Last August, President George W. Bush signed into law the Trade Adjustment Act of 2002 (TAA), helping eligible individuals maintain their health insurance if they lose their jobs due to trade arrangements. Persons covered by the TAA are eligible to receive a refundable tax credit for 65 percent of the premium cost for qualified health insurance plans. Options that qualify for the tax credit are specifically outlined in the legislation and include COBRA, purchasing pools, state continuation plans, and high-risk pools, among others.
Some of the options are automatically available to eligible individuals under TAA: COBRA, coverage under a spouse’s employer-sponsored plan, and existing individual health insurance coverage. For other coverage options–high-risk pools, private purchasing pools, state-based continuation coverage, and state employee health insurance programs, for example–legislative or regulatory action by state officials is necessary to expand eligibility to TAA eligibles, even if the option is already in existence in the state.
A person does not have to have been previously insured in order to qualify for the TAA tax credit, but individuals without prior coverage would be subject to the same pre-existing conditions limitations as other participants in the type of coverage option the state selected. If a TAA-eligible individual had been previously insured for three months and had less than a 63-day break in coverage, the option selected must extend coverage on a guaranteed-issue basis and without application of a pre-existing conditions waiting period.
TAA and High-Risk Pools
TAA also provides new funding for high-risk pools, an essential tool for increasing the number of Americans covered by health insurance. Typically, a high-risk pool is a state-created nonprofit association offering comprehensive health insurance benefits to individuals with pre-existing medical conditions.
High-risk pools play an important role in our health care system. Health care costs and health insurance costs are rising; the new TAA funding will improve stability for existing high-risk pools and encourage the development of pools in states currently lacking this important safety net.
Typically, individuals seek coverage in a high-risk pool for one of three reasons: They have been turned down for coverage in the private individual market due to a chronic illness or condition; they can purchase only limited coverage due to their health; or they have coverage that costs more than what is available from the pool.
TAA authorizes grants of up to $1 million each to states for the creation of a high-risk pool if they don’t have one, or if their existing pool is not currently qualified. Many states have been unable to implement high-risk pools due to funding shortfalls, and the ability to obtain initial start-up funds will be extremely helpful.
TAA also provides funding to offset losses experienced by pools. While the TAA funds are not intended to be the sole source of funding for pool losses in excess of premiums, TAA money should help financially stabilize existing pools and make them more affordable. TAA funds may also make it possible for the few pools that are either closed or have waiting lists to make changes necessary to ensure their pools can be re-opened and remain open.
In order to qualify for TAA funding to offset losses, the high-risk pool must cap its premiums at 150 percent of a standard rate; two or more plan options must be made available to plan participants; a mechanism other than federal funding must be established to ensure continual funding past the year-end 2004; and the pool must be open to HIPAA eligibles.
Thirty states have already implemented high-risk pools, which have provided affordable health insurance for thousands of individuals who would otherwise be uninsured. The additional federal funding is expected to encourage other states to implement such pools.
Janet Trautwein is vice president of government affairs for the National Association of Health Underwriters (NAHU). For more information call Kelly Loussedes at 703/276-3835 or email [email protected].