Study of Federal Health Tax Credit Program Finds it Expensive and Complicated

Study of various design features of the federal health care tax credit program

In 2002, the U.S. Congress enacted the Health Coverage Tax Credit to subsidize the purchase of coverage for certain individuals, particularly early retirees and workers displaced by international trade, who might otherwise be uninsured. As part of the federal Trade Adjustment Assistance Reform Act of 2002, the tax credit pays 65 percent of health insurance premiums for eligible individuals and their dependents.

In this 2004 to 2005 project, Karen Pollitz, MPP, of Georgetown University's Health Policy Institute examined early experiences with the Health Coverage Tax Credit to inform policy-makers' discussions of other health coverage tax credits.

This project was part of the Robert Wood Johnson Foundation (RWJF) national program Changes in Health Care Financing and Organization (HCFO) . HCFO supports policy analysis, research, evaluation and demonstration projects that provide public and private decision leaders with usable and timely information on health care policy and financing issues.

Key Findings

  • The researchers reported the following findings:

    • The Health Coverage Tax Credit has proven to be a highly complex and expensive program for the federal government to administer, for health insurers and health plans to participate in and for consumers to understand and use.
    • While the federal government identified a target population, set some standards for qualified coverage and established a mechanism for delivering premium subsidies, this particular program proved inadequate for most eligible individuals to participate.