Pending Program to Pump $5 Billion Into Employer Health Plans for Retirees

The U.S. Department of Health and Human Services and the White House have released a more detailed explanation of a program that will insure early retirees with coverage assistance -- one of the earliest health care reform provisions set for implementation.

By June 23, a $5 billion fund will be available for employers to continue to cover early retirees, age 55 to 64. Employer health plans will be reimbursed out of this fund for enrolled retirees who are still too young for Medicare coverage.

"Once the $5 billion is exhausted, it's over," said Susan Nash, a partner with McDermott Will & Emery, who focuses on health plans. She said she finds it "kind of hard to believe" the program -- which she compared to Cash for Clunkers -- will be running by its target date, but she said there has been a lot of interest.

Employers will submit applications to HHS if they meet the yet-to-be-released eligibility requirements, similar to the Retiree Drug Subsidy system. "To receive assistance, plans must apply, document claims, and implement programs and procedures to generate cost savings for participants with chronic and high-cost conditions," according to the initial federal information. "Plans will be subject to audits to assure fiscal integrity."

The reimbursed plans will receive "up to 80% of costs, minus negotiated price concessions, for health benefits between $15,000 and $90,000."

The cash is supposed to go back to the plan in order to lower costs, such as premiums and deductibles. Nash said it's easy to figure out how to channel that back to a plan for those who are self-insured. But for companies working with insurers, she said, "I think there's going to have to be dialogue between employers and insurance companies."

As with the other provisions of health reform, HHS is expected to offer more specific guidance soon on the process. The program is set to end when the state-based insurance exchanges get started in 2014, though Nash said companies will likely try to get into it early, so its funding could dry up quickly.