Early Retiree Reinsurance Program Under Health Care Reform Begins
June 1, 2010
The Patient Protection and Affordable Care Act establishes a special program designed to reimburse the sponsors of employment-based retiree medical plans (including employers and other plan sponsors) for the cost of providing certain health benefits to non-Medicare eligible retirees aged 55 to 65, their spouses, surviving spouses and dependents. The $5 billion Early Retiree Reinsurance Program (ERRP) goes into effect on June 1, 2010 and will expire on January 1, 2014 or when the $5 billion fund has been expended. (Click here to access the U.S. Department of Health and Human Services interim final rule implementing the ERRP.)
Employers and other plan sponsors eligible for reimbursement under the ERRP should act quickly, as both participation and reimbursements will be processed in the order received, and the $5 billion appropriated for the ERRP is not expected to be sufficient to pay all submitted claims.
The ERRP will reimburse eligible employers (or other plan sponsors) for up to 80% of the cost of qualified claims between $15,000 and $90,000 incurred per individual per plan year. For calendar year plans, the first eligible year is the January 1, 2010 plan year, but claims paid before June 1, 2010 will count only for purposes of meeting the $15,000 threshold (and will not be eligible for reimbursement).
To be eligible for ERRP reimbursement, an early retiree medical plan must be “certified” by HHS before filing claims for reimbursement. Both insured and self-funded plans may apply. Among other things, plans must have in place programs and procedures to generate cost savings for participants with chronic and high-cost conditions, as well as policies and procedures to detect and reduce fraud, waste, and abuse.
Employers (or other plan sponsors) must use reimbursements to reduce their health benefit premiums or costs (and/or to reduce participant premium contributions and other out-of-pocket costs), and they may not use the reimbursement to supplement their general revenues. HHS has also stated that plan sponsors should maintain their pre-ERRP levels of early retiree premium support while participating in the ERRP.
A separate application must be submitted with respect to each plan for which an employer (or other plan sponsor) is seeking reimbursement under the ERRP. Applications will be processed in the order received. If an initial application is rejected, it may not be modified; instead, a new application must be filed and the applicant effectively goes to the back of the line. Once a plan is certified it will continue to be certified for the duration of the program, and subsequent annual application will not be required.
The application process is expected to be similar to that of the Retiree Drug Subsidy Program. Although the ERRP certification application is not expected to be available until late June, it is important for interested plan sponsors to file as soon as possible once the application is released. Accordingly, interested employers and other plan sponsors should begin reviewing plan documents and gathering information about eligible participants.
For more information on or assistance with preparing an application for the ERRP, please contact the member of Verrill Dana’s Employee Benefits and Executive Compensation Department with whom you normally work.
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