Companies will get $5 billion from the federal government to maintain health care coverage for early retirees, the U.S. Department of Health and Human Services announced yesterday. The Early Retiree Reinsurance Program, created by the health reform bill, aims to subsidize employers that provide health insurance to retirees age 55 and older who are not yet eligible for Medicare and their spouses, surviving spouses, and dependents.
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“Many Americans who retire before they are eligible for Medicare are worried about losing health insurance coverage through their former employers,” says Health and Human Services Secretary Kathleen Sebelius. “This new program will provide much-needed relief so that employers can provide more retirees with quality, affordable insurance starting this year.”
Employers who are accepted into the program will be reimbursed for up to 80 percent of each individual’s medical expenses between $15,000 and $90,000. Only medical expenses incurred after June 1, 2010 will be eligible for reimbursement. However, claims incurred between January 1 and June 1 of this year can be credited toward the $15,000 threshold.
Much of the business community says this federal assistance with retiree health expenses is necessary to maintain retiree coverage. “The Early Retiree Reinsurance Program reduces costs and allows many of our member companies to continue providing this critical coverage,” says John Castellani, president of Business Roundtable, a group that represents chief executives.
Employers may use the reimbursement to reduce their own health care costs, to reduce premium prices for workers and their families, or a combination of both. Applications for employers will become available in June. The program ends on January 1, 2014 when health insurance exchanges will become operational.