Short Takes On News & Events

Early Exit For Early Retiree Insurance Program

By Elizabeth Stawicki, Minnesota Public Radio

December 16th, 2011, 8:04 AM

This story is part of a reporting partnership that includes Minnesota Public Radio, NPR and Kaiser Health News.

The clock is winding down on a little known – but very popular – program created by the Affordable Care Act to help employers offer health benefits to early retirees.

The $5 billion early retiree reinsurance program has already paid out $4.5 billion, and the last day to submit claims for any of the remaining funds is Dec. 31.

The federal health law created the fund to give employers an incentive to keep providing health insurance coverage for retirees between the ages of 55 and 65.

Photo by robstephaustralia via Flickr

If these younger retirees didn’t have employer-sponsored coverage, they might have a hard time finding affordable health insurance because of their age or chronic conditions. The fund was meant to be a bridge for early retirees until the health exchanges are up and running in 2014 – but the money won’t last that long.

“It was a popular program, which is why the money is running out as quick as it is,” says economist Paul Fronstin of the Employee Benefits Research Institute.

And Fronstin says it’s uncertain whether the program accomplished what it set out to do: “In terms of keeping employers from dropping retiree health benefits. It’s unclear whether it made any dent there whatsoever.”

Laurie Bauer of the Minnesota-based Andersen Corp. says her company has received about $2 million under the program.

“Medical benefits have increased dramatically as we all have seen and we want to be able to keep those affordable for our retirees,” Bauer said. “And any opportunity that we have to reduce those premiums to them is very attractive to us.”

Bauer says the window and door manufacturer would have continued providing early retiree benefits anyway. But the extra money means the company can keep a lid on rising premiums, at least through 2012. Instead of an 8 percent increase, retirees will only pay 2 percent more.

The program has been popular with all kinds of employers. Thousands have participated. For example, Citigroup has received $8 million, Ernst & Young $3 million, the state of New York $88 million. About half of all recipients have been state and local governments.

Pat Hentges is city manager of Mankato, Minn. – population about 40,000.  He says the program reimbursed his city about $300,000 this year, which largely offset rising health premiums for its early retirees.

“It’s worked out well for us,” Hentges said. He’s expecting some pain when the funding goes away. “I suspect what’s going to happen is that we will go back to double-digit costs for our health insurance plan.”

One Response to “Early Exit For Early Retiree Insurance Program”

  1. Yes you are Right Medical facilities charges going high day by day. but People should have to consider these kind of issues in the budget. Thank for sharing such a nice info.

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