Early Retiree Insurance

To Encourage Employers to Maintain Coverage for Early Retirees, the Federal Government Picks Up the Tab for High-Cost Medical Claims.

The number of employers offering health insurance coverage to early retirees–former employees older than 55 but not yet eligible for Medicare–has dropped sharply over the past two decades.

Employers who have maintained that coverage have increased the share of premiums and other costs paid by enrollees. To help keep this type of coverage in place, the Affordable Care Act established a temporary program under which the federal government will reimburse retiree health plans for high-cost medical claims. This Early Retiree Reinsurance Program will pay 80 percent of each claim that exceeds $15,000, up to $90,000.

A new policy brief from Health Affairs and the Robert Wood Johnson Foundation examines this new program, which began in June 2010, and is slated to operate until the end of 2013. The program is intended to slow the decline in employer health coverage for retirees and to help tide people over until 2014, when other provisions of the law go into effect.

At that point, it will theoretically be easier for early retirees to obtain coverage through new state health insurance exchanges, often with the aid of subsidies. The authors note that it is not clear whether the $5 billion allotted for the Early Retiree Reinsurance Program will cover the anticipated costs between now and 2014.