New analysis from the Employee Benefit Research Institute shows the $5 billion allocated for a temporary reinsurance program for early retiree health benefits will likely run out two years before the program's 2014 end date.
Under the Early Retiree Reinsurance Program, beginning June 1, companies can receive an 80 percent reimbursement on claims incurred by early retirees and dependents between $15,000 and $90,000 over the course of a year. Eligible claims include medical, prescription drug and behavioral health. The ERRP will last until Jan. 1, 2014, or until the $5 billion set aside for the program is exhausted.
According to the U.S. Department of Health and Human Services, the program – included within The Patient Protection and Affordable Care Act – is supposed to help bridge the gap to 2014, when Americans will be able to choose from additional coverage options through the health insurance exchanges.
Recommended For You
The percentage of large firms providing workers with retiree coverage has dropped from 66 percent in 1988 to 31 percent in 2008, according to White House facts, and the temporary aid is designed to create savings that can be used to reduce health care costs, provide premium relief to workers who retire before they are eligible for Medicare, or a combination of both.
"Under the early retiree reinsurance program, plan sponsors must be able to show that the subsidies were not used to reduce their level of support for the plan. Subsidies can be used to reduce retiree costs, and sponsors must also show that the subsidies were used to generate savings or had the potential to generate savings," states EBRI'sJuly 2010 Issue Brief. "If the subsidy were drawn down for all early retirees and their dependents, $2.5 billion of the $5 billion available would be exhausted in the first year of the program. The $5 billion would last no more than two years and would not be available in 2012 or 2013."
EBRI states the program will help shore up early retiree coverage in the short term, but "in the longer term, the underwriting reform combined with new subsidies for individuals enrolling for coverage through the exchange would create significant incentives for employers to drop coverage for early retirees."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
