Printed from

Early Retiree Reinsurance Program closed to new claims

Posted On: Feb. 17, 2012 12:00 AM CST

Early Retiree Reinsurance Program closed to new claims

WASHINGTON—The Centers for Medicare and Medicaid Services has stopped paying new claims under a $5 billion program created by the health care reform law that partially reimburses employers and other organizations that sponsor early retiree health care plans.

CMS disclosed Friday that through Jan. 19, $4.73 billion in payments had been made. But that amount when added to pending reimbursement requests exceeds the $5 billion Congress appropriated for the Early Retiree Reinsurance Program, CMS said.

As a result, reimbursement requests “will be held in the order of receipt, pending the availability of additional funds that may become available as a result of overpayment recoupment activities,” CMS said.

In December, when reimbursements crossed the $4.5 billion mark, CMS said it would not pay claims incurred after Dec. 31, 2011, although early retiree health care plan sponsors could continue to file for reimbursement of claims incurred through Dec. 31.

“ERRP funds have been exhausted much earlier than had been anticipated, even just a few months ago. Many plan sponsors who made submissions in late 2011 will be disappointed to not receive a payment,” said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.

Under the ERRP, the federal government reimburses plan sponsors for a portion of claims incurred on or after 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 reimburses 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 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 of ERRP funds and the payments they have received through Jan. 19 include:

• AT&T Inc., $213.8 million

• Ohio Public Employees Retirement System, $180.1 million

• Verizon Communications Inc., $163.0 million

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