In March, The American Benefits Council urged the repeal of a health care reform provision that reduces the tax deductions for companies with drug coverage for their retired employees.

According to Bloomberg: "Caterpillar, the world's largest maker of bulldozers and excavators, said in March that the health-care law would cost it $100 million and took a charge to earnings. Farm machinery maker Deere & Co., of Moline, Illinois, said the law would cost $150 million. The companies pointed to an overhaul provision that ended a tax break for providing drug coverage to retirees.

"The program announced by Obama is likely to offset some of those charges."

Facts from the White House state the percentage of large firms providing workers with retiree coverage has dropped from 66 percent in 1988 to 31 percent in 2008. Employers can use the savings from the program to either reduce their own health care costs, provide premium relief to their workers and families or a combination of both, according to a report from the Office of the Press Secretary.

"It used to be, if you worked for a big company, when you retired you could count on having health insurance until you were eligible for Medicare," Barack Obama told a meeting of the Business Council in Washington. "But one of the consequences of skyrocketing health care costs is that the proportion of large firms providing insurance to its retirees has been cut in half over the past two decades. So these folks are often unable to find affordable coverage on the individual market."

Facts about The Early Retiree Reinsurance Program (source: The White House, Office of the Press Secretary)

Relief for Businesses

• This temporary program will make it easier for employers to provide coverage to early retirees.
• Employers who are accepted into the program will receive reinsurance reimbursement for medical claims for retirees age 55 and older who are not eligible for Medicare, and their spouses, surviving spouses, and dependents.
• Health benefits that qualify for relief include medical, surgical, hospital, prescription drug, and other benefits that may be specified by the Secretary of Health and Human Services, as well as coverage for mental health services.
• The amount of this reimbursement to the employer plan is up to 80 percent of claims costs for health benefits between $15,000 and $90,000. Claims incurred between the start of the plan year (often January 1) and June 1st are credited towards toward the $15,000 threshold for reimbursement. However, only medical expenses incurred after June 1, 2010 are eligible for reimbursement under this program.
• For example: If an individual incurs costs of $30,000 between the start of the plan year and June 1, and $40,000 after that date. The amount which may be reimbursed is $40,000 – the costs above the $15,000 threshold that occur after June 1.
• If a plan incurs $90,000 or more in expenses before June 1, it is treated as having met the $15,000 threshold and is eligible for reimbursement for costs incurred after June 1.
• These limits apply and claims are filed for individual's costs. Firms cannot add two or more individuals together to attain the threshold.
• Both self-funded and insured plans can apply, including plans sponsored by private entities, state and local governments, nonprofits, religious entities, unions, and other employers.

Bridge to 2014

• HHS will begin the Early Retiree Program on June 1, 2010, in advance of the June 21 start date required by the Affordable Care Act, allowing more claims to qualify for reinsurance payments for plans this year.
• Eligible employers can apply for the program through the Department of Health and Human Services. Applications will be available by the end of June.
• To receive assistance, plans must have their applications approved, document claims, and implement programs and procedures that have or have the potential to generate cost savings for participants with chronic and high-cost conditions.
• Plans will be subject to audits to assure fiscal integrity.
• The Early Retiree Reinsurance Program will assist these employer plans and individuals with the cost of health care coverage and health care.
• The program ends on January 1, 2014 when early retirees will be able to choose from the additional coverage options that will be available in the health insurance exchanges.