Retiree Health Plans Collect $535 Million

Employers claim federal subsidy to maintain health insurance plans for retirees.

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More than 5,000 employers who maintain health care coverage for early retirees have collected $535 million from the federal government through the Early Retiree Reinsurance Program. The health reform bill promised up to $5 billion worth of subsidizes to employers that provide health insurance to retirees age 55 and older who are not yet eligible for Medicare. The program will reimburse employers for high retiree health care costs until health insurance exchanges become operational in 2014 or the funding is exhausted.

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Participating employers received reimbursement payments equal to 80 percent of medical claim costs between $15,000 and $90,000 for retirees and their spouses and dependents. There were 60,859 retiree health plan participants who had health costs that exceeded the $15,000 threshold in 2010, including 32,674 government retirees, 17,496 nonprofit retirees, and 9,419 commercial organization retirees. The United Auto Workers Retiree Benefits Trust alone had 11,679 early retirees with cost claims above $15,000 for the year. And technology company Alcatel-Lucent USA Inc. had 1,141 retirees who qualified the company for reimbursement. Payments made to individual health plans ranged from $285.13 to $108.6 million for claims in 2010.

State and local governments were the biggest beneficiaries of the federal subsidy. Almost half (47 percent) of all those accepted into the program are public sector employers, who collectively received $298 million. Individual payments to government employers ranged from $718,101 to more than $57 million. The biggest reimbursements were received by the California Public Employees' Retirement System ($58 million), the State of New Jersey Treasury Department, Pension Accounting Services ($39 million), the Georgia Department of Community Health, State Health Benefit Plan ($35 million), the Commonwealth of Kentucky ($30 million), and the Employees Retirement System of Texas ($21 million).

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Nonprofit organizations, which made up 15 percent of all program participants, received a $129 million reimbursement for the 17,496 retirees who experienced high health care costs. Just over a quarter (28 percent) of recipients were commercial organizations, where 9,419 retirees qualified their company to be reimbursed for $95 million. Unions collected $13 million to help defray the cost of providing health care for 1,258 retirees. Religious organizations also claimed $197 thousand for 12 retirees who had high health care costs.

Most of the employers that accepted the federal funding plan to use reimbursements to reduce both their own and plan participant costs (60 percent). Some employers plan to reduce only their own costs (20 percent) or pass the cost savings completely along to workers and retirees by reducing premiums, co-payments, deductibles, co-insurance, or other out-of-pocket health benefit costs (20 percent). The California Public Employees’ Retirement System, for example, plans to use the funding to mitigate 2011 premium increases for 1.1 million public employees, retirees, and their dependents by 3 percent.

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The most money from the program has flowed to employers sponsoring retiree health insurance in Michigan ($142 million for 19,557 retirees), Texas ($74 million for 8,674 retirees), California ($65 million for 5,934 retirees), Georgia ($52 million for 4,477 retirees), and New Jersey ($46 million for 4,698 retirees). The smallest reimbursements went to Maryland ($26,996 for 5 retirees), New Mexico ($186,501 for 40 retirees), and Nebraska ($227,864 for 16 retirees). You can find a full list of employers participating in the program here.

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