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2,000 Groups Approved for Early-Retiree Health Care Funds

By Stephen Miller  9/7/2010
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Update: Early Retiree Subsidy to End Early 

The health reform law’s Early Retiree Reinsurance Program (ERRP) will no longer accept applications after April 30, 2011, according to a Centers for Medicare & Medicaid Services (CMS) memo to congressional staff, dated March 31, 2011. 

Employers, unions and state and local governments that provide an employment-based group health plan to early retirees, their spouses or dependents were eligible to participate in the ERRP. The program was funded with $5 billion in the health care overhaul and was designed to stay open until 2014, when state-run insurance exchanges are set to launch. But with the $5 billion expected to run out by the end of September 2012, the administration is shutting down enrollment early.

Administration officials said that employers already enrolled in the program will continue to receive their approved funds, which must be used by December 2013. The program will not technically close until then, officials told the Capitol Hill newspaper Politico. 

According to a March 23, 2011 memo by Republican staff on the House Energy and Commerce Committee, "Over one-third of the $535 million spent by the ERRP in 2010 was spent on just five government entities. Fifty-six percent of the ERRP funding spent in 2010 ($298 million) went to government organizations."

The U.S. Department of Health and Human Services (HHS) announced the first round of applicants accepted into the Early Retiree Reinsurance Program beginning in September 2010.

The HHS Office of Consumer Information and Insurance Oversight approved nearly 2,000 plans representing a broad range of employers into the Early Retiree Reinsurance Program in this first round of approvals. Those accepted into the program will begin to receive reimbursements for employee claims during fall 2010.

Starting in September 2010, approved applicants can begin submitting claims dating to June 1, 2010, and starting in October 2010, approved applicants will begin to receive reinsurance payments on those claims. This policy is intended to allow more health benefit claims to qualify for reinsurance payments for plans in 2010.

Created by the Patient Protection and Affordable Care Act as a bridge to the new health insurance exchanges in 2014, the Early Retiree Reinsurance Program provides $5 billion in financial assistance to employers and unions to help them maintain coverage for early retirees age 55 and older who are not yet eligible for Medicare. Employers and unions that are accepted into the program will receive reimbursement for medical claims for early retirees and their spouses, surviving spouses and dependents. Savings can be used to reduce employer health care costs or provide premium relief to workers. The program ends on Jan. 1, 2014, when state health insurance exchanges are expected to be up and running.

Broad Range of Applicants

The approved applications represent nearly every sector of the U.S. economy: 32 percent of applications came from businesses, 26 percent from state and local governments, 22 percent from union sponsors, 14 percent from schools and other educational institutions, and 5 percent from not-for-profit organizations, according to HHS.

"There has been a tremendous amount of interest from businesses and organizations from across the country since the Early Retiree Reinsurance Program was announced just a few months ago,” said HHS Secretary Kathleen Sebelius in a statement. “We have received applications from more than 50 percent of Fortune 500 companies, all major unions and government entities in all 50 states and the District of Columbia.”

The nearly 2,000 approvals are a subset of applications that had been received by Aug. 31, 2010. HHS’s Office of Consumer Information and Insurance Oversight is continuing to accept and review additional applications in the order in which they were submitted.

Disappearing Retiree Health Care

Rising health care costs have made it difficult for employers to provide quality, affordable health insurance for workers and retirees while remaining competitive in the global marketplace. The percentage of large firms providing workers with retiree health coverage dropped from 66 percent in 1988 to 29 percent in 2009. Health insurance premiums for older Americans are over four times more expensive than they are for young adults, and the deductible that these enrollees pay is, on average, almost four times that for a typical employer-sponsored insurance plan, according to HHS.

New Resources Available

HHS posted its Early Retiree Reinsurance Program application, as well as application instructions, frequently asked questions and application submission do’s and don’ts, to the Office of Consumer Information and Insurance Oversight web site.

In addition to announcing approved applications, HHS announced two new information tools for employers and unions interested in the Early Retiree Reinsurance Program—a new web site ( and a new hotline (877-574-3777 or 877-574-ERRP).

Stephen Miller is an online editor/manager for SHRM.

Related Articles:

Early Retiree Reinsurance Program Application Posted, SHRM Online Legal Issues, July 2010

Applications for Early Retiree Reinsurance Program Now Being Accepted, SHRM Online Benefits Discipline, June 2010

Early Retiree Reinsurance Program: Frequently Asked Questions, SHRM Online Benefits Discipline, May 2010

Quick Links:

SHRM Online Benefits Discipline

SHRM Online Health Care Reform web page

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