Planning to retire before age 65? You'll still be too young for Medicare, but your age likely will make private health insurance a budget-breaker -- or cause an insurance company to deny your application.
The Early Retiree Reinsurance Program, one of the many provisions of the health care reform law, is designed to help employers continue to offer health insurance to retired workers before they are eligible for Medicare. The program, which launched in June 2010, stopped accepting new applications in May 2011. But if your employer already is enrolled, it can receive a substantial reimbursement of claims costs associated with your health care.
How the program works
The program is not an insurance program -- it's a reinsurance program. In other words, it does not cover retirees directly, but instead reimburses employers that offer coverage. According to the program's website, companies that enroll in the program will be reimbursed up to 80 percent of claims costs for health benefits between $15,000 and $90,000. While health claims costs for the entire 2010 year can be used to reach the $15,000 threshold, only costs incurred June 1, 2010, or later can be reimbursed.
Employers can use the program for retirees over age 55. Expenses that are eligible for reimbursement include medical care, surgery, hospital services, prescription drugs and mental health services.
Bridging the gap
Health benefits for early retirees weren't always so hard to come by. In the late 1980s, two-thirds of large employers offered retiree health insurance coverage, according to a White House fact sheet about the program. In 2008, just 31 percent of large employers did so. And the number is still falling -- 28 percent of large companies offered such benefits in 2010, according to the Kaiser Family Foundation.
For the unemployed and those still working past age 65, early retirees may not seem like a group that should garner a lot of sympathy. But many early retirees worked as manual laborers, and their age makes it difficult to find employment and get health insurance. After being "forced" to retire, some go without health insurance altogether -- and neglected preventive treatments can lead to higher Medicare costs when they finally reach age 65.
The future of the program
Like other provisions enacted as part of the Patient Protection and Affordable Care Act (also known as the health care reform law), the Early Retiree Reinsurance Program never was designed to be a permanent government program. Rather, it was included as one of many provisions that are meant to serve as a bridge to 2014, when the health insurance mandate and health insurance exchanges are set to be in place.
The program must operate within its funding allotment of $5 billion. According to the program's website, roughly $1.8 billion already had been paid out as of March 2011. Once the $5 billion is exhausted, that's it. Even if an employer already has been accepted into the program, it may not receive reimbursement if money already is depleted.
For critics, the program's end can't come soon enough. In a blog entry for conservative think tank the Heritage Fund, Kathryn Nix calls the program just one of the "favors for big labor" within the health care reform law. Nix points out that most of the employers offering retiree benefits are local governments and those with union workers. So, the thinking goes, the program is yet another benefit for union and government workers, who already receive generous benefit packages. In other words, she argues, the program would benefit special interest groups, rather than the majority of Americans.