Helping Insure Early Retirees: Health Reform In Action

We hear plenty of whining in the media and in the blogosphere about how the historic health care reform law passed earlier this year is a political loser because it did not front-load enough benefits.  But we hear precious little from so-called experts and talking heads on television about the actual benefits of health reform that are going into effect as we speak.  I believe that as advocates of health care reform, it is our job to get the truth out there about what is happening now, and how that is impacting the lives of real Americans right now.

One such early benefit of the health reform law is the Early Retiree Reinsurance Program (ERRP). In the Affordable Care Act, Congress authorized $5 billion to help employers and unions keep early retirees (retirees 55 or older but not yet eligible for Medicare) covered with health insurance until additional regulations on insurance companies go into effect and the health insurance exchanges open in January of 2014. Over 2,000 plan sponsors have already been approved for this plan.

How does the program actually work?  The cost of early retiree health care is often prohibitively high for employers and unions - whether businesses happen to self insure or purchase an insurance company plan for their employees and retirees, or whether it is insured through a union plan.  From 1988 to 2009, the percentage of large employers offering retiree health insurance benefits dropped precipitously from 66% to 29%.  For business and public employers that choose to still do the right thing by their retirees, health care costs weigh down heavily, keeping them from making additional investments in public safety, workers, new technologies, and innovations that could spur growth and job creation.
Corning Inc., the world’s biggest maker of glass for flat- panel televisions, spent $60 million last year on retiree health benefits, Debra Waggoner, head of government affairs, said at the press conference with Sebelius.
The ERRP attempts to make early retiree coverage a little more affordable by reimbursing to businesses and other plan sponsors (not insurance companies, more on that later) 80% of coverage costs between $15,000 and $90,000 yearly.

A word to be said about who can be reimbursed.  Insurance companies (other than as employers, like any other business) cannot be reimbursed by this plan.  Employers who self-insure can use the reimbursements to cover their costs.  However, in cases where employers provide insurance through payment of insurance premiums to insurance companies, the reimbursable costs are those incurred by the employer in order to provide the coverage, not how much an insurance company spends in providing benefits.  In a rule issued to govern this program, the Department of Health and Human Services clarifies "employer-based plans:"
The Early Retiree Reinsurance Program provides reimbursement to participating sponsors for a portion of the costs of providing health coverage to early retirees (and eligible spouses, surviving spouses, and dependents of such retirees). Section 1102(a)(2)(B) of the Affordable Care Act defines ‘‘employment-based plan’’ to include a group benefits plan providing health benefits that is maintained by private employers, State or local governments, employee organizations, voluntary employees’ beneficiary association, a committee or board of individuals appointed to administer such plan, or a multiemployer plan (as defined by Employee Retirement Income Security Act or ERISA). Section 1102 does not differentiate between health benefits provided by self-funded plans or through the purchase of insurance.
Note that health "benefits" are not being reimbursed directly, but rather the cost to the employer or the plan sponsor, which are private or public employers or unions.

Who's been applying to participate in this program?  Businesses big and small, non-profit organizations, unions, and public employers such as municipalities and cities.  Bloomberg reported:
Nonprofit organizations, state and local governments and schools were included with companies in the first round of reimbursement applications approved today, according to the statement. Of those, 32 percent were from companies.
Healthcare.gov has a state-by-state list of entities that have already been approved to participate in this program.  Entities as diverse as Levi Strauss & Co., the San Francisco Electrical Workers Health and Welfare Trust, countless counties, cities and school-boards, UNITE HERE hotel workers union and more are among the first to be approved.  From Helathcare.gov, here's an illustrative pie chart of what type of entities are being accepted in the first round:

early retiree reinsurance first round approved

What this chart demonstrates is more than just the much needed help being delivered to employers and unions who choose to do the right thing by their employees and members who retire early.  This chart represents relief for school districts, colleges, cities, counties and states from some of the crushing cost burden they bear of retiree health insurance.  It represents funds unions can use to lower their cost of providing coverage so they can use that freed up money to advocate more effectively for the American worker.  It represents some much needed help for non-profits that can now put more fund in direct services to communities in need.  And yes, it represents delivering some relief to businesses so that they can hire a new employee or invest in technologies.  Speaker Pelosi put it well in her statement upon the announcement of this news:
Today's announcement is a crucial step in ensuring that hundreds of thousands of Americans aged 55 to 64, who retire but are too young to qualify for Medicare, have access to affordable health care, by providing businesses with the resources they need to guarantee that coverage.
For all the criticisms of health reform and its supposed inadequacies, the health care crisis in this country wasn't created in a day, and it will not be solved in a day.  But it is important to recognize the progress that is being made right now, right here, impacting the lives of countless Americans and relieving some cost burden on employers and unions.  It is important for advocates to highlight these accomplishments and bridges to 2014.  Not because it is all we need to do.  Not because we can simply sit on our hands now and celebrate.  Not because we can stop pushing for farther reaching reforms.  But because we progressives are, first and foremost, about people and progress.  This Early Retiree Reinsurance Program is significant progress that will help countless of our fellow Americans.  That's why it's important to take a moment and take notice.

People and progress, my fellow progressives, are also the reasons we must continue to fight to keep our country moving forward on this path, albeit a difficult one.