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Report Shows Early Retiree Reinsurance Program Working


Health and Human Services Secretary Kathleen Sebelius released a new report yesterday showing that the Early Retiree Reinsurance Program (ERRP) created by the Affordable Care Act is reducing health care costs for early retirees.

The Early Retiree Reinsurance Program (ERRP) was established by section 1102 of the Patient Protection and Affordable Care Act (the Affordable Care Act) enacted on March 23, 2010. Congress appropriated $5 billion for this temporary program which effectively began on June 1, 2010 and is scheduled to end no later than January 1, 2014.

The ERRP was designed to provide financial assistance for health plan sponsors to help early retirees and their families continue to have access to quality, affordable health coverage.

As of December 31, 2010, more than 5,000 employers had been accepted into ERRP, more than $535 million in health benefit costs have been reimbursed through the program, and those payments have helped benefit more than 4.5 million Americans.

Entities eligible for this program include for-profit companies, schools and other educational institutions, unions, State and local governments, religious organizations and other non-profits.

The largest share of 2010 reimbursements went to governments, including state and local governments, school districts and other local agencies. A list of approved plan sponsors, updated on January 27, 2011, is available online here: www.HealthCare.gov/law/provisions/retirement

“The Early Retiree Reinsurance Program is helping to control health care costs and protect coverage for early retirees and their families,” said HHS Secretary Kathleen Sebelius. “This program is providing critical financial relief to help states, private employers and other organizations preserve access to affordable health coverage for millions of Americans.”

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In 1988 the percentage of large firms providing workers with retiree health coverage was 66%, but dropped to 29% in 2009. As many Americans retire before they are eligible for Medicare, they risk seeing their savings disappear due to medical bills and high rates for individual health insurance coverage without employer-sponsored health coverage.

Health insurance premiums for older Americans are over four times more expensive than those for young adults, and the deductible these enrollees pay is, on average, almost four times that in a typical employer-sponsored insurance plan.

ERRP provides reimbursement to participating sponsors of qualified plans providing health benefits to early retirees, their spouses, and surviving spouses and dependents equal to 80% of the actual cost of health expenses paid by or on behalf of an individual between a cost threshold ($15,000) and cost ceiling ($90,000).

In 2010, ERRP-issued reimbursements helped pay the high costs of care for nearly 61,000 people. Sponsors receiving the largest ERRP reimbursements – totaling approximately 58% of the funding disbursed in 2010 – reported that program payments will benefit, either directly or indirectly, more than 4.5 million retirees, spouses, dependents, and active workers.

The program allows plan sponsors to either reduce costs of health care for plan participants or the costs to the plan sponsor to help them keep their coverage. For example, approximately 80% of plans that received reimbursements are using some or all of those dollars to lower the cost of health care for plan participants. The reimbursements helping to lower plan participant costs account for 97% of funds disbursed in 2010.

The report also provides new information about how ERRP-participating plans are working to generate cost savings for people with chronic and high-cost conditions. For example, many sponsors, including a teachers’ retirement plan and a major telecommunications corporation, are providing disease management programs for people with conditions such as coronary artery disease, chronic obstructive pulmonary disease, diabetes, asthma, and osteoarthritis. Other programs are helping patients and doctors work together to manage their prescription drug treatments.

Overall, the 2010 report demonstrates that ERRP is already having a meaningful impact on employers and unions as well as millions of early retirees, their families and other plan participants. The program has seen robust participation from all major sectors of the economy, with additional sponsors applying to participate every day.

Report on Implementation and Operation of the Early Retiree Reinsurance Program During Calendar Year 2010, March 2, 2011 (pdf)

HHS press release, March 2, 2011