Order Code RL32620
CRS Report for Congress
Received through the CRS Web
Health Coverage Tax Credit
Authorized by the Trade Act
Updated February 8, 2005
Julie Stone-Axelrad
Analyst in Social Legislation
Domestic Social Policy Division
Bob Lyke
Specialist in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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Health Coverage Tax Credit
Authorized by the Trade Act
Summary
The Trade Act of 2002 (P.L. 107-210) authorized a federal income tax credit of
65% of what eligible taxpayers pay for qualified health insurance for themselves and
their family members. The credit is refundable, so taxpayers may claim the full
credit even if they have little or no federal income tax liability. The credit can also
be advanced, so taxpayers need not wait until they file their tax returns in order to
benefit from it. The credit is called the health coverage tax credit (HCTC) by the
Internal Revenue Service, the principal federal oversight agency, though other names
are used as well.
Eligibility for the HCTC is limited to three groups of taxpayers. The first two
consist of individuals who are eligible for Trade Adjustment Assistance allowances
because they have lost manufacturing jobs due to increased foreign imports or shifts
in production outside the United States. The third consists of individuals whose
defined benefit pension plans were taken over by the Pension Benefit Guaranty
Corporation due to financial difficulties. Eligible individuals cannot be enrolled in
certain other health insurance (e.g., Medicaid) or entitled to certain other coverage
(e.g., Medicare Part A).
The HCTC can be claimed only for 10 types of insurance coverage specified in
the statute, seven of which require state action to become effective. As of November,
2004, 39 states and the District of Columbia made at least one of these seven forms
of coverage available; in the remaining 11 states, only the three automatically
qualified forms not requiring state action were available, though not to all who were
eligible for the credit.
The HCTC is of interest to policy makers searching for ways to help people
acquire and maintain health insurance coverage. Debates both before and after its
enactment reflect a larger controversy over the use of tax incentives in financing
healthcare, in contrast to expanding public programs such as Medicare and Medicaid.
The HCTC is not widely used. As of November 2004, 13,369 of the estimated
223,307 taxpayers who were potentially eligible for the credit were receiving advance
payments, or about 6%. Others might be claiming the credit without an advance
payment, but their number is not likely to be large. Reasons why eligible people do
not use the credit include difficulties finding qualified insurance and difficulties
paying the part of the premium not covered by the credit (the remaining 35%).
A number of bills were introduced in the 108th Congress to expand eligibility for
the HCTC and exempt state qualified plans from its consumer protection provisions.
As these measures were not enacted, they might be reintroduced in the 109th
Congress. There may also be proposals for expanded tax credits that are generally
available to lower and modest income families. This report will be updated as
legislative activity occurs and more information about the credit and insurance
options becomes available.

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Contents
Eligibility for the HCTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Eligibility Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
TRA Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ATAA Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PBGC Pension Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Limitations on Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Family Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Qualified Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notifying Eligibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Availability of a Qualified Health Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Claiming the Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Next-Year Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Advance Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Grants to States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Infrastructure Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Gap Filler Grants (formerly Bridge Grants) . . . . . . . . . . . . . . . . . . . . . . 9
High Risk Pool Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Issues in Design and Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Participation Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Limited Availability of Qualified Plans . . . . . . . . . . . . . . . . . . . . . . . . 12
Debate over Consumer Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Debate over Individual Market Insurance . . . . . . . . . . . . . . . . . . . . . . 14
Affordability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Other Factors Affecting Participation . . . . . . . . . . . . . . . . . . . . . . . . . 15
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Legislation in the 108th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Legislation in the 109th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
List of Tables
Table 1. Infrastructure Grants from FY2002 Allocation of $10 million
(as of January 1, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Table 2. Gap Filler Grants From FY2002 Allocation of $50 million
(as of September 30, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Table 3. Gap Filler Grants From FY2002 Allocation of $29.8 million
(as of January 1, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

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Table 4. Potentially Eligible Population for the HCTC and Cumulative
Counts of Eligibles Registered and Enrolled for Advance Payments
(November 30, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

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Health Coverage Tax Credit
Authorized by the Trade Act
The Trade Act of 2002 (P.L. 107-210) authorized a federal income tax credit of
65% of what eligible taxpayers pay for qualified health insurance for themselves and
their family members. The credit is refundable, so taxpayers may claim the full
credit even if they have little or no federal income tax liability. The credit can also
be advanced, so taxpayers need not wait until they file their tax returns in order to
benefit from it.
The credit is called the “health coverage tax credit” (HCTC) by the Internal
Revenue Service on its website and in its forms and publications.1 However, the
credit is sometimes known as the “trade adjustment assistance credit” (or TAA
credit) and the “Trade Act credit,” and it appears in budget documents as the “tax
credit for health insurance purchased by certain displaced and retired individuals.”2
This report uses the term HCTC to conform to IRS practice.
The HCTC is of interest to policy makers searching for ways to help people
acquire and maintain health insurance coverage. Debates both before and after its
enactment reflect a larger controversy over the use of tax incentives in financing
healthcare, in contrast to expanding public programs such as Medicare and Medicaid.
This report begins by summarizing the detailed, complex rules regarding
eligibility and qualified insurance for the HCTC. It then discusses steps the federal
government and the states have taken to implement the credit. Next, the report
discusses issues related to why the credit is not widely used — about 6% of the
eligible population is claiming it — and whether it is equitable from a tax
perspective. The report concludes with a brief discussion of legislation in the 108th
Congress regarding the credit.
1 On the IRS website [http://www.irs.gov], search for “HCTC”in the box in the upper-left
corner of the screen and then click on the overview document, which has links for
individuals, state agency officials, and health plan officials as well as a glossary and a list
of frequently-asked questions.
2 Analytical Perspectives, Budget of the United States Government, Fiscal Year 2005, p. 312
and the accompanying tables. A similar phrase is used in Joint Committee on Taxation
documents.

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CRS-2
Eligibility for the HCTC
To claim the HCTC, taxpayers must be in one of three eligibility groups and not
enrolled in (or sometimes even eligible for) certain types of health insurance. Some
other statutory limitations also apply. In addition, eligible taxpayers must pay for
qualified health insurance, the rules for which are discussed immediately after this
section.
Eligibility Groups
Three groups of taxpayers are eligible to claim the HCTC:
! individuals receiving a Trade Readjustment Assistance (TRA)
allowance under the Trade Adjustment Assistance (TAA) program,
including those eligible for but not yet receiving the allowance
because they have not yet exhausted their state unemployment
benefits;
! individuals age 50 and over receiving an Alternative Trade
Adjustment Assistance (ATAA) allowance under the TAA program;
and
! individuals age 55 and over receiving a Pension Benefit Guaranty
Corporation (PBGC) pension payment, including those who
received a lump sum payment from the PBGC after August 5, 2002.
The first two groups consist of individuals who have lost manufacturing jobs
due to increased foreign imports or shifts in production outside the United States.
The U.S. Department of Labor (DOL) must certify that workers dislocated by these
events are eligible for TAA assistance; this occurs upon petition from the workers,
the affected company, a union, or others. After a petition is certified, workers are
notified by a state workforce agency (SWA) and may apply for TAA benefits at
One-Stop Career Centers.3 TAA benefits include counseling and other employment
services, job search and relocation allowances, training, and a TRA or ATAA
allowance.4
TRA Allowance. To be eligible for a TRA allowance (the first group
identified above), individuals must qualify for state unemployment compensation,
have worked for the affected firm at least 26 of the 52 weeks preceding their layoff,
and had weekly wages from the firm of at least $30. Usually they must be
participating in TAA-approved training. The TRA allowance is paid after state
3 State workforce agencies are state offices, funded by the DOL, that are responsible for
administering unemployment insurance, employment and training services, and labor market
information programs in the 50 states and the District of Columbia. One-Stop Career
Centers are part of a coordinated delivery system of employment and training services; they
are organized by local workforce investment boards under the Workforce Investment Act
of 1998. They can be located at [http://www.servicelocator.org].
4 Information on TAA certification and benefits is available through the DOL website at
[http://www.doleta.gov/tradeact/]. For an overview, see CRS Report 94-478, Trade
Adjustment Assistance for Workers: A Fact Sheet, by Paul J. Graney.

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CRS-3
unemployment benefits are exhausted; these benefits generally last several months
for some workers in certain states to a half year for others. (In most states, the
maximum time period for unemployment benefits is 26 weeks, though workers with
some work histories qualify for less. Benefits are sometimes extended beyond the
26-week period due to federal legislation or triggers based on higher unemployment
rates.) The basic TRA allowance then provides 26 weeks of support, though it can
be followed by 52 weeks of an additional allowance to assist completion of training.
A further 26 weeks is allowed for those receiving remedial education. Persons in all
these TRA groups are eligible for the HCTC as long as they are receiving either
unemployment benefits or the allowance, and for one month afterwards.5
ATAA Allowance. To be eligible for an ATAA allowance (the second group
identified above), individuals must obtain re-employment full-time (other than at the
affected firm) within 26 weeks of separation from employment, be at least 50 years
of age, and not earn more than $50,000 a year. The DOL must determine that a
significant number of workers at the affected firm were age 50 or older and had job
skills not easily transferable to other employment; competitive conditions within the
workers’ industry are considered as well.6 The ATAA allowance is an option to other
TAA benefits; individuals who elect it receive an allowance equal to 50% of the
difference between their wage at the affected firm and their re-employment wage.
Payments cannot exceed $10,000 over the course of two years. Eligibility for the
ATAA allowance and thus for the HCTC is limited to two years.7
PBGC Pension Benefit. To receive a PBGC pension benefit (the third group
identified above), individuals must have worked for a firm whose defined benefit
pension plan was insured and then taken over by the agency.8 The PBGC assumes
control of defined benefit plans (pension plans that promise to pay a specific monthly
benefit at retirement) when it determines the plans must be terminated to protect the
interests of participants (for example, if currently due benefits cannot be paid) or
when employers demonstrate they cannot remain in business unless the plan is
terminated. The PBGC uses plan assets and its own insurance reserves to pay the
pensions (up to a guaranteed amount) to the former workers and their survivors.
Individuals receiving PBGC-paid pensions are eligible for the HCTC provided they
are at least 55 years of age but not yet entitled to Medicare (which usually occurs at
age 65).
5 Section 35(c) of the Code extends eligibility for the HCTC for one month following the
end of TAA eligibility; this would apply to individuals receiving a TRA allowance.
6 The ATAA program is a demonstration program, limited to five years from implementation
by a state.
7 Section 35(c) of the Code extends eligibility for the HCTC for one month following the
end of TAA eligibility; this apparently would apply to individuals receiving an ATAA
allowance. However, Section 246(a)(2)(B) of the Trade Act of 1974 as amended by the
Trade Act of 2002, expressly limits their eligibility to two years.
8 Information on the PBGC is available through its website at [http://www.pbgc.gov]. For
an overview, see CRS Report 95-118, Pension Benefit Guaranty Corporation: A Fact Sheet,
by Paul J. Graney, and CRS Report RL32702, Can the Pension Benefit Guaranty
Corporation be Restored to Financial Health?, by Neela Ranade.

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CRS-4
Limitations on Eligibility
Individuals in the three groups just described are not eligible for the HCTC if
they have other specified health insurance coverage; this includes being enrolled in
the following health plans:
! a plan (including COBRA elections described below) maintained by
the individual’s employer or former employer (or the spouse’s
employer or former employer) that pays 50% or more of the cost;9
! Medicare Part B (primarily covers doctors’ services and outpatient
hospital care);
! the Federal Employees Health Benefits Program (FEHBP);
! Medicaid; or
! the State Children’s Health Insurance Program (SCHIP).
Similarly, eligible individuals cannot be entitled to the following coverage:
! Medicare Part A (primarily for inpatient hospital care); or
! coverage provided through the U.S. military health system (e.g.,
Tricare or CHAMPUS)
In addition, individuals are not eligible for the HCTC if they are imprisoned or
if they may be claimed as a dependent by another taxpayer.
Family Members
Eligible individuals may use the HCTC for health insurance that covers a spouse
and dependents who can be claimed on their tax return. For this purpose, children
of divorced or separated parents are treated as dependents of the custodial parent.
Qualifying family members cannot be enrolled in or entitled to the insurance
described above (e.g., Medicaid). They also cannot claim the credit on their own —
when the eligible individual loses eligibility, the credit no longer applies to the family
members.
Qualified Insurance
Eligible individuals can claim the HCTC only if they make payments for
qualified insurance. The statute limits qualified insurance to ten different categories
of coverage, identified as options (A) through (J). The credit cannot be claimed for
other insurance.
9 Premiums paid by employees through a cafeteria plan (i.e., premium conversion
arrangements) are considered to be paid by the employer. Additional eligibility restrictions
apply to ATAA individuals for certain types of insurance if their current or previous
employer (or the current or previous employer of a spouse) pays part of the coverage, or the
premium could be paid on a pre-tax basis.

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CRS-5
Three of the coverage categories are known as automatically qualified health
plans. Individuals may elect these options without involvement by their state. These
options (identified by their statutory letter designation) are as follows:
A.
Coverage under a COBRA continuation provision;10
I.
Coverage under a group health plan available through the
employment of a spouse; and
J.
Coverage under individual health insurance provided the
eligible individual was covered under this type of insurance
for the entire 30-day period ending on the date the individual
became separated from employment which qualified the
individual as a TAA, ATAA, or PBGC pension recipient.11
The other seven categories of coverage are known as state qualified plans;
individuals may choose these options only if their state has chosen or established
these plans to be included as qualified coverage. These options (identified by their
statutory letter designation) are as follows:12
B.
State-based continuation coverage provided by a state under
state law requiring such coverage;
C.
Coverage offered through a state high-risk pool;
D.
Coverage under a plan offered for state employees;
E.
Coverage under a state-based plan that is comparable to the
plan offered for state employees;
F.
Coverage through an arrangement entered into by a state and
a group health plan, an issuer of health insurance, an
administrator, or an employer;
10 COBRA refers to the Consolidated Omnibus Budget Reconciliation Act of 1985 (P.L. 99-
272). Title X of this legislation requires employers with 20 or more employees that offer
health insurance to provide the option of continuing coverage to their employees and their
families under certain circumstances (including termination or reduction in hours of
employment, death, divorce or legal separation, enrollment in Medicare; or the end of a
child’s dependency under a parent’s health plan) for a limited time. Employers may charge
the beneficiary for this coverage up to 100% of the premium (counting both the employer
and employee share) plus 2% for administrative expenses. Individuals generally have 60
days from formal notification by the employer in which to elect COBRA coverage, though
Section 203(e) of the Trade Act of 2002 authorizes an extension of the election period for
individuals who are eligible for TAA assistance. For additional information, see CRS Report
RL30626, Health Insurance Continuation Coverage under COBRA, by Heidi G. Yacker.
11 The requirement for prior coverage does not apply to individual insurance obtained
through a state qualified plan. This exception is not explicit in the statute.
12 For a current list and contact information of state qualified plans in each state, see the link
through the IRS website at [http://www.irs.gov/individuals/article/0,,id=110016,00.html].

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CRS-6
G.
Coverage through a state arrangement with a private sector
health care purchasing pool; and
H.
Coverage under a state-operated plan that does not receive any
federal financing.
Coverage under state qualified plans must provide consumer protections to all
qualifying individuals.13 Plans must guarantee issue (offer coverage to all qualifying
applicants) and not deny coverage based on preexisting conditions. Premiums
(without regard to subsidies) must not be greater for qualifying individuals than for
other similarly situated individuals, and benefits for qualifying individuals must be
the same as or substantially similar to those for others. In short, the statute attempts
to ensure that state qualified plans are open to all qualifying applicants and do not
charge more or provide fewer benefits to people who are receiving the credit. The
consumer protections do not preclude use of medical underwriting to set premiums.
Certain types of coverage are not considered qualified plans (even if they
otherwise fall in one of the categories above); these include accident or disability
income insurance, liability insurance, workers compensation insurance, automobile
medical payment insurance, credit-only insurance, coverage for on-site medical
clinics, limited scope dental or vision benefits, long-term care insurance, coverage
for a specified disease or illness, hospital and other fixed indemnity insurance, and
supplemental insurance.
Implementation
The HCTC involves a number of federal and state agencies. The Department
of the Treasury is primarily responsible for administering the advance payment
system and, through the Internal Revenue Service, reviewing tax returns on which the
credit is claimed. The Department of Labor (DOL) and the Pension Benefit Guaranty
Corporation (PBGC) are responsible for helping Treasury identify who might be
eligible for the credit. DOL also administers two grant programs that provide
assistance to states for helping individuals enroll and for covering 35% of the
premium for certain individuals. State-level entities include state workforce
agencies, state health agencies, and state insurance commissioners.
Treasury has contracted with Accenture, a for-profit consulting company, to
help administer the advance payment system. Accenture operates the HCTC
13 The four consumer protections mentioned apply to “qualifying” individuals, defined in
the statute as eligible individuals (as described above) who had three months of creditable
coverage in another health plan prior to applying for a state qualified plan. The requirement
that creditable coverage immediately precede the application appears in the IRS guidance;
it is not explicit in the statute. Even so, a break in coverage of up to 62 days is allowed
between having prior coverage and enrolling in the new plan. IRS guidance explicitly
provides that preexisting condition exclusions may be imposed if the individual has less than
three months of creditable coverage.

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CRS-7
Customer Contact Center, which registers people for advance payments and sends
them monthly invoices for premium payments.
Notifying Eligibles
Toward the end of 2002, DOL’s Employment and Training Administration
requested that state workforce agencies (SWAs) mail HCTC information packets to
all eligible TAA recipients or persons who would be eligible for TAA allowances as
soon as they exhaust their unemployment benefits.14 SWAs are also required to
submit to the HCTC office a daily listing of persons eligible for TAA and ATTA.15
Similarly, the PGBC identified beneficiaries who are potentially eligible for the
HCTC and provided the IRS with their relevant personal records — including names,
addresses, social security numbers, and dates of birth.16 Starting in February 2003,
the IRS sent information packets, including forms and instructions for claiming the
credit, to those persons in the PGBC list.
The HCTC office continues to mail packets to persons whose names are
included on the lists provided to them by the SWAs and PGBC. These packets are
approximately 20 pages and are available in English and Spanish. Labor unions and
advocacy groups also inform members of their potential eligibility.
The HCTC program has had difficulty notifying one group of eligibles: persons
who are receiving unemployment compensation but have not yet applied for TAA
benefits. Unless they petition the DOL directly, their names and contact information
are not easily identified. Unemployment compensation can last up to 26 weeks in
most states, and recipients often don’t apply for TAA benefits until near the end of
that period. These persons, probably the largest group of TAA eligibles, generally
will not receive notification about their HCTC eligibility until their unemployment
benefits end.
Availability of a Qualified Health Plan
The HCTC is available only to eligible taxpayers who enroll in one of the 10
categories of qualified health plans described above. The three automatically
qualified plans are available in all states, but only for certain individuals. COBRA
continuation of prior employment-based coverage (letter A in the list under the
“Qualified Insurance” section) is available only if one’s previous employer continues
to offer health insurance coverage to its remaining workers or retirees; if the company
drops coverage completely or goes out of business, a COBRA election is not
possible. Coverage under a group health plan available through the employment of
a spouse (letter I) is available only if one is married and the spouse has coverage, two
14 U.S. Department of Labor, Employment and Training Administration, Advisory System,
Training and Employment Guidance Letters No. 05-03 and No. 16-02.
15 For more information about SWA’s reporting requirements, see the questions and answers
about HCTC on [http://www.doleta.gov//tradeact/directives/UIPL33-03_AttachA.cfm].
16 67 Federal Register 66674, Nov. 2, 2002.

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CRS-8
conditions that might not apply. Even if the spouse has coverage, the credit is not
available if the spouse’s employer pays 50% or more of the cost, which usually is the
case, as mentioned in the “Limitations on Eligibility” section, above. Finally,
coverage under an individual health insurance plan (letter J) generally is not available
due to the requirement that the worker had such coverage before loss of
employment.17
The remaining seven qualified health plans (letters B through H) are available
only if states designate them as qualified insurance. As of early November, 2004, 39
states and the District of Columbia had made at least one of these seven forms of
coverage available. In the other 11 states, individuals who are eligible for the HCTC
can only select one of the three automatically qualified plans, but only if it is
available to them.
Claiming the Credit
Eligible taxpayers with qualified insurance may choose to receive the HCTC
after they file their tax returns for the year, generally in the period February 1 through
April 15 of the following year. Alternatively, they may choose to receive advance
payments for the credit throughout the year. Some might choose to receive a portion
of the credit through advance payments and the remainder after they file their return.
Advance payments are not available for coverage through a spouse’s employment.
Next-Year Payments. Taxpayers claim the HCTC after the tax year is over
by completing Form 8885 and attaching it to their standard Form 1040. The credit
cannot be claimed with standard forms 1040A or 1040EZ. Taxpayers must attach
invoices and proof of payment to qualified health plans.
As the HCTC is refundable, taxpayers may receive the full amount for which
they are eligible even if they have little or no tax liability. Their other tax credits
have no effect on their HCTC, nor does the HCTC affect their other credits.
Advance Payments. To receive advance payments of the credit, individuals
register with the HCTC program through its Customer Contact Center (telephone
number 1-866-626-4282). They must be enrolled in a qualified health plan when
they register. The program confirms applicants’ eligibility and sends them an invoice
for 35% of the total monthly premium. Participants send payments for this share plus
additional premium charges for non-qualified family members (if applicable) to the
Department of the Treasury. Upon receipt of these funds, Treasury sends payment
for 100% of the premium (35% from the participant and 65% from Treasury) to the
participants’ health insurance plans. The payment system continues in this way on
a monthly basis. Advance payments became available in August 2003.
Advance payments are available for individuals who make timely payments.
Individuals who make late or partial payments generally have to pay their insurance
plan directly to maintain coverage, though they can continue to claim the tax credit.
17 Prior individual coverage would not be required to obtain individual coverage under a
state qualified plan.

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CRS-9
Grants to States
Section 203 of the Trade Act of 2002 expanded the National Emergency Grant
program to support implementation of the HCTC.18 It authorized two new state grant
programs to be administered by DOL, Infrastructure grants and Gap Filler grants
(previously referred to as Bridge grants). In a related development, Section 201 of
the act authorized new funds to be made available through the Department of Health
and Human Services (DHHS) to help states create new high risk pools and operate
existing ones.

Infrastructure Grants. These grants assist states in developing systems and
infrastructure to conduct eligibility verification, notify eligible individuals, process
insurance credit eligibility certificates, provide enrollment assistance, and develop
and install data management systems. They are also intended to assist with
processing Gap Filler grants. Once the systems and procedures are in place and the
state is processing requests for healthcare coverage, the state may submit a request
to modify the grant award to cover ongoing operational costs for these activities.
Distributions are based on the states’ anticipated costs.
For these grants, the act appropriated $10 million for fiscal year (FY)2002. As
of November 2004, $6.9 million had been distributed to states and about $3 million
had not yet been distributed.19 Table 1 in the Appendix shows which states received
grants and how much they received. States have five years to spend the funds.
The act also authorized appropriations of $60 million for each of fiscal years
2003 through 2007. Actual appropriations for FY2003 were $29.8 million. These
funds are intended for use by both the Infrastructure and Gap Filler grant programs.
As of November 2004, these funds had not yet been distributed for Infrastructure
Grants. For FY2004, funding for Infrastructure Grants is available through the
Dislocated Worker National Reserve Account, authorized under the Workforce
Investment Act. No funds were appropriated for FY2005.
Gap Filler Grants (formerly Bridge Grants). These grants assist states
in helping eligible individuals with the cost of insurance until they can obtain
advance payments. Distributions are made during the months required for the
Department of the Treasury to enroll, process, and make the first HCTC payments.
These months are referred to as the “gap period.” Distributions can cover up to three
months of gap filler payments for 65% of the qualified health insurance premium
(i.e., the proportion that will later be covered by advance payments).
The amount distributed to each state is based on a formula that takes account of
four factors: (1) estimates of the total HCTC population in the state, including TAA,
ATAA and PGBC eligibles; (2) the percent of eligibles expected to enroll for
18 National Emergency Grants were first authorized by the Workforce Investment Act of
1998 (P.L. 105-220); in general they support employment and training assistance to workers
who lost their jobs due to layoffs or plant closings, and temporary jobs for workers affected
by natural disasters.
19 There is no time limit as to when these funds must be distributed.

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CRS-10
advance payments; (3) the amount needed to cover 65% of a qualified health
insurance premium, and (4) the average number of months eligibles will be expected
to need the gap-filler payments (generally two months).
For these grants, the act appropriated $50 million for FY2002. DOL distributed
all of these funds in FY2004. Table 2 in the Appendix shows which states received
grants and how much they received. The act also authorized appropriations of $100
million for FY2003 and $50 million for FY2004. However, $28.9 million (referred
to above) was allotted by Congress for both Gap Filler grants and Infrastructure
grants for FY2003. As of January 2004, $6.3 million had been distributed for Gap
Filler Grants to two states; Table 3 in the Appendix shows the amounts awarded to
them. For FY2004, funds for Gap Filler grants will be made available through the
Dislocated Worker National Reserve Account 2004. These funds have not yet been
distributed. No funds were appropriated for FY2005.
High Risk Pool Grants. States establish high risk pools for individuals who
have been denied policies in the individual insurance market or who have received
offers from insurers that are unaffordable or that permanently exclude coverage for
their pre-existing conditions.20 Although the high risk pool grants authorized by the
Trade Act do not directly support administration of the HCTC, they were intended
to help states provide a state qualified plan option to HCTC eligibles (see letter C in
the list under “Qualified Insurance”).
The act appropriated $20 million for FY2003 for grants to states for the creation
and initial operation of high risk pools. No state was to receive more than $1 million
(at the time, approximately 20 states had not yet established high risk pools). Funds
may remain available for obligation until the end of FY2004.
The act also appropriated $40 million for each of FY2003 and FY2004 for states
with existing high risk pools. Funds may remain available for obligation until the
end of the following fiscal year. Funds are allotted to the states based on the number
of uninsured individuals; they can be used for matching grants for up to 50% of the
losses states incur in connection with operating their high risk pool. To be eligible,
states must have risk pools that restrict premiums to no more than 150% of the
premium for applicable standard risk rates, that offer a choice of two or more
coverage options, and that have in effect a mechanism reasonably designed to ensure
continued funding of losses incurred after the end of the FY2004.
On September 22, 2004, the Senate Committee on Health, Education, Labor,
and Pensions approved legislation (S. 2283) to increase funding for high risk pools.
20 Individuals enrolled in pools must also pay a premium for coverage. Some persons who
would otherwise be eligible for high-risk pools may be unable to afford the premiums and
therefore, will not have coverage. To qualify, participants may not be eligible for coverage
under the state’s Medicaid program for low-income persons. For additional information,
see CRS Report RL31745, Health Insurance: State High-Risk Pools, by Julie Lynn Stone.

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CRS-11
Issues in Design and Implementation
The Trade Act of 2002 became law on August 6, 2002 and the HCTC became
effective that December. Advance payments began August 1, 2003. During that first
year, the Department of the Treasury and the DOL established supporting
administrative arrangements, which they continued to refine after advance payments
were implemented. Thus, 2004 will be the first full tax year for which one might
assess the credit.
Nonetheless, questions have already been raised about whether the HCTC will
be effective in helping taxpayers obtain or retain health insurance coverage; so far,
not many are using it. Moreover, there are questions about how equitable the credit
is, particularly with respect to eligibility. These two issues are discussed in this
section.
Two comprehensive studies of the HCTC have been released, tracking
developments through early 2004: Health Coverage Tax Credits under the Trade Act
of 2002: A Preliminary Analysis of Program Operation, by Stan Dorn and Todd
Kutyla, and a Government Accountability Office report, Health Coverage Tax
Credit: Simplified and More Timely Enrollment Process Could Increase
Participation.21
Effectiveness
Data for the HCTC indicate that it is not widely used, raising questions about
its effectiveness. At this time, it is not clear whether more taxpayers might use the
credit in the future or if participation will always be low.
Understanding the reasons for low participation can help inform Congress about
proposals to modify the credit as well as proposals for a more generally available
health insurance tax credit. Among the reasons discussed below are the limited
availability of qualified plans (perhaps due in part to consumer protection
requirements and restrictions on individual market insurance) and difficulties
affording the coverage. Other possible reasons include delays in certifying and
identifying dislocated workers and additional factors that might be explored.
Participation Data. As of November 30, 2004, 13,369 taxpayers were
receiving advance payments for the HCTC. They represented about 6% of the
223,307 taxpayers the IRS estimated were then potentially eligible for the credit,
including 76,201 TRA and ATAA potential eligibles (34.1% of the total) and
147,106 PGBC potential eligibles (65.9% of the total).22 Other taxpayers might be
21 Stan Dorn and Todd Kutyla, Health Coverage Tax Credits under the Trade Act of 2002:
A Preliminary Analysis of Program Operation (New York: The Commonwealth Fund, Apr.
2004). [Hereafter cited as Dorn and Kutyla, Health Coverage Tax Credits.]; U.S.
Government Accountability Office, Health Coverage Tax Credit: Simplified and More
Timely Enrollment Process Could Increase Participation, GAO-04-1029, Sept. 2004.
22 Data provided to CRS by the IRS. They include persons who registered and enrolled in
(continued...)

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CRS-12
claiming the credit on their tax returns without taking advance payments; however,
their number is not thought to be large.
Participation is growing. At the end of December 2003, there had been 8,380
taxpayers who had received advance payments, representing about 3.6% of the
235,000 taxpayers the IRS estimated were then eligible for the credit.23
Table 4 in the Appendix shows the population of potential eligibles as of
November 2004, and the number of persons registered and enrolled for advance
payments in each state. West Virginia stands out as having the highest enrollment
rate, with 24% of the state’s potentially eligible population enrolled. Although some
other states had participation rates exceeding 10% of their potentially eligible
population (Pennsylvania, Utah, and Maryland), most states had rates that were far
lower and some had no enrollees.
Limited Availability of Qualified Plans. One reason for low HCTC use
may be the limited availability of qualified plans. In contrast to proposals for a
generally available tax credit, which typically do not restrict choice of insurance, the
HCTC is available only for categories of qualified plans listed in the statute. As it
turns out, as a practical matter many of these options are not accessible by HCTC
eligibles.
Of the three types of plans that are automatically qualified, COBRA
continuation coverage (letter A in the list under “Qualified Insurance”) is an option
only if the former employer offered health insurance and then continues coverage for
its remaining workers. Dorn and Kutyla state that roughly 40% to 60% of HCTC
eligibles have access to COBRA coverage, citing unnamed federal officials.24 Those
with access must be able to pay for it, which often is difficult for people separated
from employment (see the discussion on “Affordability” below). Even so, Dorn and
Kutyla estimate that 56% of people enrolled in coverage for the credit in December
2003 were in COBRA plans.25 The spousal and individual coverage options (letters
I and J) have requirements that rule out most eligibles; for the former, one must be
married to someone with coverage not largely paid for by their employer;26 for the
latter, one must have had individual insurance before termination of employment.
22 (...continued)
HCTC advance payment arrangements through June 2004.
23 Data provided to CRS by the IRS. Approximately 60% of those receiving advance
payments on that date were PBGC eligibles. Final numbers for 2003 are not yet available,
pending receipt and processing of additional 2003 tax returns.
24 Dorn and Kutyla, Health Coverage Tax Credits, p. 20, available at
[http://www.cmwf.org/usr_doc/dorn_725_trade_act.pdf].
25 Ibid. If dependents were not included, 54% of the HCTC eligibles enrolled for the credit
would have COBRA coverage.
26 While this requirement prevents otherwise eligible individuals from using the credit, it
might be noted that they do have access to what generally is good insurance.

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CRS-13
Dorn and Kutyla estimate that 4% of people enrolled in coverage for the credit in
December 2003 were in individual plans.27
The remaining seven categories of qualified plans (letters B though H) are
available only if the enrollee’s state of residence has chosen or established them. As
discussed above, 39 states and the District of Columbia adopted at least one of the
seven options by August 2004 while 11 states had not yet acted. Dorn and Kutyla
estimate that about three-quarters of HCTC eligibles resided in one of the 26 states
and the District of Columbia that had a state qualified plan by December 2003. They
argue that generally states with larger numbers of eligibles were more likely to adopt
a qualified plan.28 Even so, some states with relatively large numbers of eligibles
(such as California and Georgia) still do not have a state qualified plan, and some
with qualified plans have low participation.
Debate over Consumer Protection. One issue regarding participation is
whether the consumer protection requirements discussed above (guaranteed issue, no
preexisting condition exclusion, nondiscriminatory premiums, and substantially the
same benefits for eligibles and noneligibles) reduce the availability and attractiveness
of state qualified plans. These requirements impose stricter standards on health plans
than other federal and most state laws.29 As a result, when the Trade Act was
enacted, many health plans sponsored or arranged by states did not meet the
consumer protection requirements specified in the statute. In order to qualify a plan
for the HCTC, states have had either to modify existing plans or to establish new
ones. Sometimes this could be done by administrative action, but often it required
state legislation. For some states, approving new plans has been difficult because of
budget crises. Even if approval is achieved, budget constraints limit the amount of
financial risk states are willing to take.
Some argue that the consumer protection requirements make access to insurance
more equitable and guarantee HCTC eligibles premiums and benefit packages like
those offered to similar groups of persons in their state. They argue that without
these requirements plans could more easily deny coverage to eligibles with higher
health care needs, particularly older workers and early retirees, making it difficult for
them to find affordable coverage.
Others criticize these requirements for limiting the availability of state qualified
plans, particularly where changing state sponsored or arranged health plans does not
seem warranted given the small number of people who might be eligible for the
credit. The requirements also increase the cost of state qualified health plans, making
their premiums less affordable (with resulting withdrawal of some who were
previously enrolled) and raising the possibility that states will have to provide
27 Dorn and Kutyla, Health Coverage Tax Credits, p. 21. If dependents were not included,
8% of HCTC eligibles enrolled for the credit would have had individual coverage.
28 Ibid., pp. 21-22.
29 For example, the Health Insurance Portability and Accountability Act (HIPAA, P.L. 104-
191) generally prohibits health plans from imposing preexisting condition exclusions for
individuals who previously had 12 months of continuous creditable coverage; for the
HCTC, the time period is reduced to three months.

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CRS-14
supplementary funding to cover plan losses. In the 108th Congress, H.R. 1528 would
have modified consumer protection requirements for state qualified plans. This bill,
which passed the House on June 19, 2003, is summarized below.
Debate over Individual Market Insurance. A second issue regarding
participation is the applicability of the HCTC to individual market insurance. Shortly
after the enactment of the Trade Act, a dispute arose over whether the credit could
apply to individual market policies only as an automatically qualified plan, in which
case the eligible individual must have been covered by an individual policy during
the 30-day period prior to separation from employment (see category J under
“Qualified Insurance”), or whether the credit could also apply to individual market
policies under a state qualified plan (such as category F), in which case there is no
requirement for prior coverage. The statute is unclear and the IRS has adopted the
latter position (that is, that prior coverage is not required). While individual policies
provided through a state qualified plan must meet the consumer protection
requirements discussed above, they can be subject to medical underwriting, which
allows younger, healthier applicants to have lower premiums. Proponents of these
arrangements argue they allow eligible individuals to obtain coverage they can afford,
increasing the likelihood they will use the credit. Opponents argue that expanded
access to individual market insurance weakens the risk pooling of group insurance,
raising the premiums for older, less healthy applicants.
Affordability. Even if qualified insurance is available, eligible people might
not be able to afford it. Generally, participants must pay 35% of the premium,30
which might or might not be easy. Dorn and Kutyla show that premiums for state
qualified plans vary widely, depending on state of residence, benefits provided,
deductible levels, coinsurance rates, age, health status (where medical underwriting
occurs), and other factors.31 For example, the annualized 35% payment required for
the most generous self-only coverage available in 15 states that they examined ranged
from $264 for a healthy, 25-year old male to nearly $6,000 for a healthy, 60-year old
male.32 Another comparison of 19 states showed that the annualized 35% payments
for a self-only policy averaged $741 in one state and $2,715 in another.33 The cost
of family coverage would be considerably higher.
It is difficult to assess these figures without having data on the eligible
population’s income and assets. Obviously, some people can afford the insurance
because they are enrolled for the advance payment. But considering that nearly all
of those who are eligible for the HCTC are not working, even the 65% credit rate
might not be enough to make coverage affordable.34
30 In some states, Bridge Grants might pay for some or all the 35% premium share.
31 Dorn and Kutyla, Health Coverage Tax Credits, pp. 24-36.
32 Ibid, p. 35. The figures are based on Nov. 2003 premiums; they would likely be higher
in 2004.
33 Ibid., p. 26. The figures are based on Nov. 2003 premiums.
34 “Health Care Subsidy Helps Some Jobless,” Washington Post, Dec. 31, 2003, p. E1;
“Sluggish Start for Offer of Tax Credit for Insurance,” New York Times, Jan. 25,2004, p. 11.

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CRS-15
Other costs may also be important. Some people might not apply for coverage
since applicants must pay 100% of the premium pending completion of the
enrollment process. Some might calculate that the copayments and deductibles
would require sizable additional out of pocket expenditures before they receive
insurance reimbursements. Still others might note that the insurance does not cover
dental costs and some other ordinary healthcare expenses.
Other Factors Affecting Participation. Additional reasons why the HCTC
participation is low may include the following:
! delays in certifying that dislocated workers are eligible for TAA
assistance;
! delays in identifying dislocated workers receiving unemployment
benefits who have not yet applied for TAA benefits;
! complexity of explanatory material and the application process;
! concerns of some people about their tax returns and tax compliance;
and
! decisions by some people that health insurance is relatively
unimportant, even if affordable.
Equity
Tax credits often are seen as a way to improve tax equity since the savings they
yield are not based on taxpayers’ marginal tax rates. In contrast, tax savings from a
deduction or the widely-used exclusion for employer-provided insurance vary with
marginal rates; savings for taxpayers in the 35% bracket (applying to taxable incomes
over $319,000) generally would be 3½ times higher than savings for taxpayers in the
10% bracket (applying to taxable incomes up to $14,300 in the case of a married
couple filing jointly). In addition, tax credits can be refundable, so low-income
taxpayers can receive the full value of the credit even if they have little or no tax
liability.
The 65% HCTC rate is available to all eligible taxpayers with qualified
insurance, regardless of income. From the standpoint of inclusiveness, this seems
equitable. Considering ability to pay, however, the one rate appears inequitable. The
65% rate provides the same dollar subsidy to taxpayers with high incomes and
taxpayers with low incomes even though the former can more readily pay for their
insurance. In the case of a $3,000 self-only policy, the HCTC provides $1,950 in tax
savings both to taxpayers with incomes of $80,000 and those with incomes of
$20,000. Proposals for a more generally-available tax credit reflect these different
perspectives; some would have one rate for all taxpayers while others would phase
out the rate for higher income taxpayers.

The 65% HCTC rate might seem roughly comparable to the proportion of
insurance cost that is paid by employers (actually, that proportion usually is
somewhat higher); from this perspective, the HCTC simply continues what
employers would be paying if the workers had not lost their jobs. This perspective,
though, overlooks the fact that employers can claim a tax deduction for their
insurance costs and likely shift most of the rest back to the workers in the form of
reduced wages and other benefits. By an economic measure, employer subsidies for

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CRS-16
health insurance probably are far less than 65%. But if a 65% tax credit provides a
more generous subsidy than employers, it apparently is still not high enough to help
many cash-constrained families purchase insurance. This conundrum has been noted
about proposals for a more generally-available health insurance tax credit; it is not
unique to the HCTC.
Taxpayers in one of the three HCTC eligibility groups likely consider it
equitable to receive tax benefits for insurance since taxpayers with employment-
based insurance receive some as well. However, unemployed workers who do not
receive TAA allowances may question why they are denied the credit, particularly if
they too have lost their jobs to foreign firms. One study estimated that more than
one-third of unemployed workers in 2000 lacked health insurance.35 In the 108th
Congress, H.R. 3881 would have extended TAA eligibility, and thus HCTC
eligibility, to service sector or public agency workers who lose their jobs due to shifts
to foreign countries. Also in the 108th Congress, S. 1693 would have made the credit
generally available to individuals who are eligible to receive state unemployment
compensation. Both of these bills are summarized below.
Similarly, early retirees whose pensions are not paid in part by the PBGC may
question not being eligible for the credit, as may those who receive no pension at
all.36 Early retirees often find individual health insurance prohibitively expensive,
even if they are in good health, since people in their 50s and early 60s have
substantially higher medical costs than younger workers. In the 108th Congress,
several bills would have extended the credit to additional groups of early retirees:
H.R. 1999, S. 1361, and S. 1018. They are summarized below.
Legislation in the 108th Congress
A number of bills were introduced in the 108th Congress that would have
modified or expanded the HCTC. They are summarized here because similar
measures may be introduced in the 109th Congress.
H.R. 1528
Taxpayer Protection and IRS Accountability Act of 2003,
attempted to address some of the concerns around the consumer
protection requirements, on a temporary basis. Among other
things, this bill as amended would allow individuals living in
states without certain state qualified plans (coverage C through
H in the list under “Qualified Insurance”) to waive requirements
for guaranteed issue and no preexisting condition exclusions.37
35 Jeanne Lambrew, How the Slowing U.S. Economy Threatens Employer-Based Health
Insurance (New York: The Commonwealth Fund, Nov. 2001).
36 For data on pension plans and retirement accounts, including the shift from defined
benefit plans to defined contribution plans, see CRS Report RL30922, Retirement Savings
and Household Wealth: A Summary of Recent Data, by Patrick J. Purcell.
37 The waiver would not supersede or otherwise affect consumer insurance protections under
(continued...)

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CRS-17
Individuals could use these waivers only through December 31,
2004. In addition, the bill would permanently exempt state
based continuation coverage (coverage B in the list) from the
requirements regarding guaranteed issue, preexisting condition
exclusions, nondiscriminatory premiums, and similar benefits.
The bill was introduced on April 1, 2003, by Representative
Portman, reported by the Committee on Ways and Means on
April 8, and passed by the House on June 19, 2003.
H.R. 1999
Health Care Tax Credit Enhancement for Workers and Steel
Security Act of 2003. Among other things, this bill would lower
the minimum age for eligibles receiving PBGC pensions from
55 to 50; eliminate the three-month requirement for previous
coverage with respect to state qualified plans; and allow a
spouse to be eligible even if the individual eligible for the
HCTC were entitled to Medicare Part A. Introduced on May 7,
2003 by Representative Visclosky and referred to the Committee
on Ways and Means. (An amendment to H.R. 1528 with these
same provisions was rejected during House floor debate on June
19, 2003.)
H.R. 3601
Steel Industry Retiree Benefits Protection Act of 2003. This bill
would add a fourth group of taxpayers eligible for the HCTC:
individuals who are qualified steel industry retirees. In addition,
it would allow the credit to be claimed by qualifying steel
companies and certain suppliers, unions, and transporters; add
steel retiree health benefits to the list of qualified health
insurance; and include a number of special rules related to these
changes. Introduced on November 21, 2003, by Representative
English and referred to the Committee on Ways and Means.
H.R. 3881
Trade Adjustment Assistance Equity for Service Workers Act of
2004. Among other things, this bill would extend TAA
eligibility to service sector and public agency workers who lose
their jobs due to shifts in the provision of services to foreign
countries. In addition, it would (a) provide presumptive
eligibility for the HCTC when the TAA provision is filed, (b)
allow a 100% credit the first month of eligibility, (c) require that
premiums for individual market insurance (coverage J on the list
on page 4) be restricted under a community rating or rate-band
system, (d) modify the measurement period for creditable
coverage regarding pre-existing condition exclusions, (e) allow
other family members to remain eligible when the individual
eligible for the HCTC becomes entitled to Medicare Part A, and
(f) allow enrollment in FEHBP if their state has not adopted a
state qualified plan. Introduced on March 3, 2004, by
37 (...continued)
state law.

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CRS-18
Representative A. Smith and referred to the Committee on Ways
and Means.
S. 1018
Same as H.R. 1999. Introduced on May 7, 2003 by Senator
Bayh and referred to the Committee on Finance.
S. 1693
Health Care Tax Credit Expansion Act of 2003. This bill would
add a fourth group of taxpayers eligible for the HCTC:
individuals who are eligible to receive state unemployment
compensation. The bill was introduced on October 1, 2003 by
Senator Grassley and referred to the Committee on Finance.
Legislation in the 109th Congress
The President’s FY2006 budget, released on February 7, 2005, includes a
proposal that would allow state qualified plans to impose a pre-existing condition
exclusion for a period of up to 12 months, provided the plan reduces the restriction
period by the length of the eligible individual’s creditable coverage as of the date of
application for the state qualified plan.38
The FY2006 budget also proposes allowing the spouse of an HCTC-eligible
individual to claim the credit when the HCTC-eligible individual becomes entitled
to Medicare. The spouse would have to be at least 55 years of age and meet other
HCTC eligibility requirements.
In addition, the budget proposes five clarifications to current law HCTC. Similar
changes had been included in the FY2005 budget.
! clarify that individuals who receive one-time lump sum payments
from the PBGC and certain alternative PBGC payees would be
eligible for the credit;
! deem Puerto Rico, the Northern Mariana Islands, American Samoa,
Guam, and the U.S. Virgin Islands to be states for purposes of state-
based coverage rules;
! clarify that health insurance providers could include employers and
administrators of health plans and allow disclosure of information
necessary to carry out the advance payment program;
! clarify that state continuation coverage under state law would
automatically be considered qualified health insurance as federally
mandated COBRA coverage, without meeting the requirements for
state qualified coverage; and
! make the definition of “other specified coverage” for ATAA
allowance recipients conform to the definition applying to other
eligible individuals.
38 U.S. Department of the Treasury, General Explanations of the Administration’s Fiscal
Year 2006 Revenue Proposals, p. 27.

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CRS-19
The following bills have been introduced in the 109th Congress that would
change or affect the HCTC:
S. 14
Fair Wage, Competition, and Investment Act of 2005. Among other
things, this bill would extend TAA eligibility to service sector and
public agency workers who lose their jobs due to shifts in the
provision of services to foreign countries. In addition, it would lower
the minimum age for a worker to be eligible for the ATAA allowance
from 50 to 40. The HCTC would be changed by (a) setting the credit
equal to what the taxpayer paid for qualified insurance minus the
lesser of 20% of that amount or 5% of the taxpayer’s income (as
certified by the taxpayer’s state); (b) allowing eligible taxpayers to
enroll in health plans offered in the Federal Employees Health
Benefits Program (FEHBP); and (c) allowing the spouse of an eligible
taxpayer to be eligible if the eligible taxpayer becomes entitled to
Medicare.

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CRS-20
Appendix
Table 1. Infrastructure Grants from FY2002 Allocation
of $10 million (as of January 1, 2005)
State
Amount Awarded
Alabama
$55,206
Alaska (two grants)
$135,000
Arizona
$74,717
Arkansas
$200,000
California
$50,000
Colorado
$184,615
Connecticut
$189,700
Delaware
$50,500
Florida (two grants)
$288,020
Georgia
$199,953
Hawaii
$23,400
Idaho
$150,000
Illinois
$127,266
Iowa
$200,000
Kansas
$150,000
Kentucky
$50,000
Louisiana
$50,000
Maine
$136,853
Maryland (two grants)
$579,867
Massachusetts
$150,000
Michigan
$128,384
Minnesota
$81,551
Missouri
$98,456
Montana (two grants)
$36,572
Nebraska
$97,156
Nevada
$92,738
New Hampshire
$150,000
New Jersey
$200,000
New Mexico
$78,499
New York
$214,425
North Carolina
$141,971
Ohio
$222,105
Oregon
$144,369
Pennsylvania (two grants)
$394,908
Rhode Island
$152,000
South Carolina
$200,000
South Dakota
$57,760
Tennessee
$244,779
Texas
$200,000
Utah (six grants)
$428,946
Vermont
$50,000
Virginia
$12,702
Washington
$74,219
West Virginia
$117,053
Wisconsin (two grants)
$256,245
Total awards to states
$6,919,935
Amount unspent of allocation
$3,080,065
Source: Provided to CRS by the Department of Labor in January 2005.

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CRS-21
Table 2. Gap Filler Grants From FY2002 Allocation
of $50 million (as of September 30, 2004)
State
Amount Awarded
Florida
$8,542,978
Illinois
$2,802,966
Maine
$7,500,000
Maryland
$5,632,000
Minnesota (2 grants)
$2,965,264
Montana
$114,548
New Jersey
$1,930,000
North Carolina
$7,614,684
Ohio
$1,569,493
Utah
$3,786,892
Virginia
$3,176,800
Washington
$1,512,000
West Virginia
$2,852,374
Total awards to states
$49,999,999
Amount unspent of allocation
$1
Source: Provided to CRS by the Department of Labor in January 2005.
Table 3. Gap Filler Grants From FY2002 Allocation
of $29.8 million (as of January 1, 2004)
State
Amount awarded
Florida
$4,023,874
Kentucky
$2,317,865
Total awards to states
$6,341,739
Amount unspent of allocation
$23,463,261
Source: Provided to CRS by the Department of Labor in January 2005.

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CRS-22
Table 4. Potentially Eligible Population for the HCTC and Cumulative Counts of Eligibles Registered and Enrolled
for Advance Payments (November 30, 2004)
Potentially Eligible Population
Registered and Enrolled Population
Potentially Eligible
State Qualified
Individual
Population Enrolled or
State
PBGC
TAA/ATAA
Total
Plan
Cobra Plan
Plan
Total
Registered (Rounded)
Alabama
2,554
1,626
4,180
75
84
*
159
3.8%
Alaska
73
21
94
0
0
0
0
0.0%
Arizona
1,447
484
1,931
0
42
*
42
2.2%
Arkansas
767
940
1,707
*
61
*
61+
3.6%
California
6,279
1,317
7,596
na
227
18
245
3.2%
Colorado
1,233
362
1,595
*
52
*
52+
3.3%
Connecticut
1,548
919
2,467
*
90
*
102
4.1%
Delaware
270
94
364
na
18
0
18
4.9%
District of Columbia
87
0
87
0
0
0
0
0.0%
Florida
10,963
599
11,562
264
232
11
507
4.4%
Georgia
6,368
2,599
8,967
na
103
12
115
1.3%
Hawaii
530
24
554
na
*
*
*
0.0%
Idaho
359
774
1,133
0
49
0
49
4.3%
Illinois
8,183
4,480
12,663
242
212
*
454+
3.6%
Indiana
7,358
2,921
10,279
462
402
14
878
8.5%
Iowa
1,169
574
1,743
*
45
*
45+
2.6%
Kansas
978
234
1,212
0
44
*
44+
3.6%
Kentucky
1,467
2,901
4,368
*
219
20
239+
5.5%

---

CRS-23
Potentially Eligible Population
Registered and Enrolled Population
Potentially Eligible
State Qualified
Individual
Population Enrolled or
State
PBGC
TAA/ATAA
Total
Plan
Cobra Plan
Plan
Total
Registered (Rounded)
Louisiana
994
89
1,083
na
18
*
18+
1.7%
Maine
367
1,092
1,459
49
64
*
113+
7.7%
Maryland
4,293
521
4,814
278
269
*
547+
11.4%
Massachusetts
3,822
838
4,660
na
37
*
37+
0.8%
Minnesota
2,445
820
3,265
165
64
*
229+
7.0%
Michigan
5,406
3,756
9,162
427
264
10
701
7.7%
Mississippi
999
894
1,893
na
72
0
72
3.8%
Missouri
5,484
1,046
6,530
0
132
*
132+
2.0%
Montana
76
141
217
*
11
0
11+
5.1%
Nebraska
303
135
438
*
18
0
18+
4.1%
Nevada
745
30
775
na
16
0
16
2.1%
New Hampshire
926
348
1,274
*
25
*
25+
2.0%
New Jersey
3,474
1,592
5,066
*
90
*
101
2.0%
New Mexico
301
125
426
na
*
*
*
0.0%
NewYork
7,556
2,162
9,718
201
180
17
398
4.1%
North Carolina
6,293
10,904
17,197
996
638
*
1,634+
9.5%
North Dakota
26
28
54
*
*
*
0+
0.0%
Ohio
12,685
2,253
14,938
769
360
25
1,154
7.7%
Oklahoma
960
1,271
2,231
0
39
*
39+
1.7%
Oregon
471
914
1,385
na
57
*
57+
4.1%

---

CRS-24
Potentially Eligible Population
Registered and Enrolled Population
Potentially Eligible
State Qualified
Individual
Population Enrolled or
State
PBGC
TAA/ATAA
Total
Plan
Cobra Plan
Plan
Total
Registered (Rounded)
Pennsylvania
16,770
4,759
21,529
703
1,505
51
2,259
10.5%
Puerto Rico
978
0
978+
na
0
0
0
0.0%
Rhode Island
271
424
695
*
19
*
19+
2.7%
South Carolina
2,333
3,063
5,396
14
131
*
145+
2.7%
South Dakota
57
117
174
na
*
0
0+
0.0%
Tennessee
2,997
3,952
6,949
11
258
*
269+
3.9%
Texas
4,165
3,497
7,662
37
121
*
158+
2.1%
Utah
701
393
1,094
121
*
0
121+
11.1%
Virginia
2,908
3,430
6,338
419
136
10
565
8.9%
Vermont
449
79
528
*
*
*
21
4.0%
Washington
1,125
2,333
3,458
*
175
*
175+
5.1%
Wisconsin
1,852
3,585
5,437
*
260
*
260+
4.8%
West Virginia
3,169
727
3,896
532
404
*
936+
24.0%
Wyoming
72
0
72+
na
0
0
0
0.0%
Total
147,106
76,201
223,307
5,813
7,279
277
13,369
6.0%
Source: Data provided to CRS by the IRS in January 2005.
Notes: Registered and enrolled numbers are for the advance payment option only. Totals include the count of persons represented by the asterisk. States shaded in gray do not have state qualified
plans.
* Denotes a value less than 10. These data cannot be released due to IRS Disclosure and Privacy guidelines.
+ Denotes the total number of Registered and Enrolled persons plus the number of persons represented by *.
na = not applicable. Such states do not have state qualified plans.

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