infrastructure grant: 2.
Total;
Bridge grant: 35 states[B];
Infrastructure grant: 5 states[C].
Source: GAO survey of state workforce agencies.
Note: Puerto Rico's workforce agency was included in this survey; the
District of Columbia's workforce agency was not included.
[A] Not applicable. This was not a response option for the survey
question.
[B] Some states cited multiple reasons for not applying for bridge
grants.
[C] One state was uncertain of the status of its grant at the time we
conducted our survey.
[End of table]
Twenty-one States Received Grants to Start or Operate High-Risk Pools:
Almost half of the states (21 states) received high-risk pool grants as
of August 2004. Six states were awarded seed grants of between about
$53,000 and $1 million for establishing a high-risk pool and 16 states
received operating grants to offset losses incurred by their high-risk
pools.[Footnote 61] As of August 2004, $4 million of the $20 million
available for seed grants had been awarded to establish new high-risk
pools, and less than half (about $30 million) of the $80 million
available for high-risk pool operating grants had been awarded. CMS was
reviewing an application from the District of Columbia, as of August
2004, and Vermont's application will be withdrawn because legislation
to create a high-risk pool in Vermont was not enacted by its state
legislature. (See app. V for a list of high-risk pool awards to
states.)
According to a CMS official, one reason more states did not apply for
high-risk pool seed grants was that states' fiscal concerns made them
reluctant to take on the ongoing financial obligations of a new high-
risk pool, which typically enrolls individuals with a history of high
medical costs, incurs costs potentially higher than the premiums
received from enrollees, and requires subsidization from taxes on local
insurers or other revenue sources. CMS officials also said that several
states that had high-risk pools were not eligible for the high-risk
pool operating grant because they did not meet the eligibility
criteria. The operating grant is available only to qualified high-risk
pools that meet certain eligibility criteria, and the award amounts are
based on the number of uninsured individuals in each state. In addition
to meeting the criteria for a qualified high-risk pool contained in the
Public Health Services Act,[Footnote 62] eligibility criteria for
receipt of the grant included restrictions on the premiums charged, the
number of plan choices available to enrollees, and the availability of
mechanisms to fund ongoing losses incurred by the pool. California and
Texas, where the numbers of uninsured people are among the highest in
the nation and therefore would have been eligible for proportionately
larger shares of the grant funds, were among the states that did not
meet these criteria. California did not qualify because its high-risk
pool did not meet the qualified high-risk pool requirement that
eligible individuals have immediate access to the pool, and Texas did
not qualify because the premiums for its high-risk pool were set above
the allowable limits. Three other states--New Jersey, Idaho, and
Oregon--that applied for an operating grant were turned down because
their arrangements did not meet the definition of a qualified high-risk
pool.
Conclusions:
The Trade Adjustment Assistance Reform Act of 2002 established the HCTC
to help trade-displaced workers and retirees whose pension plans have
been assumed by PBGC to purchase health coverage. The establishment of
the HCTC within 1 year of enactment, including development of a new
mechanism for paying the HCTC directly to hundreds of health plans on
behalf of enrollees in advance of the premium due date, resulted from
the collaborative efforts of multiple federal and state agencies and
private health plans. As implementation issues arose--such as certain
health plans' reluctance to participate, some initial payment problems,
and ineligible individuals receiving the end-of-year credit in 2002--
the IRS-based HCTC program office worked with other federal, state, and
private stakeholders and adapted its policies and processes to address
these and other issues.
Despite these efforts, the number of individuals receiving the HCTC to
date continues to be a smaller portion of those potentially eligible
than many stakeholders had expected and some implementation issues
remain unresolved. A major factor cited by many state and health plan
officials as a reason for lower than expected enrollment was the
affordability of coverage, as some eligible individuals may find it
difficult to pay the entire premium for 3 to 6 months to maintain
coverage until they receive the advance HCTC, and even the 35 percent
share of premiums, once the HCTC covers remaining premium costs can
represent a high proportion of income, particularly for displaced
workers or retirees. Further, while the advance payment option was
intended to make the HCTC attractive for eligible individuals by
minimizing their out-of-pocket payments, most HCTC recipients in 2003
did not use this option. Instead, the majority of recipients opted to
receive the HCTC by claiming the credit on their year-end tax forms.
State, health plan, and union officials told us that the complexity of
the eligibility determination and enrollment process contributed to the
lower than expected usage of the advance payment option. For example,
* The multitude of tax, labor, and health coverage requirements related
to the HCTC are challenging for workers and retirees to navigate.
Potentially eligible individuals must often contact multiple federal,
state, and private entities to obtain the information they need to
enroll. While the HCTC program office offers information to potentially
eligible individuals through its call center, this resource begins
after individuals have been identified by states or PBGC as potentially
eligible and often after individuals have already made decisions about
maintaining, changing, or dropping health coverage.
* Individuals who have more than a 63-day break in continuous health
coverage may lose federal consumer protections guaranteed in the TAA
Reform Act, such as guaranteed acceptance by a health plan and coverage
for their preexisting medical conditions. Given that it takes 3 to 6
months to become eligible for and receive the advance HCTC, during
which time the individual is responsible for the full premium amount,
some individuals may lose these consumer protections if they do not
maintain coverage during this time.
* To receive the HCTC, the TAA Reform Act requires that an individual
must meet certain trade readjustment allowance eligibility
requirements, including (1) waiting 60 days or more from the time that
a petition to certify that workers were displaced due to trade is
submitted to Labor, and (2) complying with the requirement to obtain
reemployment training or obtain a waiver from training each month.
State workforce agencies contend that granting these waivers to
facilitate eligibility for the HCTC is an added administrative burden
that further complicates enrollment in the HCTC.
* Lists from state workforce agencies used to verify individuals'
eligibility were sometimes incomplete, causing individuals to lose
access to the advance HCTC if their names were erroneously dropped.
Although the HCTC program office began auditing the lists to ensure
that they contained all eligible individuals, this time-consuming
process had not led to the correction of the underlying problem with
the accuracy of the state lists.
* Enrollees may face delays in having the correct amount of their
advance HCTC payment adjusted and paid promptly to their health plans
if they fail to notify the HCTC program office when the health plan
changes their premiums.
* PBGC beneficiaries who enroll in Medicare lose eligibility for the
HCTC for themselves and their spouse and other dependents, even though
their spouse or dependent may not yet be eligible for Medicare and may
not have access to other sources of coverage. State and union officials
often noted that this was a concern of PBGC beneficiaries when
discussing potential eligibility for the HCTC.
As the HCTC program begins its second full year and transitions from
design and early implementation to more routine operations, it is
reducing its contractor staffing and some service levels. As the
program evolves, a less complex enrollment process and shorter time
period before enrollees begin receiving advance payments could enhance
the attractiveness of the HCTC and the advance payment option for
eligible individuals.
Matters for Congressional Consideration:
We suggest that Congress consider taking the following three actions:
* To simplify the advance HCTC eligibility process and enable some
trade-displaced workers to qualify for the HCTC sooner after losing
employment, Congress may wish to amend existing law to permit TAA
recipients to enroll in the HCTC program (1) without waiting 60 days or
more to establish eligibility for the trade readjustment allowance and
(2) without first meeting trade readjustment allowance requirements
pertaining to training.
* To more promptly reimburse eligible individuals for some of the
health coverage premiums they paid during the 3 to 6 months that the
advance HCTC eligibility and enrollment process typically takes,
Congress may wish to allow the HCTC program to retroactively pay the 65
percent HCTC for the 1 to 3 months between enrollment for and receipt
of the advance HCTC, rather than requiring individuals to wait for the
end-of-year credit to receive that portion of the benefit.
* To help eligible individuals maintain their rights to guaranteed
coverage and other consumer protections during the time it takes to
become eligible and enroll for the HCTC, Congress may wish to specify
that for individuals who had health coverage for the 3 months
immediately prior to becoming eligible for TAA benefits or PBGC pension
payments, the 63-day break in coverage used to determine continuous
coverage may begin with the HCTC program office's notification of
potential eligibility.
Recommendations for Executive Action:
We recommend that the Secretary of Labor, Commissioner of Internal
Revenue, Administrator of CMS, and Executive Director of the PBGC take
the following five actions.
* To help individuals understand and comply with the multiple labor,
health coverage, and tax eligibility requirements for receipt of the
HCTC, the Secretary of Labor, the Commissioner of Internal Revenue, the
Administrator of CMS, and the Executive Director of the PBGC should, in
coordination with state officials, provide for a centralized resource
for individuals to receive information on and assistance with HCTC
eligibility criteria, including individualized assistance in
completing each step of the eligibility and enrollment process and
information about qualified health coverage options available in their
local area. This centralized resource should be available at the time
individuals must make decisions about purchasing qualifying health
coverage and meeting other qualifying criteria, which may occur before
the HCTC call center and other existing resources have been notified
about an individual's potential eligibility.
* To ensure that HCTC-eligible individuals and recipients receive
timely and appropriate information, responses to inquiries, enrollment
processing, and advance HCTC payments, the Commissioner of Internal
Revenue should evaluate the effect that any reduced service levels will
have on eligible individuals and health plans' ability to receive the
HCTC on a timely basis and their satisfaction with the information and
services provided.
* To improve the quality of eligibility information provided by the
states, the Secretary of Labor and the Commissioner of Internal Revenue
should coordinate to improve the accuracy of data received from state
workforce agencies.
* To simplify payment processing for advance HCTC enrollees and avoid
disruptions resulting from premium changes, the Commissioner of
Internal Revenue should encourage participating health plans to provide
notification of changes in premiums directly to the HCTC program office
rather than relying primarily on individuals for providing this
information.
* Given that PBGC beneficiaries who enroll in Medicare lose eligibility
for the HCTC even though their spouses or other dependents may not yet
be eligible for Medicare or have alternative sources for insurance
coverage, the Commissioner of Internal Revenue and the Executive
Director of the PBGC should coordinate to report to Congress on how
many PBGC beneficiaries previously receiving the HCTC have attained the
age of 65 and potentially lost eligibility due to enrolling in
Medicare, and how many of these former HCTC recipients have spouses or
other dependents who are no longer able to receive coverage subsidized
by the HCTC.
Agency and State Comments and Our Evaluation:
We provided a draft of this report to Labor, IRS, CMS, and PBGC and
officials in the eight states we reviewed, including each state's
workforce agency and the department of insurance or high-risk pool in
seven states. We received comments from all four federal agencies, five
states' workforce agencies (California, Maryland, New York, Ohio, and
Pennsylvania), five states' departments of insurance (California, New
York, Ohio, Pennsylvania, and Texas), and two states' high-risk pools
(Illinois and Maryland).[Footnote 63] The four federal agencies either
concurred with our recommendations or deferred to IRS as the lead
agency in implementing the HCTC. The state agencies that commented on
our draft generally concurred with our findings. Comments from the
federal agencies are reprinted in appendixes VI through IX.
Regarding our recommendation that Labor, IRS, CMS, and PBGC work
together to develop a centralized resource to help individuals
understand the eligibility requirements for the HCTC, IRS agreed with
our recommendation and highlighted efforts it has made to date to
provide a centralized resource, including developing informational
documents for individuals and states, making information available on
its Web site, and establishing a call center. Labor agreed on the
importance of providing individuals with information about the HCTC and
highlighted certain actions it had taken to provide information and
training to state workforce agencies and other interested parties such
as businesses and unions. Labor also suggested reviewing and evaluating
the quality of the existing information before taking further actions.
PBGC commented that it would coordinate with the other agencies to
address this recommendation, and CMS deferred to IRS as the lead in
HCTC outreach and education. While we recognize that agencies have made
efforts to provide individuals with information about the HCTC, we
noted in the draft report that individualized assistance is not
available until after individuals may have already made decisions that
affect their eligibility for the HCTC. Thus, while a review of existing
resources may be helpful, we have added to our recommendation the need
for a centralized resource that provides individualized information and
assistance earlier than it is currently available.
Regarding our recommendation for IRS to evaluate whether any reduced
service levels will affect individuals' and health plans' satisfaction,
IRS stated that the agency cannot at this time systematically measure
customer satisfaction. In response to our recommendation, however, IRS
stated that it would include questions in future surveys or other
research to elicit an indication of changes in satisfaction.
In response to our recommendation that IRS and Labor improve the
quality of eligibility information provided by the states, IRS agreed
that the information provided by states continues to present a
challenge. IRS noted that, although it does not have authority over
states to implement solutions to problems with the eligibility lists,
it will work with Labor to develop a plan for improving the accuracy of
these data. Labor agreed with our recommendation and highlighted the
burden the audits placed on states and agreed to continue to work with
IRS to improve the quality of the data.
In response to our recommendation that IRS encourage health plans to
provide notifications of premium changes directly to the HCTC program
office, IRS agreed to develop an action plan to make this change. IRS
noted that it would likely phase in this change because of the number
of plans and individuals affected.
IRS and PBGC agreed with our recommendation that PBGC work with IRS to
report to Congress the number of PBGC beneficiaries who turn 65 and
lose eligibility for the HCTC even though their spouse or dependent may
still need HCTC coverage. Additionally, PBGC suggested that IRS, as the
lead agency for the HCTC, submit the recommended information to
Congress. IRS noted that some estimates may be necessary because not
all data elements are readily available to IRS or PBGC.
In addition to its comments on our recommendations, IRS stated that the
HCTC presented significant new responsibilities for IRS and that
challenges remain. IRS reported it is continuing to identify ways to
improve the operation of the HCTC program, decrease administrative
costs, and obtain data about those who receive the HCTC in order to
make outreach activities more effective. IRS stated that it is working
to shorten the period of time required before an individual receives
the advance HCTC. It noted, however, that the first 3 months of the 3-
to 6-month period we identified for this process relates to TAA
certification requirements, and that amending these requirements may
have broader implications than just for the HCTC program. Additionally,
regarding our statement that the benefits offered by qualified health
plans across states differ widely, IRS noted that the coverage
available for the HCTC is dependent on decisions made by the states and
the plans that volunteer to participate. IRS stated that it hopes to
obtain data that will enable a better understanding of the health
status and other characteristics of HCTC enrollees to help alleviate
health plans' uncertainty about health care costs of HCTC individuals
compared to others and to encourage more health plans to participate in
the advance HCTC program.
IRS and Labor and officials from Maryland, New York, Ohio,
Pennsylvania, and Texas also provided technical comments, which we
incorporated as appropriate.
As agreed with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after its date. We will then send copies to the Secretary of Labor,
Secretary of the Treasury, Administrator of CMS, Commissioner of
Internal Revenue, Executive Director of PBGC, appropriate congressional
committees, and other interested parties. We will also make copies
available to others upon request. In addition, this report will be
available at no charge on GAO's Web site at http://www.gao.gov.
Please call me at (202) 512-7118 if you have additional questions.
Another contact and key contributors are listed in appendix X.
Signed by:
Kathryn G. Allen:
Director, Health Care--Medicaid and Private Health Insurance Issues:
[End of section]
Appendix I: Advance Health Coverage Tax Credit Enrollees, by State,
July 2004:
State: Alabama;
Potentially eligible population[A]: 4,594;
Enrolled[B]: 142[C].
State: Alaska;
Potentially eligible population[A]: 86;
Enrolled[B]: 0.
State: Arizona;
Potentially eligible population[A]: 1,865;
Enrolled[B]: 45[C].
State: Arkansas;
Potentially eligible population[A]: 1,604;
Enrolled[B]: 39[C].
State: California;
Potentially eligible population[A]: 7,574;
Enrolled[B]: 259.
State: Colorado;
Potentially eligible population[A]: 1,608;
Enrolled[B]: 56[C].
State: Connecticut;
Potentially eligible population[A]: 2,281;
Enrolled[B]: 83[C].
State: Delaware;
Potentially eligible population[A]: 402;
Enrolled[B]: 20.
State: District of Columbia;
Potentially eligible population[A]: 86;
Enrolled[B]: 0.
State: Florida;
Potentially eligible population[A]: 11,565;
Enrolled[B]: 473.
State: Georgia;
Potentially eligible population[A]: 8,907;
Enrolled[B]: 93[C].
State: Hawaii;
Potentially eligible population[A]: 552;
Enrolled[B]: [C].
State: Idaho;
Potentially eligible population[A]: 1,291;
Enrolled[B]: 55[C].
State: Illinois;
Potentially eligible population[A]: 12,149;
Enrolled[B]: 478[C].
State: Indiana;
Potentially eligible population[A]: 10,139;
Enrolled[B]: 841.
State: Iowa;
Potentially eligible population[A]: 1,747;
Enrolled[B]: 39[C].
State: Kansas;
Potentially eligible population[A]: 1,260;
Enrolled[B]: 37[C].
State: Kentucky;
Potentially eligible population[A]: 4,309;
Enrolled[B]: 228[C].
State: Louisiana;
Potentially eligible population[A]: 1,036;
Enrolled[B]: 14[C].
State: Maine;
Potentially eligible population[A]: 1,970;
Enrolled[B]: 131[C].
State: Maryland;
Potentially eligible population[A]: 5,269;
Enrolled[B]: 577.
State: Massachusetts;
Potentially eligible population[A]: 4,662;
Enrolled[B]: 44[C].
State: Michigan;
Potentially eligible population[A]: 8,733;
Enrolled[B]: 651.
State: Minnesota;
Potentially eligible population[A]: 2,778;
Enrolled[B]: 252.
State: Mississippi;
Potentially eligible population[A]: 1,786;
Enrolled[B]: 42.
State: Missouri;
Potentially eligible population[A]: 6,537;
Enrolled[B]: 161[C].
State: Montana;
Potentially eligible population[A]: 230;
Enrolled[B]: 20[C].
State: Nebraska;
Potentially eligible population[A]: 452;
Enrolled[B]: 17.
State: Nevada;
Potentially eligible population[A]: 755;
Enrolled[B]: 17.
State: New Hampshire;
Potentially eligible population[A]: 1,274;
Enrolled[B]: 24[C].
State: New Jersey;
Potentially eligible population[A]: 5,619;
Enrolled[B]: 102[C].
State: New Mexico;
Potentially eligible population[A]: 430;
Enrolled[B]: [C].
State: New York;
Potentially eligible population[A]: 10,317;
Enrolled[B]: 399.
State: North Carolina;
Potentially eligible population[A]: 17,875;
Enrolled[B]: 1,636[C].
State: North Dakota;
Potentially eligible population[A]: 80;
Enrolled[B]: 0[C].
State: Ohio;
Potentially eligible population[A]: 15,285;
Enrolled[B]: 1,090.
State: Oklahoma;
Potentially eligible population[A]: 2,617;
Enrolled[B]: 42.
State: Oregon;
Potentially eligible population[A]: 1,555;
Enrolled[B]: 66.
State: Pennsylvania;
Potentially eligible population[A]: 22,101;
Enrolled[B]: 2,265.
State: Puerto Rico;
Potentially eligible population[A]: 988[C];
Enrolled[B]: 0.
State: Rhode Island;
Potentially eligible population[A]: 588;
Enrolled[B]: 23[C].
State: South Carolina;
Potentially eligible population[A]: 4,934;
Enrolled[B]: 136[C].
State: South Dakota;
Potentially eligible population[A]: 166;
Enrolled[B]: 0[C].
State: Tennessee;
Potentially eligible population[A]: 7,629;
Enrolled[B]: 259[C].
State: Texas;
Potentially eligible population[A]: 8,719;
Enrolled[B]: 131[C].
State: Utah;
Potentially eligible population[A]: 998;
Enrolled[B]: 57.
State: Vermont;
Potentially eligible population[A]: 551;
Enrolled[B]: 16.
State: Virginia;
Potentially eligible population[A]: 6,541;
Enrolled[B]: 505.
State: Washington;
Potentially eligible population[A]: 4,737;
Enrolled[B]: 274[C].
State: West Virginia;
Potentially eligible population[A]: 4,203;
Enrolled[B]: 947[C].
State: Wisconsin;
Potentially eligible population[A]: 5,523;
Enrolled[B]: 286[C].
State: Wyoming;
Potentially eligible population[A]: 77[C];
Enrolled[B]: 0.
Total[D];
Potentially eligible population[A]: 229,044;
Enrolled[B]: 13,194.
Source: IRS's HCTC program office.
Notes: Comparable numbers for those receiving the end-of-year HCTC
were not available.
Data for Puerto Rico are also included in this table.
[A] Not all of the individuals that PBGC and state workforce agencies
reported as potentially eligible will meet all eligibility criteria
for HCTC.
[B] The enrollment total for each state is the sum of individuals
enrolled in a state-qualified plan, COBRA, and individual market plans.
[C] Total number of eligible or enrolled individuals is incomplete
because IRS does not report data categories where the number of
individuals is from 1 to 9, citing its disclosure and privacy rules.
For this reason, the sum of enrollment for all states listed does not
equal the total.
[D] Totals include values not reported in state totals cited above.
[End of table]
[End of section]
Appendix II: State-Qualified Coverage Options:
As of July 2004, 36 states had designated state-qualified coverage
options that could be purchased by individuals receiving either the
advance or end-of-year health coverage tax credit (HCTC). Another 3
states--Arizona, Idaho, and Washington--had designated state-qualified
plans, but these plans were not yet open to enrollment as of July 2004.
Most of the 36 states that made state-qualified coverage available
chose to provide this coverage through arrangements with insurers or
through state high risk-pools, and 3 states designated both their
high- risk pool and an arrangement with an insurer as state-qualified
coverage. Thirteen states designated mini-COBRA coverage--state-based
continuation coverage pertaining to insurers providing coverage to
plans maintained by employers with fewer than 20 employees. Mini-COBRA
coverage was the sole state-qualified coverage option available to
HCTC recipients in 4 states (see table 10). According to federal
officials, only a small percentage of Trade Adjustment Assistance
(TAA) recipients and Pension Benefit Guaranty Corporation (PBGC)
beneficiaries eligible to receive the HCTC likely had access to mini-
COBRA coverage, as few of these individuals formerly worked for an
employer with fewer than 20 employees.
Table 10: Types of State-Qualified HCTC Plans Available, by State,
July 2004:
State: Alabama;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: No.
State: Alaska;
High-risk pool: Yes;
Arrangement with one or more insurer: No;
Mini-COBRA: No.
State: Arkansas;
High-risk pool: Yes;
Arrangement with one or more insurer: No;
Mini-COBRA: No.
State: Colorado;
High-risk pool: Yes;
Arrangement with one or more insurer: No;
Mini-COBRA: Yes.
State: Connecticut;
High-risk pool: Yes;
Arrangement with one or more insurer: No;
Mini-COBRA: Yes.
State: District of Columbia;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: No.
State: Florida;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: Yes.
State: Illinois;
High-risk pool: Yes;
Arrangement with one or more insurer: No;
Mini-COBRA: No.
State: Indiana;
High-risk pool: Yes;
Arrangement with one or more insurer: Yes;
Mini-COBRA: No.
State: Iowa;
High-risk pool: Yes;
Arrangement with one or more insurer: No;
Mini-COBRA: No.
State: Kansas;
High-risk pool: Yes;
Arrangement with one or more insurer: No;
Mini-COBRA: No.
State: Kentucky;
High-risk pool: No;
Arrangement with one or more insurer: No;
Mini-COBRA: Yes.
State: Maine;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: No.
State: Maryland;
High-risk pool: Yes;
Arrangement with one or more insurer: Yes;
Mini-COBRA: No.
State: Michigan;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: No.
State: Minnesota;
High-risk pool: Yes;
Arrangement with one or more insurer: No;
Mini-COBRA: No.
State: Missouri;
High-risk pool: No;
Arrangement with one or more insurer: No;
Mini-COBRA: Yes.
State: Montana;
High-risk pool: Yes;
Arrangement with one or more insurer: No;
Mini-COBRA: No.
State: Nebraska;
High-risk pool: Yes;
Arrangement with one or more insurer: No;
Mini-COBRA: Yes.
State: New Hampshire;
High-risk pool: Yes;
Arrangement with one or more insurer: No;
Mini-COBRA: No.
State: New Jersey;
High-risk pool: No;
Arrangement with one or more insurer: No;
Mini-COBRA: Yes.
State: New York;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: Yes.
State: North Carolina;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: No.
State: North Dakota;
High-risk pool: Yes;
Arrangement with one or more insurer: No;
Mini-COBRA: No.
State: Ohio;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: Yes.
State: Oklahoma;
High-risk pool: Yes;
Arrangement with one or more insurer: No;
Mini-COBRA: No.
State: Pennsylvania;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: No.
State: Rhode Island;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: Yes.
State: South Carolina;
High-risk pool: Yes;
Arrangement with one or more insurer: No;
Mini-COBRA: No.
State: Tennessee;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: No.
State: Texas;
High-risk pool: Yes;
Arrangement with one or more insurer: Yes;
Mini-COBRA: No.
State: Utah;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: Yes.
State: Vermont;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: Yes.
State: Virginia;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: No.
State: Wisconsin;
High-risk pool: No;
Arrangement with one or more insurer: No;
Mini-COBRA: Yes.
State: West Virginia;
High-risk pool: No;
Arrangement with one or more insurer: Yes;
Mini-COBRA: No.
Total;
High-risk pool: 17;
Arrangement with one or more insurer: 18;
Mini-COBRA: 13.
Source: IRS's HCTC program office.
Note: According to IRS's HCTC program office, Arizona, Idaho, and
Washington had begun the process of electing state-qualified coverage,
but the plans in these states were not yet open to HCTC recipients as
of July 2004.
[End of table]
[End of section]
Appendix III: Variation in Benefits Across State-Qualified Health Plans
in Seven States:
The benefits offered to HCTC recipients varied across coverage types
and from plan to plan. COBRA benefits, which were typically identical
to the benefits provided to working individuals covered by the
employer's group market health plan, generally included lower
deductibles than high-risk pools and more comprehensive benefits and
lower deductibles than state-qualified arrangements with insurers in
the seven states we reviewed that had state-qualified plans.[Footnote
64]
The majority of state-qualified plans in the states we reviewed were
preferred provider organization (PPO) plans, although health
maintenance organization (HMO), exclusive provider organizations
(EPO), unrestricted fee for service (FFS), and point of service (POS)
plans were available in some states.[Footnote 65] According to a
national employer benefits survey, PPO health plans offered by
employers in 2003 generally included an average annual deductible for
services provided within the health plan's preferred provider network
of $275.[Footnote 66] Table 11 shows that most of the state-qualified
health plans in the states we reviewed offered a choice among
deductible amounts, ranging from $0 to $5,000, and that HCTC recipients
generally selected the lowest deductibles available, typically $1,000
or less.
Table 11: Annual Deductibles across Selected State-Qualified Health
Plans in Seven States:
State-qualified HCTC plan: High-risk pools: Illinois--PPO;
Annual deductible[A]: Deductible options offered: $500, $1,000, $1,500,
$2,500, and $5,000;
Annual deductible[A]: Deductible most commonly selected by HCTC
recipients: $500.
State-qualified HCTC plan: High-risk pools: Maryland--PPO option;
Annual deductible[A]: Deductible options offered: $1,000;
Annual deductible[A]: Deductible most commonly selected by HCTC
recipients: [B].
State-qualified HCTC plan: High-risk pools: Maryland--EPO option;
Annual deductible[A]: Deductible options offered: [C];
Annual deductible[A]: Deductible most commonly selected by HCTC
recipients: [C].
State-qualified HCTC plan: High-risk pools: Texas--PPO;
Annual deductible[A]: Deductible options offered: $500, $1,000, $2,500,
and $5,000;
Annual deductible[A]: Deductible most commonly selected by HCTC
recipients: $2,500.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Maryland--FFS;
Annual deductible[A]: Deductible options offered: $800;
Annual deductible[A]: Deductible most commonly selected by HCTC
recipients: [B].
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
New York--HMO, Healthy NY;
Annual deductible[A]: Deductible options offered: [C];
Annual deductible[A]: Deductible most commonly selected by HCTC
recipients: [C].
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
New York--HMO, Healthy NY Plus[E];
Annual deductible[A]: Deductible options offered: [C];
Annual deductible[A]: Deductible most commonly selected by HCTC
recipients: [C].
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
New York--HMO or POS;
Annual deductible[A]: Deductible options offered: [C];
Annual deductible[A]: Deductible most commonly selected by
HCTC recipients: [C].
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
North Carolina--PPO[F];
Annual deductible[A]: Deductible options offered: $250, $500,
$1,000, and $2,500;
Annual deductible[A]: Deductible most commonly selected by
HCTC recipients: $250.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Ohio--PPO;
Annual deductible[A]: Deductible options offered: $500, $1,000,
$2,500, and $5,000;
Annual deductible[A]: Deductible most commonly selected by
HCTC recipients: $500.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Pennsylvania--FFS (central region);
Annual deductible[A]: Deductible options offered: $750 and $1,500;
Annual deductible[A]: Deductible most commonly selected by
HCTC recipients: $750.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Pennsylvania--FFS (western region)[F];
Annual deductible[A]: Deductible options offered: $750;
Annual deductible[A]: Deductible most commonly selected by
HCTC recipients: [B].
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Texas--PPO;
Annual deductible[A]: Deductible options offered: $500, $1,000,
$1,500, $2,500, and $5,000;
Annual deductible[A]: Deductible most commonly selected by
HCTC recipients: $1,000.
Sources: GAO interviews with health plan officials and reviews of
health plan Web sites, brochures, and benefit summaries.
Notes: Mini-COBRA plans were also designated as state-qualified plans
by New York and Ohio; however, information on the benefits offered by
these plans was not readily available and is not included in the table.
Federal officials estimated that few individuals eligible to receive
the HCTC had access to mini-COBRA coverage.
The eighth state we reviewed, California, did not designate any state-
qualified coverage for HCTC recipients.
[A] Deductible options are for one-person coverage and apply to
services received within the health plan's network, if applicable.
[B] This state-qualified plan or plan option did not offer a choice in
deductible amounts.
[C] This state-qualified plan or plan option did not have an annual
deductible.
[D] Some states provided state-qualified HCTC coverage through
arrangements with more than one insurer. In these instances, we
selected the insurer with the highest HCTC enrollment. New York was
unable to provide HCTC enrollment data for each of its state-qualified
HCTC coverage options, so we were unable to determine which insurer
had the highest number of HCTC enrollees: we reviewed plans offered by
an insurer that served areas in which companies had closed and HCTC-
eligible individuals would likely have resided. The insurer with the
largest HCTC enrollment in Pennsylvania sold coverage in both the
central and western regions of the state, and this coverage varied
between regions.
[E] Healthy NY Plus is an unsubsidized state-based health insurance
plan available to HCTC recipients who do not meet the income criteria
for the subsidized Healthy NY plan.
[F] More than one benefits package was offered by the insurer. We
selected the benefits package most commonly purchased by HCTC
recipients.
[End of table]
We reviewed these state-qualified health plans for the extent of the
benefits they offered with regard to maternity care, mental health
care, and prescription drugs. The extent to which maternity benefits
were covered by state-qualified plans in the states we reviewed is
shown in table 12. Employer-sponsored plans typically provided
coverage for maternity benefits because the federal Pregnancy
Discrimination Act required employers with 15 or more employees to
cover expenses for maternity services on the same basis as coverage
for other medical conditions.[Footnote 67] Only one state-qualified
plan in the states we reviewed did not provide coverage for maternity
benefits, and three state-qualified health plans offered maternity
coverage that was available as an optional benefit with an additional
premium charge.
Table 12: Maternity Benefits across State-Qualified Health Plans in
Seven States:
State-qualified HCTC plan: High-risk pools: Illinois--PPO;
Maternity benefits: Optional[A].
State-qualified HCTC plan: High-risk pools: Maryland--PPO option;
Maternity benefits: Covered.
State-qualified HCTC plan: High-risk pools: Maryland--EPO option;
Maternity benefits: Covered.
State-qualified HCTC plan: High-risk pools: Texas--PPO;
Maternity benefits: Covered.
State-qualified HCTC plan: Arrangements with one or more insurers[B]:
Maryland--FFS;
Maternity benefits: Covered.
State-qualified HCTC plan: Arrangements with one or more insurers[B]:
New York--HMO, Healthy NY;
Maternity benefits: Covered.
State-qualified HCTC plan: Arrangements with one or more insurers[B]:
New York--HMO Healthy NY Plus[C];
Maternity benefits: Covered.
State-qualified HCTC plan: Arrangements with one or more insurers[B]:
New York--HMO or POS;
Maternity benefits: Covered.
State-qualified HCTC plan: Arrangements with one or more insurers[B]:
North Carolina--PPO[D];
Maternity benefits: Optional[A].
State-qualified HCTC plan: Arrangements with one or more insurers[B]:
Ohio--PPO;
Maternity benefits: Optional[A].
State-qualified HCTC plan: Arrangements with one or more insurers[B]:
Pennsylvania--FFS (central region);
Maternity benefits: Covered.
State-qualified HCTC plan: Arrangements with one or more insurers[B]:
Pennsylvania--FFS (western region)[D];
Maternity benefits: Covered.
State-qualified HCTC plan: Arrangements with one or more insurers[B]:
Texas--PPO;
Maternity benefits: Not covered[E].
Sources: GAO interviews with health plan officials and reviews of
health plan Web sites, brochures, and benefit summaries.
Notes: Mini-COBRA plans were also designated as state-qualified plans
by New York and Ohio; however, information on the benefits offered by
these plans was not readily available and is not included in the table.
Federal officials estimated that few individuals eligible to receive
the HCTC had access to mini-COBRA coverage.
The eighth state we reviewed, California, did not designate any state-
qualified coverage for HCTC recipients.
[A] The benefit is offered as an option available for an additional
monthly premium charge.
[B] Some states provided state-qualified HCTC coverage through
arrangements with more than one insurer. In these instances, we
selected the insurer with the highest HCTC enrollment. New York was
unable to provide HCTC enrollment data for each of its state-qualified
HCTC coverage options: we reviewed plans offered by an insurer that
served areas in which companies had closed and HCTC-eligible
individuals would likely have resided. The insurer with the largest
HCTC enrollment in Pennsylvania sold coverage in both the central and
western regions of the state, and this coverage varied between the
regions.
[C] Healthy NY Plus is an unsubsidized state-based health insurance
plan available to HCTC recipients who do not meet the income criteria
for the subsidized Healthy NY plan.
[D] More than one benefits package was offered by the insurer. We
selected the benefits package most commonly purchased by HCTC
recipients.
[E] Benefits for maternity care were not available under this plan
except for treatment of pregnancy-related complications.
[End of table]
The mental health benefits offered by state-qualified health plans in
the states we reviewed are summarized in table 13. A national survey
of health benefits offered by employers in 2003 reported that 99
percent of employer PPO plans provided coverage for both inpatient and
outpatient mental health services, and the majority of these plans
provided coverage for at least 21 days of inpatient care and 21
outpatient visits per year.[Footnote 68] In comparison, two state-
qualified health plans in a state we reviewed did not provide any
coverage for mental health benefits, and one health plan in another
state we reviewed limited coverage of mental health benefits to 10
inpatient days and 10 outpatient visits per year. State-qualified
plans in three states required enrollees to pay 50 percent of the cost
of outpatient mental health visits. Two state-qualified health plans
in one state limited coverage to certain mental disorders.
Table 13: Mental Health Benefits across State-Qualified Health Plans
in Seven States:
State-qualified HCTC plan: High-risk pools: Illinois--PPO;
Mental health benefits[A]: Inpatient care: Maximum 45 days per year[B]
20% coinsurance;
Mental health benefits[A]: Outpatient care: Maximum 50 visits per
year[B] 20% coinsurance;
Mental health benefits[A]: Separate annual or lifetime
mental health maximum benefit (dollars): None.
State-qualified HCTC plan: High-risk pools: Maryland--PPO option;
Mental health benefits[A]: Inpatient care: Maximum 60 days per year[B]
30% coinsurance;
Mental health benefits[A]: Outpatient care: Maximum 30 visits per
year[B] 30% coinsurance;
Mental health benefits[A]: Separate annual or lifetime
mental health maximum benefit (dollars): None.
State-qualified HCTC plan: High-risk pools: Maryland--EPO option;
Mental health benefits[A]: Inpatient care: Maximum 60 days per year
$250 copayment;
Mental health benefits[A]: Outpatient care: Maximum 30 visits per year
30% coinsurance;
Mental health benefits[A]: Separate annual or lifetime
mental health maximum benefit (dollars): None.
State-qualified HCTC plan: High-risk pools: Texas--PPO;
Mental health benefits[A]: Inpatient care: Serious mental illness
only[C] Maximum 45 days per year 20% coinsurance;
Mental health benefits[A]: Outpatient care: Serious mental illness
only[C] Maximum 60 visits per year 20% coinsurance;
Mental health benefits[A]: Separate annual or lifetime
mental health maximum benefit (dollars): None.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Maryland--FFS;
Mental health benefits[A]: Inpatient care: 25% coinsurance;
Mental health benefits[A]: Outpatient care: 20% coinsurance for visits
1-5[B] 35% coinsurance for visits 6- 30b 50% coinsurance for 31+
visits[B];
Mental health benefits[A]: Separate annual or lifetime
mental health maximum benefit (dollars): None.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
New York--HMO, Healthy NY;
Mental health benefits[A]: Inpatient care: Not covered;
Mental health benefits[A]: Outpatient care: Not covered;
Mental health benefits[A]: Separate annual or lifetime
mental health maximum benefit (dollars): Not applicable.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
New York--HMO, Healthy NY Plus[E];
Mental health benefits[A]: Inpatient care: Not covered;
Mental health benefits[A]: Outpatient care: Not covered;
Mental health benefits[A]: Separate annual or lifetime
mental health maximum benefit (dollars): Not applicable.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
New York--HMO or POS;
Mental health benefits[A]: Inpatient care: Maximum 30 days per year[B]
10% coinsurance;
Mental health benefits[A]: Outpatient care: Maximum 33 visits per year
10% coinsurance;
Mental health benefits[A]: Separate annual or lifetime
mental health maximum benefit (dollars): None.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
North Carolina--PPO[F];
Mental health benefits[A]: Inpatient care: 50% coinsurance;
Mental health benefits[A]: Outpatient care: 50% coinsurance;
Mental health benefits[A]: Separate annual or lifetime
mental health maximum benefit (dollars): $2,000 annual benefit[B]
$10,000 maximum lifetime benefitb.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Ohio--PPO;
Mental health benefits[A]: Inpatient care: Maximum 10 days per year[B]
20% coinsurance;
Mental health benefits[A]: Outpatient care: Maximum 10 visits per
year[B] 20% coinsurance;
Mental health benefits[A]: Separate annual or lifetime
mental health maximum benefit (dollars): None.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Pennsylvania--FFS (central region);
Mental health benefits[A]: Inpatient care: Maximum 30 days per year
20% coinsurance;
Mental health benefits[A]: Outpatient care: Maximum 60 visits per year
50% coinsurance;
Mental health benefits[A]: Separate annual or lifetime
mental health maximum benefit (dollars): $50,000 maximum lifetime
benefit.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Pennsylvania--FFS (western region)[F];
Mental health benefits[A]: Inpatient care: Maximum 30 days per year 0%
coinsurance;
Mental health benefits[A]: Outpatient care: 50% coinsurance;
Mental health benefits[A]: Separate annual or lifetime
mental health maximum benefit (dollars): $25,000 maximum lifetime
benefit[B].
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Texas--PPO;
Mental health benefits[A]: Inpatient care: Organic brain disease
only[G] 20% coinsurance;
Mental health benefits[A]: Outpatient care: Organic brain disease
only[G] 20% coinsurance;
Mental health benefits[A]: Separate annual or lifetime
mental health maximum benefit (dollars): None.
Sources: GAO interviews with health plan officials and reviews of
health plan Web sites, brochures, and benefit summaries.
Notes: Mini-COBRA plans were also designated as state-qualified plans
by New York and Ohio;
however, information on the benefits offered by these plans was not
readily available and is not included in the table. Federal officials
estimated that few individuals eligible to receive the HCTC had access
to mini-COBRA coverage.
The eighth state we reviewed, California, did not designate any state-
qualified coverage for HCTC recipients.
[A] Benefits are for services received within the health plan's
network, if applicable.
[B] Applies to mental health and substance abuse benefits combined.
[C] Serious mental illness includes only the following psychiatric
illnesses: schizophrenia; paranoid and other psychotic disorders;
bipolar disorders; major depressive disorders; schizo-affective
disorders; pervasive developmental disorders; obsessive compulsive
disorders; and depression in childhood and adolescence as defined in
the American Psychiatric Association's current revision of Diagnostic
and Statistical Manual of Mental Disorders.
[D] Some states provided state-qualified HCTC coverage through
arrangements with more than one insurer. In these instances, we
selected the insurer with the highest HCTC enrollment. New York was
unable to provide HCTC enrollment data for each of its state-qualified
HCTC coverage options: we reviewed plans offered by an insurer that
served areas in which companies had closed and HCTC-eligible
individuals would likely have resided. The insurer with the largest
HCTC enrollment in Pennsylvania sold coverage in both the central and
western regions of the state and this coverage varied between regions.
[E] Healthy NY Plus is an unsubsidized state-based health insurance
plan available to HCTC recipients who do not meet the income criteria
for the subsidized Healthy NY plan.
[F] The insurer offered more than one benefits package. We selected
the benefits package most commonly purchased by HCTC recipients.
[G] Organic brain disease includes dementia, alcohol-or drug-induced
psychoses, or other disorders listed in the American Psychiatric
Association's Diagnostic and Statistical Manual of Mental Disorders
III-R or the International Classification of Diseases, Ninth Revision
(ICD-9) under diagnostic codes 290 to 294 and 310. Other mental and
nervous disorders are not covered.
[End of table]
Prescription drug benefits offered by state-qualified health plans in
the states we reviewed are summarized in table 14. According to a
national survey of employer-sponsored health benefits, 99 percent of
employer PPO plans provided coverage for prescription drugs in 2003,
and 92 percent of all employer-sponsored plans did not require a
separate prescription drug deductible.[Footnote 69] The average
copayments for prescription drugs reported in this survey were $9 for
generic products, $19 for brand-name products that the plan designated
as preferred, and $29 for brand-name products that the plan did not
designate as preferred. All but one of the state-qualified plans in
the states we reviewed included coverage for prescription drugs, and
the one plan that did not include such coverage offered it as an
optional benefit available for an additional premium charge. State-
qualified plans in three states we reviewed required a separate annual
deductible for prescription drugs, ranging from $100 to $250. State-
qualified health plans in five states we reviewed had annual benefit
maximums for prescription drugs, ranging from $500 to $3,000, and one
plan did not provide any coverage for brand-name drugs.
Table 14: Prescription Drug Benefits across State-Qualified Health
Plans in Seven States:
State-qualified HCTC plan: High-risk pools: Illinois--PPO;
Prescription drug benefits[A]: Copayment for 1-month supply
(preferred/nonpreferred brand-name drugs): 20% coinsurance Minimum
$5 copayment per drug Maximum $100 copayment per drug[C];
Prescription drug benefits[A]: Separate annual deductible[B]
(dollars): None;
Prescription drug benefits[A]: Separate annual prescription drug
maximum benefit (dollars): None.
State-qualified HCTC plan: High-risk pools: Maryland--PPO option;
Prescription drug benefits[A]: Copayment for 1-month supply
(preferred/nonpreferred brand-name drugs): $15 generic drugs $20/$35
brand-name drugs[C];
Prescription drug benefits[A]: Separate annual deductible[B]
(dollars): $250;
Prescription drug benefits[A]: Separate annual prescription drug
maximum benefit (dollars): None.
State-qualified HCTC plan: High-risk pools: Maryland--EPO option;
Prescription drug benefits[A]: Copayment for 1-month supply
(preferred/nonpreferred brand-name drugs): $15 generic drugs
$20/$35 brand-name drugs[C];
Prescription drug benefits[A]: Separate annual deductible[B]
(dollars): $250;
Prescription drug benefits[A]: Separate annual prescription drug
maximum benefit (dollars): None.
State-qualified HCTC plan: High-risk pools: Texas--PPO;
Prescription drug benefits[A]: Copayment for 1-month supply
(preferred/nonpreferred brand-name drugs): $10 generic drugs
$25/$40 brand-name drugs[C];
Prescription drug benefits[A]: Separate annual deductible[B]
(dollars): None;
Prescription drug benefits[A]: Separate annual prescription drug
maximum benefit (dollars): None.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Maryland--FFS;
Prescription drug benefits[A]: Copayment for 1-month supply
(preferred/nonpreferred brand-name drugs): 25% coinsurance;
Prescription drug benefits[A]: Separate annual deductible[B]
(dollars): None;
Prescription drug benefits[A]: Separate annual prescription drug
maximum benefit (dollars): $500.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
New York--HMO, Healthy NY;
Prescription drug benefits[A]: Copayment for 1-month supply
(preferred/nonpreferred brand-name drugs): Optional benefit[E]
$10 GENERIC DRUGS $20 brand- name drugsc;
Prescription drug benefits[A]: Separate annual deductible[B]
(dollars): Optional benefit[E] $100;
Prescription drug benefits[A]: Separate annual prescription drug
maximum benefit (dollars): Optional benefit[E] $3,000.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
New York--HMO, Healthy NY Plus[F];
Prescription drug benefits[A]: Copayment for 1-month supply
(preferred/ nonpreferred brand-name drugs): $10 generic drugs $20
brand-name drugs[C];
Prescription drug benefits[A]: Separate annual deductible[B]
(dollars): $100;
Prescription drug benefits[A]: Separate annual prescription drug
maximum benefit (dollars): $3,000.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
New York--HMO or POS;
Prescription drug benefits[A]: Copayment for 1-month supply
(preferred/nonpreferred brand-name drugs): $5 generic drugs
$10 brand-name drugs;
Prescription drug benefits[A]: Separate annual deductible[B]
(dollars): $100[G];
Prescription drug benefits[A]: Separate annual prescription drug
maximum benefit (dollars): None.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
North Carolina--PPO[H];
Prescription drug benefits[A]: Copayment for 1-month supply
(preferred/nonpreferred brand-name drugs): $10 generic drugs
$35/$50 brand-name drugs;
Prescription drug benefits[A]: Separate annual deductible[B]
(dollars): None;
Prescription drug benefits[A]: Separate annual prescription drug
maximum benefit (dollars): $2,000 for brand-name drugs.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Ohio--PPO;
Prescription drug benefits[A]: Copayment for 1-month supply
(preferred/nonpreferred brand-name drugs): $15 generic drugs
No coverage for brand-name drugs;
Prescription drug benefits[A]: Separate annual deductible[B]
(dollars): None;
Prescription drug benefits[A]: Separate annual prescription drug
maximum benefit (dollars): None.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Pennsylvania--FFS (central region);
Prescription drug benefits[A]: Copayment for 1-month supply
(preferred/ nonpreferred brand-name drugs): 50% coinsurance[C]
$10 MINIMUM COINSURANCE PER DRUG $100 maximum coinsurance per drug;
Prescription drug benefits[A]: Separate annual deductible[B]
(dollars): $250;
Prescription drug benefits[A]: Separate annual prescription drug
maximum benefit (dollars): $3,000.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Pennsylvania--FFS (western region)[H];
Prescription drug benefits[A]: Copayment for 1-month supply
(preferred/ nonpreferred brand-name drugs): 20% coinsurance;
Prescription drug benefits[A]: Separate annual deductible[B]
(dollars): None;
Prescription drug benefits[A]: Separate annual prescription drug
maximum benefit (dollars): None.
State-qualified HCTC plan: Arrangements with one or more insurers[D]:
Texas--PPO;
Prescription drug benefits[A]: Copayment for 1-month supply
(preferred/nonpreferred brand-name drugs): $15 generic drugs
$30/$45 brand-name drugs;
Prescription drug benefits[A]: Separate annual deductible[B]
(dollars): None;
Prescription drug benefits[A]: Separate annual prescription drug
maximum benefit (dollars): $2,500.
Sources: GAO interviews with health plan officials and reviews of
health plan Web sites, brochures, and benefit summaries.
Notes: Mini-COBRA plans were also designated as state-qualified plans
by New York and Ohio, however; information on the benefits offered by
these plans was not readily available and is not included in the
table. Federal officials estimated that few individuals eligible to
receive the HCTC had access to mini-COBRA coverage.
The eighth state we reviewed, California, did not designate any state-
qualified coverage for HCTC recipients.
[A] Benefits are for services received within the health plan's
network, if applicable.
[B] Separate annual deductibles are for one-person coverage.
Prescription drug benefits could still be subject to an overall
deductible for all medical services.
[C] In addition to the copayment or coinsurance amount for brand-name
prescription drugs, the enrollee must pay any cost difference between
the brand-name and generic drugs if there is a generic version
available.
[D] Some states provided state-qualified HCTC coverage through
arrangements with more than one insurer. In these instances, we
selected the insurer with the highest HCTC enrollment. New York was
unable to provide HCTC enrollment data for each of its state-qualified
HCTC coverage options: we reviewed plans offered by an insurer that
served areas in which companies had closed and HCTC-eligible
individuals would likely have resided. The insurer with the largest
HCTC enrollment in Pennsylvania sold coverage in both the central and
western regions of the state and this coverage varied between regions.
[E] Benefit is offered as an option available for an additional
monthly premium charge.
[F] Healthy NY Plus is an unsubsidized state-based health insurance
plan available to HCTC recipients who do not meet the income criteria
for the subsidized Healthy NY plan.
[G] Applies to coverage sold through HMOs only.
[H] More than one benefits package was offered by the insurer. We
selected the benefits package most commonly purchased by HCTC
recipients.
[End of table]
[End of section]
Appendix IV: Premiums Paid by Advance HCTC Enrollees:
The cost of qualified health coverage for advance HCTC enrollees
varied considerably across states. Total monthly premiums--
representing both the individual and federal shares--were affected by
the number of people covered on each enrollee's health plan and
whether the advance HCTC enrollee was a TAA recipient or a PBGC
beneficiary (see table 15). According to the HCTC program office, most
advance HCTC enrollees purchased coverage for a single individual or
for an individual and one other family member. On average, PBGC
beneficiaries paid more for qualified coverage than TAA recipients.
Table 15: Average Total Monthly Premiums for Advance HCTC Enrollees,
by State, February 2004:
State: Alabama;
TAA recipients: Premium for 1 person: $226;
TAA recipients: Premium for 2 people: $476;
PBGC beneficiaries: Premium for 1 person: $226;
PBGC beneficiaries: Premium for 2 people: $427.
State: Alaska;
TAA recipients: Premium for 1 person: [A];
TAA recipients: Premium for 2 people: [A];
PBGC beneficiaries: Premium for 1 person: [A];
PBGC beneficiaries: Premium for 2 people: [A].
State: Arizona;
TAA recipients: Premium for 1 person: $312;
TAA recipients: Premium for 2 people: $654;
PBGC beneficiaries: Premium for 1 person: $323;
PBGC beneficiaries: Premium for 2 people: $587.
State: Arkansas;
TAA recipients: Premium for 1 person: $334;
TAA recipients: Premium for 2 people: $589;
PBGC beneficiaries: Premium for 1 person: $397;
PBGC beneficiaries: Premium for 2 people: $1,028.
State: California;
TAA recipients: Premium for 1 person: $253;
TAA recipients: Premium for 2 people: $443;
PBGC beneficiaries: Premium for 1 person: $279;
PBGC beneficiaries: Premium for 2 people: $495.
State: Colorado;
TAA recipients: Premium for 1 person: $322;
TAA recipients: Premium for 2 people: $577;
PBGC beneficiaries: Premium for 1 person: $383;
PBGC beneficiaries: Premium for 2 people: $566.
State: Connecticut;
TAA recipients: Premium for 1 person: $371;
TAA recipients: Premium for 2 people: $788;
PBGC beneficiaries: Premium for 1 person: $372;
PBGC beneficiaries: Premium for 2 people: $1,031.
State: Delaware;
TAA recipients: Premium for 1 person: $360;
TAA recipients: Premium for 2 people: $690;
PBGC beneficiaries: Premium for 1 person: $666;
PBGC beneficiaries: Premium for 2 people: $970.
State: District of Columbia;
TAA recipients: Premium for 1 person: [B];
TAA recipients: Premium for 2 people: [B];
PBGC beneficiaries: Premium for 1 person: [B];
PBGC beneficiaries: Premium for 2 people: [B].
State: Florida;
TAA recipients: Premium for 1 person: $277;
TAA recipients: Premium for 2 people: $632;
PBGC beneficiaries: Premium for 1 person: $550;
PBGC beneficiaries: Premium for 2 people: $982.
State: Georgia;
TAA recipients: Premium for 1 person: $291;
TAA recipients: Premium for 2 people: $706;
PBGC beneficiaries: Premium for 1 person: $403;
PBGC beneficiaries: Premium for 2 people: $557.
State: Hawaii;
TAA recipients: Premium for 1 person: [A];
TAA recipients: Premium for 2 people: [A];
PBGC beneficiaries: Premium for 1 person: [A];
PBGC beneficiaries: Premium for 2 people: [A].
State: Idaho;
TAA recipients: Premium for 1 person: $235;
TAA recipients: Premium for 2 people: $534;
PBGC beneficiaries: Premium for 1 person: $227;
PBGC beneficiaries: Premium for 2 people: $648.
State: Illinois;
TAA recipients: Premium for 1 person: $321;
TAA recipients: Premium for 2 people: $788;
PBGC beneficiaries: Premium for 1 person: $598;
PBGC beneficiaries: Premium for 2 people: $595.
State: Indiana;
TAA recipients: Premium for 1 person: $347;
TAA recipients: Premium for 2 people: $755;
PBGC beneficiaries: Premium for 1 person: $487;
PBGC beneficiaries: Premium for 2 people: $927.
State: Iowa;
TAA recipients: Premium for 1 person: $284;
TAA recipients: Premium for 2 people: $554;
PBGC beneficiaries: Premium for 1 person: $270;
PBGC beneficiaries: Premium for 2 people: $510.
State: Kansas;
TAA recipients: Premium for 1 person: $330;
TAA recipients: Premium for 2 people: $628;
PBGC beneficiaries: Premium for 1 person: $280;
PBGC beneficiaries: Premium for 2 people: $383.
State: Kentucky;
TAA recipients: Premium for 1 person: $309;
TAA recipients: Premium for 2 people: $513;
PBGC beneficiaries: Premium for 1 person: $349;
PBGC beneficiaries: Premium for 2 people: $724.
State: Louisiana;
TAA recipients: Premium for 1 person: [A];
TAA recipients: Premium for 2 people: [A];
PBGC beneficiaries: Premium for 1 person: [A];
PBGC beneficiaries: Premium for 2 people: [A].
State: Maine;
TAA recipients: Premium for 1 person: $396;
TAA recipients: Premium for 2 people: $879;
PBGC beneficiaries: Premium for 1 person: $370;
PBGC beneficiaries: Premium for 2 people: $853.
State: Maryland;
TAA recipients: Premium for 1 person: $320;
TAA recipients: Premium for 2 people: $707;
PBGC beneficiaries: Premium for 1 person: $478;
PBGC beneficiaries: Premium for 2 people: $929.
State: Massachusetts;
TAA recipients: Premium for 1 person: $286;
TAA recipients: Premium for 2 people: $659;
PBGC beneficiaries: Premium for 1 person: $333;
PBGC beneficiaries: Premium for 2 people: $830.
State: Michigan;
TAA recipients: Premium for 1 person: $373;
TAA recipients: Premium for 2 people: $820;
PBGC beneficiaries: Premium for 1 person: $403;
PBGC beneficiaries: Premium for 2 people: $861.
State: Minnesota;
TAA recipients: Premium for 1 person: $276;
TAA recipients: Premium for 2 people: $583;
PBGC beneficiaries: Premium for 1 person: $327;
PBGC beneficiaries: Premium for 2 people: $691.
State: Mississippi;
TAA recipients: Premium for 1 person: $262;
TAA recipients: Premium for 2 people: [B];
PBGC beneficiaries: Premium for 1 person: $453;
PBGC beneficiaries: Premium for 2 people: $868.
State: Missouri;
TAA recipients: Premium for 1 person: $315;
TAA recipients: Premium for 2 people: $716;
PBGC beneficiaries: Premium for 1 person: $264;
PBGC beneficiaries: Premium for 2 people: $523.
State: Montana;
TAA recipients: Premium for 1 person: $562;
TAA recipients: Premium for 2 people: $626;
PBGC beneficiaries: Premium for 1 person: [B];
PBGC beneficiaries: Premium for 2 people: [B].
State: Nebraska;
TAA recipients: Premium for 1 person: $329;
TAA recipients: Premium for 2 people: $613;
PBGC beneficiaries: Premium for 1 person: $327;
PBGC beneficiaries: Premium for 2 people: $591.
State: Nevada;
TAA recipients: Premium for 1 person: [B];
TAA recipients: Premium for 2 people: [B];
PBGC beneficiaries: Premium for 1 person: $267;
PBGC beneficiaries: Premium for 2 people: $801.
State: New Hampshire;
TAA recipients: Premium for 1 person: $329;
TAA recipients: Premium for 2 people: $529;
PBGC beneficiaries: Premium for 1 person: $395;
PBGC beneficiaries: Premium for 2 people: $581.
State: New Jersey;
TAA recipients: Premium for 1 person: $350;
TAA recipients: Premium for 2 people: $769;
PBGC beneficiaries: Premium for 1 person: $386;
PBGC beneficiaries: Premium for 2 people: $586.
State: New Mexico;
TAA recipients: Premium for 1 person: [A];
TAA recipients: Premium for 2 people: [A];
PBGC beneficiaries: Premium for 1 person: [A];
PBGC beneficiaries: Premium for 2 people: [A].
State: New York;
TAA recipients: Premium for 1 person: $267;
TAA recipients: Premium for 2 people: $454;
PBGC beneficiaries: Premium for 1 person: $378;
PBGC beneficiaries: Premium for 2 people: $719.
State: North Carolina;
TAA recipients: Premium for 1 person: $415;
TAA recipients: Premium for 2 people: $716;
PBGC beneficiaries: Premium for 1 person: $478;
PBGC beneficiaries: Premium for 2 people: $997.
State: North Dakota;
TAA recipients: Premium for 1 person: [A];
TAA recipients: Premium for 2 people: [A];
PBGC beneficiaries: Premium for 1 person: [A];
PBGC beneficiaries: Premium for 2 people: [A].
State: Ohio;
TAA recipients: Premium for 1 person: $274;
TAA recipients: Premium for 2 people: $674;
PBGC beneficiaries: Premium for 1 person: $461;
PBGC beneficiaries: Premium for 2 people: $842.
State: Oklahoma;
TAA recipients: Premium for 1 person: $273;
TAA recipients: Premium for 2 people: $527;
PBGC beneficiaries: Premium for 1 person: $277;
PBGC beneficiaries: Premium for 2 people: $891.
State: Oregon;
TAA recipients: Premium for 1 person: $305;
TAA recipients: Premium for 2 people: $614;
PBGC beneficiaries: Premium for 1 person: $325;
PBGC beneficiaries: Premium for 2 people: $617.
State: Pennsylvania;
TAA recipients: Premium for 1 person: $323;
TAA recipients: Premium for 2 people: $696;
PBGC beneficiaries: Premium for 1 person: $509;
PBGC beneficiaries: Premium for 2 people: $938.
State: Puerto Rico;
TAA recipients: Premium for 1 person: [B];
TAA recipients: Premium for 2 people: [B];
PBGC beneficiaries: Premium for 1 person: [B];
PBGC beneficiaries: Premium for 2 people: [B].
State: Rhode Island;
TAA recipients: Premium for 1 person: [A];
TAA recipients: Premium for 2 people: [A];
PBGC beneficiaries: Premium for 1 person: [A];
PBGC beneficiaries: Premium for 2 people: [A].
State: South Carolina;
TAA recipients: Premium for 1 person: $310;
TAA recipients: Premium for 2 people: $591;
PBGC beneficiaries: Premium for 1 person: $676;
PBGC beneficiaries: Premium for 2 people: $869.
State: South Dakota;
TAA recipients: Premium for 1 person: [A];
TAA recipients: Premium for 2 people: [A];
PBGC beneficiaries: Premium for 1 person: [A];
PBGC beneficiaries: Premium for 2 people: [A].
State: Tennessee;
TAA recipients: Premium for 1 person: $336;
TAA recipients: Premium for 2 people: $636;
PBGC beneficiaries: Premium for 1 person: $421;
PBGC beneficiaries: Premium for 2 people: $897.
State: Texas;
TAA recipients: Premium for 1 person: $321;
TAA recipients: Premium for 2 people: $662;
PBGC beneficiaries: Premium for 1 person: $481;
PBGC beneficiaries: Premium for 2 people: $693.
State: Utah;
TAA recipients: Premium for 1 person: [A];
TAA recipients: Premium for 2 people: [A];
PBGC beneficiaries: Premium for 1 person: [A];
PBGC beneficiaries: Premium for 2 people: [A].
State: Vermont;
TAA recipients: Premium for 1 person: [A];
TAA recipients: Premium for 2 people: [A];
PBGC beneficiaries: Premium for 1 person: [A];
PBGC beneficiaries: Premium for 2 people: [A].
State: Virginia;
TAA recipients: Premium for 1 person: $275;
TAA recipients: Premium for 2 people: $543;
PBGC beneficiaries: Premium for 1 person: $393;
PBGC beneficiaries: Premium for 2 people: $839.
State: Washington;
TAA recipients: Premium for 1 person: $337;
TAA recipients: Premium for 2 people: $663;
PBGC beneficiaries: Premium for 1 person: $289;
PBGC beneficiaries: Premium for 2 people: $520.
State: West Virginia;
TAA recipients: Premium for 1 person: $312;
TAA recipients: Premium for 2 people: $774;
PBGC beneficiaries: Premium for 1 person: $441;
PBGC beneficiaries: Premium for 2 people: $933.
State: Wisconsin;
TAA recipients: Premium for 1 person: $387;
TAA recipients: Premium for 2 people: $749;
PBGC beneficiaries: Premium for 1 person: $329;
PBGC beneficiaries: Premium for 2 people: $841.
State: Wyoming;
TAA recipients: Premium for 1 person: [B];
TAA recipients: Premium for 2 people: [B];
PBGC beneficiaries: Premium for 1 person: [B];
PBGC beneficiaries: Premium for 2 people: [B].
Average across states;
TAA recipients: Premium for 1 person: $346;
TAA recipients: Premium for 2 people: $660;
PBGC beneficiaries: Premium for 1 person: $460;
PBGC beneficiaries: Premium for 2 people: $877.
Source: IRS's HCTC program office.
Notes: The most current state data available from the HCTC program
office on the average monthly premium costs of TAA recipients and PBGC
beneficiaries receiving the advance HCTC were from February 2004.
Data for Puerto Rico are also included in this table.
[A] Because of IRS disclosure and privacy regulations, premium data
are only reported for states in which 10 or more individuals were
receiving the advance HCTC in February 2004.
[B] There were no PBGC beneficiaries or TAA recipients using the
advance HCTC to purchase plans covering this number of people in this
state.
[End of table]
[End of section]
Appendix V: Amount Awarded for National Emergency Grants and High-Risk
Pool Grants, by State, August 2004:
State: Alaska;
National emergency grant: Infrastructure grant: $100,000;
High risk pool: Operating grant: $495,769.
State: Alabama;
National emergency grant: Infrastructure grant: $55,206.
State: Arizona;
National emergency grant: Infrastructure grant: $74,717.
State: Arkansas;
National emergency grant: Infrastructure grant: $200,000;
High risk pool: Operating grant: $1,764,129.
State: California;
National emergency grant: Infrastructure grant: $50,000.
State: Colorado;
National emergency grant: Infrastructure grant: $184,615;
High risk pool: Operating grant: $2,945,322.
State: Connecticut;
National emergency grant: Infrastructure grant: $189,700;
High risk pool: Operating grant: $1,460,719.
State: Delaware;
National emergency grant: Infrastructure grant: $50,500.
State: Florida;
National emergency grant: Infrastructure grant: $288,020.
State: Georgia;
National emergency grant: Infrastructure grant: $199,953.
State: Hawaii;
National emergency grant: Infrastructure grant: $23,400.
State: Idaho;
National emergency grant: Infrastructure grant: $150,000.
State: Illinois;
National emergency grant: Infrastructure grant: $127,266;
High risk pool: Operating grant: $7,451,658.
State: Indiana;
High risk pool: Operating grant: $2,889,802.
State: Iowa;
National emergency grant: Infrastructure grant: $200,000;
High risk pool: Operating grant: $1,018,945.
State: Kansas;
National emergency grant: Infrastructure grant: $150,000;
High risk pool: Operating grant: $1,337,299.
State: Kentucky;
National emergency grant: Infrastructure grant: $50,000;
High risk pool: Operating grant: $2,297,008.
State: Louisiana;
National emergency grant: Infrastructure grant: $50,000.
State: Maine;
National emergency grant: Bridge grant: $7,500,000;
National emergency grant: Infrastructure grant: $136,853.
State: Maryland;
National emergency grant: Bridge grant: $5,632,000;
National emergency grant: Infrastructure grant: $579,867;
High risk pool: Seed grant: $1,000,000.
State: Massachusetts;
National emergency grant: Infrastructure grant: $150,000.
State: Michigan;
National emergency grant: Infrastructure grant: $128,384.
State: Minnesota;
National emergency grant: Bridge grant: $4,000,000;
National emergency grant: Infrastructure grant: $81,551;
High risk pool: Operating grant: $1,710,789.
State: Mississippi;
High risk pool: Operating grant: $1,890,350.
State: Missouri;
National emergency grant: Infrastructure grant: $98,456.
State: Montana;
National emergency grant: Bridge grant: $266,923;
National emergency grant: Infrastructure grant: $36,572;
High risk pool: Operating grant: $638,228.
State: Nebraska;
National emergency grant: Infrastructure grant: $97,156;
High risk pool: Operating grant: $719,841.
State: Nevada;
National emergency grant: Infrastructure grant: $92,738.
State: New Hampshire;
National emergency grant: Infrastructure grant: $150,000;
High risk pool: Seed grant: $1,000,000;
High risk pool: Operating grant: $224,559.
State: New Jersey;
National emergency grant: Bridge grant: $1,930,000;
National emergency grant: Infrastructure grant: $200,000.
State: New Mexico;
National emergency grant: Infrastructure grant: $78,499.
State: New York;
National emergency grant: Infrastructure grant: $214,425.
State: North Carolina;
National emergency grant: Bridge grant: $7,614,684;
National emergency grant: Infrastructure grant: $141,971.
State: North Dakota;
High risk pool: Operating grant: $310,349.
State: Ohio;
National emergency grant: Bridge grant: $1,600,000;
National emergency grant: Infrastructure grant: $222,105;
High risk pool: Seed grant: $150,000.
State: Oklahoma;
High risk pool: Operating grant: $2,681,597.
State: Oregon;
National emergency grant: Infrastructure grant: $144,369.
State: Pennsylvania;
National emergency grant: Infrastructure grant: $394,908.
State: Rhode Island;
National emergency grant: Infrastructure grant: $152,000.
State: South Carolina;
National emergency grant: Infrastructure grant: $200,000.
State: South Dakota;
National emergency grant: Infrastructure grant: $57,760;
High risk pool: Seed grant: $1,000,000.
State: Tennessee;
National emergency grant: Infrastructure grant: $244,779.
State: Texas;
National emergency grant: Infrastructure grant: $200,000.
State: Utah;
National emergency grant: Bridge grant: $2,173,097;
National emergency grant: Infrastructure grant: $362,256;
High risk pool: Seed grant: $52,618.
State: Vermont;
National emergency grant: Infrastructure grant: $50,000.
State: Virginia;
National emergency grant: Bridge grant: $3,176,800;
National emergency grant: Infrastructure grant: $12,702.
State: Washington;
National emergency grant: Bridge grant: $1,512,000;
National emergency grant: Infrastructure grant: $74,219.
State: West Virginia;
National emergency grant: Bridge grant: $2,852,374;
National emergency grant: Infrastructure grant: $117,053;
High risk pool: Seed grant: $500,000.
State: Wisconsin;
National emergency grant: Infrastructure grant: $256,245.
State: Total awards;
National emergency grant: Bridge grant: $38,257,878;
National emergency grant: Infrastructure grant: $6,818,245;
High risk pool: Seed grant: $3,702,618;
High risk pool: Operating grant: $29,836,364.
Total number of states;
National emergency grant: Bridge grant: $11;
National emergency grant: Infrastructure grant: $45;
High risk pool: Seed grant: $6;
High risk pool: Operating grant: $16.
Sources: Department of Labor for national emergency grants and CMS for
high-risk pool grants.
[End of table]
[End of section]
Appendix VI: Comments from the Department of Labor:
Pages 1 to 4 of the enclosed comments were technical in nature and are
not reproduced in this report.
U.S. Department of Labor:
Assistant Secretary for Employment and Training:
Washington. D.C. 20210:
SEP 16 2004:
Ms. Kathryn G. Allen:
Director:
Health Care-Medicaid and Private Health Insurance Issues:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, D.C. 20548:
Dear Ms. Allen:
The Employment and Training Administration is in receipt of the draft
Government Accountability Office (GAO) report, "HEALTH COVERAGE TAX
CREDIT: Simplified and More Timely Process Could' Increase
Participation," GAO-04-1029. The objectives of the study were to
examine: (1) how many individuals are receiving the Health Coverage Tax
Credit (HCTC); (2) the factors influencing participation; and (3) the
type and cost of coverage they purchase.
The report includes five specific recommendations for executive action.
These include: (1) provide a centralized resource for individuals to
receive information and assistance with HCTC eligibility criteria; (2)
evaluate the effect of reducing service levels by the Internal Revenue
Service (IRS) on the provision of timely and appropriate information,
responses to inquiries, enrollment processing, and advance HCTC
payments; (3) improve the quality of eligibility information provided
by the states; (4) simplify IRS processing for advance HCTC recipients
and avoid disruptions resulting from premium changes; and (5) provide a
report to Congress regarding how Pension Benefit Guaranty Corporation
(PBCG) beneficiaries receiving HCTC are affected due to turning 65. It
is the first and third of these recommendations for executive action
which appear to relate to the responsibilities of the Employment and
Training Administration.
We believe the enclosed comments can improve the final report. If you
would like additional information, please don't hesitate to contact me
at (202) 693-2700.
Sincerely,
Signed for:
Emily Stover DeRocco:
Enclosure:
Draft Government Accountability Office (GAO) Report (GAO-04-1029)
"HEALTH COVERAGE TAX CREDIT: Simplified and More Timely Enrollment
Process Could Increase Participation"
Comments on Overall Report:
* On pages 1 and 2, the reference should be to the Pension Benefit
Guaranty Corporation, not Pension Benefit Guarantee Corporation.
* On page 2, the GAO report states in the first sentence: "The Trade
Adjustment Assistance Reform Act of 2002 created a health coverage tax
credit for ... are eligible to receive Trade Adjustment Assistance
(TAA) and for certain retirees..." ETA suggests that this be revised
for clarity as follows: "The Trade Adjustment Assistance (TAA) Reform
Act of 2002 created a health coverage tax credit for ... are eligible
to receive either Trade Readjustment Allowances (TRA) under the TAA
program or wage subsidies under the Alternative Trade Adjustment
Assistance for Older Workers (ATAA) program and for certain
retirees..."
On page 5, line 20, the GAO report states; "Labor provided us with
information on the NEG awards, and..." ETA suggests that this statement
be expanded to state: "Labor provided us with information on the NEG
awards and the process by which state workforce agencies report
individuals who are potentially eligible for the credit to the IRS,
and..."
On page 10, footnote 12 should be revised as follows to clarify the
qualifying conditions of TRA that must be met: "TAA-eligible workers
who meet the qualifying conditions for trade readjustment allowances
except for the condition that they have exhausted unemployment
insurance benefits are also eligible to receive HCTC. The qualifying
conditions include that the worker is enrolled in or has received a
waiver from training."
* On page 12, footnote 17, the GAO report states: See 29 U.S.C. §§1161-
1169, 42 U.S.C. §§300bb-1 through 300bb-8, 42 U.S.C. §§300bb-1 through
300bb-8 (2000)." ETA suggests that this footnote be revised as follows:
26 U.S.C. §4980B (2000), 29 U.S.C. §§1161-1168 (2000), 42 U.S.C.
§§300bb-1 through 300bb-8."
* On page 13, the GAO reports states in the third bullet point:
"Because COBRA provisions only apply to employer plans covering 20 or
more workers, some states have enacted so-called mini-COBRA laws
requiring employers with fewer than 20 workers to offer continuation
coverage." ETA suggests that this sentence should be revised as
follows: "Because COBRA provisions only apply to plans maintained by
employers with 20 or more workers, some states have so-called mini-
COBRA laws requiring insurers providing coverage to plans maintained
by employers with fewer than 20 workers to offer continuation coverage
to such plans."
* On page 15, the report states: "Three federal departments-Treasury,
Labor, and HHS-share responsibility for implementing the HCTC ..." ETA
suggests the following language: "Although the IRS is responsible for
the administration of the HCTC program„three federal departments-
Treasury, Labor, and HHS-shared responsibility for implementing the
HCTC created by the TAA Reform Act. The three departments continue to
work together to oversee the HCTC program."
* ETA proposes that the following footnote by added on page 15: *
Congress did not appropriate funds for the Department of Labor, the
Pension Benefit Guaranty' Corporation, or Health and Human Services
(HHS) specifically for the implementation of the HCTC.
In the second sentence on page 16, the GAO report states: "It begins
with a qualifying event..." ETA would clarify this statement as
follows: "Potential eligibility begins with a qualifying event..."
Currently the heading for figure 1 on page 18 is "Steps Required to
Enroll for and Receive Advance HCTC." ETA would revise it as follows:
"Steps Required to Qualify for and Receive the HCTC." Also, Steps 1 and
2 must be corrected to reflect the following: For Step f-Qualifying
Event: a displaced worker for trade-certification purposes should be
defined as "A primary or secondary worker who loses his or her job due
to imports from or a shift in production to certain foreign countries."
For Step 2-Eligibility Determination: "Petitions for certification
under TAA may be filed by a group of three or more workers, a labor
union, which represents the workers, company officials from the
affected company, operators or partners of the local One-Stop Career
Center, or the State Dislocated Worker Unit. Labor investigates and
certifies the petition and notifies the petitioners and the state
workforce agency." It should be noted as well that the enrollment
process for the advance credit starts at step 3 in Figure 1 when the
individual calls to enroll after receipt of the HCTC package.
* In the first full paragraph on page 23, the GAO report language
states: "States and PBGC-who develop lists of potential eligibles - do
not screen the lists they send to the HCTC program office for all
health coverage and tax eligibility criteria." ETA suggests that that
language be revised as follows: "States and PBGC are responsible for
identifying and reporting individuals who are eligible for TRA and
PBGC. The responsibility for assessing the health coverage or tax
eligibility criteria lies with the HCTC office. Therefore, individuals
identified by states and PBGC are only considered potentially eligible
for the HCTC, since the health coverage and tax eligibility criteria
must also be met for HCTC eligibility."
* On page 23, the fourth sentence in the first full paragraph reads:
"For example, the October 2003, HCTC program office survey found that
about half of those identified as potentially eligible, but not
enrolled, for the advance HCTC were in fact ineligible because they had
other coverage such as Medicare or through a spouse's employer that
made them ineligible for the advance HCTC" ETA suggests the following
language: " For example, the October 2003, HCTC program office survey
found that about half of those identified as eligible TAA or PBGC
recipients, thus potentially eligible for the HCTC, were, in fact,
ineligible for the HCTC because they had other health coverage such as
Medicare or through a spouse's employer."
* On page 24, under the heading "Several factor may limit..." the
report concludes that the factors limiting the number of individuals
who receive HCTC include "the fragmentation and complexity of the
eligibility and enrollment process, the time lag before the advance
payments are available,..." ETA suggests that this sentence be revised
as follows: "...the fragmentation and complexity of the eligibility and
enrollment process, initial and ongoing TAA/TRA eligibility criteria,
and PBGC program requirements resulting in a time lag before the
advance payments are available, ... "
* On page 25, there is an anecdotal description of how HCTC information
was provided to potentially eligible individuals. However, what is
missing is a discussion of the formal information system that has been
implemented to answer questions from the public concerning HCTC. ETA
would recommend that there be a discussion of the HCTC Contact Center,
the elaborate scripts that have been vetted by the various agencies
involved in this HCTC process and provided to trained customer service
representatives, as well as the referral system to the ETA Help Line
and the state workforce agencies.
* On page 26, the first sentence should be clarified with respect to
the eligibility requirements as follows: "...the requirement that
individuals must be receiving a trade readjustment allowance or meet
the qualifying conditions for such allowances (except for exhaustion of
unemployment insurance benefits), which include the conditions that
more than 60 days have passed since the filing of a petition for
certification with the Secretary of Labor and that the worker be
enrolled in training or receive a waiver from training, added to the
time and complexity of the advance HCTC eligibility and enrollment
process and could limit participation."
* Regarding Figure 3 on page 27, ETA views this as an overly simplified
timeline illustrating when Trade-affected workers may receive the
advance HCTC payment. It assumes that the worker simultaneously looses
employment and petitions the Department of Labor (DOL) for a Trade
Adjustment Assistance (TAA) certification. Although it is possible that
both events may happen at the same time, it is not the norm. Many
workers are already covered by a certification when they lose their
jobs or the petition is filed weeks or months after their employment
ends.
* In the first paragraph on page 53, ETA suggests the addition of
similar language to the following to this part of the report:
"The verification process creates a significant workload on both the
HCTC program staff and the state workforce agencies. Although states
have received NEG infrastructure grants for HCTC purposes, the
verification (audit) process was not envisioned as an ongoing activity.
Additionally, the IRS letters to Ul and TRA claimants concerning the
denial of their end-of-year HCTC claims and the instructions that the
taxpayer contact the state workforce agency was also not envisioned and
has become an additional burden on the states. Since these activities
are recognized as necessary --and because UI administrative funds may
not be used for HCTC-related activities --states need to request
additional NEG funds for these ongoing costs to ensure that staff and
resources are devoted to improving the process."
There is general agreement that some small percentage of incomplete
records by the state workforce agencies is likely uncontrollable due to
the complexity of the TAA program requirements; therefore, the
verification (audit) process may be needed on an ongoing basis.
While all states have automated payment systems for regular state
unemployment insurance (UI) benefits, which create much larger
workloads for state workforce agencies than TRA, some states do not
have automated systems for payment of TRA since these workloads are
much smaller.
* On pages 59-60, this part of the report appears to apply primarily to
the bridge NEGS, rather than infrastructure NEGs. Procedures for
requesting bridge NEG funds were outlined in Training and Employment
Guidance Letter No. 20-02 dated March 3, 2003. Unemployment insurance
(UI) grant funds may not be used to cover non-UI activities, and all
states were advised to request NEG funds to cover costs related to
their responsibilities involving the HCTC.
* On page 63 of the report, in the last bullet the word "agreements"
after "trade" should be deleted.
Specific Comments on the GAO Recommendations for Executive Action:
Recommendation 1: To help individuals understand and comply with the
multiple health coverage, labor, and tax eligibility requirements for
receipt of the HCTC, the Secretary of Labor, the Commissioner of
Internal Revenue, the Administrator of CMS, and the Executive Director
of the PBGC should, in coordination with state officials, provide for a
centralized resource for individuals to receive information and
assistance with HCTC eligibility criteria, including individualized
assistance in completing each step of the eligibility and enrollment
process and information about qualified health coverage options
available in their local area.
* ETA agrees that the provision of information to individuals regarding
HCTC is essential because of the complexity of this program. However,
we would recommend that there be a review of the existing system,
including the quality of the information provided to individuals as
well as the referrals made to other federal agencies and the state
workforce agencies. This review would include the HCTC Contact Center,
including the scripts and information trees that are currently used by
the CSRs, and the ETA Help Line, including the scripts and information
trees. Also of interest would be the role of the state workforce
agencies in providing information. Once this review is completed,
recommendations could be implemented to improve this system.
* In addition, we think it is important to summarize our
accomplishments to date to implement the Trade Reform Act of 2002.
-Upon enactment of the legislation in August 2002, 15 training sessions
were conducted from November 2002 through January 2003 on the
provisions of the Act in eight locations around the country. Theses
sessions included representatives from state and local workforce
investment entities, business groups, unions, intergovernmental
organizations and other interested parties.
-Numerous directives were developed and issued containing policy and
guidelines on implementation of the Act's requirements. Directives
provided guidance on how to apply for infrastructure grants to support
building of the system to transmit the names of potentially eligible
trade-certified individuals to the HCTC operations center, as well as
how to apply for grants to support partial payment of health coverage
premiums.
-Outreach resources were developed to inform interested parties of the
provisions of the new Act and how to access assistance for the HCTC.
These resources include a new web site on the program and a brochure
designed to provide businesses, unions, worker groups and interested
individuals with information on the program.
-Six regional forums launched to emphasize the importance of an
integrated approach among programs and funding streams serving
dislocated workers, including situations where trade contributed
importantly to the dislocation. These forums were used to clarify
policy and guidance relative to the Act's provisions including the HCTC
program.
Recommendation 3: To improve the quality of eligibility information
provided by the states, the Secretary of Labor and the Commissioner of
Internal Revenue should coordinate to improve the accuracy of data
received from state workforce agencies.
* ETA agrees with this recommendation that the Department of Labor and
the IRS need to continue to work together, and assist the HCTC office
and the state workforce agencies to improve the process and the data.
On page 70, Appendix II, the GAO report states that "State-based
continuation coverage pertaining to employers with fewer than 20
employees, also known as mini-COBRA coverage, was designated by 11
states, and was the sole state-qualified coverage option available to
HCTC recipients in 3 states (see table 10)." ETA suggests that this
sentence be revised as follows: "State-based continuation coverage
pertaining to insurers providing coverage to plans maintained by
employers with fewer than 20 employees, also known as mini-COBRA
coverage.
[End of section]
Appendix VII: Comments from the Internal Revenue Service:
DEPARTMENT OF THE TREASURY:
INTERNAL REVENUE SERVICE:
WASHINGTON, D.C. 20224:
COMMISSIONER:
September 8, 2004:
Ms. Kathryn G. Allen:
Director, Health Care-Medicaid and Private Health Insurance Issues:
United States Government Accountability Office:
Washington, DC 20548:
Dear Ms. Allen:
I have reviewed your proposed report entitled "Health Coverage Tax
Credit: Simplified and More Timely Enrollment Process Could Increase
Participation" (GAO-04-1029). Your report recognizes the challenges
that the Internal Revenue Service (IRS) and other federal and state
agencies, as well as private entities, faced in timely implementing the
provisions of the Trade Adjustment Assistance Act of 2002 (Trade Act),
which created the Health Coverage Tax Credit (HCTC).
The Trade Act provided important new benefits for eligible individuals
but presented significant new responsibilities for the IRS.
Responsibility for determining individuals' eligibility for the credit,
and whether those eligible individuals had purchased qualified
insurance, was spread among multiple state and federal agencies. In
addition, as the nation's tax collector, IRS had to develop expertise
in administering health insurance benefits, because we had neither
systems nor processes in place to implement the advance payment option
at the time of passage of the Trade Act. IRS' processes are based on
receiving information and data from taxpayers and refunding payments to
taxpayers. Because data for the advance payment is received from state
agencies and health insurance providers, existing IRS tax systems could
not be used to receive, retain, or verify that data and issue payments
to third-parties.
As your report noted, IRS implemented the HCTC on time and addressed
most early implementation issues. We designed and implemented an
advance payment system for health coverage; learned to identify and
enroll potentially eligible individuals from two other Government
programs; established new relationships with states, health plans, and
other partners; and accomplished this within a very short timeframe.
Successful implementation of the HCTC within the timeframe set by
Congress was the result of close collaboration between federal and
state agencies and the use of contractors to administer the advance
payment portion of the HCTC.
Since late 2002, the IRS established the HCTC program office, engaged
the services of a contractor to aid in program design and
implementation, developed new tax forms and outreach materials,
established a customer contact center, published information on the IRS
website for all partners and participants, and developed and enhanced
processes for processing HCTC claims made with the tax return. The IRS
and the Department of the Treasury have been very aggressive in
recruiting state-qualified plans. In February 2003 there were no state-
qualified health plans and there are now 39 states with at least one
designated qualified plan. Similarly, we have continuously worked with
every state to help them understand the overall program, identify
qualified health plans, and integrate federal-state efforts to
maximize potentially eligible candidates' understanding and
participation in the program.
As a result, more than 19,000 individuals were able to receive $37.3
million in HCTC benefits for the year 2003. The 19,000 includes
individuals who enrolled in the advance payment program plus those who
received the credit on their tax return, and a combination of both. In
2004, enrollment in the advance option is steadily growing. Over 12,000
are now enrolled in the advance program compared to 6,800 in 2003.
Since the advance payment program's inception, a cumulative
participation of 17,900 individuals has been achieved as of July 31,
2004. Most importantly, we have learned that an advance payment for
health care coverage is a viable option for administering this program.
The Trade Act set out substantial requirements for qualification and
enrollment, in a process requiring participants to interact with
multiple federal and state agencies, as well as private insurers. The
GAO report recognizes the complexities of the process and the agencies'
efforts to minimize their effect on participants to the extent possible
in light of legal requirements.
These successes are due in large part to new and important partnerships
developed at the federal and state level. The IRS established working
relationships with the Department of Labor (DOL) and the Pension
Benefit Guaranty Corporation (PBGC) to coordinate our efforts, and also
developed relationships with non-government organizations to obtain
their assistance and support in establishing the HCTC program. We have
relied on labor unions and health plan associations to inform their
members about HCTC and its requirements, and both were instrumental in
helping identify qualified plans and supplementing HCTC outreach to
individuals in several states. These relationships and efforts were
critical in launching the advance HCTC program and remain so as we work
to improve the program. The HCTC program office also worked very hard
to develop a system that was flexible and fulfilled a variety of health
plans' needs and concerns. With considerable help from the health plan
community, we believe we have addressed these issues and have an
effective payment process in place.
However, as outlined in your report, some challenges remain. The IRS
has and continues to use HCTC communication channels to emphasize the
importance of state eligibility data quality, and has established the
HCTC monthly eligibility review process as a tool for the states to use
in their efforts to improve data quality. The IRS can only identify
processing errors as they occur and recommend solutions, but the IRS
does not have the authority to require the states to implement them.
Continued collaboration with DOL will be important as we work to
consider and implement approaches that could improve overall data
quality.
Participants who claim the HCTC in advance often must pay 100 percent
of the cost of health coverage for possibly one or more months before
they are enrolled in the advance payment program. How quickly an
individual registers, provides the required documentation, and whether
the individual's health plan is currently enrolled to receive advance
payments from the HCTC program affect the number of months it takes to
enroll in HCTC. As a result, to minimize burden on individuals, we are
working very hard to shorten the HCTC enrollment period of 3-6 months.
However, the first 3 months of the 3-6 month period is the result of
the Trade Adjustment Assistance (TAA) certification requirements under
the Trade Act.
To enable state workforce agencies to help individuals maintain their
health coverage between job loss and advance payment of the HCTC, the
Trade Act established National Emergency Grant (NEG) Bridge funds. The
IRS does not directly administer the NEG Bridge program, but has
integrated the availability of NEG funds into HCTC marketing and
outreach efforts. Additionally, we continue to explore opportunities to
streamline our processes to expedite individuals' receipt of the HCTC.
The IRS is transitioning the HCTC Program from development and
implementation to an operational environment. Recent contract
restructuring has resulted in a projected savings of close to 30
percent. The IRS is also identifying ways to use existing IRS resources
to supplant contractor resources, and projects that annual operating
costs will decrease as processes are enhanced. An analysis by IRS'
Office of Program Evaluation and Risk Analysis, currently underway,
will identify administrative process and efficiency improvements and
gain insights to eligibility demographics that will help maximize the
effectiveness of our outreach efforts.
We would like to clarify several observations in your report regarding
qualified health plans. First, the report mentions the diversity in
benefits offered in various state qualified plans. The Trade Act does
not give the IRS the authority to regulate the benefits offered by
state qualified plans. This is a decision made solely by the states and
the plans that voluntarily agree to participate. The IRS' role is
limited to (1) verifying through the states, typically the state
Department of Insurance, that the plans meet the four consumer
protections established in the Trade Act and (2) providing state-
qualified plan contact information on the IRS web site and through the
HCTC customer contact center. Potentially eligible individuals must
contact the qualified plans directly to obtain information about
benefits or premiums.
Second, some plans have expressed a reluctance to participate in the
HCTC program because they are unsure of the HCTC population's health
status. A number of participating plans and plan associations have
agreed to help the IRS establish a better understanding of the
enrolling population when a full calendar year of data are available,
some time in 2005. We hope that this data will help encourage more
health plans to participate in the HCTC. Finally, the consumer
protections in the Trade Act differ significantly from existing state
and federal insurance laws. This creates substantial uncertainty for
insurers trying to decide whether to participate in the HCTC program.
We agree with your recommendations to accept notification of premium
changes from participating health plans rather than relying on
participants to provide this information. We will also work with PBGC
to estimate the number of PBGC beneficiaries previously receiving HCTC
that have lost their eligibility at attaining age 65 and the number
whose spouses and/or dependents also have become ineligible for the
HCTC due to the beneficiaries ineligibility upon turning age 65. We
recognize that changes, such as amending certain TAA program
requirements and helping eligible individuals maintain their rights to
guaranteed coverage, may have broader implications for labor and health
policy.
Our specific response to your recommendation for Executive Action is
attached.
We appreciate the opportunity to address your recommendation and look
forward to working with DOL, PBGC, and the states in improving the
enrollment process, expediting payments, and improving outreach to
potential participants. If you have any questions, please call Floyd
Williams, Director, Legislative Affairs, at (202) 622-3720.
Sincerely,
Signed for:
Mark W. Everson:
Enclosure:
The IRS' Response to Recommendations included in GAO-04-1029, "Health
Coverage Tax Credit --Simplified and More Timely Enrollment Process
Could Increase Participation."
Recommendation:
We recommend that the Secretary of Labor, Commissioner of Internal
Revenue, Administrator of Centers for Medicare and Medicaid Services
(CMS), and Executive Director of the PBGC work together to take the
following five actions.
The IRS generally agrees, and our responses to each of the recommended
actions are as follows:
A) To help individuals understand and comply with the multiple health
coverage, labor, and tax requirements for receipt of the HCTC, the
Secretary of Labor, the Commissioner of Internal Revenue, the
Administrator of CMS, and the Executive Director of the PBGC should, in
coordination with state officials, provide for a centralized resource
for individuals to receive information and assistance with HCTC
eligibility criteria, including individualized assistance in
completing each step of the eligibility and enrollment process and
information about qualified health coverage options available in their
local area.
Response:
Early on the IRS recognized the benefits of centralizing information
and assistance for HCTC candidates. We made significant efforts to lay
the foundation for delivering consistent messages about HCTC and, to
the greatest extent possible, provide a centralized source of HCTC
information and assistance with input from our federal, state, and
private partners. The results of our efforts include:
* The HCTC brochure, program kit and registration form for individuals,
* The State Toolkit, which outlined roles and responsibilities and
provided training for Governors' offices, state departments of
insurance, and the state workforce agencies,
* Extensive content on the IRS website (www.irs.gov), and
* Early establishment of the HCTC Customer Contact Center, offering
individuals, our partners, and the public another significant resource
to address questions about the program.
Additionally, together with representatives from multiple state
agencies, local qualified health plans, and labor unions, we organized
a series of on-site registration sessions in 11 states. These sessions
provided individualized assistance in completing each step of the
eligibility and enrollment process. While over 4,000 HCTC candidates
attended the sessions and over half completed forms or registered to
receive advance payments, none of the agencies or health plans involved
have the resources to support such an effort on a routine basis. The
IRS has explored requirements for creating a virtual registration
support capacity. However, the numbers of affected agencies and health
plans, as well as privacy and disclosure issues, make such a solution
a major challenge.
In the interim, we will explore further development of our web and call
center capabilities as we work with the Department of Labor (DOL),
PBGC, and CMS to identify any possible cost-effective ways to meet this
need we have not already considered.
B) To ensure that HCTC-eligible individuals and recipients receive
timely and appropriate information, responses to inquiries, enrollment
processing, and advance HCTC payments, the Commissioner of Internal
Revenue should evaluate the effect that any reduced service levels will
have on eligible individuals and health plans' ability to receive the
HCTC on a timely basis, and their satisfaction with the information and
services provided.
Response:
Your report highlights our service level for processing HCTC
registrations. This service level has not changed. The service levels
most recently defined are part of our transition from implementation to
operations. We will continue to monitor service levels and their impact
on delivering quality service to our partners and customers. We will
adjust our capabilities to meet changing demand. At this time, we
cannot systemically measure customer satisfaction. However, we will
include appropriate questions in future HCTC customer and stakeholder
research that will give us an indication of changes in satisfaction.
C) To improve the quality of eligibility information provided by the
states, the Secretary of Labor and the Commissioner of Internal Revenue
should coordinate to improve the accuracy of data received from state
workforce agencies.
Response:
Although the IRS and DOL have taken several steps to address this
problem, we agree that the quality of eligibility information provided
by the states continues to present a challenge. As your report notes,
the lists of eligible individuals provided by state workforce agencies
and the PBGC are accepted by the IRS as valid and form the basis for
participation in the HCTC Program. We will work with them to develop an
action plan for improving the accuracy of eligibility data.
D) To simplify payment processing for advance HCTC recipients and avoid
disruptions resulting from premium changes, the Commissioner of
Internal Revenue should encourage participating health plans to provide
notification of changes in premiums directly to the HCTC program office
rather than relying primarily on individuals for providing this
information.
Response:
The IRS agrees that accepting notification of premium changes from
participating health plans would be an administrative improvement.
However, because of the number of plans and individuals affected, there
are a significant number of issues that must be addressed. As a result,
we will develop an action plan to phase in this change so we can
monitor results and make adjustments based on plan and participant
feedback.
E) Given that as PBGC beneficiaries turn 65 they lose eligibility for
the HCTC even though their spouses or other dependents may not yet be
Medicare-eligible or have alternative sources for insurance coverage,
the Executive Director of PBGC, in coordination with the Commissioner
of Internal Revenue, should report to the Congress on how many PBGC
beneficiaries previously receiving the HCTC have lost eligibility due
to turning 65, and how many of these former HCTC recipients have
spouses or other dependents who are no longer able to receive coverage
subsidized by the HCTC.
Response:
We will work with the PBGC to develop this information and make it
available to the Congress. This information may require the inclusion of
estimates for some data elements that are not readily available to
either the IRS or the PBGC.
[End of section]
Appendix VIII: Comments from the Centers for Medicare & Medicaid
Services:
DEPARTMENT OF HEALTH & HUMAN SERVICES:
Centers for Medicare & Medicaid Services:
Administrator:
Washington, DC 20201:
SEP 24 2004:
DATE:
TO: Kathryn G. Allen:
Director, Health Care --Medicaid And Private Health Insurance Issues:
Government Accountability Office:
FROM: Mark B. McClellan, M.D.:
Administrator:
Initialed by: Mark B. McClellan:
SUBJECT. Government Accountability Office (GAO) Draft Report: HEALTH
COVERAGE TAX CREDIT: Simplified and More Timely Enrollment Process
Could Increase Participation (GAO-04-1029):
Thank you for the opportunity to review and comment on the above-
referenced GAO draft report. Although the Centers for Medicare &
Medicaid Services (CMS) was only involved in the implementation of the
high risk pool grant programs, we agree with the intent and goals of
the Health Care Tax Credit (HCTC) Program and feel that GAO is
providing an invaluable service in its review of the implementation of
the HCTC program.
Because the draft report accurately states the status of the high-risk
pool grant programs, we do not have any substantive comments on the
report. Attached are CMS' comments on the specific recommendations,
none of which addresses the high-risk pool grant programs.
Attachment:
Centers for Medicare & Medicaid Services' (CMS) Comments to the
Government Accountability Office (GAO) Draft Report: HEALTH COVERAGE
TAX CREDIT: Simplified and More Timely Enrollment Process Could
Increase Participation (GAO-04-1029):
We recommend that the Secretary of Labor, Commissioner of Internal
Revenue, Administrator of CMS, and Executive Director of the PBGC take
the following five actions:
GAO Recommendation:
To help individuals understand and comply with the multiple health
coverage, labor, and tax eligibility requirements for receipt of the
HCTC, the Secretary of Labor, the Commissioner of Internal Revenue, the
Administrator of CMS, and the Executive Director of the PBGC should, in
coordination with slate officials, provide for a centralized resource
for individuals to receive information and assistance with HCTC
eligibility criteria, including individualized assistance in
completing each step of the eligibility and enrollment process and
information about qualified health coverage options available in their
local area.
CMS Response:
The Internal Revenue Service has the lead in the HCTC outreach and
education. We defer to the Commissioner of Internal Revenue.
GAO Recommendation:
To ensure that HCTC-eligible individuals and recipients receive timely
and appropriate information, responses to inquiries, enrollment
processing, and advance HCTC payments, the Commissioner of Internal
Revenue should evaluate the effect that any reduced service levels will
have on eligible individuals and health plans' ability to receive the
HCTC on a timely basis and their satisfaction with the information and
services provided.
CMS Response:
This recommendation does not impact CMS jurisdiction. We defer to the
Secretary of Labor, Commissioner of Internal Revenue, and Executive
Director of the PBGC.
GAO Recommendation:
To improve the quality of eligibility information provided by the
states, the Secretary of Labor and the Commissioner of Internal Revenue
should coordinate to improve the accuracy of data received from state
workforce agencies.
CMS Response:
This recommendation does not impact CMS jurisdiction. We defer to the
Secretary of Labor, Commissioner of Internal Revenue, and Executive
Director of the PBGC.
GAO Recommendation:
To simplify payment processing for advance HCTC recipients and avoid
disruptions resulting from premium changes, the Commissioner of
Internal Revenue should encourage participating health plans to provide
notification of changes in premiums directly to the HCTC program office
rather than relying primarily on individuals for providing this
information.
CMS Response:
This recommendation does not impact CMS jurisdiction. We defer to the
Secretary of Labor, Commissioner of Internal Revenue, and Executive
Director of the PBGC.
GAO Recommendation:
Given that as PBGC beneficiaries turn 65 they lose eligibility for the
HCTC even though their spouses or other dependents may not yet be
Medicare-eligible or have alternative sources for insurance coverage,
the Executive Director of the PBGC, in coordination with the
Commissioner of Internal Revenue, should report to the Congress on how
many PBGC beneficiaries previously receiving the HCTC have lost
eligibility due to turning 65, and how many of these former HCTC
recipients have spouses or other dependents who are no longer able to
receive coverage subsidized by the HCTC.
CMS Response:
This recommendation does not impact CMS jurisdiction. We defer to the
Secretary of Labor, Commissioner of Internal Revenue, and Executive
Director of the PBGC.
[End of section]
Appendix IX: Comments from the Pension Benefit Guaranty Corporation:
Pension Benefit Guaranty Corporation:
PBGC:
Office of the Executive Director:
1200 K Street, N.W.,
Washington, D.C. 20005-4026:
SEP 2 2004:
Ms. Kathryn G. Allen,
Director:
Health Care - Medicaid and Private Health Insurance Issues:
Government Accountability Office:
441 G St., NW (Room 5A14):
Washington, DC 20548:
Dear Ms. Allen:
Thank you for the opportunity to review and comment on your draft
report entitled, Health Coverage Credit: Simplified and More Timely
Enrollment Process Could Increase Participation (GAO-04-1029).
As discussed at the exit conference, the Internal Revenue Service (IRS)
is primarily responsible for administration of the Health Coverage Tax
Credit (HCTC) program. PBGC helps promote the program by highlighting
it in Your Guaranteed Pension and various PBGC newsletters. PBGC also
provides participant data to the IRS's HCTC program office so that it
may follow up with beneficiaries regarding their potential eligibility
under the program. Finally, PBGC refers participants and beneficiaries
that contact our Customer Service Center regarding this program to the
HCTC Program Customer Contact Center's 1-800 number.
Two of the report's five recommendations relate to PBGC, and we provide
our specific responses, as follows:
GAO Recommendation:
To help individuals understand and comply with the multiple health
coverage, labor, and tax requirements for receipt of the HCTC, the
Secretary of Labor, the Commissioner of Internal Revenue, the
Administrator of CMS, and the Executive Director of the PBGC should, in
coordination with state officials, provide for a centralized resource
for individuals to receive information and assistance with HCTC
eligibility criteria, including individualized assistance in
completing each step of the eligibility and enrollment process and
information about qualified health coverage options available in their
local area.
PBGC Response:
PBGC defers to the other agencies responsible for administration of the
HCTC program on this recommendation to provide a centralized resource
for HCTC information. PBGC will continue support the IRS and coordinate
with other agencies, as needed, to help address this recommendation.
GAO Recommendation:
Given that as PBGC beneficiaries turn 65 they lose eligibility for the
HCTC even though their spouses or other dependents may not yet be
Medicare-eligible or have alternative sources for insurance coverage,
the Executive Director of PBGC, in coordination with the Commissioner
of Internal Revenue, should report to the Congress on how many PBGC
beneficiaries previously receiving the HCTC have lost eligibility due
to turning 65, and how many of these former HCTC recipients have
spouses or other dependents who are no longer able to receive coverage
subsidized by the HCTC.
PBGC Response:
PBGC suggests that IRS, as the lead agency responsible for
administering the HCTC program, should submit the report to Congress
called for in the recommendation. PBGC has and will continue to work
closely with the IRS in support of their administration of the HCTC
program, particularly by providing information on PBGC recipients who
may be eligible for the HCTC. Also, we note that PBGC benefit
administration does not require information on spouses of all PBGC
participants, therefore, we do not have this information for many
participants. We can provide the IRS with spousal information on some,
but not all, PBGC recipients.
Again, we thank you for the opportunity to review and comment on this
proposed report and appreciate your work in reviewing this important
program.
Sincerely,
Signed by:
Bradley D. Belt:
Executive Director:
[End of section]
Appendix X: GAO Contact and Staff Acknowledgments:
GAO Contact:
John E. Dicken, (202) 512-7043:
Acknowledgments:
The following staff made important contributions to this report: N.
Rotimi Adebonojo, JoAnne R. Bailey, Elizabeth T. Morrison, and Pamela
N. Roberto.
FOOTNOTES
[1] Pub. L. No. 107-210, Division A, 116 Stat. 933, 935.
[2] For this report, we refer to individuals who qualify for the HCTC
because they lost employment as a result of trade agreements as TAA
recipients and those who qualify for HCTC because they receive payments
from PBGC as PBGC beneficiaries. PBGC beneficiaries are individuals who
receive payments from PBGC because their pension plan was terminated.
[3] The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
requires certain employers with 20 or more employees to offer continued
coverage for individuals, with certain exceptions, who would have
otherwise lost employer-sponsored health coverage. Pub. L. No. 99-272,
Title X, 100 Stat. 82, 222 (1986).
[4] High-risk pools traditionally provide health coverage to
individuals unable to otherwise obtain private health coverage because
of existing health conditions.
[5] For this report, we use the term HCTC to encompass both the end-of-
year and advance payment options. When we explicitly refer to the end-
of-year option, we use the term end-of-year HCTC and when we explicitly
refer to the advance payment option, we use the term advance HCTC.
[6] For this report, we use the term HCTC recipient when we discuss
information about individuals receiving the end-of-year HCTC or for
information that applies to both the end-of-year and advance HCTC. We
use the term HCTC enrollee when we discuss information applicable only
to the advance HCTC option.
[7] The number of individuals receiving and the number enrolled for the
advance HCTC differ because some individuals had enrolled for the
advance HCTC but had not yet had advance payments made to their health
plans.
[8] The first survey included individuals who were enrolled for the
advance HCTC and potentially eligible individuals who had not enrolled
for the advance HCTC. The second survey included only potentially
eligible individuals who were not enrolled for the advance HCTC. The
overall response rates for the surveys were 59 percent and 61 percent,
respectively.
[9] For this report, the District of Columbia is included in our
discussion of states, unless otherwise noted.
[10] We conducted a Web-based survey of state workforce agencies in
every state and Puerto Rico in 2004. The District of Columbia was not
included in this survey. We received an overall response rate of 98
percent; however, the response rates for specific questions in the
survey varied. Additional data from this survey are included in GAO,
Trade Adjustment Assistance: Reforms Have Accelerated Training
Enrollment, but Implementation Challenges Remain, GAO-04-1012
(Washington, D.C.: Sept. 22, 2004).
[11] We report the most current data made available from IRS. In some
instances, analyses of monthly premium data were available for the
month of February, April, or May 2004.
[12] Qualified family members include spouses and individuals who can
be claimed as dependents on the eligible individual's federal tax
return, provided they are enrolled in qualified health coverage.
[13] Petitions for certification under TAA may be filed by certain
groups, such as a group of three or more workers, a labor union that
represents the workers, officials from the affected company, or the
state dislocated workers unit. Labor investigates and certifies the
petition and notifies the petitioners and the state workforce agency.
[14] TAA-eligible workers who meet the qualifying conditions for trade
readjustment allowances except for the condition that they have
exhausted unemployment insurance benefits are also eligible to receive
HCTC. The qualifying conditions include that the worker is enrolled in
or has received a waiver from training.
[15] Section 231 of the Trade Act of 1974, as amended, states that a
trade readjustment allowance is to be paid to an adversely affected
worker, covered by a certification, who applies for the allowance for
any week of unemployment that begins more than 60 days after the date
on which the petition that resulted in the certification was filed.
Pub. L. No. 93-618, §231, 88 Stat. 1978, 2020, as amended by Pub. L.
No. 97-35, §2503, 95 Stat. 357, 881 (1981).
[16] Because of the newness of the ATAA program and the small number of
individuals participating, we combine any available data on ATAA
recipients along with TAA recipients for the remainder of this report
and refer to these groups as TAA recipients, unless otherwise noted.
[17] PBGC was established by the Employee Retirement Income Security
Act of 1974 to encourage the growth of pension plans, provide
uninterrupted payment of pensions, and keep pension premiums to a
minimum. PBGC collects premiums from employers that sponsor insured
pension plans and can take over and assume payments for insured pension
plans of employers that are in severe financial distress.
[18] Other individuals aged 55 or older who may be eligible for the
HCTC include spouses and former spouses receiving PBGC benefits as a
survivor or beneficiary.
[19] See 29 U.S.C. §§1161-1168 (2000), 42 U.S.C. §§300bb-1 through
300bb-8 (2000); see also 26 U.S.C. §§4980B (2000).
[20] State-qualified individual market coverage differs from the
automatically qualified individual market coverage in that the latter
is coverage purchased by an individual more than 30 days prior to the
separation from employment that results in the individual's becoming
eligible for TAA benefits or PBGC pension payments. In contrast to the
state-qualified coverage, automatically qualified individual market
coverage is not restricted to particular plans sold by insurers with
which states have entered into an arrangement to provide HCTC coverage.
[21] Creditable coverage includes most health coverage, including group
coverage from an employer or other employee organization, individual
health insurance, Medicaid, or Medicare. Creditable coverage excludes
coverage that consists solely of excepted benefits such as dental or
vision.
[22] These consumer protections may differ from existing federal health
coverage or state health insurance law. For example, HIPAA-eligible
individuals are also guaranteed the issuance of coverage if they have
creditable prior coverage; however, to receive this protection under
HIPAA the applicant must have had creditable coverage for 18 months,
while HCTC-eligible individuals must only have had creditable coverage
for 3 months.
[23] Generally, an HCTC recipient for whom there is a break in coverage
of 63 days or more is not considered a qualified individual and
therefore does not have to be provided these consumer protections by a
state-qualified HCTC plan. Nonqualified individuals, however, may still
use the HCTC to enroll in a state-qualified health plan without the
consumer protections applying; alternatively, a state-qualified plan
may choose to extend some or all of these consumer protections to all
HCTC recipients.
[24] National emergency grants are discretionary awards made by the
Secretary of Labor. These grants are made in response to significant
events leading to the dislocation of workers and creating a sudden need
for assistance that cannot reasonably be expected to be accommodated
within the ongoing operations of existing programs. National emergency
grants are intended to temporarily expand service capacity for
providing benefits to dislocated workers at the state and local levels
by providing time-limited funding assistance.
[25] These criteria include (1) restricting premiums to no more than
150 percent of the standard risk rate (the premium charged a comparable
individual in good health in the private market), (2) offering a choice
of two or more coverage options, and (3) having a mechanism to continue
to fund high-risk pool losses after the receipt of the grant.
[26] July 1, 1944, ch. 373, §2744, as added by Pub. L. No. 104-191,
§111a, 110 Stat. 1986 (1996) (codified as amended at 42 U.S.C. §300gg-
44).
[27] IRS generally receives the majority of its funding through
multiyear appropriations.
[28] The number of individuals reported to have received the HCTC in
2003 excludes those who enrolled in December 2003 but received the
advance HCTC payment after December 11, 2003--these payments were
considered credits for January 2004 premiums--and those whose tax
returns were not processed by May 28, 2004, including those with tax
filing extensions for the 2003 tax filing season.
[29] Approximately 17,900 people had enrolled for the advance HCTC at
some time from August 2003 through July 2004.
[30] The survey was conducted with a statistically valid sample of
HCTC-eligible individuals.
[31] The HCTC program office maintains a call center that is available
to potentially eligible individuals once they have had their names
forwarded from states or PBGC. The call center provides referrals to
the Department of Labor's Help Line or state workforce agencies as
appropriate.
[32] We found that the number of training waivers issued by the states
increased from about 21,000 in fiscal year 2002 to more than 30,000 in
fiscal year 2003 and that state officials reported that a major reason
for the increase in training waivers was to facilitate enrollment in
the HCTC. See GAO-04-1012.
[33] Eligible individuals can also receive the HCTC at the end of the
year to help offset 65 percent of the cost of their COBRA premiums,
once they qualify for the HCTC.
[34] Whereas individuals losing coverage from an employer typically
have one opportunity to elect COBRA continuation coverage at the time
they lose their coverage, the TAA Reform Act provides TAA recipients
with a second opportunity to purchase COBRA coverage. This second
opportunity is a 60-day period that begins the first day of the month
in which they become eligible to receive TAA benefits. To qualify for
this second election period, no more than 6 months must have elapsed
between the date individuals lost health coverage as the result of the
trade-related layoff that made them eligible for TAA and the date they
seek to purchase COBRA coverage. COBRA administrators reported that
only a small percentage of HCTC recipients have used this second
election period to purchase coverage.
[35] The average household income for HCTC nonenrollees surveyed in
2003 was $34,000 compared to $36,300 for a family of two at 300 percent
of the federal poverty level in the same year.
[36] See Leighton Ku and Teresa A. Coughlin, The Use of Sliding Scale
Premiums in Subsidized Insurance Programs (Washington, D.C.: The Urban
Institute, Mar. 1, 1997).
[37] These percentages were even higher for PBGC beneficiaries. For
example, the average two-person monthly HCTC premium was almost three
times the median pension payment received by PBGC beneficiaries in
2003.
[38] Health plans typically require enrollees to pay for a portion of
the cost of their medical care. These cost-sharing arrangements include
deductibles, which are fixed payments enrollees are required to make
before coverage applies; copayments, which are the fixed payments that
enrollees are required to make at the time benefits or services are
received; and coinsurance, which is a percentage of the cost of
benefits or services that the enrollee is responsible for paying
directly to the provider.
[39] See Stan Dorn and Todd Kutyla, Health Coverage Tax Credits Under
the Trade Act of 2002: A Preliminary Analysis of Program Operation (New
York, N.Y.: The Commonwealth Fund, April 2004).
[40] See Henry J. Kaiser Family Foundation and Health Research and
Educational Trust, Employer Health Benefits 2003 Annual Survey (Menlo
Park, Calif., and Chicago: 2003).
[41] See Paul Fronstin, Sources of Health Insurance and Characteristics
of the Uninsured: Analysis of the March 2003 Current Population Survey
(Washington, D.C.: Employee Benefit Research Institute, December 2003).
[42] We selected PPO plans as a point of comparison because the
majority of state-qualified coverage options in the seven states we
reviewed, including both high-risk pools and arrangements with
insurers, were also PPO plans, although health maintenance organization
(HMO), exclusive provider organization (EPO), unrestricted fee for
service (FFS), and point of service (POS) plans were available in some
states. A PPO is a type of managed care plan that offers a choice of
health care providers but offers financial incentives to use preferred
health care providers. HMOs and EPOs are types of managed care plans
that typically provide coverage only for services through health care
providers within the managed care plan's network. POS plans are similar
to HMOs, but allow use of nonnetwork providers at a higher cost to
participants. Unrestricted FFS plans do not differentiate coverage or
cost-sharing requirements for preferred or nonpreferred health care
providers.
[43] Pub. L. No. 95-555, 92 Stat. 2076 (1978).
[44] According to an official at the Ohio Department of Insurance, a
large percentage of the individual health insurance coverage sold on
the open market in Ohio is written as group coverage as a result of
Ohio's health insurance laws. Health insurers in Ohio, including those
offering state-qualified plans, create associations or trusts to sell
individual health insurance coverage. This coverage is technically
group coverage and is therefore subject to certain group health
insurance laws, but is also regulated in part under Ohio's individual
health insurance laws. The benefits and premium-setting practices
resemble those typically observed in the individual, rather than group,
coverage market.
[45] Whereas individual market coverage is regulated almost exclusively
at the state level, employer-sponsored benefits are regulated by the
federal government. For example, federal law includes certain minimum
benefit requirements for employers that choose to offer mental health,
mastectomy, and maternity benefits.
[46] The first 6 days of inpatient care received in a hospital were
subject to a $100 per day copayment, with no cost sharing required
thereafter.
[47] According to the HCTC program office, most advance HCTC enrollees
purchased coverage for one or two individuals.
[48] These employee contributions represent the overall average
contributions made by employees to purchase health coverage through an
employer, regardless of the type of health plan. The average employee
contributions for PPO coverage were similar to these overall averages,
with employees contributing $44 toward the cost of one-person coverage
and $210 toward the cost of family coverage purchased through an
employer. See Kaiser Family Foundation, Employer Health Benefits 2003
Annual Survey.
[49] Although the TAA Reform Act specifically prohibited insurers from
charging HCTC recipients higher premiums than those charged similarly
situated non-HCTC-eligible persons, this provision has not prohibited
the medical underwriting of HCTC applicants if the insurer uses the
same premium-setting practices for all eligible persons who apply for
the same coverage. One state department of insurance official raised a
concern about the clarity of the current federal guidance regarding
this provision.
[50] The degree of premium regulation varies by state. Not all states
limit the extent to which insurers may vary premiums based on factors
such as age and health status. Among those that do, a few states such
as New York, require insurers to charge the same premium to all
enrollees, regardless of age, health status, or any other factor, a
practice known as community rating. Other states require modified
community rating, which permits insurers to adjust premiums based on
demographic characteristics such as age and gender, but not health
status. States may also impose rating bands, which limit the amount to
which premiums can vary based on health status, age, and other factors.
See, for example, GAO, Private Health Insurance: Access to Individual
Market Coverage May Be Restricted for Applicants with Mental Disorders,
GAO-02-339 (Washington, D.C.: Feb. 28, 2002) and Beth C. Fuchs,
Expanding the Individual Health Insurance Market: Lessons from the
State Reforms of the 1990s (Princeton, N.J.: Robert Wood Johnson
Foundation, June 2004).
[51] The TAA Reform Act specifically prohibited insurers from charging
HCTC recipients higher premiums than similarly situated non-HCTC-
eligible individuals. This health plan regarded non-HCTC enrollees who
were eligible for guaranteed coverage under HIPAA as the similarly
situated population. The plan also charged people eligible for coverage
under HIPAA up to 200 percent of the standard premium rate.
[52] HCTC program officials reported that some states were not ready to
submit the names of potentially eligible individuals by August 1, 2003,
but all states were able to transmit names of potentially eligible TAA
recipients by the end of August 2003.
[53] Puerto Rico's workforce agency was included in this survey; the
District of Columbia's workforce agency was not included.
[54] In addition to its primary contractor, Accenture, IRS also
contracted with MITRE for program management support and MITRE's
subcontractor, The Lewin Group, for health industry expertise.
[55] IRS has requested about $35 million for implementation of the HCTC
for fiscal year 2005 and receives separate funding for HCTC payments
made to health plans and individuals. As of July 2004, payments to
health plans for the advance HCTC were about $32 million, and, as of
May 2004, payments to individuals for the end-of-year HCTC were $30
million.
[56] IRS's contract with Accenture, its primary contractor and the
entity responsible for establishing and maintaining the HCTC program
office, began February 1, 2003. These operating costs do not include
costs incurred by IRS or other federal agencies or contractors prior to
the establishment of the HCTC program office in February 2003. These
costs also do not include those incurred by IRS outside of the HCTC
program office, such as costs to process end-of-year HCTC claims or
costs to states and other federal agencies to implement the HCTC.
[57] The HCTC task order was awarded through IRS's Treasury Information
Processing Support Services multiple-award contract. Eighteen
multiple-award contractors, including Accenture, are eligible to
receive individual task order awards in some or all of the service
areas encompassed by the contract. IRS awarded Accenture the HCTC task
order at the end of January 2003, with work beginning February 1, 2003.
[58] According to the HCTC program office, Accenture subcontracted with
15 other companies for work on the HCTC. An official from Accenture
stated that while most of these subcontracts were small and made for
specific technological skills, there was one major subcontract for call
center activities and two other minor subcontracts for network and
backup program support.
[59] Labor issued guidance to states for requesting national emergency
grant funds in its Training and Employment Guidance Letter No. 20-02 in
March 2003. In May 2004, Labor issued additional guidance on the use of
NEG bridge grants for premium assistance during this gap period and
provided procedures for states to access these funds. In addition to
funds for premium assistance, states may use a portion of the grant for
administration, outreach, and informational activities needed for the
HCTC, an amount generally limited to 10 percent.
[60] Since the time our survey was completed in March 2004, Labor has
approved bridge grant applications for Utah and Ohio, and
infrastructure grants for five states (Colorado, Louisiana,
Pennsylvania, Utah, and Wisconsin).
[61] New Hampshire received both a seed grant and an operating grant.
[62] July 1, 1944, c. 373, §2744(c)(2), as added by Pub. L. No. 104-
191, §111(a), 110 Stat. 1984 (1996) (codified at 42 U.S.C. §300gg-
44(c)(2)). CMS interprets the act to require, among other things, that
high-risk pools provide coverage to all individuals who are guaranteed
coverage through HIPAA.
[63] Specifically, we received responses from the California Department
of Insurance and the California Employment Development Department,
Illinois's Comprehensive Health Insurance Plan, the Maryland Health
Insurance Plan and the Maryland Department of Labor, Licensing, and
Regulation, the New York State Department of Labor and the New York
State Insurance Department, the Ohio Department of Insurance and Ohio
Department of Job and Family Services, the Pennsylvania Insurance
Department and Pennsylvania Department of Labor and Industry, and the
Texas Department of Insurance.
[64] We selected eight states for review that had large potentially
eligible populations for the HCTC, had designated different types of
state-qualified plans, and were in geographically diverse areas. One of
these states did not designate any state-qualified coverage for HCTC
recipients.
[65] A PPO is a type of managed care plan that offers a choice of
health care providers but offers financial incentives to use preferred
health care providers. HMOs and EPOs are types of managed care plans
that typically provide coverage only for services through health care
providers within the managed care plan's network. POS plans are similar
to HMOs, but allow use of nonnetwork providers at a higher cost to
participants. Unrestricted FFS plans do not differentiate coverage or
cost-sharing requirements for preferred or nonpreferred health care
providers.
[66] See Henry J. Kaiser Family Foundation and Health Research and
Educational Trust, Employer Health Benefits 2003 Annual Survey (Menlo
Park, Calif., and Chicago: 2003).
[67] Pub. L. No. 95-555, 92 Stat. 2076 (1978).
[68] See Kaiser Family Foundation, Employer Health Benefits 2003 Annual
Survey.
[69] See Kaiser Family Foundation, Employer Health Benefits 2003 Annual
Survey.
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