Eligibility Under The Trade Adjustment Assistance Act

The Trade Adjustment Assistance Act signed by President Bush in August of 2002 for the first time provides health insurance benefits for eligible individuals in the form of a tax credit for 65% of qualified health insurance premiums. The premium amount is not capped, and eligible individuals are responsible for payment of the remaining 35% of the premium. The tax credit is refundable which means that individuals do not have to owe income taxes in order to qualify.

There are two basic categories of eligibles under TAA. The first category is those individuals and their families certified as eligible for benefits under TAA because they are impacted by US trade agreements. The second category is individuals age 55-64 and their families who are receiving benefits from the Pension Benefit Guarantee Corporation (PBGC). Eligible individuals must not be covered by other specified coverage, which is basically coverage for which more than 50% of the premiums are paid for the eligible individual by an employer or spouse's employer. The benefit period is for two years or the remainder of the TAA certification period, if less than two years, or the period of time a person is in an eligible category for PBGC eligibles, which could be up to 10 years depending on their age.

Eligible individuals are further broken down between those who have basic eligibility and those who are "qualified" eligibles.

"Qualified" Eligible Individuals
The "qualified" eligible has three months of prior creditable coverage prior to separation from employment with no more than a 63-day break in coverage. This eligibility category applies to purchasing options that a state may elect, but not to the three "automatic" options described below. "Qualified" eligible individuals must be offered coverage through qualified health insurance purchasing options, if elected by a state, on a guaranteed issue basis, with no pre-existing conditions limitation, and with the same benefits and premiums that would be offered a similarly situated individual, (an individual with similar characteristics who is not eligible for TAA participating in the same coverage option.)

The average qualified TAA eligible individual who has prior creditable coverage should be no more or less healthy than any other individual with the same characteristics in the general population. Most TAA eligibles who do have prior coverage will in fact have more than 3 months of prior coverage, since businesses facing financial difficulties are unlikely to be hiring new employees. These individuals will probably have been covered for a significant period of time, with little if any incentive for adverse selection. Many would very likely meet the definition of HIPAA eligibility, except that unlike typical HIPAA eligibles, these individuals will have a tax credit to help with the cost of the coverage. This purchasing assistance is very important since it will be a strong incentive for healthier individuals to purchase coverage making the risk of this population much less.

Eligible Individuals
Some individuals will be eligible for the TAA tax credit even if they weren't previously insured. These individuals will be "eligible" but not "qualified". Additionally, due to the nature of TAA, those who lose their jobs and are later certified as TAA eligible will most likely have some gap in coverage between loss of coverage and TAA eligibility, which may exceed 63 days. Unless the person voluntarily continues coverage on his or her own upon loss of the employer coverage, he or she may lose credit for prior coverage if uninsured for longer than 63 days. While still eligible for the tax credit, he or she may no longer be considered "qualified" and eligible for guaranteed issue coverage with no pre-existing conditions limitation.

Purchasing Options
There are three automatic qualified health insurance purchasing options where state action is not required: COBRA (federal only), spouse's employer's plan if the employer pays less than 50% of the total cost of coverage, and individual health insurance if in force for at least 30 days prior to separation from employment. The "qualified" definition does not apply to these options, therefore, if an eligible individual elected one of these options and had only been covered for three months with prior coverage, any remaining pre-existing conditions limitation on the policy would still apply.

For those eligibles coming from an employer where a COBRA option is available, a new 60-day election period will begin upon the date of TAA certification. This additional election period is only available within six months of termination of employment. Coverage that is elected during the special election period will be retroactive only back to the date of certification. Additionally, for the COBRA option only, the period of time between loss of employment and TAA certification will not count against the 63-day break in coverage period allowed under HIPAA.

States are not required to provide any options for eligible individuals in addition to the three automatic options; however, some TAA eligibles will not have prior creditable coverage or will not have available employer options and will therefore not be eligible for any of the automatic options. Most states will want to offer at least one option in addition to the three automatic options. Qualified purchasing options elected by a state for TAA eligibles must be available to qualified individuals with prior coverage as described above. Individuals who are eligible but who do not have prior creditable coverage may also be eligible for the tax credit but may participate in any qualified health insurance options subject to medical underwriting, pre-existing conditions limitations, and premiums based on their specific characteristics.

Early action is important on the part of states. If a state does not act to provide one or more additional options, TAA eligibles may find themselves with a tax credit to spend on the purchase of qualified health insurance, but no place to spend it. Initial eligibility for the TAA tax credit began in December of 2002 for individuals who file for the credit on their tax return. The credit became advanceable on a monthly pro-rata basis in August of 2003.

For questions, contact Janet Trautwein, jtrautwein@nahu.org, (703) 276-3806.

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