oversight

Private Health Insurance: Expiration of the Health Coverage Tax Credit Will Affect Participants' Costs and Coverage Choices as Health Reform Provisions Are Implemented

Published by the Government Accountability Office on 2012-12-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                United States Government Accountability Office

GAO             Report to Congressional Requesters




                PRIVATE HEALTH
December 2012



                INSURANCE

                Expiration of the
                Health Coverage Tax
                Credit Will Affect
                Participants’ Costs
                and Coverage Choices
                as Health Reform
                Provisions Are
                Implemented




GAO-13-147
                                             December 2012

                                             PRIVATE HEALTH INSURANCE
                                             Expiration of the Health Coverage Tax Credit Will
                                             Affect Participants’ Costs and Coverage Choices as
                                             Health Reform Provisions Are Implemented
Highlights of GAO-13-147, a report to
congressional requesters




Why GAO Did This Study                       What GAO Found
The HCTC pays 72.5 percent of health         Expiration of the Health Coverage Tax Credit (HCTC) and implementation of
plan premiums for certain workers who        Patient Protection and Affordable Care Act (PPACA) premium tax credits, cost-
lost their jobs due to foreign import        sharing subsidies, and Medicaid expansion will affect HCTC participants’ costs
competition and for certain retirees         for health plans in multiple ways. Projections from GAO’s analysis of 2010
whose pensions from their former             Internal Revenue Service (IRS) data show that most HCTC participants in 2014
employers were terminated and are            will likely be eligible for less generous tax credits under PPACA than the HCTC.
now paid by the Pension Benefit              Specifically, about 69 percent of HCTC participants will likely be ineligible for
Guaranty Corporation. A small share of       either a PPACA premium tax credit or Medicaid, or they will likely receive a
individuals who are potentially eligible
                                             PPACA premium tax credit less generous than the HCTC. On the other hand,
for the HCTC participate. In 2010
                                             GAO’s analysis also found that at least 23 percent will likely be eligible for
there were 43,864 participants and
469,168 nonparticipants. The HCTC
                                             PPACA premium tax credits more generous than the HCTC. In addition to the
program will expire at the end of 2013       PPACA premium tax credit, up to 28 percent of all HCTC participants will likely
when premium tax credits and cost-           be eligible for PPACA cost-sharing subsidies—subsidies that will help them pay
sharing subsidies become available to        for deductibles and copays—depending in part on whether or not their state
eligible individuals who purchase            expands Medicaid under PPACA. For HCTC nonparticipants, the projections
health plans through health insurance        from GAO’s analysis of 2010 IRS data show that as many as 30 percent may be
exchanges under PPACA. PPACA also            eligible for either Medicaid or a PPACA premium tax credit more generous than
expands Medicaid eligibility to              the HCTC in 2014, depending in part on whether or not their state expands
nonelderly individuals who meet              Medicaid and whether they meet all other eligibility criteria for the PPACA
specific income requirements to the          premium tax credits.
extent that states choose to implement
this provision. Therefore, the costs for     In general, the health plan coverage that will be available through the PPACA
health plans and coverage available to       exchanges will be comparable to coverage in HCTC participants’ current plans;
individuals potentially eligible for the     however, HCTC participants may have an incentive to choose plans through the
HCTC will change when the HCTC               exchanges that have different levels of coverage than their HCTC plans. Plans
expires.                                     purchased through the PPACA exchanges will be required to provide essential
                                             health benefits—including coverage for specific service categories, such as
This report examines (1) how the             ambulatory care, prescription drugs, and hospitalization—and most HCTC plans
HCTC’s expiration and the
                                             cover these categories of services. In addition, the vast majority of HCTC plans
implementation of the PPACA premium
                                             in 2012 likely had actuarial values—the expected percentage of costs that a plan
tax credit, cost-sharing subsidies, and
Medicaid expansion will affect HCTC          will incur for services provided to a standard population—above the minimum
participants and nonparticipants, and        actuarial value of 60 percent that health plans sold through the PPACA
(2) how the coverage that will be            exchanges will be required to meet. However, because the PPACA premium tax
available through the PPACA                  credit amount will be based on a plan with an actuarial value of 70 percent,
exchanges compares to HCTC                   HCTC participants who currently have plans with either higher or lower actuarial
participants’ health plan coverage.          values and are eligible for PPACA premium tax credits may have an incentive to
GAO analyzed 2010 HCTC program               choose plans that will have different levels of coverage than their HCTC plans.
data and individual tax filer data. GAO      For example, those who have HCTC plans with actuarial values that are higher
also compared the services and               than 70 percent may have an incentive to shift to health plans with an actuarial
actuarial values of the plans that will be   value of 70 percent to avoid paying any difference in premiums that could result
available through the exchanges to           from choosing plans with higher actuarial values. Similarly, those who now have
HCTC plans.                                  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
View GAO-13-147. For more information,
contact John Dicken at (202) 512-7114 or     Services and IRS for review, and both provided technical comments, which we
dickenj@gao.gov.                             incorporated as appropriate.

                                                                                     United States Government Accountability Office
Contents


Letter                                                                                             1
                       Background                                                                  9
                       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                                      17
                       Health Plan Coverage under PPACA Will Be Comparable to HCTC
                         Plans, but Participants May Have an Incentive to Change Their
                         Level of Coverage                                                       23
                       Agency Comments                                                           30

Appendix I             Characteristics of Health Coverage Tax Credit (HCTC)
                       Participants and Nonparticipants in 2010                                  32



Appendix II            GAO Contact and Staff Acknowledgments                                     34



Related GAO Products                                                                             35



Tables
                       Table 1: Total Number of 2010 HCTC Participants and
                                Nonparticipants                                                  10
                       Table 2: For Individuals Eligible for PPACA Premium Tax Credits,
                                the Percentage of Household Income That Will Be Spent
                                on Health Care Premiums for Plans Purchased through
                                PPACA Exchanges in 2014                                          13
                       Table 3: Example of a PPACA Premium Tax Credit in 2014 at Two
                                Different Income Levels Based on a Hypothetical
                                Reference Plan with a Premium of $10,000                         14
                       Table 4: Percentage of HCTC Participants Who Will Likely Be
                                Eligible and Ineligible for a PPACA Premium Tax Credit,
                                and Possibly Eligible for Medicaid in 2014                       18
                       Table 5: Actuarial Value of Selected HCTC Plans in Selected States,
                                2012                                                             27
                       Table 6: Number and Percentage of HCTC Participants and
                                Nonparticipants by Age Groups in 2010                            32




                       Page i                           GAO-13-147 HCTC and PPACA Premium Tax Credits
          Table 7: Number and Percentage of HCTC Participants and
                   Nonparticipants by Household Income Based on the FPL
                   in 2010                                                                          33
          Table 8: Number and Percentage of HCTC Participants and
                   Nonparticipants by Eligibility Type in 2010                                      33


Figures
          Figure 1: Comparison of the PPACA Premium Tax Credit to the
                   HCTC among HCTC Participants Who Will Likely Be
                   Eligible for a PPACA Premium Tax Credit in 2014                                  19
          Figure 2: Comparison of the Percentage of Household Income
                   Spent on Premiums with the HCTC to Premiums with a
                   PPACA Premium Tax Credit among HCTC Participants
                   Who Will Likely Be Eligible for a PPACA Premium Tax
                   Credit in 2014                                                                   21




          Abbreviations

          CCIIO             Center for Consumer Information and Insurance Oversight
          COBRA             Consolidated Omnibus Budget Reconciliation Act
          EHB               essential health benefits
          FPL               federal poverty level
          HCTC              Health Coverage Tax Credit
          HHS               Department of Health and Human Services
          IRS               Internal Revenue Service
          PBGC              Pension Benefit Guaranty Corporation
          PPACA             Patient Protection and Affordable Care Act
          RTAA              Reemployment Trade Adjustment Assistance
          TAA               Trade Adjustment Assistance
          VEBA              Voluntary Employees’ Beneficiary Association


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          Page ii                                 GAO-13-147 HCTC and PPACA Premium Tax Credits
United States Government Accountability Office
Washington, DC 20548




                                   December 28, 2012

                                   The Honorable Max Baucus
                                   Chairman
                                   Committee on Finance
                                   United States Senate

                                   The Honorable John D. Rockefeller, IV
                                   Chairman
                                   Subcommittee on Health Care
                                   Committee on Finance
                                   United States Senate

                                   The health coverage tax credit (HCTC) pays a share of health plan
                                   premiums for certain workers who lost their jobs because of foreign
                                   import competition and who are eligible for benefits in the Trade
                                   Adjustment Assistance (TAA) program and for certain retirees age 55 and
                                   over whose pensions from a former employer were terminated and are
                                   now paid by the Pension Benefit Guaranty Corporation (PBGC). The
                                   Trade Adjustment Assistance Reform Act of 2002 established the HCTC,
                                   which is administered by the Internal Revenue Service (IRS). 1 The Trade
                                   Adjustment Assistance Extension Act of 2011 increased the HCTC from
                                   65 percent to 72.5 percent of health plan premiums and also specified
                                   that the HCTC program will expire at the end of 2013. 2 Beginning
                                   January 1, 2014, premium tax credits and cost-sharing subsidies—
                                   subsidies that will help individuals pay for out-of-pocket expenses such as
                                   deductibles and copays—will become available under the Patient
                                   Protection and Affordable Care Act (PPACA). 3 These tax credits and
                                   subsidies will help eligible individuals pay for the premiums and cost-
                                   sharing for health plans purchased through health insurance exchanges


                                   1
                                    Pub. L. No. 107-210, div. A, § 201, 116 Stat. 935, 954. The HCTC was applicable to tax
                                   years beginning in 2002.
                                   2
                                    Pub. L. No. 112-40, title II, § 241, 125 Stat. 402, 418. The increased credit rate was
                                   applicable to coverage months beginning after February 12, 2011.
                                   3
                                    See Pub. L. No. 111-148, title I, subtitles D and E, title X, subtitle A, §§ 10104, and
                                   10105, 124 Stat. 119, 162, 213, 896, 906 (2010), as amended by the Health Care and
                                   Education Reconciliation Act of 2010, Pub. L. No. 111-152, title I, subtitle A, 124 Stat.
                                   1029, 1030. For purposes of this report, references to PPACA include the amendments
                                   made by the Health Care and Education Reconciliation Act of 2010.




                                   Page 1                                   GAO-13-147 HCTC and PPACA Premium Tax Credits
created under PPACA. 4 Effective January 1, 2014, PPACA also expands
eligibility for Medicaid to nonelderly individuals who meet specific income
requirements to the extent that states choose to implement this
provision. 5 As a result, individuals who participate in or were potentially
eligible for the HCTC may be eligible for Medicaid when the HCTC
expires. The IRS will administer the PPACA premium tax credits and the
Department of Health and Human Services’ (HHS) Center for Consumer
Information and Insurance Oversight (CCIIO) will oversee the PPACA
exchanges and cost-sharing subsidies.

Although the HCTC pays a significant share of health plan premiums for
eligible individuals who participate in the program, participation in the
HCTC has been lower than expected. For example, in 2010 less than
10 percent of over 500,000 potentially eligible individuals were
participating in the HCTC. In our prior work, we analyzed data from IRS
surveys conducted in 2009 of individuals who were potentially eligible for
the HCTC. 6 We found that survey respondents most commonly reported
improved affordability of health plans as a reason for participation in the
HCTC and most commonly reported ineligibility as a reason for not




4
 An exchange is a mechanism for organizing the health insurance marketplace to help
consumers and small businesses shop for health insurance plans and compare available
plan options based on price, benefits, and quality. Throughout this report we refer to these
as PPACA exchanges.
5
 Pub. L. No. 111-148, §§ 2001, 10201(c), 124 Stat. 271, 1051, as amended by Pub. L.
No. 111-152 § 1201, 124 Stat. 1051. Eligibility for Medicaid varies by state. However, in
most states, nondisabled childless adults are not currently eligible for Medicaid regardless
of age or level of income. Under the Medicaid program, failure by a state to comply with
federal requirements may result in a termination of federal Medicaid matching funds.
However, the U.S. Supreme Court has ruled that states choosing not to expand Medicaid
coverage to this group of individuals will forgo only the federal matching funds associated
with such expanded coverage. See National Federation of Independent Business, et al.,
vs. Sebelius, Sec. of Health and Human Services, et al., 567 U.S. ___, 2012 WL 2427810
(U.S. June 28, 2012).
6
 See GAO, Health Coverage Tax Credit: Participation and Administrative Costs,
GAO-10-521R (Washington, D.C.: Apr. 30, 2010).




Page 2                                  GAO-13-147 HCTC and PPACA Premium Tax Credits
participating. 7 The second most commonly reported reason for not
participating was lack of affordability—such as being unable to afford to
pay for health plan premiums even with the credit. While HCTC
nonparticipants do not currently benefit from the HCTC, some may benefit
from PPACA. That is, some may have new incentives to obtain health
coverage under PPACA rules, for example if they are eligible for the
PPACA premium tax credit, and particularly if they are eligible for a credit
that is more generous than the HCTC. In addition, some nonparticipants
may be eligible for PPACA cost-sharing subsidies or become newly
eligible for Medicaid.

To receive the HCTC, recipients must be enrolled in HCTC-qualified
health plans. 8 These include certain group health plans, such as plans
that are a continuation of employer-sponsored health plans through the
Consolidated Omnibus Budget Reconciliation Act (COBRA)—referred to
as COBRA plans throughout this report—and Voluntary Employees’
Beneficiary Association (VEBA) plans. 9 The HCTC-qualified health plans
also include individual (nongroup) market plans and HCTC state-qualified
plans, which can vary in design, but which must ensure certain consumer
protections. Similarly, to receive PPACA premium tax credits and cost-
sharing subsidies when they become available in 2014, recipients must
be enrolled in health plans that are purchased through the PPACA
exchanges. These plans will need to meet certain coverage requirements.
Specifically, they will be required to provide essential health benefits
(EHB) which include coverage for specific service categories, such as




7
 There are several reasons why individuals who are identified as potentially eligible may
ultimately be ineligible for the HCTC. One reason is that HCTC eligibility is conditioned on
the individual not having “other specified coverage,” which is defined to include coverage
under Medicare, Medicaid, or the state Children’s Health Insurance Program. 26 U.S.C.
§ 35 (b)(1)(A)(iii), (f). Medicare is the federally financed health care program for persons
65 years of age or over as well as for certain individuals with disabilities and individuals
with end-stage renal disease. Medicaid and the state Children’s Health Insurance
Program are joint federal-state programs that finance health care for certain categories of
low-income individuals.
8
26 U.S.C. § 35(a), (e).
9
 VEBAs may be established through bankruptcy court to provide certain specified
benefits, including group health benefits, and are generally similar to employer-sponsored
health plans. Group coverage obtained through a spouse’s current or former employer
may also be HCTC-qualified, with certain restrictions.




Page 3                                  GAO-13-147 HCTC and PPACA Premium Tax Credits
hospitalization, prescription drugs, and emergency services. 10 A plan will
be identified in each state that specifies what the EHB are for that state—
this plan will be referred to as that state’s benchmark plan. In addition,
plans sold through the PPACA exchanges will be offered at four different
levels of coverage corresponding to a percentage of the full actuarial
value of plan benefits for EHB and designated by a different metal tier:
60 percent (bronze), 70 percent (silver), 80 percent (gold), and 90 percent
(platinum). 11 For the purposes of this report, the term “coverage” includes
two elements: (1) the categories of services a plan covers; and (2) a
plan’s actuarial value, which we refer to as a plan’s level of coverage.

Because the HCTC will expire when the PPACA premium tax credit and
cost-sharing subsidies become available for health plans purchased
through the PPACA exchanges and the PPACA Medicaid expansion
takes effect, the costs for health coverage and the health plan options at
that time will change for individuals who are currently participating in or
who were potentially eligible for the HCTC. You asked us to examine
issues related to the expiration of the HCTC and its interaction with the
PPACA premium tax credit, cost-sharing subsidies, and expansion of
Medicaid. Specifically, this report addresses (1) How the expiration of the
HCTC 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 for
plans purchased through the PPACA exchanges compares to HCTC
participants’ HCTC-qualified health plans’ coverage.




10
  Pub. L. No. 111-148, §§ 1301, 1302, 1311, 1321, 10104, 124 Stat. 162, 163, 173, 186,
896.
11
  Pub. L. No. 111-148, §§ 1302 (d)(2), 10104(b)(1), 124 Stat. 167, 896. Accordingly, the
actuarial value of a plan represents the expected percentage of costs the plan will incur for
the EHB services provided to a standard population. For example, a gold plan with an
80 percent actuarial value would be expected to pay, on average, 80 percent of a
standard population’s expected medical expenses for the EHB. The individuals covered by
the plan would be expected to pay, on average, the remaining 20 percent of the expected
cost-sharing expenses in the form of deductibles, copayments, and coinsurance.




Page 4                                  GAO-13-147 HCTC and PPACA Premium Tax Credits
To determine how the expiration of the HCTC and implementation of the
PPACA premium tax credit, cost-sharing subsidies, and Medicaid
expansion will affect HCTC participants and nonparticipants, 12 we
analyzed 2010 IRS HCTC program data and individual tax filer data for
HCTC participants, which were the most current data available. For the
PPACA premium tax credit and the cost-sharing subsidies, we made
projections assuming that HCTC participants would meet many of the key
eligibility criteria—namely that they would not be eligible for Medicare or
Medicaid and would not be enrolled in health plans in which employers
paid for the majority of the premium amounts. Using these data, we
determined whether each HCTC participant would be eligible for a
PPACA premium tax credit on the basis of their household income 13 and,
if eligible, estimated the amount of that PPACA premium tax credit. We
compared the estimated PPACA premium tax credit amounts to the
estimated HCTC amounts for each participant. 14 We also calculated the
percentage of income in 2010 that HCTC participants paid for their share
of premiums after the HCTC was applied, and compared these amounts
to the estimated percentage of their income they will likely pay for
premiums with the PPACA premium tax credit assuming their incomes
would remain constant. We also used these data to estimate the


12
  For the purposes of our analysis we assumed that individuals in all states could
potentially be eligible for PPACA premium tax credits, consistent with the final rule issued
by IRS. See Health Insurance Premium Tax Credit, preamble 1.f and regulations to be
codified at 26 C.F.R. §§ 1.36B-0 et seq., 77 Fed. Reg. 30377, 30378, 30385 (May 23,
2012). In addition, we limited our analysis of participants who will likely be eligible for cost-
sharing subsidies to those earning up to 250 percent of the federal poverty level (FPL),
consistent with CCIIO guidance. See Center for Consumer Information and Insurance
Oversight, Actuarial Value and Cost-Sharing Reductions Bulletin (Feb. 24, 2012).
13
  Household income was calculated by summing the income of each participant with the
incomes of each participant’s spouse and dependents.
14
  These estimates are from estimated annualized HCTC premiums for all HCTC
participants. Participants can receive the HCTC in two ways: yearly as a tax credit when
they file their federal income tax returns, or monthly as an advance payment directly to
their health plans when their premiums are due each month. Data on HCTC monthly
participants included monthly 2010 HCTC amounts, which we used to calculate
annualized HCTC premiums. We calculated an estimated annualized HCTC premium for
monthly participants who did not receive the HCTC for all 12 months in 2010. To calculate
the estimated annualized HCTC premiums for yearly participants, we used available data
on premium amounts from monthly HCTC participants and calculated a state average in
the states in which these monthly participants lived in 2010. The state average estimate
was applied to yearly participants according to the state in which they lived in 2010. We
also used these estimated annualized HCTC premiums as the basis for our estimation of
the PPACA premium tax credit amounts.




Page 5                                    GAO-13-147 HCTC and PPACA Premium Tax Credits
percentage of HCTC participants who will likely be eligible for PPACA
cost-sharing subsidies and the number and percentage of participants
who will likely be eligible for Medicaid, depending in part on whether or
not their state expands Medicaid. We excluded from our analyses any
participants and nonparticipants aged 65 or older at any point in 2010
because they would have likely been eligible for Medicare and therefore
ineligible for either the HCTC, a PPACA premium tax credit, or PPACA
cost-sharing subsidies. We conducted the same analyses for HCTC
nonparticipants as we did for the HCTC participants using 2010 IRS
data. 15 However, we did not make the same assumption that most
nonparticipants would meet many of the key eligibility criteria for the
PPACA premium tax credit or cost-sharing subsidies because we could
not determine why these individuals did not participate in the HCTC. For
example, nonparticipants may have been enrolled in health plans paid for
by an employer, which would make them ineligible for a PPACA premium
tax credit or cost-sharing subsidy. In light of this, our ability to draw
conclusions based on our analysis of the data on HCTC nonparticipants
was more limited than it was for HCTC participants. We also reviewed
regulations, guidance, and selected literature on the PPACA premium tax
credit and cost-sharing subsidies. To determine the reliability of IRS’s
2010 HCTC program data and individual tax filer data, we reviewed
relevant documentation, conducted interviews with IRS officials
knowledgeable about the data, and conducted electronic testing of the
data to identify obvious errors or outliers. We determined that the data
were sufficiently reliable for purposes of this report.

To determine how the coverage that will be available through the PPACA
exchanges compares to the qualified health plans for HCTC participants
for each HCTC plan type—COBRA, HCTC state-qualified, VEBA, and
individual market—we compared the services that plans purchased
through the PPACA exchanges will cover, and actuarial values that plans
will be offered at through the exchanges, to the services and actuarial
values of HCTC-qualified plans. Since COBRA plans are an extension of


15
  We also calculated an estimated annualized HCTC premium for HCTC nonparticipants
using available data on premium amounts from monthly HCTC participants in the states in
which these monthly participants lived in 2010. The state average estimate was applied to
nonparticipants according to the state in which they lived in 2010. We used these
estimated annualized HCTC premiums as the basis for our estimation of the PPACA
premium tax credit amounts. In addition, we limited our analysis of nonparticipants who
will likely be eligible for cost-sharing subsidies to those earning up to 250 percent of the
FPL, consistent with the 2012 CCIIO bulletin on cost-sharing reductions.




Page 6                                  GAO-13-147 HCTC and PPACA Premium Tax Credits
employer-sponsored health plans, we based our comparison on existing
data on the services covered by, 16 and the actuarial values of, employer-
sponsored health plans. 17 For HCTC state-qualified plans, we used 2011
IRS HCTC program data to select a nongeneralizable sample of four
states to compare the services covered by the plans that will likely be
available through the PPACA exchanges in those states, and the
actuarial values at which plans will be offered through the exchanges, to
the services covered by and the actuarial values of, selected HCTC state-
qualified plans. 18 The four states selected—California, Michigan, North
Carolina, and Ohio—were among the states with the largest number in
2011 of both individuals potentially eligible for the HCTC and HCTC
monthly participants; were geographically varied; and offered different
types of HCTC state-qualified plans. 19 In each state we identified the
state’s likely EHB benchmark plan and the HCTC state-qualified plan with
the largest enrollment for our comparison. 20 In California and Michigan we
used the benchmark plans that those states selected, and in the other two
states we used the largest small group health plan in each state as the
potential exchange benchmark plan because HHS has proposed this as
the default exchange benchmark if the state does not choose a
benchmark plan. 21 In certain states, choosing an existing small group
health plan as a benchmark may lead to lower costs for the state than if it



16
  Department of Labor, Selected Medical Benefits: A Report From the Department of
Labor to the Department of Health and Human Services (Washington, D.C.: April 2011).
17
  Department of Health and Human Services, Office of the Assistant Secretary for
Planning and Evaluation, Actuarial Value and Employer-Sponsored Insurance
(Washington, D.C.: November 2011).
18
  We used 2011 IRS HCTC program data to select the states because 2011 was the most
recent year of data available regarding the types of HCTC-qualified plans that participants
have.
19
  In 2011, the four selected states combined represented 28 percent of all individuals
potentially eligible for the HCTC and 34 percent of all monthly participants. At the time of
our analysis, data on yearly participants for 2011 were not yet available, so we selected
states with the highest numbers of individuals potentially eligible for the HCTC and
monthly participants in 2011.
20
  Throughout this report we refer to these plans as potential exchange benchmark plans.
21
  Patient Protection and Affordable Care Act; Standards Related to Essential Health
Benefits, Actuarial Value, and Accreditation, 77 Fed. Reg. 70644, 70670 (proposed
Nov. 26, 2011) (to be codified at 45 C.F.R. § 156.100(c)). The term “small group” is used
to describe health plans offered by employers with 100 or fewer employees.




Page 7                                   GAO-13-147 HCTC and PPACA Premium Tax Credits
chose a different plan. 22 In the four states, we reviewed health plan
documents and interviewed health plan officials from the four potential
exchange benchmark plans and the four selected HCTC state-qualified
plans. 23 For VEBA plans, we analyzed the HCTC data from the selected
states to identify the VEBA plan that had the largest number of HCTC
participants. We reviewed health plan documents and interviewed health
plan officials for the selected VEBA plan and compared the services
covered by the potential exchange benchmark for the state that contained
the majority of the VEBA plan’s HCTC enrollees to the services covered
by the VEBA plan. We also compared the actuarial values at which plans
will be offered through the exchanges to the actuarial value of the VEBA
plan. For individual market plans, we used available data on this type of
plan to compare the services covered by, 24 and the actuarial value of,
plans purchased through the PPACA exchanges to individual market
plans. 25 We also reviewed regulations and guidance on EHB, actuarial
value, and other insurance market reforms that may affect premiums and
cost-sharing in 2014. To determine the reliability of IRS’s 2011 HCTC
program data, we reviewed relevant documentation, interviewed officials
knowledgeable about the data, and conducted electronic testing of the
data to identify obvious errors or outliers. To assess the reliability of the
available data on employer-sponsored health plans and individual market
health plans, we reviewed the methodologies used to collect and report
these data. Using these methods, we determined that the data were
sufficiently reliable for the purposes of this report.



22
  States will be required to defray the costs of state-mandated benefits in addition to EHB.
See Pub. L. No. 111-148, § 1311(d)(3)(B),124 Stat. 176. However, HHS has proposed
that a state not be required to defray the costs of state-mandated benefits enacted on or
before December 31, 2011 as they would be considered EHB. See, 77 Fed. Reg. 70644,
70647, 70668 (to be codified at 45 C.F.R. § 155.170(a)(2)). Because small group plans
are typically subject to many of a state’s mandated benefits, states may be more likely to
choose a small group plan as their benchmark plan.
23
  We reviewed health plan documents for the 2012 plan year for the HCTC state-qualified
plans and potential exchange benchmark plans which were the most current data
available. We also used 2012 plan documents for the VEBA plan we reviewed.
24
  Department of Health and Human Services, Office of the Assistant Secretary for
Planning and Evaluation, Essential Health Benefits: Individual Market Coverage
(Washington, D.C.: December 2011).
25
  Jon.R Gabel et al., “More Than Half of Individual Health Plans Offer Coverage That Falls
Short Of What Can Be Sold Through Exchanges As of 2014,” Health Affairs, vol. 31, no 6
(Bethesda, Md.: June 2012).




Page 8                                  GAO-13-147 HCTC and PPACA Premium Tax Credits
             We conducted this performance audit from November 2011 to November
             2012 in accordance with generally accepted government auditing
             standards. Those standards require that we plan and perform the audit to
             obtain sufficient, appropriate evidence to provide a reasonable basis for
             our findings and conclusions based on our audit objectives. We believe
             that the evidence obtained provides a reasonable basis for our findings
             and conclusions based on our audit objectives.


             The HCTC, which pays a portion of health plan premiums for certain
Background   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.


HCTC         The HCTC program is administered by the IRS and currently pays for
             72.5 percent of health plan premiums for HCTC participants. The amount
             of the credit is based solely on the participant’s health plan premium
             amount and is not based on other factors, such as the participant’s
             income. As an example of the credit, an HCTC participant with an annual
             premium of $10,000 would receive a credit of $7,250. 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), 26 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). 27




             26
               Within the TAA program, there is a Reemployment Trade Adjustment Assistance
             (RTAA) program. The RTAA program provides a wage subsidy to workers aged 50 years
             or older who have lost their jobs because of foreign import competition and have accepted
             a job where they earn less money than they did at their prior job. Throughout this report,
             any reference to TAA eligible individuals includes both TAA and RTAA eligible individuals.
             27
               About 1 percent of individuals potentially eligible for the HCTC have multiple eligibility
             types—they are eligible both through receiving TAA benefits and because their pensions
             are now paid by PBGC—and for about less than 1 percent, HCTC eligibility type could not
             be identified.




             Page 9                                  GAO-13-147 HCTC and PPACA Premium Tax Credits
We have previously reported that many potentially eligible individuals do
not participate in the HCTC program. In 2010, less than 10 percent of
those potentially eligible for the program participated in the HCTC (see
table 1). Some of the potentially eligible individuals may in fact not be
eligible for the HCTC, for example if they are eligible for Medicare or
Medicaid, or if they are covered by their spouse’s employer-sponsored
health plan under certain conditions. Others may choose not to
participate, for example if even with the HCTC they still cannot afford the
cost of their share of health plan premiums.

Table 1: Total Number of 2010 HCTC Participants and Nonparticipants

 Participation category                                            Number of individuals
 Number of HCTC participants                                                         43,864
 Number of HCTC nonparticipants                                                    469,168
 Total number of potentially eligible individuals                                  513,032
Source: GAO analysis of IRS data.



HCTC participants obtain coverage from HCTC-qualified health plans,
which include COBRA plans, 28 HCTC state-qualified plans, 29 VEBA




28
  COBRA in general requires employers that offer group health plans (i.e., employer-
sponsored health plans) and have 20 or more employees to make health insurance
available for a limited period of time for employees and their dependents who have lost
health insurance because of certain events, including the loss of employment. Former
employees who opt to continue their coverage through COBRA are responsible for the full
cost of the health plan premium and the administrative costs for the continuation of
coverage (not to exceed 102 percent of the applicable premium for such period). See
29 U.S.C. §§ 1161-1168.
29
  HCTC state-qualified plans are health plans designated by each state’s department of
insurance. A state-qualified plan may be a private health insurance plan offered by a
company or a public health insurance plan offered by a state (e.g., state high-risk pool).
These plans must offer certain statutorily defined consumer protections.




Page 10                                 GAO-13-147 HCTC and PPACA Premium Tax Credits
                 plans, 30 and individual market plans. 31 In 2011, the majority of HCTC
                 participants received coverage from COBRA plans (46 percent) or HCTC
                 state-qualified plans (37 percent). 32 A smaller proportion of HCTC
                 participants received coverage from VEBA plans (10 percent) or
                 individual market plans (1 percent). 33


Selected PPACA   Beginning on January 1, 2014, a premium tax credit will be available to
Provisions       help eligible tax filers and their dependents pay for qualified health plans
                 purchased through the PPACA exchanges, to be administered by the
                 IRS. 34 PPACA premium tax credits will be calculated using income
                 reported on tax returns. 35 The credits will generally be available to eligible
                 tax filers and their dependents who are (1) enrolled in one or more
                 qualified health plans through a PPACA exchange, and (2) not eligible for
                 minimum essential coverage other than coverage in the individual




                 30
                   VEBAs may be established for individuals who have an employment-related common
                 bond (e.g., common employer, coverage under one or more collective bargaining
                 agreements, etc.) through a bankruptcy court to provide certain specified benefits,
                 including health benefits, to their members or their members’ designated beneficiaries.
                 VEBAs can provide health plan benefits in place of COBRA and retiree benefits. Coverage
                 under a VEBA may receive consideration for HCTC purposes only for eligible coverage
                 months beginning before February 13, 2012.
                 31
                    Group coverage obtained through a spouse’s current or former employer may also be
                 HCTC-qualified, with certain restrictions. Certain types of health plans do not qualify for
                 the HCTC, including the Federal Employees Health Benefits plans, stand-alone dental or
                 vision plans, and long-term care benefits; or coverage for only a specified disease or
                 illness. HCTC candidates enrolled in these plans would not be eligible for the HCTC.
                 32
                   Data on the HCTC plan types of the 2011 yearly participants were not available, so all of
                 the percentages are based on the HCTC plan types of the 2011 monthly participants.
                 33
                  About 6 percent of monthly participants in 2011 had multiple types of HCTC plans,
                 which means that they may have changed plans during the year, such as switching from a
                 COBRA plan to a HCTC state-qualified plan.
                 34
                   See Pub. L. No. 111-148, title I, subtitles D and E, title X, subtitle A, §§ 10104
                 and 10105, 124 Stat. 162, 213, 896, 906, as amended by Pub. L. No. 111-152, title I,
                 subtitle A, 124 Stat. 1030. See also 26 C.F.R. §§ 1.36B-0 et seq.
                 35
                  Therefore, the PPACA premium tax credits can only be obtained by eligible individuals
                 who file tax returns.




                 Page 11                                 GAO-13-147 HCTC and PPACA Premium Tax Credits
market. 36 For example, individuals would not be eligible if they had
coverage in a government program, such as Medicare or Medicaid, or
certain employer-sponsored coverage. 37

Tax filers eligible for PPACA premium tax credits will be those with
household incomes from 100 percent to 400 percent of the federal
poverty level (FPL) for the tax year in which they are receiving the
PPACA premium tax credit. 38 The amount of the PPACA premium tax
credit will vary by household income level, family size, and other factors.
It will subsidize a portion of the tax filer’s health insurance premiums. 39
The tax filer’s contribution to premiums will be based on their household
income relative to the FPL, and will range from 2 percent of their
household income for those with household incomes from 100 percent to
less than133 percent of the FPL, to 9.5 percent of household income for
those with household incomes from 300 percent up to 400 percent of the
FPL (see table 2).




36
  26 C.F.R. § 1.36B-2 (2012). “Minimum essential coverage” includes health plans such
as individual market health plans, eligible employer-sponsored health plans (if they meet
affordability and quality standards), or government-sponsored health coverage such as
Medicare, Medicaid, and the Children’s Health Insurance Program. See 26 U.S.C.
§ 5000A(f).
37
  PPACA also requires that individuals, subject to certain exceptions, obtain minimum
essential health insurance coverage or pay a tax penalty. Pub. L. No. 111-148,
§§ 1501(b), 10106(b), 124 Stat. 244, 909, as amended by Pub. L. No. 111-152, § 1002,
124 Stat. 1032. Exceptions may be available for certain individuals, such as those who
cannot afford coverage or have been determined to have suffered hardships, members of
Indian tribes, and those who qualify for religious reasons.
38
  Individuals who are eligible for Medicaid, Medicare, or other minimum essential
coverage may purchase a policy through a PPACA exchange but will not be eligible for
coverage subsidized by the PPACA premium tax credits, regardless of their household
income.
39
   Household income is defined as the sum of a tax filer’s modified adjusted gross income
(i.e., adjusted gross income increased by amounts from tax-exempt interest, foreign
earned income, and untaxed social security benefits) and the aggregate modified adjusted
gross income of all other individuals for whom the tax filer is allowed a deduction for a
personal exemption and who are required to file their own income tax returns for that
taxable year.




Page 12                                 GAO-13-147 HCTC and PPACA Premium Tax Credits
Table 2: For Individuals Eligible for PPACA Premium Tax Credits, the Percentage of
Household Income That Will Be Spent on Health Care Premiums for Plans
Purchased through PPACA Exchanges in 2014

                                                                            Percentage of income spent
 Household income level based on FPL                                           on health care premiums
 (percent of FPL)                                                        (percent of household income)
 100 percent to less than 133%                                                                   2.0%
 At least 133 but less than 150                                                                3.0–4.0
 At least 150 but less than 200                                                                4.0–6.3
 At least 200 but less than 250                                                               6.3–8.05
 At least 250 but less than 300                                                               8.05–9.5
 At least 300 and up to 400                                                                        9.5
Source: IRS and 26 C.F.R. §§ 1.36B-2(b), 1.36B-3(g)(2) (2012).


Eligibility for PPACA premium tax credits by household income level
based on the FPL may vary by state because states may choose not to
expand eligibility for Medicaid to nonelderly individuals whose household
income does not exceed 133 percent of the FPL. 40 Under the PPACA
rule, tax filers with household incomes from 100 percent of the FPL and
up to 400 percent of the FPL will be eligible for PPACA premium tax
credits. However, also under the PPACA rule, in states that expand
Medicaid, individuals with household incomes from 100 percent and up to
138 percent of the FPL will be eligible for Medicaid and therefore
ineligible for PPACA premium tax credits. Further, in states that do not
expand Medicaid, individuals with household incomes from 100 percent
and up to 400 percent of the FPL will be eligible for PPACA premium tax
credits, and individuals with household incomes less than 100 percent of
the FPL will not be eligible for PPACA premium tax credits and may not




40
  In determining Medicaid income eligibility, PPACA requires an income equivalent to
5 percent of the FPL to be disregarded from an individual’s income. Therefore, the
threshold for Medicaid eligibility will effectively increase from 133 percent of the FPL to
138 percent of the FPL in states that expand Medicaid. Accordingly, we refer to the
Medicaid upper income threshold as up to 138 percent of the FPL. From 2014 through
2016, the federal government will pay 100 percent of the cost of providing coverage to
individuals who are newly eligible for Medicaid in the states that opt to expand Medicaid.
Starting in 2017, the federal government will gradually reduce its share each year until
2020 when it reaches 90 percent, which is the percentage it will pay thereafter.




Page 13                                                   GAO-13-147 HCTC and PPACA Premium Tax Credits
                                       be eligible for Medicaid, depending on their states’ Medicaid eligibility
                                       criteria. 41

                                       The applicable household income level expressed as a percent of the
                                       FPL determines an individual’s share of his or her annual premium. The
                                       amount of the premium for the second-lowest-cost silver plan in the
                                       PPACA exchange available in the state where the eligible individual
                                       resides will be the reference for calculating the amount of the PPACA
                                       premium tax credit. 42 See table 3 for an example of a PPACA premium
                                       tax credit for two different people, both in a family of four, one with a
                                       household income at 150 percent of the FPL, and the other with a
                                       household income at 300 percent of the FPL, using a hypothetical annual
                                       premium of $10,000 for the second-lowest-cost silver plan (reference
                                       plan) in the PPACA exchange available in the state where they reside.

Table 3: Example of a PPACA Premium Tax Credit in 2014 at Two Different Income Levels Based on a Hypothetical Reference
Plan with a Premium of $10,000

                                                                                   Tax filer’s share for annual premium amount
Household income             Hypothetical annual             Annual PPACA                       Percentage of
(percentage of FPL)            premium amount             premium tax credit                household income             Dollar amount
$33,075 (150% FPL)                       $10,000                         $8,677                               4%                  $1,323
66,150 (300)                                10,000                        3,716                                9.5                  6,284
                                       Source: GAO.

                                       Note: Example is based on 2010 FPLs for the contiguous 48 states and the District of Columbia for a
                                       family size of four.




                                       41
                                         Individuals’ eligibility for Medicaid depends on their states’ current Medicaid eligibility
                                       standards. According to a recent report by the Kaiser Family Foundation, Medicaid
                                       eligibility for adults, including parents, is very limited in most states. The report found that
                                       in 17 states, the eligibility level for parents is below 50 percent of the FPL and nondisabled
                                       childless adults are typically not eligible for Medicaid regardless of their income level. See
                                       Kaiser Commission on Medicaid and the Uninsured. How Will the Medicaid Expansion for
                                       Adults Impact Eligibility and Coverage (Washington, D.C.: Kaiser Family Foundation, July
                                       2012).
                                       42
                                         If an individual chooses a more expensive plan than the reference plan (the second-
                                       lowest-cost-silver plan), the PPACA premium tax credit will not change and the individual
                                       will be responsible for the additional premium amount. If he or she chooses a plan with a
                                       less expensive premium than the reference plan, the individual will still be eligible to
                                       receive a PPACA premium tax credit up to the amount calculated based on the premium
                                       for the reference plan, which would reduce the amount of premium expenses the
                                       individual would have to pay.




                                       Page 14                                     GAO-13-147 HCTC and PPACA Premium Tax Credits
                  Enrollees may also be eligible for separate, PPACA cost-sharing
                  subsidies to help reduce their out-of-pocket expenses such as
                  deductibles and copays. 43 However, as with the PPACA premium tax
                  credits, tax filers will not be eligible for PPACA cost-sharing subsidies if
                  they are eligible for Medicaid in their state. PPACA cost-sharing subsidies
                  will reduce the maximum out-of-pocket limit for eligible individuals (not
                  including health plan premiums). 44 For example, had the limits been in
                  place in 2010, an eligible individual with an income of 150 percent of the
                  FPL would have had his or her maximum out-of-pocket limit reduced by
                  two-thirds. Therefore, the individual’s maximum out-of-pocket limit would
                  have been about $1,981 instead of $5,950 for single coverage.


PPACA Exchanges   PPACA provides for the establishment and operation of exchanges in
                  each state that will provide competitive marketplaces for qualified
                  individuals 45 and small employers 46 to directly compare and purchase
                  available private health insurance plans by January 1, 2014. 47

                  PPACA requires that health plans purchased through the PPACA
                  exchanges offer services in each of the following EHB categories:

                  •     ambulatory patient services;


                  43
                    See Pub. L. No. 111-148, § 1402, 124 Stat.220, as amended by Pub. L. No. 111-152,
                  § 1001(b), 124 Stat. 1031.
                  44
                    If these maximum out-of-pocket limits had been in place in 2010 they would have been
                  $5,950 for an individual and $11,900 for a family. These out-of-pocket limits are updated
                  annually, so when these limits become effective in 2014 they will likely be different than
                  what they would have been in 2010.
                  45
                      Qualified individuals include U.S. citizens and lawful residents who are not incarcerated.
                  46
                    Small Business Health Options Program exchanges, which are separate from the
                  exchanges offering qualified health plans to individuals, are designed to help small
                  businesses with up to 100 employees obtain a plan offered in the small group market in
                  the state for their employees. States may also elect to provide only one exchange for both
                  qualified individuals and small employers if the exchange has adequate resources. Our
                  study focuses on exchanges that will offer health insurance options in the individual
                  market.
                  47
                     HHS will establish and operate exchanges within states not electing to establish an
                  exchange or that will not have an exchange operational by January 1, 2014. Pub. L.
                  No. 111-148, § 1321(c), 124 Stat. 186. HHS will consider an exchange fully operational if
                  it is capable of beginning operations by October 1, 2013 to support the initial open
                  enrollment period.




                  Page 15                                   GAO-13-147 HCTC and PPACA Premium Tax Credits
•     emergency services;

•     hospitalization;

•     maternity and newborn care;

•     mental health and substance use disorder services, including
      behavioral health treatment;

•     prescription drugs;

•     rehabilitative and habilitative services and devices;

•     laboratory services;

•     preventive and wellness services and chronic disease management;
      and

•     pediatric services, including oral and vision care.

CCIIO will oversee the implementation and operation of the exchanges,
including the provision of guidance on EHB categories and the actuarial
value of plans purchased through the PPACA exchanges. Because each
state will have its own benchmark plan, EHB services may vary by
state. 48 Health plans will be offered at four levels of actuarial value
through the exchanges and designated by different metal tiers. These
levels of coverage will allow individuals purchasing a plan to compare
what the potential differences in out-of-pocket expenses would be for
each plan. The four metal tiers include the following:

•     bronze: plans that have actuarial values of 60 percent,

•     silver: plans that have actuarial values of 70 percent,

•     gold: plans that have actuarial values of 80 percent, and




48
    See 77 Fed. Reg. 70644, 70669 (to be codified at 45 C.F.R. Part 156, Subpart B).




Page 16                                  GAO-13-147 HCTC and PPACA Premium Tax Credits
                         •    platinum: plans that have actuarial values of 90 percent. 49


                         The expiration of the HCTC and implementation of the PPACA premium
When the HCTC            tax credits and Medicaid expansion will affect HCTC participants’ costs
Expires Most HCTC        for health plans in multiple ways. Projections from our analysis of 2010
                         IRS data show that about 69 percent of HCTC participants will likely
Participants Will        either be ineligible for a PPACA premium tax credit or Medicaid, or will be
Likely Be Ineligible     eligible for a PPACA premium tax credit that is less generous than the
                         HCTC. These projections show that about 37 percent of HCTC
for a PPACA Premium      participants will likely be ineligible for either a PPACA premium tax credit
Tax Credit or Eligible   or Medicaid because their incomes are too high, and 32 percent will be
                         eligible for a PPACA premium tax credit less generous than the HCTC.
for a Credit Less        On the other hand, at least 27 percent of HCTC participants will be
Generous Than the        eligible for a PPACA premium tax credit more generous than the HCTC or
                         be eligible for Medicaid. An additional 3 percent of all participants will
HCTC                     likely be ineligible for a PPACA premium tax credit because their incomes
                         are too low, and their eligibility for Medicaid will depend in part on their
                         state’s decision on Medicaid expansion (see table 4).




                         49
                           HHS has proposed a de minimis variation of +/-2 percentage points for the actuarial
                         value associated with each metal tier (e.g., silver plans will be able to have actuarial
                         values that range from 68 to 72 percent). See 77 Fed. Reg. 70644, 70671 (to be codified
                         at 45 C.F.R. § 156.140). CCIIO officials told us, that in 2014, plans with actuarial values
                         that do not fall within +/- 2 percentage points of one of the metal tiers will not be allowed to
                         be sold either inside or outside of the PPACA exchanges.




                         Page 17                                   GAO-13-147 HCTC and PPACA Premium Tax Credits
Table 4: Percentage of HCTC Participants Who Will Likely Be Eligible and Ineligible for a PPACA Premium Tax Credit, and
Possibly Eligible for Medicaid in 2014

                                                                                                                        Percentage (among all
HCTC participants                                                                                       Number             HCTC participants)
Eligible for PPACA premium tax credit (household income >138% FPL to 400% FPL)                            21,748                               55%
                                                                                                                 a
    Credit more generous than HCTC                                                                         9,054                                 23
                                                                                                                 a
    Credit less generous than HCTC                                                                       12,694                                  32
                                                                                 b
Either eligible for PPACA premium tax credit more generous than HCTC or eligible for
                                                                                                                 a
Medicaid (household income 100% FPL to 138% FPL)                                                           1,678                                   4
Ineligible for PPACA premium tax credit but possibly eligible for Medicaid
(household income <100% FPL)                                                                                1,312                                  3
Ineligible for PPACA premium tax credit (household income >400% FPL)                                      14,726                                 37
                                                                                                                   c
Total number of participants                                                                             39,464                              100%
                                             Source: GAO analysis of IRS data.

                                             Notes: The percentages may not add to 100 percent because of rounding.
                                             a
                                              To compare the PPACA premium tax credit amounts to the HCTC amounts, we calculated PPACA
                                             premium tax credits using the same premium amount each HCTC participant was estimated to have
                                             paid for his or her HCTC coverage.
                                             b
                                              For participants who will likely be eligible for a PPACA premium tax credit because their state did not
                                             expand Medicaid, the tax credit will likely be more generous than the HCTC.
                                             c
                                              We excluded all participants who were age 65 or older in 2010, and those for whom we were unable
                                             to obtain tax data. As a result, 39,464 of the 43,864 participants in 2010 were included in our
                                             analyses.



                                             For the HCTC participants who will likely be eligible for a PPACA
                                             premium tax credit in 2014, projections from our analysis of 2010 IRS
                                             data show that there will be variation in the extent to which their credit
                                             differs from the HCTC. For example, of the total 39,464 HCTC
                                             participants in our analysis, 6,492 will likely receive a PPACA premium
                                             tax credit at least 25 percent less than the HCTC. However, up to 12,141
                                             participants will likely receive a credit similar to or greater than the HCTC.
                                             For example, 2,922 participants will likely receive a PPACA premium tax
                                             credit of about the same value as the HCTC (within 5 percentage points
                                             above or below the HCTC). In addition, depending in part on whether or
                                             not their state expands Medicaid, between 1,823 and 3,217 participants
                                             will likely receive a credit more than 25 percent higher than the HCTC
                                             (see fig. 1).




                                             Page 18                                       GAO-13-147 HCTC and PPACA Premium Tax Credits
Figure 1: Comparison of the PPACA Premium Tax Credit to the HCTC among HCTC
Participants Who Will Likely Be Eligible for a PPACA Premium Tax Credit in 2014




Note: To compare the PPACA premium tax credit amounts to the HCTC amounts, we calculated
PPACA premium tax credits using the same premium amount each HCTC participant was estimated
to have paid for his or her HCTC coverage.


The PPACA premium tax credit was designed to provide a larger subsidy
amount to lower-income tax filers than to higher-income tax filers. Thus,
lower-income HCTC participants who will likely be eligible for a PPACA
premium tax credit 50 will pay a smaller share of their incomes for
premiums under PPACA in 2014 than they did under the HCTC.


50
 This assumes that HCTC participants with household incomes from 100 percent of the
FPL to 400 percent of the FPL will likely be eligible for a PPACA premium tax credit.




Page 19                                 GAO-13-147 HCTC and PPACA Premium Tax Credits
For example, projections from our analysis of 2010 IRS data show that
while all 2,488 HCTC participants with incomes from 100 percent 51 to
150 percent of the FPL will likely pay between 2 percent and 4 percent of
their incomes for health plan premiums under the PPACA rule, 1,456
HCTC participants—close to 60 percent of participants in the same
income range—paid 9.5 percent or more of their incomes for health plan
premiums under the HCTC. In contrast, while all 7,658 HCTC participants
with incomes from 300 percent to 400 percent of the FPL 52 will likely pay
9.5 percent of their household income for premiums under the PPACA
rule, 2,391—over 30 percent of participants in the same income range—
paid less than 4 percent of their household income for premiums under
the HCTC (see fig. 2). Unlike the HCTC that pays 72.5 percent of health
plan premiums, individuals eligible for a PPACA premium tax credit will
continue to pay that set percentage even if premiums increase because
PPACA rules limit the amount individuals will pay for premiums to a set
percentage of their incomes. 53




51
  Household incomes at 100 percent of the FPL in 2010 ranged from $10,830 for an
individual to $22,050 for a family of four in the 48 contiguous states and the District of
Columbia.
52
  Household incomes at 400 percent of the FPL in 2010 ranged from $43,320 for an
individual to $88,200 for a family of four in the 48 contiguous states and the District of
Columbia.
53
  In 2012, the Congressional Budget Office and staff from the Joint Committee on
Taxation reported that there is uncertainty about the future growth rate of private
insurance premiums as a result of the insurance coverage provisions in PPACA. See
Congressional Budget Office, Estimates of the Effects of the Affordable Care Act on the
Number of People Obtaining Employment-Based Health Insurance (Washington, D.C.:
March 2012). However, according to Congressional Budget Office projections, premiums
for private health insurance per enrollee will increase by 5.7 percent per year, on average,
between 2012 and 2022. See Congressional Budget Office, Updated Estimates for the
Insurance Coverage Provisions of the Affordable Care Act (Washington, D.C.: March
2012). Another study from the Commonwealth Fund said that that the provisions in
PPACA may help slow the rate of premium growth over time with a larger risk pool of
younger, healthier people. See The Commonwealth Fund, Help on the Horizon: How the
Recession Has Left Millions of Workers Without Health Insurance, and How Health
Reform Will Bring Relief (Washington, D.C.: March 2011).




Page 20                                   GAO-13-147 HCTC and PPACA Premium Tax Credits
Figure 2: Comparison of the Percentage of Household Income Spent on Premiums
with the HCTC to Premiums with a PPACA Premium Tax Credit among HCTC
Participants Who Will Likely Be Eligible for a PPACA Premium Tax Credit in 2014




Page 21                            GAO-13-147 HCTC and PPACA Premium Tax Credits
a
 This analysis assumes that the second-lowest-cost silver plan was chosen. The percentage of
household income for premiums with a PPACA premium tax credit may vary if a more or less
generous plan is purchased through the exchanges.


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. Similar cost-sharing
subsidies are not available for the HCTC, therefore, this would be an
additional financial benefit for those who qualify.

The effect of the expiration of the HCTC and implementation of certain
PPACA provisions will likely be different for nonparticipants 54—individuals
who were potentially eligible for the HCTC in 2010 but did not participate
in it—than it will be for participants. First, nonparticipants who may not be
eligible for PPACA premium tax credits or who may be eligible for tax
credits less generous than the HCTC will not be losing any benefits
because they are not receiving the HCTC. Our projections show that
70 percent of nonparticipants fall into this category. Second, because
some individuals do not participate in the HCTC since they cannot afford
to do so, some nonparticipants who will be eligible for PPACA premium
tax credits that are more generous than the HCTC or who are eligible for
Medicaid coverage under PPACA may choose to use these options and
receive benefits they do not receive under the HCTC. Our projections
show that up to 30 percent of nonparticipants fall into this category,
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. 55




54
  We excluded all nonparticipants who were age 65 or older in 2010, and those for whom
we were unable to obtain tax data. As a result, 390,203 of the 469,168 HCTC
nonparticipants in 2010 were included in our analyses.
55
  For example, individuals who have access to employer-sponsored health plans may not
be eligible for the PPACA premium tax credits.




Page 22                                    GAO-13-147 HCTC and PPACA Premium Tax Credits
                             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.

                             See appendix I for details on characteristics of 2010 HCTC participants
                             and nonparticipants.


                             The health plan coverage available under PPACA will be comparable to
Health Plan Coverage         coverage in current HCTC-qualified health plans. Specifically, the
under PPACA Will Be          categories of services that plans purchased through the PPACA
                             exchanges will be required to cover are comparable to those currently
Comparable to HCTC           covered by most HCTC plans, and the actuarial values of HCTC plans
Plans, but                   are likely above the minimum level of coverage that will be required in
                             PPACA exchange plans. However, under PPACA, HCTC participants
Participants May             may have an incentive to choose plans through the exchanges that have
Have an Incentive to         different levels of coverage than their HCTC plans.
Change Their Level of
Coverage
The Categories of Services   The EHB categories that will be required for plans purchased through the
That Will Be Required for    PPACA exchanges are comparable to the categories of services covered
Plans Purchased through      in almost all of the health plans used now by HCTC participants.
                             Specifically, the categories covered by COBRA plans as well as the four
the PPACA Exchanges Are      HCTC state-qualified plans and the VEBA plan that we reviewed are
Comparable to the            comparable to the EHB categories. Collectively, at least 93 percent of
Categories of Services       HCTC participants in 2011 were enrolled in these three types of HCTC
Currently Covered by         plans. However, for two of the EHB categories—”rehabilitative and
                             habilitative services and devices” and “pediatric services, including oral
HCTC Plans                   and vision care”—more services may be covered by the plans purchased
                             through the PPACA exchanges than are covered by the COBRA, HCTC
                             state-qualified, and VEBA plans. This is because many health plans,
                             whether HCTC or other, do not currently cover habilitative services or
                             pediatric dental and vision services. While not all of the EHB categories
                             are covered by individual market plans, only about 1 percent of HCTC
                             participants are covered by individual market plans.




                             Page 23                          GAO-13-147 HCTC and PPACA Premium Tax Credits
COBRA plans (46 percent of HCTC participants). COBRA plans are an
extension of employer-sponsored health plans, and our analysis of data
reported in a 2011 Department of Labor report found that employer-
sponsored health plans generally covered services in the EHB
categories. 56 For example, in the EHB category of ambulatory care,
100 percent of employer-sponsored health plans cover physician office
visits; 98 percent of plans cover outpatient surgery; and 73 percent of
plans cover home health care services. In addition, the report indicated
that the majority of employer-sponsored health plans cover services in the
EHB categories of hospitalization, emergency services, maternity care,
mental health and substance abuse disorders, and prescription drugs.
Although COBRA plans generally cover services in the EHB categories, it
is possible that coverage of habilitative services and pediatric dental and
vision services will be more generous in plans purchased through the
PPACA exchanges than in COBRA plans. According to CCIIO, the EHB
categories that are commonly not covered among typical employer plans
are habilitative services, pediatric oral services, and pediatric vision
services. 57

HCTC state-qualified plans (37 percent of HCTC participants). Our
analysis of four 2012 HCTC state-qualified plans found that they also
generally covered services in all of the EHB categories. Specifically, all of
the plans we reviewed—including both the four potential exchange
benchmark plans and the four HCTC state-qualified plans—covered
services in the same EHB categories, such as ambulatory care,
preventive care, laboratory services, hospitalization, and emergency
services. In addition, all of the plans covered prescription drugs to some
extent; although one of the HCTC state-qualified plans that we reviewed
covered generic prescriptions but did not cover brand-name prescriptions.
Among some of the HCTC state-qualified plans and the potential
benchmark plans there was an absence of coverage for subsets of



56
  Department of Labor, Selected Medical Benefits. The report used data that the
Department of Labor obtained from 2009 health plan documents as well as published
survey data from the 2008 and 2009 Bureau of Labor Statistics National Compensation
Survey (NCS), which were the most recently available NCS service-level data for health
plans sponsored by private sector employers.
57
  See 77 Fed. Reg. 70644, 70649 (preamble to proposed rules, II. C. 2. c.). It is unknown
whether the specific COBRA plans that HCTC participants are enrolled in cover these
services, as the data sources that we reviewed on employer-sponsored health plans did
not address these services.




Page 24                                GAO-13-147 HCTC and PPACA Premium Tax Credits
                           services in certain EHB categories, such as habilitative services and
                           pediatric dental and vision services, which are services that will be
                           required to be covered in plans sold through the PPACA exchanges. For
                           example, habilitative services were not covered by two of the potential
                           exchange benchmark plans or by three of the HCTC state-qualified
                           plans. 58

                           VEBA plans (10 percent of HCTC participants). The potential
                           exchange benchmark plans cover the same EHB categories that the 2012
                           VEBA plan that we reviewed does. Also, like some of the potential
                           exchange benchmark plans, the VEBA plan does not cover certain
                           services that are a subset of certain EHB categories, such as habilitative
                           services.

                           Individual market plans (1 percent of HCTC participants). Plans
                           purchased through the PPACA exchanges may provide coverage of EHB
                           categories in which coverage may be more limited in individual market
                           plans. In 2011, HHS reported that coverage of certain EHB categories is
                           limited in individual market plans, specifically for maternity services,
                           substance abuse services, mental health services, and prescription
                           drugs. 59 However, only about 1 percent of HCTC participants are enrolled
                           in individual market plans.


HCTC Plans’ Actuarial      The vast majority of HCTC participants in 2012 were likely enrolled in
Values Are Likely above    plans with actuarial values that were above the minimum level of
PPACA’s Minimum Level of   60 percent (bronze) required for plans purchased through the PPACA
                           exchanges, including many who were likely enrolled in plans that had
Value                      actuarial values of 80 percent (gold) or higher.




                           58
                             For any EHB category where a potential exchange benchmark plan lacks coverage, the
                           plan will be supplemented to ensure that the plan covers services in all 10 EHB
                           categories. For example, to ensure that plans cover habilitative services, HHS has
                           proposed that plans either offer habilitative services at parity with rehabilitative services or
                           determine which habilitative services they will cover and report those to HHS. See 77 Fed.
                           Reg. 70644, 70670 (to be codified at 45 C.F.R. 156.115(a)(4).
                           59
                             Department of Health and Human Services, Office of the Assistant Secretary for
                           Planning and Evaluation, Essential Health Benefits.




                           Page 25                                   GAO-13-147 HCTC and PPACA Premium Tax Credits
COBRA plans (46 percent of HCTC participants). The majority of
HCTC participants in COBRA plans are likely to be in plans with actuarial
values of 80 percent or higher on the basis of data from two studies. One
study estimated that 80 percent of all enrollees in employer-sponsored
health plans in 2010 were in plans that met or exceeded 80 percent
(gold). 60 The other study estimated that about 65 percent of all employees
enrolled in group health plans in 2010 were in plans with actuarial values
that met or exceeded 80 percent (gold). 61

HCTC state-qualified and VEBA plans (47 percent of HCTC
participants combined). The actuarial values of the four HCTC state-
qualified plans and the one VEBA plan that we reviewed in the selected
states vary. However, all of the plans have an actuarial value of at least
60 percent (bronze) and three of the five plans have an actuarial value of
80 percent (gold) or higher. 62 See table 5.




60
  Department of Health and Human Services, Office of the Assistant Secretary for
Planning and Evaluation, Actuarial Value and Employer-Sponsored Insurance.
61
 Jon R. Gabel et al., “More Than Half of Individual Health Plans Offer Coverage That
Falls Short Of What Can Be Sold Through Exchanges As of 2014.”
62
  Most of the plan officials we interviewed told us that the methods they used to calculate
the actuarial values of the selected HCTC plans align with the February 2012 CCIIO
Actuarial Value and Cost-Sharing Reductions Bulletin. However, for one of the selected
HCTC plans, its actuarial value reflects the costs and utilization of a high-risk population
and uses data reflective of that population in 2010 rather than of the plan’s 2012
population.




Page 26                                  GAO-13-147 HCTC and PPACA Premium Tax Credits
Table 5: Actuarial Value of Selected HCTC Plans in Selected States, 2012
                                                                                            b
                                             Actuarial value level of coverage (percent)
    Selected
             a
    HCTC plan                 Below 60                  60–69         70-79      80-89          Above 90
    Plan 1                                                                                         X
    Plan 2                                                  X
            c
    Plan 3                                                  X
    Plan 4                                                                         X
    Plan 5                                                                                         X
    Total                           0                       2           0          1               2
Source: GAO analysis of interviews with health plan officials.
a
 The five selected plans include four HCTC state-qualified plans and one VEBA plan. Plan officials
provided all actuarial values during interviews with GAO. All values reflect the plan coverage available
in 2012 with the exception of Plan 3’s value.
b
 For the purposes of our analysis, we used actuarial value ranges of 10 percentage points for
each level of coverage. Plan officials told us the actuarial value range that each plan was in (i.e. 70-
79 percent) rather than the specific actuarial value estimate. However, HHS has proposed a de
minimis variation of +/-2 percentage points (e.g., a silver-level plan will be able to have a value from
68 to 72 percent) in actuarial value rather than the wider range of actuarial values at each level of
coverage that our analysis used. CCIIO officials told us that plans that have actuarial values that do
not fall within +/-2 percentage points of one of the levels of coverage will not be sold inside or outside
of an exchange.
c
 Plan 3’s actuarial value was calculated using estimated 2010 costs and utilization for the plan’s
standard population rather than estimated costs and utilization for the current (2012) standard
population of the plan. A plan official told us that it is likely that actuarial value has increased slightly
since 2010, as the plan’s deductibles have not increased since 2010 to accommodate any increases
in inflation.


Individual market plans (1 percent of HCTC participants). The small
number of HCTC participants that have individual market plans are likely
to have a plan with a lower level of actuarial value. A recent study 63 found
that about half of the plans (51 percent) in the individual market have an
actuarial value of less than 60 percent and another third (33 percent)
have an actuarial value at the 60 percent (bronze) level. 64




63
 Jon R. Gabel et al., “More Than Half of Individual Health Plans Offer Coverage That
Falls Short Of What Can Be Sold Through Exchanges As of 2014.”
64
  This study used 2010 data on individual market plans from a sample of five states. We
found that at least a third of the HCTC monthly participants enrolled in individual market
plans in 2011 were from the five states that were sampled for the study.




Page 27                                                      GAO-13-147 HCTC and PPACA Premium Tax Credits
Certain PPACA Provisions     The varied actuarial values of the HCTC plans suggest that the level of
May Incentivize HCTC         coverage for many HCTC participants may change after the expiration of
Participants to Change       the HCTC depending on the options available to participants and the
                             choices they make in 2014 under PPACA. Also, the way that the PPACA
Their Level of Coverage in   tax credits will be calculated may incentivize HCTC participants to change
2014                         their level of coverage. 65 The PPACA premium tax credits will be
                             calculated from a reference plan at the 70 percent (silver) level of
                             coverage, so individuals who choose other plans—with either higher or
                             lower levels of actuarial value—could face higher or lower out-of-pocket
                             costs for premiums. However, plans with higher levels of actuarial value
                             may result in lower out-of-pocket costs for copays and deductibles, and
                             plans with lower levels of actuarial value may result in higher out-of-
                             pocket costs for copays and deductibles. Ultimately, for any HCTC
                             participant, the overall financial effect of a change from an HCTC plan to
                             a PPACA exchange plan will be the net effect of the choice between
                             higher or lower premium costs and higher or lower cost-sharing. 66
                             Further, out-of-pocket costs for premiums and cost-sharing for HCTC
                             participants will be affected by whether they are eligible for the PPACA
                             premium tax credits and cost-sharing subsidies. 67 Considering these
                             factors, current HCTC participants may choose to change their level of
                             coverage when the HCTC expires. 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


                             65
                               A change in the level of coverage, in general, will not affect the services that are
                             covered as all plans in a given exchange will cover services on the basis of their
                             exchange’s EHB benchmark plan.
                             66
                               While it is unknown how premium amounts may change in 2014, there will be
                             restrictions under PPACA on the extent to which health insurance issuers who offer
                             coverage through the exchanges can vary premiums. For example, health insurance
                             issuers will still be able to vary premiums to a certain extent on the basis of age, tobacco
                             use, family size, and geography, but they will no longer be allowed to vary premiums on
                             the basis of factors such as health status, gender, or preexisting conditions.
                             67
                               In addition, other PPACA provisions requiring changes across the health insurance
                             market are already affecting or will soon affect health plans, including many HCTC-
                             qualified plans and plans that will be purchased through the PPACA exchanges. For
                             example, lifetime limits that plans placed on essential benefits were prohibited in all
                             individual market and group plans for plan years starting on or after September 23, 2010,
                             and annual limits that plans placed on essential benefits are gradually being phased out
                             for most health plans and will be prohibited by 2014. Pub. L. No. 111-148, §§ 1001(5),
                             10101(a), 124 Stat. 130, 883.




                             Page 28                                  GAO-13-147 HCTC and PPACA Premium Tax Credits
    60 percent (bronze) level of coverage are eligible for PPACA premium
    tax credits, they may choose a PPACA exchange plan that has a
    higher actuarial value than their current HCTC plan. This is because
    PPACA premium tax credit amounts will be calculated on the basis of
    the reference plan premium (the second-lowest-cost 70 percent
    [silver] plan) for their exchange. Given this, it could be possible for
    these HCTC participants to purchase a 70 percent (silver) plan that
    would have on average lower out-of-pocket cost-sharing expenses
    than their current HCTC plan.

•   Alternatively, some HCTC participants who will be eligible for
    PPACA premium tax credits could have an incentive to change to
    a lower 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 [silver] plan) for their exchange. For example, if a
    participant in a family of four with a household income at 300 percent
    of the FPL purchases a plan in a PPACA exchange with an annual
    reference (silver) plan premium for a family of four of $10,000, he or
    she would receive a PPACA premium tax credit of $3,716 and would
    have to pay $6,284 for the premium if he or she purchased the
    reference plan. However, if the participant instead decided to
    purchase a plan with an actuarial value of 80 percent (gold) having an
    annual premium of $11,000, the PPACA premium tax credit would
    remain the same ($3,716) but the premium amount the participant
    would have to pay would increase by $1,000 to $7,284. Because
    participants would have to pay this difference in premiums, they may
    opt to purchase a plan with a lower level of actuarial value than their
    current plan, such as a plan at the 70 percent level of coverage
    (silver), even though it may have higher out-of-pocket cost-sharing
    expenses on average than their current plan. In contrast, HCTC
    participants may also have an incentive to choose a plan below the 70
    percent (silver) level if obtaining the lowest possible premium is their
    main factor in choosing a health plan. In this case, participants could
    choose a plan at the 60 percent (bronze) level of coverage because
    the premium cost would likely be lower than choosing a
    70 percent (silver) level plan. However, a plan at this level would




Page 29                          GAO-13-147 HCTC and PPACA Premium Tax Credits
                       mean that on average participants could have higher out-of-pocket
                       cost-sharing expenses than they would with a 70 percent (silver) plan.

                  •    The health plan coverage options for HCTC participants not
                       eligible for a PPACA premium tax credit will vary depending on
                       their household income level. The HCTC participants’ not eligible
                       for PPACA premium tax credits because their incomes are above
                       400 percent of the FPL could decide to purchase a health plan at any
                       level of coverage. However, the loss of the HCTC combined with their
                       ineligibility for PPACA premium tax credits because of their higher
                       incomes could affect the level of coverage that they choose or even
                       whether they purchase a health plan through a PPACA exchange or
                       elsewhere. The HCTC participants who have household incomes
                       below 138 percent of the FPL and live in states that expand Medicaid
                       will not be eligible for PPACA premium tax credits; instead they will be
                       eligible for Medicaid. However, in states that do not expand Medicaid,
                       it is uncertain what health plan, if any, that HCTC participants who
                       have household incomes below 100 percent of the FPL may purchase
                       in 2014. These individuals would not be eligible for PPACA premium
                       tax credit in any instance or Medicaid in most instances, and their
                       ability to pay for premiums will be limited. However, because of their
                       low incomes, these HCTC participants will likely be exempt from
                       certain PPACA provisions, such as the tax penalty that individuals will
                       have to pay beginning in 2014 if they do not have a health plan. 68


                  We provided draft copies of this report to HHS and IRS for review, and
Agency Comments   both provided technical comments, which we incorporated as appropriate.




                  68
                    Participants who are exempt from the tax penalty will have the option to purchase
                  individual market catastrophic health plans through the PPACA exchanges that will have
                  an actuarial value below 60 percent because these plans will be available to individuals
                  who are exempt from the tax penalty (and available to individuals under the age of 30).
                  However, even though these participants will have the option to purchase this coverage, it
                  is unlikely that they will because the cost of their premium will be high relative to their
                  income and the lower actuarial value of the plans will increase the potential costs of
                  accessing covered services.




                  Page 30                                 GAO-13-147 HCTC and PPACA Premium Tax Credits
As arranged with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days from the
report date. At that time, we will send copies to the Secretary of the
Treasury and the Commissioner of the IRS, the Secretary of Health and
Human Services, appropriate congressional committees, and other
interested parties. In addition, the report will be available at no charge on
the GAO website at http://www.gao.gov.

If you or your staffs have any questions about this report, please contact
me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices
of Congressional Relations and Public Affairs are on the last page of this
report. GAO staff who made major contributions to this report are listed in
appendix II.




John E. Dicken
Director, Health Care




Page 31                           GAO-13-147 HCTC and PPACA Premium Tax Credits
Appendix I: Characteristics of Health
              Appendix I: Characteristics of Health Coverage
              Tax Credit (HCTC) Participants and
              Nonparticipants in 2010


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. We found that most HCTC participants and nonparticipants
              were ages 55 to 64 (see table 6), over a third of participants and
              nonparticipants had household income greater than 400 percent of the
              FPL (see table 7), and more than half were potentially eligible for the
              HCTC because of participation in the Trade Adjustment Assistance (TAA)
              or Reemployment Trade Adjustment Assistance (RTAA) programs rather
              than being eligible by having their pension payments assumed by the
              Pension Benefit Guaranty Corporation (PBGC) (see table 8).

              Table 6: Number and Percentage of HCTC Participants and Nonparticipants by Age
              Groups in 2010
                                                               a                                          a
                                                   Participants                       Nonparticipants
                  Age groups                      Number       Percent                   Number           Percent
                  34 or younger                     1,127            3%                    31,577              8%
                  35–44                             3,505              9                   48,462               13
                  45–54                             8,370             22                   70,316               19
                  55–64                            24,733             66                 223,878                60
              Source: GAO analysis of IRS data.
              a
               This analysis excludes all participants and nonparticipants who were age 65 or older in 2010, any tax
              filers for whom we could not identify an age, and those for whom we were unable to obtain tax data.
              As a result, 86 percent of participants and 80 percent of nonparticipants were included in this
              analysis.




              Page 32                                       GAO-13-147 HCTC and PPACA Premium Tax Credits
Appendix I: Characteristics of Health Coverage
Tax Credit (HCTC) Participants and
Nonparticipants in 2010




Table 7: Number and Percentage of HCTC Participants and Nonparticipants by
Household Income Based on the FPL in 2010
                                                         a                                        a
                                          Participants                       Nonparticipants
    Household income
    by percent of FPL                  Number            Percent            Number            Percent
    <100%                                 1,312                   3%          25,935                  7%
    100 to <150                           2,488                    6          38,003                  10
    150 to <200                           4,205                   11          42,512                  11
    200 to <250                           4,424                   11          38,457                  10
    250 to <300                           4,651                   12          36,972                  10
    300 to 400                            7,658                   19          65,022                  17
    >400                                 14,726                   37        143,302                   37
Source: GAO analysis of IRS data.

Notes: The percentages may not add to 100 percent because of rounding.
a
 This analysis excludes all participants and nonparticipants who were age 65 or older in 2010, and
those for whom we were unable to obtain tax data. As a result, 90 percent of participants and 83
percent of nonparticipants were included in this analysis.



Table 8: Number and Percentage of HCTC Participants and Nonparticipants by
Eligibility Type in 2010
                                                    a                                         a
                                     Participants                         Nonparticipants
    Eligibility Type                Number          Percent                  Number          Percent
    TAA or RTAA                      22,148                  59              214,843                  55
    PBGC                             14,443                  38              170,458                  44
                         b
    Multiple Eligibility              1,136                  3                  4,898                 1
Source: GAO analysis of IRS data.
a
 This analysis excludes all participants and nonparticipants who were age 65 or older in 2010, any tax
filers for whom we could not identify an eligibility type, and those for whom we were unable to obtain
tax data. As a result, 86 percent of participants and 83 percent of nonparticipants were included in
this analysis.
b
 According to IRS officials, HCTC participants and nonparticipants may have multiple eligibility types,
for example, individuals may be eligible through TAA benefits and by having their pension payments
assumed by PBGC.




Page 33                                       GAO-13-147 HCTC and PPACA Premium Tax Credits
Appendix II: GAO Contact and Staff
                  Appendix II: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  John E. Dicken, (202) 512-7114 or dickenj@gao.gov
GAO Contact
                  In addition to the contact named above, Gerardine Brennan, Assistant
Staff             Director; George Bogart; Andrew Ching; Sandra George; Alison Goetsch;
Acknowledgments   Lisa A. Lusk; John Mingus; and Laurie Pachter made key contributions to
                  this report.




                  Page 34                              GAO-13-147 HCTC and PPACA Premium Tax Credits
Related GAO Products
             Related GAO Products




             Trade Adjustment Assistance: Changes to the Workers Program
             Benefited Participants, but Little Is Known about Outcomes. GAO-12-953.
             Washington, D.C.: September 28, 2012.

             Medicaid Expansion: States’ Implementation of the Patient Protection and
             Affordable Care Act. GAO-12-821. Washington, D.C.: August 1, 2012.

             Health Coverage Tax Credit: Participation and Administrative Costs.
             GAO-10-521R. Washington, D.C.: April 30, 2010.

             Health Coverage Tax Credit: Simplified and More Timely Enrollment
             Process Could Increase Participation. GAO-04-1029. Washington, D.C.:
             September 30, 2004.




(290997)
             Page 35                         GAO-13-147 HCTC and PPACA Premium Tax Credits
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