Making sure that all Americans have insurance coverage has historically been a joint federal-state partnership, and state policymakers should take advantage of the 2002 Trade Adjustment Assistance Act (TAA). This federal law provides a federal health insurance tax credit for workers hurt by foreign trade along with funding to states so they can ensure access to coverage if it is not available from the worker's former employer. Unfortunately, a handful of states still have not done so, leaving many unemployed workers without health coverage with which to use the tax credit. The TAA also provides the same assistance to retired workers whose pensions have gone bankrupt.
In this newest federal-state partnership, the federal government provides a tax credit worth 65 percent of the premium of health insurance. Many unemployed workers are eligible for the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) program. The COBRA system requires employers who offer health insurance and have more than 25 employees to allow employees to keep their insurance for up to 18 months after they leave the company, as long as the former employee pays the full premium. The new tax credit is both refundable and advanceable, meaning that workers who owe no income tax can still use the tax credit to offset monthly premium costs instead of waiting for a refund on their tax return. But many workers do not qualify for COBRA coverage, and states are responsible for making coverage available to them. Several states offer models for helping them get insurance by offering a "mini-COBRA" that covers workers in small businesses. But for workers who are ineligible for both federal and state COBRA, states need to make another option available.
One option is a high-risk insurance pool. Legislators in at least 24 states have previously created subsidized high-risk pools so that people with pre-existing health conditions will not be excluded when they search for health insurance on the private market after losing a job or if their employer does not offer health insurance. While subsidized high-risk pools help relatively few people and have technical problems that make them a far-from-perfect health care solution, they may be the most direct route to implementing TAA coverage.
For example, Maryland used its high-risk pool and became one of the first states to implement TAA. In 2002, then-Delegate Casper Taylor, Speaker of the House of Delegates, sponsored legislation to create the Maryland Health Insurance Plan (MHIP), a high-risk pool that gives the hard-to-insure an option while lowering the cost of premiums for insurance purchased by individuals. With its Health Insurance Plan up and running, Maryland was well-positioned to leverage its high-risk pool and win grants to enable coverage.
Pennsylvania was also quick to implement TAA but used a different option. It has arranged coverage through Blue Cross and Blue Shield health plans, which operate as insurers of last resort much like the high-risk pool in Maryland.
Whether through a high-risk pool, an arrangement with a private insurer, or a mini-COBRA plan, 43 states now offer some purchasing option for TAA eligibles. Nevertheless, TAA implementation still has a long way to go. The most recent figures reveal that only 22 percent of eligible participants take advantage of the health coverage tax credit, a third of the number anticipated at the program's inception, according to a 2005 report by the Commonwealth Fund.
There are a number of reasons why workers have been slow to take advantage of the new tax credit. Aside from implementation delays, part of the problem is the cost of the coverage to workers. The federal tax credit covers 65 percent of the cost, but 35 percent can still be steep -- especially for low-income workers. Stan Dorn, a senior fellow at the Urban Institute, believes that the TAA program should increase the credit to cover 75 percent of health insurance premiums for displaced workers. He believes that the failure of workers to take advantage of the new tax credit is due to their inability to pay for the loss in coverage given that workers usually have 85 percent of premiums covered while employed. If the nation is to provide more generous and more targeted assistance, states could adopt a little-used Medicaid option to pay 100 percent of a low-income worker's COBRA coverage.
Another problem is that premiums for state-based plans vary widely from person to person and state to state. A healthy 25-year-old might have to pay as little as $32 a month, while an unhealthy 60-year-old must pay as much as $690 a month. As much as local insurance practices will permit, states should constrain these variations within reasonable limits.
A third issue preventing higher participation rates is the waiting period between the time when the applicant submits his or her request and the time the application is processed. The IRS typically takes 1-3 months to process claims, during which time applicants are expected to pay the full 35 percent of the insurance premium. Only 12 states cover applicants during this wait time. Other states should do the same in order to remove this critical barrier to participation.
Much can also be done to simplify and improve the complicated enrollment materials sent to workers. Workers need the equivalent of a quick-start guide found in new electronic products. Online enrollment would also be helpful, as would outreach to workers who are eligible for TAA cash assistance as well as multilingual options.
Like the State Children's Health Insurance Program, the TAA program will take time to become widely appreciated and effectively administered, while weighing the investment of time and money needed to make this program work, states should consider that members of both political parties in Congress have proposed using the TAA program as a model for covering more uninsured Americans.
Health Insurance Safety Act of 2002, Maryland House of Delegates
http://mlis.state.md.us/2002rs/billfile/hb1228.htm
Pennsylvania Health Care Cost Containment Council, "Pennsylvania Takes the Lead with New Federal Health Care Tax Credit Program," PHC4 fyi, May 2003
http://www.phc4.org/reports/fyi/fyi18.htm
Trade Adjustment Assistance Reform Act of 2002, U.S. Department of Labor
http://www.doleta.gov/tradeact/2002act_index.cfm
"HHS to Help States Create High-Risk Pools to Increase Access to Health Coverage," U.S. Department of Health and Human Services Press Release, November 26, 2002
http://www.hhs.gov/news/press/2002pres/20021126a.html
Trade Adjustment Act of 2002
www.doleta.gov/tradeact/2002act_index.cfm
National Association of Health Underwriters
www.nahu.org/legislative/TAA/index.cfm
Pension Benefit Guaranty Corporation
www.pbgc.gov
IRS Listing of State-Qualified HCTC Plans for 2005
http://www.irs.gov/individuals/article/0,,id=119335,00.html
Jeff Lemieux, "A Small but Significant Victory for Health Coverage," Progressive Policy Institute, May 15, 2002
www.ppionline.org/ppi_ci.cfm?contentid=250475
&knlgAreaID=111&subsecid=137
Jeff Lemieux, "Transitional Health Coverage For All Unemployed Workers," Progressive Policy Institute, April 3, 2003
www.ppionline.org/ppi_ci.cfm?contentid=251448
&knlgAreaID=111&subsecid=137
Stan Dorn, Janet Varon, and Fouad Pervez, "Limited Take-Up of Health Coverage Tax Credits: A Challenge to Future Tax Credit Design," The Commonwealth Fund, October 2005
http://www.cmwf.org/publications/publications_show.htm?doc_id=311250
Stan Dorn, Tanya Alteras, and Jack A. Meyer, "Early Implementation of the Health Coverage Tax Credit in Maryland, Michigan, and North Carolina: A Case Study Summary," The Commonwealth Fund, April 2005
www.cmwf.org/usr_doc/806_dorn_earlyimplementationhct.pdf
"New Dem Daily: Equal Help for Service Workers," Democratic Leadership Council, February 24, 2004
www.dlc.org/ndol_ci.cfm?kaid=131
&subid=192&contentid=252408
Geoff Dunaway
Director, Accident & Health Bureau
Pennsylvania Insurance Department
1311 Strawberry Square, 13th Floor
Harrisburg, Pennsylvania 17120
(717) 787-4192
(717) 787-8555 (fax)
gdunaway@state.pa.us
David B. Kendall
Progressive Policy Institute
4021 Heritage Way
Missoula, MT 59802
(406) 543-2265
(772) 679-0652 (fax)
dkendall@ppionline.org
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