An official at the U.S. Government Accountability Office (GAO) takes a cautious approach in a new report on the performance of the Early Retiree Reinsurance Program (ERRP).
The GAO official – John Dicken, a GAO director – comes to no conclusions in the ERRP report about whether the program has saved any early retiree health benefit programs.
Dicken describes only what the employers or other plan sponsors that received the money intend to do with the money.
GAO investigators looked at the 25 biggest ERRP recipients and found that only 13 would make representatives available to talk to the investigators.
The investigators supplemented interviews with information from ERRP recipient documents and found that 17 of the 25 plans intend to use ERRP money to reduce costs both for themselves and early retiree plan participants.
Another 4 intend to use the money only to reduce their own costs, and 4 intend to use the money only to reduce the participants' costs.
"HHS projects that the $5 billion appropriated for ERRP will be expended by the end of fiscal year 2012—before the January 1, 2014, end date for the program," Dicken says.
Dickens prepared the report at the request of Sen. Mike Enzi, R-Wyo., the highest-ranking Republican on the Senate Health, Education, Labor and Pensions Committee.
Members of Congress added the ERRP provision to the Patient Protection and Affordable Care Act of 2010 (PPACA) in an effort to do something for retirees ages 55 to 64 between 2010 and 2014, when PPACA is supposed to require health insurances to sell coverage on guaranteed-issue, mostly community-rated basis.
The ERRP creators were responding to reports that the percentage of group health plan sponsors that offer retiree health benefits dropped to 28% in 2010, from 39% in 2001.
If PPACA takes effect as written and works as drafters expect, the law will require insurers to sell coverage to early retirees on a guaranteed-issue basis. The insurers will be able to add a penalty for tobacco use, but they will not be able to reject applicants based on health status, and the maximum difference between the rates charged the oldest insureds and the rates charged the youngest insureds will be 400%.
Today, however, there are no federal constraints on medical underwriting, and early retirees with health problems may find qualifying for affordable, comprehensive coverage especially difficult.
ERRP is supposed to compensate by providing $5 billion in reimbursement payments for part of the cost of providing health benefits for retirees ages 55 and older who are not eligible for Medicare.
Early retiree plan sponsors can use the ERRP subsidy to reduce their own health benefit costs, reduce plan participants' health benefit costs, or reduce both their own costs and the participants' costs.
The Center for Consumer Information & Insurance Oversight (CCIIO), an arm of the U.S. Department of Health and Human Services (HHS), set up the program June 1, 2010, and has sent reimbursement payments to 6,078 plan sponsors, GAO officials found.
CCIIO officials have approved about $2.7 billion in ERRP payments as of June 30, 2011, and about 46% of that money went to government plan sponsors, Dicken says.
A large portion of the money seems to have gone to government plan sponsors because government employers tend to be more likely to offer retiree health benefits than private-sector employers are, Dicken says.
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