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Early Retiree Reinsurance Program funds 80% used up: CMS

Posted On: Nov. 21, 2011 12:00 AM CST

WASHINGTON—The Centers for Medicare and Medicaid Services has paid out more than $4 billion of a $5 billion fund created by the health care reform law that partially reimburses employers and other organizations that sponsor early retiree health care plans.

As of Nov. 3, the latest date reimbursement information for the Early Retiree Reinsurance Program is available, just less than $4.1 billion had been distributed, CMS said Friday. That's up from $3.6 billion as of mid-October.

Under the ERRP, the federal government reimburses plan sponsors for a portion of claims incurred starting June 1, 2010, by retirees who are at least age 55 but not eligible for Medicare, as well as covered dependents, regardless of age.

After a participant incurs $15,000 in health care claims in a plan year, the government will reimburse 80% of claims, up to $90,000.

Of the total paid out so far, $387.2 million was distributed to the United Auto Workers Retiree Medical Benefits Trust. The trust is a voluntary employees' beneficiary association set up by the UAW under a 2007 collective bargaining agreement between General Motors Corp., Ford Motor Co. and Chrysler L.L.C. and the UAW.

Under that agreement, the automakers agreed to contribute more than $50 billion to the VEBA. In return, the automakers no longer have to provide health care benefits to UAW-represented retirees and their dependents. The UAW is responsible for managing the VEBA and paying retiree health care claims.

Other big recipients of ERRP funds and the payments they have received through Nov. 3, include:

• AT&T Inc., $213.8 million;

• Verizon Communications Inc., $163.0 million;

• California Public Employees' Retirement System, $131.4 million; and

• State of New Jersey, $98.6 million.

Because of the rapid disbursement of funds, CMS announced in April that it would not accept new applications after May 5. It is widely expected that the $5 billion fund will be exhausted by the end of this year.

As total payments approach the one-time $5 billion appropriation, CMS said it will post total program payments more frequently.