IRS finds few takers for healthcare tax credits

Federal healthcare benefits are going unclaimed by an estimated 17,000 Californians whose jobs were moved overseas or retirees whose pensions are being paid by the government after their former employers terminated their retirement plans.

So far, less than a third of those in the state who could be eligible are getting the money that can pay as much as 80% of their healthcare costs, and the federal government has begun a major push to find people who are eligible.

The Internal Revenue Service, which is in charge of finding eligible recipients, will hold a series of meetings in states with low participation, including California, Georgia and New York.

But its efforts to promote the Health Coverage Tax Credit have had little success.


“It’s pretty amazing how many people aren’t taking advantage of this program,” said IRS spokesman Raphael Tulino. “We want to help people out, we want to pay for their health coverage, but we can’t do that unless they sign up for the benefit.”

Across the U.S., about 23,000 out of an estimated 100,000 potentially eligible people are receiving the credit, said Shannon Norman, an IRS spokeswoman.

Californians in the program get an average of $670 each month for their healthcare costs, or a savings of about $8,040 a year, said Jesse Weller, an IRS spokesman.

Two meetings held last week in California, one in Pomona and the other in Fremont, drew about 200 people.


Two groups are eligible:

* Retirees ages 55 to 65 who receive a pension from the Pension Benefit Guaranty Corp. The federal agency insures retirement benefits after companies go bankrupt or terminate them.

* Workers laid off because of certain international trade issues or when their jobs were sent overseas and who are receiving benefits from the Trade Adjustment Assistance Program, run by the U.S. Department of Labor.

Recipients are ineligible if they are enrolled in Medicare, Medicaid or the Children’s Health Insurance Program.

The credit can be used in limited ways to help curb healthcare costs. It can be used to help pay premiums through COBRA, the federal program that extends medical coverage after a person loses a job. And in California the credit can also be used for health plans offered through Kaiser Permanente, the state’s largest nonprofit health maintenance organization.

The tax credit is offered either as a monthly subsidy paid by the IRS directly to the healthcare provider or as an annual tax credit.

The IRS has been chided for its efforts so far. “If you’re trying to reach 17,000 people and you bring out just 200, well, that really isn’t putting a dent in the low-participation problem,” said Mark Luscombe, tax analyst with CCH Inc., a Riverwoods, Ill., publisher of tax information. “But since this program got going in about 2002, it’s always had low participation.”

There are dozens of tax credits like the Health Coverage Tax Credit that go largely unused by thousands of eligible people, he said.


“This isn’t anything new. It’s really a reflection of the tax system as a whole,” Luscombe said.

Those who qualify because they were laid off must still be unemployed to get the credit. If they’re working part time, even if the job doesn’t provide healthcare, they no longer qualify. Such was the case for Mark Pomes of Huntington Beach.

“I really thought I was going to enroll in this today. That’s why I came: to sign up, and I’m a bit surprised I don’t qualify,” the 57-year-old said at the Pomona meeting Feb. 5.

Pomes was laid off in June from his job as a computer technician at a Santa Ana computer and fiber optics parts manufacturer that moved jobs to China and Mexico. He attended the meeting after getting an IRS letter stating he could be eligible because he was receiving benefits under the Trade Adjustment Assistance Program.

But Pomes said he found out that a temporary job he recently took makes him ineligible.

“Unless I get laid off again, then I can take advantage of the program,” he said. “I’m sort of stuck in the middle for now, and I can’t really afford to be.”