Draft Application for Early Retiree Reinsurance Program and Interim Final Regulations

Monday, June 14, 2010

The U.S. Office of Management and Budget (OMB) has released a initial draft application form and supporting documents for the new early retiree reinsurance program created by the Patient Protection and Affordable Care Act. The program became effective on June 1, 2010 and the interim final regulations were released in May of this year. This is only a draft the finalized application is expected later in June of this year.

The Early Retiree Reinsurance Program provides a financial offset to employer costs associated with pre age 65 retirees for both private and public employers.

The program is intended to

• Make it easier for employers to provide coverage to early retirees.

• Employers who are accepted into the program will receive reinsurance reimbursement for medical claims for retirees age 55 and older who are not eligible for Medicare, and their spouses, surviving spouses, and dependents.

• Health benefits that qualify for relief include medical, surgical, hospital, prescription drug, and other benefits that may be specified by the Secretary of Health and Human Services, as well as coverage for mental health services.

• The amount of this reimbursement to the employer plan is up to 80% of claims costs for health benefits between $15,000 and $90,000. Claims incurred between the start of the plan year (often January 1) and June 1st are credited towards toward the $15,000 threshold for reimbursement. However, only medical expenses incurred after June 1, 2010 are eligible for reimbursement under this program.

• For example: If an individual incurs costs of $30,000 between the start of the plan year and June 1, and $40,000 after that date. The amount which may be reimbursed is $40,000 – the costs above the $15,000 threshold that occur after June 1.

• If a plan incurs $90,000 or more in expenses before June 1, it is treated as having met the $15,000 threshold and is eligible for reimbursement for costs incurred after June 1.

• These limits apply and claims are filed for individual’s costs. Firms cannot add two or more individuals together to attain the threshold.

• Both self-funded and insured plans can apply, including plans sponsored by private entities, state and local governments, nonprofits, religious entities, unions, and other employers.

Forms and directions are located at: http://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201005-0938-012