June 19, 2019

Update: HHS Details Early Retiree Reinsurance Program

As of June 1, Americans who opt to retire early will be eligible for a temporary program that will assist them in maintaining affordable health coverage during the “gap” years between early retirement and Medicare eligibility.

Under the program, early retirees will see lower costs and a greater variety of choices in high-quality, affordable health care.

The U.S. Department of Health and Human Services (HHS) has established the Early Retiree Reinsurance Program as part of the Patient Protection and Affordable Care Act, which itself is part of President Obama’s larger healthcare reform agenda.

How will this program affect employers? A Fact Sheet released by the White House press office summarized the program’s key benefits to employers:

This temporary program will make it easier for employers to provide coverage to early retirees.

Employers who are accepted into the program will receive reinsurance reimbursement for medical claims for retirees age 55 and older who are not eligible for Medicare, and their spouses, surviving spouses, and dependents.

Health benefits that qualify for relief include medical, surgical, hospital, prescription drug, and other benefits that may be specified by the Secretary of Health and Human Services, as well as coverage for mental health services.

The amount of this reimbursement to the employer plan is up to 80% of claims costs for health benefits between $15,000 and $90,000. Claims incurred between the start of the plan year (often January 1) and June 1st are credited towards toward the $15,000 threshold for reimbursement. However, only medical expenses incurred after June 1, 2010 are eligible for reimbursement under this program.

For example: If an individual incurs costs of $30,000 between the start of the plan year and June 1, and $40,000 after that date.  The amount which may be reimbursed is $40,000 – the costs above the $15,000 threshold that occur after June 1.

If a plan incurs $90,000 or more in expenses before June 1, it is treated as having met the $15,000 threshold and is eligible for reimbursement for costs incurred after June 1.

These limits apply and claims are filed for individual’s costs.  Firms cannot add two or more individuals together to attain the threshold.

Both self-funded and insured plans can apply, including plans sponsored by private entities, state and local governments, nonprofits, religious entities, unions, and other employers.

HHS Secretary Kathleen Sebelius remarked:

Rising costs have made it hard for employers to provide quality, affordable health insurance for workers and retirees. As a result, many Americans who retire before they are eligible for Medicare are worried about losing health insurance coverage through their former employers, putting them at risk of losing their life savings due to medical costs. This new program will provide much-needed relief so that employers can provide more retirees with quality, affordable insurance, starting this year.

The Act includes $5 billion in financial assistance to employers to retain coverage for retirees age 55 and older who are not yet eligible for Medicare. The Early Retiree Reinsurance Program will end in 2014, when Americans will be able to choose healthcare coverage through insurance exchanges.

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