OPINION: Early Retiree Reinsurance Program flawed

A HEALTH CARE reform law program providing $5 billion in subsidies for sponsors of early retiree health plans may not have been a “bailout,” but it was inequitable and maybe even deceptive.

Under the Early Retiree Reinsurance Program, after a participant enrolled in a plan offered by an approved sponsor incurs $15,000 in health care claims in a plan year, the government reimburses 80% of claims up to $90,000. The reimbursement cannot be used as general revenue by plan sponsors. Instead, the money must be used to reduce sponsors' health plan costs or premiums, and/or plan participants' premiums and other out-of-pocket costs.

That doesn't strike us as a bailout, a claim made in a memo by Republican staff members of the House Energy and Commerce committee's Oversight and Investigations subcommittee.

On the other hand, the program was hardly fair. Early retiree health care plan participants are the lucky ones in that they have group coverage. Contrast them with other early retirees age 55 through 64—who lack group coverage and have to shell out five-figure amounts to pay premiums for individual coverage. Those millions of early retirees and their families didn't receive one penny of federal financial support for their health care premiums and costs. That strikes us as particularly unfair, even for federal programs that routinely limit their aid to a particular group.

The program also strikes us as deceptive. The health care reform law created the program, with the law clearly stating that it would end Jan. 1, 2014. That wording certainly created an expectation that funds for reimbursement of claims would be available through the end of 2013.

But as of Dec. 2, according to Centers for Medicare & Medicaid Services, more than $4.5 billion in reimbursement money had been distributed to plan sponsors. Government regulators said they will not accept applications for reimbursement for claims incurred after Dec. 31, a clear sign they believe the reinsurance fund soon will be exhausted.

In the interest of truth in communications—an important issue for a law that has many critics—federal lawmakers would have been better off when establishing the fund to cap its total and then state that the program would end when the fund was out of money, without giving a date.