Health Coverage Tax Credit: Simplified and More Timely Enrollment Process Could Increase Participation

Highlights

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.

Recommendations

Matter for Congressional Consideration

Matter	Status	Comments
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.	Closed – Not Implemented	The Trade Adjustment Assistance Extension Act of 2011 specified that the HCTC program will expire at the end of 2013. Therefore, any additional congressional action related to the HCTC will not be needed.
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.	Closed – Not Implemented	The Trade Adjustment Assistance Extension Act of 2011 specified that the HCTC program will expire at the end of 2013. Therefore, any additional congressional action related to the HCTC will not be needed.
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.	Closed – Not Implemented	The Trade Adjustment Assistance Extension Act of 2011 specified that the HCTC program will expire at the end of 2013. Therefore, any additional congressional action related to the HCTC will not be needed.

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Centers for Medicare & Medicaid Services	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.	Closed – Implemented To address GAO's recommendation regarding information to assist HCTC eligibles comply with HCTC's eligibility requirements, IRS and other agencies have developed the following tools: 1) A HCTC program kit was launched in early 2007 to assist eligible individuals through the steps required to determine eligibility for HCTC and access program benefits. The program kit is an interactive tool which asks a variety of eligibility questions and addresses other program requirements. Based on the responses provided to these questions the individual goes through the program eligibility process to determine whether they are qualified for HCTC, and what actions are required to establish eligibility and receive program benefits. The design of the program kit--incorporating a skip pattern--assists the individual in addressing issues that are relevant to their specific individual circumstance and skips those that are not. 2) HCTC Guide for State Rapid Response Teams-this guide offers tips to help state rapid response teams provide timely information about HCTC to employers, employees and health plan administrators. 3) TAA/ATAA registration to do list--helps TAA/ATAA eligibles successfully register for HCTC. 4) Employer's information guide--this guide provided to employers contains answers on questions such as what is the HCTC, who is eligible for HCTC, how employers can help their employees access HCTC benefits, and what are qualified health plans. 5) PBGC Registration to do list--this check list is designed to ensure successful registration for HCTC. The check list contains information on how to register for PBGC benefits, how to enroll in a qualified health plan, what to do when you receive a HCTC program kit and what to expect once registration is complete. 6) HCTC flow chart--shows each step in the TAA and PBGC certification process and how long the overall process typically takes. The tools developed and actions taken by the IRS and Labor address this recommendation.
Pension Benefit Guaranty Corporation	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.	Closed – Implemented To address GAO's recommendation regarding information to assist HCTC eligibles comply with HCTC's eligibility requirements, IRS and other agencies, including PBGC, have developed the following tools: 1) A HCTC program kit was launched in early 2007 to assist eligible individuals through the steps required to determine eligibility for HCTC and access program benefits. The program kit is an interactive tool which asks a variety of eligibility questions and addresses other program requirements. Based on the responses provided to these questions the individual goes through the program eligibility process to determine whether they are qualified for HCTC, and what actions are required to establish eligibility and receive program benefits. The design of the program kit--incorporating a skip pattern--assists the individual in addressing issues that are relevant to their specific individual circumstance and skips those that are not. 2) HCTC Guide for State Rapid Response Teams-this guide offers tips to help state rapid response teams provide timely information about HCTC to employers, employees and health plan administrators. 3) TAA/ATAA registration to do list--helps TAA/ATAA eligibles successfully register for HCTC. 4) Employer's information guide--this guide provided to employers contains answers on questions such as what is the HCTC, who is eligible for HCTC, how employers can help their employees access HCTC benefits, and what are qualified health plans. 5) PBGC Registration to do list--this check list is designed to ensure successful registration for HCTC. The check list contains information on how to register for PBGC benefits, how to enroll in a qualified health plan, what to do when you receive a HCTC program kit and what to expect once registration is complete. 6) HCTC flow chart--shows each step in the TAA and PBGC certification process and how long the overall process typically takes. The tools developed and actions taken by the IRS and Labor address this recommendation.
Department of Labor	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.	Closed – Implemented To address GAO's recommendation regarding information to assist HCTC eligibles comply with HCTC's eligibility requirements IRS and Labor have developed the following tools: 1) A HCTC program kit was launched in early 2007 to assist eligible individuals through the steps required to determine eligibility for HCTC and access program benefits. The program kit is an interactive tool which asks a variety of eligibility questions and addresses other program requirements. Based on the responses provided to these questions the individual goes through the program eligibility process to determine whether they are qualified for HCTC, and what actions are required to establish eligibility and receive program benefits. The design of the program kit--incorporating a skip pattern--assists the individual in addressing issues that are relevant to their specific individual circumstance and skips those that are not. 2) HCTC Guide for State Rapid Response Teams-this guide offers tips to help state rapid response teams provide timely information about HCTC to employers, employees and health plan administrators. 3) TAA/ATAA registration to do list--helps TAA/ATAA eligibles successfully register for HCTC. 4) Employer's information guide--this guide provided to employers contains answers on questions such as what is the HCTC, who is eligible for HCTC, how employers can help their employees access HCTC benefits, and what are qualified health plans. 5) PBGC Registration to do list--this check list is designed to ensure successful registration for HCTC. The check list contains information on how to register for PBGC benefits, how to enroll in a qualified health plan, what to do when you receive a HCTC program kit and what to expect once registration is complete. 6) HCTC flow chart--shows each step in the TAA and PBGC certification process and how long the overall process typically takes. The tools developed and actions taken by the IRS and Labor address this recommendation.
Internal Revenue Service	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.	Closed – Implemented To address GAO's recommendation regarding information to assist HCTC eligibles comply with HCTC's eligibility requirements, IRS and other agencies have developed the following tools: 1) A HCTC program kit was launched in early 2007 to assist eligible individuals through the steps required to determine eligibility for HCTC and access program benefits. The program kit is an interactive tool which asks a variety of eligibility questions and addresses other program requirements. Based on the responses provided to these questions the individual goes through the program eligibility process to determine whether they are qualified for HCTC, and what actions are required to establish eligibility and receive program benefits. The design of the program kit--incorporating a skip pattern--assists the individual in addressing issues that are relevant to their specific individual circumstance and skips those that are not. 2) HCTC Guide for State Rapid Response Teams-this guide offers tips to help state rapid response teams provide timely information about HCTC to employers, employees and health plan administrators. 3) TAA/ATAA registration to do list--helps TAA/ATAA eligibles successfully register for HCTC. 4) Employer's information guide--this guide provided to employers contains answers on questions such as what is the HCTC, who is eligible for HCTC, how employers can help their employees access HCTC benefits, and what are qualified health plans. 5) PBGC Registration to do list--this check list is designed to ensure successful registration for HCTC. The check list contains information on how to register for PBGC benefits, how to enroll in a qualified health plan, what to do when you receive a HCTC program kit and what to expect once registration is complete. 6) HCTC flow chart--shows each step in the TAA and PBGC certification process and how long the overall process typically takes. The tools developed and actions taken by the IRS and Labor address this recommendation.
Internal Revenue Service	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.	Closed – Implemented The HCTC program monitors service levels at the customer contact center to assess the quality of service delivered to its customers. The HCTC program tracks the following statistics: (1) assistor response level (ARL); (2) average speed to answer (ASA); and (3) average handle time (AHT). These statistics are monitored daily, weekly, and monthly. The target ARL of an 80 percent target level (80 percent of calls answered in 30 seconds) was met each month during the specified period. AHT improved from May 2004 to May 2005 and ASA increased during the 2 month period (December 04 and January 05) when health plan changes are processed.
Department of Labor	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.	Closed – Implemented To address GAO's recommendation regarding improving the quality and accuracy of data received from state workforce agencies, IRS and Labor have taken a number of steps. These steps include: (1) conducting monthly reviews of the eligibility list and providing feedback to the states through Labor; (2) establishing a data quality working group to diagnose existing data quality issues and provide guidance to help states; and (3) encouraging registration for HCTC earlier in the month, resulting in fewer late records. As of September 2006, a Labor official reported that they continue to work with IRS to monitor the eligibility lists received from the state workforce agencies. A Labor official reported in September 2007 that "there has been a dramatic decrease in congressional correspondence surrounding HCTC eligibility issues, which would support a conclusion that accuracy of state lists has been successfully addressed." In addition, the official stated that changes to the HCTC program which would simplify the process are under discussion in the Trade Reauthorization process currently before Congress. The actions taken by Labor and IRS address this recommendation.
Internal Revenue Service	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.	Closed – Implemented To address GAO's recommendation regarding improving the quality and accuracy of data received from state workforce agencies, IRS and Labor have taken a number of steps. These steps include: (1) conducting monthly reviews of the eligibility list and providing feedback to the states through Labor; (2) establishing a data quality working group to diagnose existing data quality issues and provide guidance to help states; and (3) encouraging registration for HCTC earlier in the month, resulting in fewer late records. As of September 2006, a Labor official reported that they continue to work with IRS to monitor the eligibility lists received from the state workforce agencies. A Labor official reported in September 2007 that "there has been a dramatic decrease in congressional correspondence surrounding HCTC eligibility issues, which would support a conclusion that accuracy of state lists has been successfully addressed." In addition, the official stated that changes to the HCTC program which would simplify the process are under discussion in the Trade Reauthorization process currently before Congress. The actions taken by Labor and IRS address this recommendation.
Internal Revenue Service	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.	Closed – Implemented The HCTC executive change control board has approved a proposal to standardize the HCTC's ability to process bulk premium changes from health plan administrators using standardized forms and documentation. Approximately 30 percent of premium changes made this year were bulk premium changes made upon the health plan administrator's request.
Internal Revenue Service	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.	Closed – Implemented HCTC and PBGC analyzed their data to estimate the number of HCTC enrollees who have lost eligibility for HCTC because they became eligible for Medicare. Based on this analysis, it was estimated that 1,300 PBGC advance payment enrollees turn 65 in a year, affecting approximately 600 qualified family members who lost coverage. As HCTC program enrollment increases, it is expected that the number of participants turning 65 and the number of affected qualified family members will increase proportionately.
Pension Benefit Guaranty Corporation	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.	Closed – Implemented HCTC and PBGC analyzed their data to estimate the number of HCTC enrollees who have lost eligibility for HCTC because they became eligible for Medicare. Based on this analysis, it was estimated that 1,300 PBGC advance payment enrollees turn 65 in a year, affecting approximately 600 qualified family members who lost coverage. As HCTC program enrollment increases, it is expected that the number of participants turning 65 and the number of affected qualified family members will increase proportionately.