New health insurance program could help early retirees keep coverage

Doctor provides health care to patientThe good news for early retirees is that it may be easier after June 1 to stay on their company's health insurance plan. The better news is that their costs might actually go down.

One feature of the health care reform legislation -- a program offering government reinsurance to businesses that provide early retirees with health insurance -- is ready to kick in next month, and several groups predict the new program could slow the rate of companies dropping this type of coverage.According to the Department of Health and Human Services, the percentage of large firms providing workers with retiree coverage decreased from 66% in 1988 to 31% in 2008.

"We have seen a decline in the number of firms offering early retiree health insurance," said Kim Bailey, senior health policy analyst for Families USA. She said as a result of the program, "We are hoping to have more firms offering it."

The new $5 billion program is aimed at retirees 55 and older and their spouses or families, potentially providing coverage until they become eligible for Medicare.

Under the program, the government will pay back 80% to the insurance carrier for many of the most common claims an early retiree or a family member submits -- between $15,000 and $90,000 in a year. This year, the government funding only applies to health costs incurred after June 1.

While that doesn't cover all claims and certainly not all of a business's costs to provide health insurance, there is hope it lessens the costs enough to convince businesses not to eliminate the health insurance for early retirees.

"The Early Retiree Reinsurance Plan makes benefits more affordable for employers, employees and their families," said John J. Castellani, president of the Business Roundtable in a statement. He said the program will allow member companies to continue programs.

Bailey said businesses who now offer the coverage could also use the program to cut the costs their retirees pay, but she said it wasn't clear that would happen.

In announcing the program, Health and Human Services Secretary Kathleen Sebelius said an outcome of just keeping the programs in place would be an improvement.

"Rising costs have made it hard for employers to provide quality, affordable health insurance for workers and retirees," she said. "As a result, many Americans who retire before they are eligible for Medicare are worried about losing health insurance coverage through their former employers, putting them at risk of losing their life savings due to medical costs. This new program will provide much-needed relief so that employers can provide more retirees with quality, affordable insurance, starting this year."

The department will start taking applications from businesses for the program next month, a department spokeswoman said.

The Early Retiree Reinsurance Plan is a temporary stopgap effort included in the health care reform legislation. When that legislation fully takes effect in 2014, early retirees will have a choice of a number of plans that will be available in the health insurance exchange market the legislation creates.
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