A part of the massive health care reform law aimed at encouraging employers to offer health insurance to early retirees is set to launch June 1.
Regulations for the Early Retirement Reinsurance Program were issued by the U.S. Department of Health and Human Services (HHS) on May 4. The program will provide $5 billion for employer health plans that offer coverage to early retirees who are ages 55 to 64. That’s a group the White House considers particularly vulnerable because they aren’t eligible for Medicare until they reach age 65 but they’re in an age bracket that makes them more likely to report fair to poor health.
A fact sheet from the White House says health spending for the average person ages 55 to 64 is about 50 percent higher than the average for people ages 45 to 54. Those 55- to 64-year-olds also make up a group less likely to be employed full-time. Also, the number of employers providing health coverage to early retirees has fallen from 66 percent of large firms in 1988 to 31 percent in 2008.
For many early retirees, buying insurance on the individual market isn’t an option because it’s generally so much more expensive than group insurance offered through an employer.
Which Employers Are Eligible?
To receive a share of the $5 billion, employer and union-based plans must file applications with HHS. Applications will be available by the end of June. Both self-funded and insured plans can participate, including plans sponsored by private entities, state and local governments, nonprofits, and religious entities.
Plans receiving funds will need to document claims and implement programs and procedures to generate cost savings for participants with chronic and high-cost conditions, according to the White House fact sheet. Plans also will be subject to audits.
Since the program has a limit of $5 billion, assistance will be offered on a first-come first-served basis.
How It Works
Reimbursement will be made to plans on behalf of early retirees and their spouses, surviving spouses, and dependents. The White House fact sheet says that for each early retiree, spouse, surviving spouse, and dependent, the employer plan will be reimbursed for up to 80 percent of costs, minus negotiated price concessions, for health benefits between $15,000 and $90,000.
The fact sheet goes on to say that claims incurred between the start of the plan year and June 1, 2010, are credited toward the $15,000 threshold, but only expenses incurred after June 1 will be eligible for reimbursement.
The program spells out that employers can use the savings made possible through the program to either reduce their own costs, provide premium relief for workers, or a combination of both.
The Early Retiree Reinsurance Program will end January 1, 2014, the date when early retirees will be able to choose from coverage options available through the health insurance exchanges that will be set up under another part of the comprehensive health care reform bill.
Keep up with the latest legal changes affecting employer benefits and trends in employee benefits with the Benefits and Compensation Law Alert and with changes in federal employment laws in the Federal Employment Law Insider.