$2.5 billion in unpaid early retiree health program claims: GAO

Employers and other early retiree health care plan sponsors awaiting government payment from a health care reform law program are likely to be paid only a fraction of the $2.5 billion they have filed in claims.

The reason is that the $5 billion Congress authorized for the Early Retiree Reinsurance Program has been nearly exhausted by payment of earlier claims filed by plan sponsors, according to a Government Accountability Office report released Thursday.

While the Patient Protection and Affordable Care Act authorized reimbursement of early retiree health care claims incurred through Dec. 31, 2013, amid heavy demand, the Center for Consumer Information and Insurance Oversight, which administers the program, stopped accepting new applications for the program in May 2011. By then, nearly half of the $5 billion program already had been paid out in claims reimbursement.

A few months later, the agency said it would not accept reimbursement requests for claims incurred after Dec. 31, 2011.

By September 2012, reimbursements exceeded a $4.7 billion cap regulators allocated for paying claims — with the remaining $300 million reserved for administrative expenses — reimbursements were halted, the GAO said.

By then, though, about $2.5 billion in pending claims still had not been paid and it appears likely that only a fraction of those pending claims will be paid.

While the CCIIO said it will transfer overpayments it recovers from plan sponsors to pay pending claims, it identified just $60.2 million in overpayments as of January and recovered $54 million.

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Some 2,858 retiree health care plan sponsors had received payments as of last October, the GAO said. More than 20% of the claims paid went to just five plan sponsors.

The highest amount, $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.

Other payouts 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 early retiree program, the federal government reimbursed plan sponsors for a portion of claims incurred on or after June 1, 2010, by retirees who were at least age 55 but not eligible for Medicare, as well as covered dependents, regardless of age.

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