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Short life for early retiree reinsurance program: Analysis


A $5 billion early retiree reinsurance program established by the health care reform law will run out of money long before the program expires at the end of 2013, according to an analysis released Monday.

The program, set to begin this month, is designed to reimburse employers with early retiree health care programs for a portion of their claims costs.

After a plan sponsor applies and files claims information under the Early Retiree Reinsurance Program, the government will reimburse employers for a portion of health care claims incurred by retirees who are at least age 55 but not eligible for Medicare as well as retirees’ covered dependents, regardless of age.

After a participant in an early retiree plan incurs $15,000 in health care claims in a plan year, the government will reimburse plan sponsors for 80% of a participant’s claims up to $90,000.

The Employee Benefit Research Institute on Monday estimated that the government will provide $2.5 billion in subsidies this year for reimbursement of claims incurred starting June 1, and that the program likely will run out of money sometime in 2011.

While the subsidy is intended to give employers an incentive to maintain early retiree health care coverage, the health care reform legislation in the longer term will “create significant incentives for employers to drop coverage,” EBRI said in its analysis.

Among other things, the law will give lower-income early retirees subsidies to purchase coverage and will bar insurers from denying coverage based on pre-existing conditions.

The analysis, “The Early Retiree Reinsurance Program: The $5 billion Will Last About Two Years,” is available online at