	Background

The HCTC, which pays a portion of health plan premiums for certain  eligible workers and retirees, is set to expire at the end of 2013 when  certain PPACA provisions, including PPACA premium tax credits, cost- sharing subsidies, and expansion of Medicaid eligibility, are implemented. Individuals  potentially eligible for the HCTC include manufacturing and service  workers who lost their jobs due to foreign import competition and were  eligible for TAA benefits (representing about 51 percent of all potentially  eligible individuals), and certain retirees between the ages of 55 and 64  whose pensions from a former employer were terminated and are now  paid by the PBGC (representing about 47 percent of all potentially eligible  individuals). When the HCTC Expires Most HCTC Participants Will Likely Be Ineligible for a PPACA Premium Tax Credit or Eligible for a Credit Less Generous Than the HCTC

The expiration of the HCTC and implementation of the PPACA premium  tax credits and Medicaid expansion will affect HCTC participants’ costs  for health plans in multiple ways. Projections from our analysis of 2010  IRS data show that about 69 percent of HCTC participants will likely  either be ineligible for a PPACA premium tax credit or Medicaid, or will be  eligible for a PPACA premium tax credit that is less generous than the  HCTC. On the other hand, at least 27 percent of HCTC participants will be  eligible for a PPACA premium tax credit more generous than the HCTC or  be eligible for Medicaid. However, up to 12,141  participants will likely receive a credit similar to or greater than the HCTC. The expiration of the HCTC and implementation of PPACA cost-sharing  subsidies will also affect HCTC participants’ out-of-pocket costs for health  plans. Projections from our analysis of 2010 IRS data show that up to   28 percent of all HCTC participants who are eligible for the PPACA  premium tax credit will likely also be eligible for a PPACA cost-sharing  subsidy in 2014 to help pay for deductibles and copays, depending in part  on whether or not their state expands Medicaid. In addition to being eligible for the PPACA premium tax credit, based on  projections from our analysis of 2010 IRS data, up to 30 percent of all  HCTC nonparticipants may also be eligible for a PPACA cost-sharing  subsidy in 2014 to help pay for deductibles and copays, depending in part  on whether or not their state expands Medicaid and whether they meet all  other eligibility criteria for the PPACA premium tax credits. Health Plan Coverage under PPACA Will Be Comparable to HCTC Plans, but Participants May Have an Incentive to Change Their Level of Coverage

The health plan coverage available under PPACA will be comparable to  coverage in current HCTC-qualified health plans. Specifically, the  categories of services that plans purchased through the PPACA  exchanges will be required to cover are comparable to those currently  covered by most HCTC plans, and the actuarial values of HCTC plans  are likely above the minimum level of coverage that will be required in  PPACA exchange plans. However, under PPACA, HCTC participants  may have an incentive to choose plans through the exchanges that have  different levels of coverage than their HCTC plans. HCTC Plans’ Actuarial Values Are Likely above PPACA’s Minimum Level of Value

The vast majority of HCTC participants in 2012 were likely enrolled in  plans with actuarial values that were above the minimum level of   60 percent (bronze) required for plans purchased through the PPACA  exchanges, including many who were likely enrolled in plans that had  actuarial values of 80 percent (gold) or higher. For example:
Some HCTC participants eligible for PPACA premium tax credits  could have an incentive to change to a higher level of coverage. For example, if the HCTC participants  who have coverage at the 80 percent (gold) or 90 percent (platinum)  levels of coverage are eligible for a PPACA premium tax credit and  want to purchase a plan through a PPACA exchange with a  comparable actuarial value, they will have to pay the difference  between the premium for a plan with an actuarial value of 80 percent  (gold) or 90 percent (platinum) and their PPACA premium tax credit. Again, this is because the PPACA premium tax credit amount will be  based on the reference plan premium (the second-lowest-cost   70 percent  plan) for their exchange. Agency Comments

We provided draft copies of this report to HHS and IRS for review, and  both provided technical comments, which we incorporated as appropriate. Appendix I: Characteristics of Health Coverage Tax Credit (HCTC) Participants and Nonparticipants in 2010

We identified HCTC participants and nonparticipants by age groups,  household income based on a percentage of the federal poverty level  (FPL), and HCTC eligibility type using 2010 Internal Revenue Service  (IRS) data. Medicaid Expansion: States’ Implementation of the Patient Protection and  Affordable Care Act.
Why GAO Did This Study

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. A small share of individuals who are potentially eligible for the HCTC participate. In 2010 there were 43,864 participants and 469,168 nonparticipants. 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 PPACA. PPACA also expands Medicaid eligibility to nonelderly individuals who meet specific income requirements to the extent that states choose to implement this provision. Therefore, the costs for health plans and coverage available to individuals potentially eligible for the HCTC will change when the HCTC expires.
This report examines (1) how the HCTCs expiration and the implementation of the PPACA 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 PPACA 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.

What GAO Found

Expiration of the Health Coverage Tax Credit (HCTC) and implementation of Patient Protection and Affordable Care Act (PPACA) premium tax credits, cost-sharing subsidies, and Medicaid expansion will affect HCTC participants' costs for health plans in multiple ways. Projections from GAO's analysis of 2010 Internal Revenue Service (IRS) data show that most HCTC participants in 2014 will likely be eligible for less generous tax credits under PPACA than the HCTC. Specifically, about 69 percent of HCTC participants will likely be ineligible for either a PPACA premium tax credit or Medicaid, or they will likely receive a PPACA premium tax credit less generous than the HCTC. On the other hand, GAO's analysis also found that at least 23 percent will likely be eligible for PPACA premium tax credits more generous than the HCTC. In addition to the PPACA premium tax credit, up to 28 percent of all HCTC participants will likely be eligible for PPACA cost-sharing subsidies--subsidies that will help them pay for deductibles and copays--depending in part on whether or not their state expands Medicaid under PPACA. For HCTC nonparticipants, the projections from GAO's analysis of 2010 IRS data show that as many as 30 percent may be eligible for either Medicaid or a PPACA premium tax credit more generous than the HCTC in 2014, depending in part on whether or not their state expands Medicaid and whether they meet all other eligibility criteria for the PPACA premium tax credits.
In general, the health plan coverage that will be available through the PPACA 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 PPACA 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--the expected percentage of costs that a plan will incur for services provided to a standard population--above the minimum actuarial value of 60 percent that health plans sold through the PPACA exchanges will be required to meet. However, because the PPACA premium tax credit amount will be based on a plan with an actuarial value of 70 percent, HCTC participants who currently have plans with either higher or lower actuarial values and are eligible for PPACA premium tax credits may have an incentive to choose plans that will have different levels of coverage than their HCTC plans. For example, those who have HCTC plans with actuarial values that are higher than 70 percent may have an incentive to shift to health plans with an actuarial value of 70 percent to avoid paying any difference in premiums that could result from choosing plans with higher actuarial values. Similarly, those who now have plans with actuarial values below 70 percent could have the opposite incentive and may purchase plans that offer a higher level of coverage than their current HCTC plans.
We provided draft copies of this report to the Department of Health and Human Services and IRS for review, and both provided technical comments, which we incorporated as appropriate.