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Report: Governmental Entities Benefit Most from Early Retiree Program

Federal agency says of the more than $2.7 billion that was paid out through June 30, 45.6 percent went to governmental entities while 36.6 percent went to commercial entities, such as self-funded private employers.

October 31, 2011
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Nearly half of the money paid out by a $5 billion federal program that partially reimburses employers and other organizations that sponsor early retiree health care plans has gone to governmental entities, the Government Accountability Office concluded in a report released Monday.

Of the more than $2.7 billion that was paid out through June 30, 45.6 percent went to governmental entities; 36.6 percent went to commercial entities, such as self-funded private employers; 15.2 percent to nonprofit organizations; and 2.6 percent to unions, the GAO said. The program was established as part of the health care reform law.

That finding is consistent with the fact that governmental entities are far more likely to sponsor early retiree health care plans than private employers, the GAO noted.

While no individual early retiree health care sponsor is identified by name in the report, the Department of Health and Human Services unit that administers the Early Retiree Reimbursement Program reported previously that the California Public Employees' Retirement System was the biggest government recipient of ERRP funds. Through Sept. 22, CalPERS had received $98.7 million in ERRP funds.

The GAO also found that as of June 30, 6,078 plan sponsors had been approved to participate in the program and reimbursement had been approved for 1,930 sponsors. The amount of reimbursement approved per request ranged from less than $100 to nearly $92 million, with a median reimbursement amount of about $119,000.

As of Sept. 22—the latest date reimbursement information for the program is available—just more than $2.95 billion had been paid out, up from $2.73 billion as of Aug. 26, according to the Center for Consumer Information & Insurance Oversight.

Because of the rapid disbursement of funds, the CCIIO announced in April that it would not accept new applications after May 5. It is widely expected that the $5 billion fund will be exhausted by the end of the year.

Under the ERRP, the federal government reimburses plan sponsors for a portion of claims incurred starting June 1, 2010, by retirees who are at least age 55 but not eligible for Medicare, as well as covered dependents, regardless of age.

After a participant incurs $15,000 in health care claims in a plan year, the government will reimburse 80 percent of claims up to $90,000.

Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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