Benefits

Senate Leaders Agree on New Approach to Health Coverage Tax Credit

By Staff Report

Aug. 5, 2011

Democratic and Republican leaders agreed on a new approach to consider legislation to increase federal health insurance premium subsidies for employees who lose their jobs because of foreign competition and older retirees in failed pension plans.


Senate Finance Committee Chairman Max Baucus, D-Montana, previously proposed, with support from the Obama administration, increasing the Health Coverage Tax Credit as part of a free-trade agreement with South Korea. However, Republican panel members opposed the approach and boycotted a hearing on the issue.


On Aug. 3, Senate Majority Leader Harry Reid, D-Nevada, and Minority Leader Mitch McConnell, R-Kentucky, announced an agreement in which there would be separate votes on legislation to extend the Trade Adjustment Assistance law, which contains the health premium subsidy provisions, and the South Korean trade pact and two other trade pacts with Colombia and Panama.


Previously, House Ways and Means Committee Chairman Dave Camp, R-Michigan, said his panel would consider extending the Trade Adjustment Assistance health premium subsidy provision, so long as it was not included in a free trade agreement.


The Health Coverage Tax Credit was created in 2002 and included as part of the Trade Adjustment Assistance law. Federal lawmakers set the subsidy as a 65 percent federal tax credit. In 2009, an economic stimulus law raised the credit to 80 percent through Dec. 31, 2010, and Congress last year approved a temporary extension through Feb. 13.


The administration said it would back raising the tax credit to 72.5 percent and letting the credits expire after Dec. 31, 2013. That is when key provisions of the health care reform law begin, including federal health insurance premium subsidies for the lower-income uninsured. Baucus incorporated the 72.5 percent subsidy as part of a draft free-trade agreement with South Korea that he unveiled in June.


Aside from those who lose their jobs because of foreign competition, the subsidy is available to those at least age 55 whose pension plans have been taken over by the Pension Benefit Guaranty Corp.


The Health Coverage Tax Credit can be used to offset the cost of a variety of health insurance plans, including COBRA continuation coverage and individual plans offered by commercial insurers.


Nearly 60 percent of beneficiaries use the credit to pay COBRA premiums.
Unlike other federal tax credits, the health coverage credit is available regardless of whether an individual pays any federal taxes.


Under a system implemented by the Internal Revenue Service, the beneficiary pays 35 percent of his or her premium to the government. Then the IRS remits the full amount to the health plan or plan administrator.  


Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.


 


Stay informed and connected. Get human resources news and HR features via Workforce Management’s Twitter feed or RSS feeds for mobile devices and news readers.

About Workforce.com

blog workforce

We build robust scheduling & attendance software for businesses with 500+ frontline workers. With custom BI reporting and demand-driven scheduling, we help our customers reduce labor spend and increase profitability across their business. It's as simple as that.

Book a call
See the software

Related Articles

workforce blog

Benefits

EEOC says that employers legally can offer incentives to employees to get vaccinated in almost all instances

If you’re an employer looking to get as many of your employees vaccinated as possible, you can rest eas...

ADA, CDC, COVID-19, EEOC, GINA, pandemic, vaccinated

workforce blog

Benefits

Fixing some common misconceptions about HIPAA

Ever since the CDC amended its COVID-19 guidance to say that the fully vaccinated no longer need to wea...

COVID-19, health care, HIPAA, human resources, wellness

workforce blog

Benefits

We are in the midst of a public mental health crisis; how employers can help

Do not ignore these issues or your employees who are living with them. Mental health illnesses are no d...

ADA, benefits, Coronavirus, FMLA, mental health, paid time off