The Patient Protection and Affordable Care Act of 2010 (“PPACA”) permits sponsors (public, private, VEBAs and multiemployer plans) of employer group health plans that provide coverage to early retirees to apply for reinsurance payments. The Department of Health and Human Services (HHS) issued guidance on May 5, 2010 outlining the application process and program requirements. Highlights of the program are:
- The program is designed to be a financial incentive to employers currently providing coverage to early retirees (age 55 and older and not eligible for Medicare) to continue to offer such coverage.
- There will be a total of $5 billion available under the program to be allocated first come – first served until exhausted.
- Applications are scheduled to be available in June. The application process is expected to be similar to the process to apply for Medicare Part D Retiree Drug Subsidies.
- The effective date for incurring reimbursable claims is June 1, 2010. The program ends the earlier of January 1, 2014 or when the $5 billion fund is exhausted.
- For each early retiree, spouse and dependent the employer plan can apply for reimbursement of up to 80% of costs, less negotiated price concessions, for benefits between $15,000 and $90,000 (adjusted annually by the medical component of the CPI).
- Plans are required to use payments to 1) reduce the sponsor’s health benefit premiums or health benefit costs, 2) reduce health benefit premium contributions, copayments, deductibles, coinsurance or other out-of-pocket costs, or any combination of these costs for plan participants, or 3) any combination of the above. Proceeds under the program cannot be used as general revenue for the plan sponsor.
- Premiums are not eligible for reimbursement – only actual claims incurred and paid during an applicable plan year qualify.
- Plans must, as part of the application process, become “certified” by HHS, implement design features to generate cost savings for participants with chronic or high cost conditions, agree to provide data and documentation to HHS and adopt policies and procedures to prevent fraud, abuse and waste under the plan.
General information can be found at the following link to a fact sheet on the program at the White House Blog.
The HHS interim final regulation outlining the requirements and application process is attached here.
Available funds will likely be exhausted quickly. As a result, eligible employers desiring to apply will need to do so as soon as possible following release of the application. In anticipation of the application release, employers that provide or offer coverage to early retirees should start reviewing the program requirements, including determining whether they must make design changes.
If you wish to discuss this program or other issues relating to health care reform with respect to employer-sponsored plans, please contact the attorney in the Benefits and Compensation practice group with whom you work.