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Early Retiree Reinsurance Program a bailout: House Republicans

Early Retiree Reinsurance Program a bailout: House Republicans

WASHINGTON—House Republicans allege that there was no rational basis to establish a $5 billion early retiree health care claims reimbursement program that is part of the health care reform law.

The Early Retiree Reinsurance Program reimburses employers and other organizations that sponsor early retiree health care plans. It will stop making reimbursements for claims incurred after Dec. 31.

However, according to a memo prepared by the majority staff of the House Energy and Commerce Oversight and Investigations subcommittee, the program “simply threw money at a problem—here, the cost of retiree medical care—without doing anything to address the skyrocketing costs of that care.”

The program “simply bailed out overextended state programs, wasted taxpayer money that otherwise could never have been justified or spent on a case-by-case basis, and unnecessarily doled out taxpayer funds to some of the nation's most profitable corporations,” according to the Republican committee staff memo released Wednesday.

In a March report, the Department of Health and Human Services defended the program, noting that ERRP “provides financial help to group health plans that provide health coverage to retirees and their families who depend on this coverage for their health care needs.”

20 organizations received funds

While more than 5,000 organizations had applications approved for reimbursement of early retiree health care claims, more than 40%, or $2 billion, of the $4.5 billion that has been distributed as of Dec. 2, went to just 20 organizations, according to the memo.

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 Co., 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

Other big recipients of ERRP funds and the payments they have received through Dec. 2, include:

• AT&T Inc., $213.8 million;

• Ohio Public Employees Retirement System, $180.1 million;

• Verizon Communications Inc., $163.0 million; and

• California Public Employees' Retirement System, $131.4 million.

Under the program, 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.

For in-depth coverage of this topic and related issues, visit our Solution Arc on What Benefits Managers Need to Know About Health Care Reform.