Early birds

The Obama administration moved up the timeframe to implement another provision of the new health reform law last week—this one aimed at benefiting employers who provide health coverage to early retirees.

The $5 billion Early Retiree Reinsurance Program will begin accepting applications from employers on June 1. The program will help offset medical costs of retirees between the ages of 55 and 64, their spouses and dependents. The program was slated to launch on June 21.

The program ends in 2014, when health coverage will become available through health insurance exchanges.

Despite the shortened implementation timeframe, employers and covered retirees likely won’t see financial relief until 2011 at the earliest because of the complex administrative changes, said Milind Desai, principal and actuary at Hewitt Associates, a human resources consulting firm.

“I think it will be challenging to make modifications to deductibles for this year,” Desai said.

Employers can apply for reimbursements of up to 80% of claim costs for health benefits between $15,000 and $90,000. Only medical expenses incurred after June 1 are eligible for reimbursement, but claims incurred after Jan. 1 of this year can count toward the $15,000 threshold, the HHS said.

The number of large employers who offer coverage to early retirees has fallen significantly in the past two decades. Thirty-one percent of large employers offered these benefits in 2008, down from 66% in 1988, HHS said.

Among employers that still offer benefits, this new program is expected to be popular. About three-fourths of large employers providing early retirement health coverage are interested in applying, according to preliminary survey data from Hewitt.

Many early retirees fall into a coverage gap because they are too young to qualify for Medicare but cannot quality for individual insurance because of pre-existing medical conditions. While this reinsurance program does not aid older uninsured Americans, it aims to stop the steep drop-off in private early retirement health benefits.

The program is voluntary, and employers can decide how they want to divvy up the funds. They could keep all the money for themselves, or pass all or a portion of it onto early retirees in the form of lower premiums and other out-of-pocket costs. Employers must explain how they intend to divide the funding in their applications to HHS, which will likely deter them from claiming all the money, Desai said.