Administrative costs for advance payment of health coverage tax credits: an initial analysis

Health Coverage Tax Credits (HCTCs), created under the Trade Act of 2002, pay 65 percent of health insurance premiums for certain workers displaced by international trade and early retirees. These credits can be paid directly to insurers when monthly premiums are due, in advance of annual tax return filing. While HCTC administrative costs have fallen significantly since program start-ups, they still comprise approximately 34 percent of total spending. Changes to the HCTC program could lower administrative costs, but the size of the resulting savings is unknown. These findings have important implications for any future tax credit plan intended to cover the uninsured.