Expiration Of Health Coverage Tax Credit Will Affect Participants’ Costs And Coverage Choices: GAO

The expiration of the health coverage tax credit (HCTC) and implementation of the Patient Protection and Affordable Care Act’s (ACA) premium tax credits, cost-sharing subsidies, and Medicaid expansion will affect HCTC participants’ costs for health plans in multiple ways, according to a recent report from the Government Accountability Office (GAO). The report, Expiration of the Health Coverage Tax Credit Will Affect Participants’ Costs and Coverage Choices as Health Reform Provisions Are Implemented (GAO-13-147), found that most HCTC participants in 2014 will likely be eligible for less generous tax credits under ACA than the HCTC.

The HCTC pays 72.5 percent of health plan premiums for certain workers who lost their jobs due to foreign import competition and for certain retirees whose pensions from their former employers were terminated and are now paid by the Pension Benefit Guaranty Corporation. The HCTC program will expire at the end of 2013 when premium tax credits and cost-sharing subsidies become available to eligible individuals who purchase health plans through health insurance exchanges under the ACA.

The GAO report examines: (1) how the HCTC’s expiration and the implementation of the ACA premium tax credit, cost-sharing subsidies, and Medicaid expansion will affect HCTC participants and nonparticipants, and (2) how the coverage that will be available through the ACA exchanges compares to HCTC participants’ health plan coverage. GAO analyzed 2010 HCTC program data and individual tax filer data. GAO also compared the services and actuarial values of the plans that will be available through the exchanges to HCTC plans.

The GAO found that approximately 69 percent of HCTC participants will likely be ineligible for either an ACA premium tax credit or Medicaid, or they will likely receive a ACA premium tax credit less generous than the HCTC. However, the GAO’s analysis also found that at least 23 percent will likely be eligible for ACA premium tax credits more generous than the HCTC. In addition to the ACA premium tax credit, up to 28 percent of all HCTC participants will likely be eligible for ACA cost-sharing subsidies, depending in part on whether or not their state expands Medicaid under the ACA.

In general, the health plan coverage that will be available through the ACA exchanges will be comparable to coverage in HCTC participants’ current plans; however, HCTC participants may have an incentive to choose plans through the exchanges that have different levels of coverage than their HCTC plans. Plans purchased through the ACA exchanges will be required to provide essential health benefits—including coverage for specific service categories, such as ambulatory care, prescription drugs, and hospitalization—and most HCTC plans cover these categories of services. In addition, the vast majority of HCTC plans in 2012 likely had actuarial values above the minimum actuarial value of 60 percent that health plans sold through the ACA exchanges will be required to meet.

For more information, visit http://www.gao.gov/products/GAO-13-147.

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