PL 111-5 (H.R. 1, the American Recovery and Reinvestment Act of 2009)

Target population(s)
COBRA. Workers and their families who have lost their health insurance as a result of losing their job and need help in paying for COBRA continuation coverage premiums.

HCTC. Trade Adjustment Assistance Act recipients (i.e. workers who lost their jobs and health benefits as a result of trade and who can also meet other program requirements) and individuals over 55 receiving pensions from the Pension Benefit Guaranty Corporation (PBGC). 

Eligibility
COBRA.  Individuals involuntarily terminated from employment between September 1, 2008 and December 31, 2009 and who qualify for a COBRA premium subsidy on the basis of income.  (A voluntary resignation will not qualify.)  Premium assistance is available to individuals with annual incomes below $145,000 (single) or $290,000 (couples). (The amount of the assistance is reduced for those between $125,000 and $145,000 and couples between $250,000 and $290,000.)  Note that an employer group health plan must offer COBRA continuation coverage if it had 20 or more employees on a typical business day during the preceding calendar year.  Smaller firms are not required to offer COBRA.  However, individuals who live in states with “mini-COBRA” laws may also qualify for the temporary premium subsidy. 

HCTC. Trade Adjustment Assistance Act recipients and individuals over 55 receiving pensions from the PBGC as long as the individuals do not have other specified health coverage (e.g., Medicare, Medicaid, or SCHIP, or coverage as an employee under an employer-sponsored plan where the employer pays at least a 50% subsidy).  Beginning in January 2010, qualified family members may continue receiving the HCTC for up to 24 months after the primary eligible individual is no longer receiving the HCTC due to certain life events, including enrollment in Medicare, divorce and death. (TAA recipients can receive COBRA for as long as they have TAA eligibility.  PBGC benefit recipients can receive COBRA as a lifetime benefit. Additionally, PBGC beneficiaries can receive COBRA for an additional 24 months after the death of the primary PBGC benefit recipient.)

If a TAA recipient receives a COBRA continuation premium subsidy through his or her employer, the person is not eligible to receive the HCTC during that same month. 

Annual amount of credit/deduction
COBRA.  The premium subsidy is equal to 65% of the COBRA continuation coverage premium. The subsidy is available for a maximum of nine months.  (As under current law, the COBRA continuation coverage itself is generally available for up to 18 or 36 months depending on the qualifying event.)  The premium assistance is not included in an individual’s gross income for federal income tax purposes.

HCTC. Under the Trade Act of 2002, “eligible individuals” and their qualifying family members are eligible for a refundable tax credit for 65% of the health care premium they pay for “qualifying health insurance” during each month they are eligible.   The Act increases the refundable tax credit on a temporary basis (until 2010) to 80% of the premium (including premiums for COBRA coverage).

Qualified health insurance coverage
COBRA.  The subsidy is available for COBRA continuation coverage and for continuation coverage mandated under state law.  (For example, some states mandate that continued coverage be provided to laid-off workers from firms that have fewer than 20 employees.) 

If an employer offers additional health insurance coverage options to active employees, the employer may (but is not required to) allow subsidy eligible individuals to switch the coverage options they had when they became eligible for COBRA. To retain eligibility for the premium reduction, the different coverage must have the same or lower premiums as the individual’s original coverage. The different coverage cannot be coverage that provides only dental, vision, a health flexible spending account, or coverage for treatment that is furnished in an on-site facility maintained by the employer.

HCTC.  Qualified coverage includes COBRA or state-based continuation coverage; a state qualified health plan (e.g., a state high-risk pool); spousal coverage through an employer; or if certain conditions are satisfied, non-group (individual) health insurance.   In addition, until 2011, qualified health insurance includes coverage under a Voluntary Employees’ Benefit Association (VEBA) that is established pursuant to a bankruptcy court order. 

Tax credit refundability
COBRA continuation coverage subsidy: Since the subsidy is not provided as a tax credit to the individual but instead as a premium reduction, it is not refundable.  However, the 65% premium subsidy is refunded to the employer or insurer through a reduction in its payroll taxes.

HCTC.  As under current law, the increased HCTC is refundable. The HCTC is available on a monthly basis to help individuals pay their health insurance costs as they become due or on a yearly basis when they file their federal tax return. 

Availability of tax credit advance payment
COBRA. The premium subsidy is made available to the individual by reducing their monthly premium payments for COBRA coverage to 35% of the premium amount. The employer or insurer then covers the remaining 65% and is reimbursed for this amount through a reduction in the payroll taxes otherwise owed to the federal government.

HCTC. As under current law, the HCTC is available on an advance basis. An individual who is a monthly HCTC participant will see an increase in their HCTC from 65% to 80% tax credit reflected in their bill for the premium beginning in April 2009.  Newly-enrolled participants will be able to receive a credit on their HCTC account for qualified health insurance payments they paid while enrolling in the monthly HCTC program. The HCTC program will begin offering this option in August 2009.

Requirements on employers to maintain existing coverage
COBRA.  No provision.  However, employers and other plan issuers are required to allow qualified beneficiaries eligible for the subsidy to have a 60-day period to elect COBRA coverage if not previously elected because they could not afford the premium.  However, the coverage is prospective only beginning on the date of election.

HCTC.  No provision. 

Changes to the tax exclusion for health insurance
COBRA:  No provision.

HCTC: No provision.

New federal requirements on the health insurance market (e.g., underwriting, rating or marketing).
COBRA:  No provision.

HCTC: No provision. 

Related changes to public insurance programs (Medicare, Medicaid, SCHIP)
COBRA continuation coverage subsidy:  No provision.

HCTC: No provision.

Effective date
COBRA.  In general, the premium reduction applies to periods of health coverage on or after February 17, 2009 and lasts up to nine months.

HCTC.  The increased credit is effective for the first month beginning 60 days after enactment and expires on December 31, 2010.  The changes to the HCTC - including the new timeframes for extended benefits - are only valid for the remainder of 2009 and 2010.

Other provisions in bill
COBRA. Qualified beneficiaries who are no longer eligible for premium assistance must notify the group health plan.  The timing and content of the notice is to be prescribed by the Secretary of Labor.  A money penalty will be imposed for failure to notify the group health plan.  Group health plans and issuers are also subject to a variety of notice requirements. The Secretary of Labor or HHS (depending on the appropriate administering agency) – in consultation with the Secretary of Treasury – is required to provide for expedited review of denials of the COBRA continuation coverage premium subsidy. Either Secretary’s determination is final (i.e., it cannot be appealed).

Requires the GAO to submit to Congress an analysis of administrative costs to the federal government of advance payment of refundable tax credit and the administrative costs to providers of qualified health insurance; health status and relative risk of those receiving the HCTC; participation rate of those eligible for HCTC; and extent to which those eligible for HCTC obtained non-qualified insurance or went without insurance.