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Study Finds Mixed Record for Health Insurance Tax Credit

JUNE 5, 2006 -- A new report by the Kaiser Family Foundation suggests a 2002 health insurance tax credit for trade-displaced workers and retirees is effective—when eligible individuals know how to use it.

According to the report, 26 percent of the surveyed retirees from bankrupt steel companies LTV Corporation and Bethlehem Steel Corporation reported using the tax credit after losing their health benefits. Eligible workers can use the refundable credit, which was part of a 2002 expansion of Trade Adjustment Assistance (TAA) programs (PL 107-210), to pay up to 65 percent of their health insurance premiums.

"It's a very effective tax credit" that seems to help protect individuals from going uninsured," said Isadora Gil, a Kaiser policy analyst and one of the report's authors. "It seems to offer some protection, which is important for this group of people," she said, noting that retirees are more likely than younger individuals to need health insurance to safeguard against high costs for illness and injury.

Yet the survey also suggests that outreach constitutes a key element of the tax credit's effectiveness.

Eligible Bethlehem Steel retirees were more than twice as likely to take advantage of the credit as retirees from LTV, a discrepancy the report says might relate to the education campaign the United Steelworkers of America (USWA) implemented for Bethlehem retirees.

LTV retirees, in contrast, lost their health benefits before the tax credit went into effect, though retirees younger than age 65 were eligible once the credit took force. The credit was in place by the time Bethlehem Steel retirees younger than age 65 lost their coverage.

"We didn't expect to find this . . . really big difference," Gil said of the tax credit claim rates.

The survey found that 34 percent of eligible Bethlehem Steel respondents used the tax credit, compared with only 13 percent of eligible LTV retirees.

Both groups surpassed the national average of 7 percent of eligible individuals taking the tax credit.

Gil said the survey's findings on the health insurance tax credit indicate that its effectiveness correlates to access to information and support on how to use the credit.

"There's scant information available about it, even on the Internet," and applying for the health insurance tax credit is complicated, said Gary Hubbard, a USWA spokesman. The union assisted Kaiser's survey by helping identify affected retirees and surviving spouses.

"The program is not being used as much as it ought to be," Hubbard said.

Kaiser released the study, which evaluated 2004 data, on May 30. The report surveyed 2,691 retirees who lost their health coverage in 2002 and 2003 when the two major U.S. steel companies went bankrupt. Overall, those bankruptcies left about 200,000 former workers and their dependents without health benefits.

Most of those surveyed—about 75 percent—secured alternative coverage once they lost their retirement health benefits. But the remainder of the survey's findings indicates that loss of benefits led to significant hardship for retirees.

Close to half of respondents under age 65, for instance, said they or a spouse returned to work or put off retirement because of health care costs.

Medicare afforded retirees and spouses 65 and older with primary coverage; 74 percent of that group was covered by a Medicare HMO or purchased supplemental coverage.

Of those Medicare-eligible respondents without supplemental coverage, however, 51 percent said they "often" or "sometimes" skip prescription medications due to cost. Only 29 percent of those with supplemental coverage reported skipping medication.

Eighteen percent of respondents were uninsured at the time of the survey. That group was twice as likely as other retirees to say cost forced them to forgo or delay needed care.

"It's a fundamental policy problem for our country," said Hubbard of legacy health care costs, adding that the automobile and airline industries are facing similar strains. If government does not find a solution, he argued, the burden will fall on workers and their families.

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