03-02: Federal Trade Act of 2002 Health Coverage Tax Credit

* This bulletin was repealed by 08-05

To:           All Health Insurance Companies, Health Services Corporations And Health Maintenance                 Organizations Licensed In Missouri

From:      Scott B. Lakin, Director, Missouri Department of Insurance

Re:          The Federal Trade Act Of 2002 Health Coverage Tax Credit

Date:       August 8, 2003

The federal Trade Act of 2002, Public Law No. 107-210 (the Act) includes important provisions to assist certain individuals participating in the Trade Adjustment Assistance program who lost their job due to the effect of international trade as well as persons receiving a payment from the Pension Benefit Guarantee Corporation. The Act provides this assistance in the form of a health coverage tax credit (HCTC) equal to 65% of the amount paid by eligible individuals for qualified health insurance coverage.

The Act lists ten categories of health insurance that may be "qualified" for the purposes of the HCTC. Three of these categories of health insurance coverage (i.e., federal COBRA continuation coverage, coverage under a spouse's employer group health plan if the employer contributes less then 50% of the cost of coverage, and individual health insurance if the eligible individual was covered for 30 days prior to termination from employment) automatically qualify for the HCTC without any action by the various states. For the other seven categories, however, the states must notify the federal government of the availability of health insurance coverage to eligible individuals that meets the criteria set forth in the Act (i.e., guarantee issue, no pre-existing condition restrictions and nondiscriminatory premiums and benefits) in order for the coverage to be considered "qualified" for the purposes of the HCTC.

One category of coverage that may qualify is coverage that private insurers have agreed to provide to eligible individuals in a state under the criteria set forth in the Act. The purpose of this bulletin is to urge all companies to provide health insurance coverage that HCTC eligible individuals may purchase to benefit from the tax credit. This would be particularly easy for those companies that are already providing guarantee issue coverage to HIPAA eligible individuals. Once your company has identified the plan or plans that it is willing to make available to HCTC eligible individuals, we would request that you notify the Department's Life and Health Section. Upon a finding that the coverage meets the standards to be considered qualified health insurance, the Department will notify the appropriate federal agencies so that your company may begin participation in the program.

You may obtain more detailed information concerning what constitutes qualified health insurance and how to coordinate premium payment and receipt of the HCTC payment directly from the U.S. Department of the Treasury at www.IRS.gov, key word HCTC. Our office will be pleased to assist you in any way that we can. You may contact the Life and Health Section with questions at 573-751-1953.