Wednesday, October 6, 2010

Early Retiree Reinsurance Program Popular Among Many Sponsors

Since late August, the Department of Health and Human Services (HHS) has approved nearly 3,000 applications for the early retiree reinsurance program (ERRP) established under the Affordable Care Act. HHS says applications for the program have been received from more than 50% of Fortune 500 companies, all major unions, and government entities in all 50 states and the District of Columbia. The approved applications represent nearly every sector of the economy: 32% of applications came from businesses, 26% from state and local governments, 22% from union sponsors, 14% from schools and other educational institutions, and 5% from nonprofit organizations.

Among the applicants for the ERRP are these nine states that are suing to overturn the Affordable Care Act: Alaska, Arizona, Florida, Idaho, Indiana, Louisiana, Michigan, Nebraska, and Nevada. Cities or counties in many other states that also are challenging the health reform law also have applied for the ERRP. Might as well take advantage of the program while it’s available—even while they fight it.

You may recall that this temporary reinsurance program reimburses part of the claims cost for participating employment-based plans that provide health insurance coverage for early retirees (ages 55 to 65), and their eligible spouses, surviving spouses, and dependents. The program is to reimburse plan sponsors 80% of individual claims between $15,000 and $90,000. The program is effective June 1, 2010, and ends on the earlier of Jan. 1, 2014, or when the $5 billion appropriated for the program is exhausted.

The intent of the ERRP is to encourage employers to continue to provide their early retirees with medical benefits, at least until the health insurance exchanges establised by the ACA become operational.

Beginning this month, approved applicants will begin to submit claims and receive reinsurance payments on those claims.

A complete list of approved applicants is available here.

Although many companies are taking advantage of ERRP, others have decided to phase out their current retiree coverage offerings because of health care reforms. For example, 3M Company has announced that it would replace its Retiree Group Medical Plan with a health reimbursement arrangement, beginning Jan. 1. 2013 for Medicare-eligible retirees amd spouses, and beginning Jan. 1, 2015, for non-Medicare eligible retirees and eligible dependents. Non-Medicare retirees and their families may use the HRA funds to purchase individual insurance through the insurance exchanges.

3M attributes to the ACA changes the company’s switch to an HRA. Health reform “should dramatically improve the individual insurance marketplace for non-Medicare eligible retirees and their eligible dependents,” a 3M spokesman explained. “At the same time, the 3M-sponsored retiree group medical plans will no longer have the advantages over the individual insurance marketplace that they once did.” The ACA presents an opportunity to shed costs, in 3M’s view.

Read all about it here!

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