February 2010 Archives

Sec. 1102- Reinsurance for Early Retirees

A temporary reinsurance program will reimburse participating employment-based plan for a portion of the cost of providing health insurance coverage to early retirees. The program will reimburse eligible employment-based plans for about 80% of the cost of benefits provided per enrollee between $15,000 and $90,000. The employers would be required to use the federal reinsurance money to either reduce the employer's premium cost, or reduce participant contributions and plan cost-sharing. This could be done through deductibles, copayments and out-of-pocket expenses.
An early retiree is:
1) Ages 55 and older
2) Not yet eligible for the Medicare Program
3) Not covered under title XVIII of the Social Security Act
4) Not active employees of an employer maintaining or currently contributing to, the employment- based plan or of any employer that has made substantial contributions to fund such a plan.

An employment-based plan meets requirements if they:
1) Implement programs and procedures to generate cost-savings with respect to participants with chronic and high-cost conditions
2) Provides documentation of the actual cost of medical claims involved
3) Is certified by the Secretary

From an economic standpoint, this may pose several issues for Americans as it does not seem sustainable for a long period of time. The program will begin no later than 90 days from the establishment date and ending on January 1st, 2014. In the short run yes, employers may be delighted by the opportunity to provide their employees with exactly what their looking for-health benefits. The program supplies employers an incentive to give the early retirees the health benefits they deserve without taking a huge financial burden on the company. However, the funds for this program are limited. Funds will be provided by the Senate bill of $5 billion or from the House bill of $10 billion and without fiscal year limitations. These funds are capped, which means they will eventually run out. After these funds run out, the only incentive employers have are to drop their retirees from the program in order to keep their company from sinking in financial debt.

One quote that I read that I thought put it very well said, "The program's characterization as 'temporary,' however, makes it sound like the pre-65 retiree equivalent of 'cash for clunkers,' since the program lasts only as long as there is money to pay for it." This is exactly like what it sounds like to me and probably what it sounds like to any economist. People soak in the short term benefits, but it will only benefit those who can be involved with it right now, or until the money runs out. Yes it will solve the problem right now, but what about 20 years from now?

Sources:
http://www.towersperrin.com/tp/getwebcachedoc?webc=USA/2009/200911/113009_HCReform_TPAnalysis_PauseToConsiderRM.pdf
www.opencongress.org
http://www.ebri.org/pdf/briefspdf/EBRI_IB_01-2010_No338_RetHlth1.pdf

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