The Department of Health and Human Services (HHS) announced on Tuesday that it has approved nearly 2,000 employers and unions to participate in a $5 billion early retiree reinsurance program created under the Affordable Care Act. The program, operated by HHS' new Office of Consumer Information and Insurance Oversight, will help pay health benefit claims for early retirees—those individuals age 55 or older who are not yet eligible for Medicare.
The nearly 2,000 employers, selected from the first round of applicants, represent a variety of organizations such as businesses with familiar names (Hewlett-Packard, Anheuser-Busch, Mack Trucks); hospitals and healthcare systems (Christiana Care Health Systems, Scott and White Memorial Hospital); health plans and insurers (Kaiser Foundation Health Plan, Highmark, Blue Cross Blue Shield of Michigan); plus numerous unions, state and local governments, and educational institutions.
Among the states claiming subsidies for their retired government employees are seven that currently are suing to overturn the federal healthcare reform legislation as unconstitutional. The seven—Arizona, Idaho, Indiana, Louisiana, Michigan, Nebraska, and Nevada—are part of a group of 20 states that have challenged the law's requirement to carry health insurance or face fines.
Businesses and other employers accepted into the program will receive reimbursement for medical claims for early retirees and their spouses, surviving spouses, and dependents. Savings can be used for reducing employer healthcare costs, providing premium relief to workers and families, or both. The program will end on Jan. 1, 2014, when state health insurance exchanges begin operating.
"In these tough economic times, it is difficult for employers to keep up with skyrocketing healthcare costs for employees and retirees," said HHS Secretary Kathleen Sebelius, in a statement. "Many Americans who retire before they are eligible for Medicare see their life savings disappear because of medical bills and exorbitant rates in the individual health insurance market."
Commerce Department Secretary Gary Locke, commenting Tuesday on the White House Website blog, said much interest has flared up from businesses and organizations from across the country since the reinsurance program was announced three months ago.
"We have received applications from more than half of the Fortune 500 companies, all major unions, and government entities in all 50 states and the District of Columbia," Locke said. The new reinsurance program "will directly reduce companies? health premiums for many retirees?[offering] an important bridge for early retirees who are not yet eligible for Medicare."
According to HHS, the approved applications represent nearly all sectors of the economy: 32% came from businesses, 26% from state and local governments; 22% from union sponsors; 14% from schools and other educational institutions: and 5% from non-profits.
According to a Hewitt Associates retiree benefits survey released earlier this year, many employers are likely to be looking to use "new cost management opportunities" in relation to pre-Medicare retiree benefits. Of the 242 employers Hewitt surveyed that provide coverage to 1.3 million retirees and their families, 77% said they plan to apply for the temporary federal reinsurance program intended to help younger retirees.
The nearly 2,000 approvals are just a part of the applications; the Office of Consumer Information is continuing to accept and review additional applications in the order in which they were submitted.
In addition to unveiling the approved applications, HHS announced two tools for employers and unions interested in the Early Retiree Reinsurance Program—a website and a hotline (877-574-3777 or 877-574-ERRP).
Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at jsimmons@healthleadersmedia.com.