(update posted Sept 2, 2010)
The Affordable Care Act’s Early Retiree Reinsurance Program
| Background from www.healthcare.gov Rising health care costs have made it difficult for employers to provide quality, affordable health insurance for workers and retirees while also remaining competitive in the global marketplace. The percentage of large firms providing workers with retiree health coverage has dropped from 66 percent in 1988 to 29 percent in 2009. Many Americans who retire without employer-sponsored insurance and before they are eligible for Medicare see their life savings disappear because of exorbitant rates in the individual market. Health insurance premiums for older Americans are over four times more expensive than they are for young adults, and the deductible these enrollees pay is, on average, almost four times that for a typical employer-sponsored insurance plan. |
The Early Retiree Reinsurance Program provides much-needed financial relief for employers, unions and state and local governments so retirees can get quality, affordable insurance.
The Affordable Care Act provides a fund of $5.0 billion in financial assistance to employers (as well as unions and state and local governments) to help them maintain coverage for early retirees age 55 and older who are not yet eligible for Medicare. Employers can use the savings to reduce their own health care costs, provide premium relief to their workers and families, or both.
The program was announced at the time that Healthcare Reform was passed, and applications began being accepted at the end of June, 2010. Intel submitted its application the first day that applications were accepted.
Employers that are accepted into the program will receive reinsurance reimbursement for some medical claims for retirees age 55 and older who are not eligible for Medicare, and their spouses, surviving spouses, and dependents (the program will reimburse employers or insurers for certain retiree claims between $15,000 and $90,000).
To participate in the program, employers must have their applications approved, be able to 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. Intel’s application was approved August 30, 2010 but additional information on when and how employers may submit claims is still pending.
The program is “first come first served” – the government will accept all companies that qualify via the application, companies can then file claims for the reinsurance. The reimbursements will occur on a “first come first served” basis, when the fund is depleted the program is over. While the Early Retiree Reinsurance Program is designed to provide temporary assistance until 2014, when early retirees will be able to choose from additional coverage options provided in the health insurance Exchanges, the fund is $5.0 billion dollars and may be depleted prior to 2014.
It is difficult to predict what the impact of this program will be on Intel’s early retirees. It has the potential to lower health insurance cost increases in the future, but it is unknown now just how long the fund will last and if Intel’s claims will be funded before the $5.0 Billion dollars is depleted.
Below are 3 links to understand more about US Healthcare reform: