Early Retirees Get Health Coverage Boost

 

Trying to entice employers to keep early retirees on their medical plans, the Obama administration announced recently that it will make $5 billion available until the safety net of the new health care law is in place. Under the program, starting June 1, employers can get reimbursed for up to 80 percent of the cost of medical claims between $15,000 and $90,000 for their early retirees ages 55 to 64 not yet eligible for Medicare as well as their spouses and dependents. Both self-funded and insured plans may apply, including plans sponsored by private entities, state and local governments, nonprofits, religious entities, unions, and other employers. The money can be used to reduce premiums for retirees and their dependents, or by employers to keep their own costs in check. But as a condition of receiving federal aid, employers must maintain their current contributions to the cost of retiree health benefits.

“Research shows that people who go without health insurance as they approach age 65 are in worse health and need more care after they enroll in Medicare.” said Medicare Rights Center President Joe Baker in a statement. “By helping maintain coverage for these early retirees, this fund will help keep down Medicare’s cost of providing them care.”

Specialists predict President Obama’s health overhaul will accelerate the decline of employer-sponsored retiree coverage in the long run, by making it easier for people to find affordable coverage on their own, as well as improving Medicare benefits. Starting in 2014, the health care law forbids insurers from denying coverage to people with medical problems, limits what the companies can charge older individuals, and sets up competitive health insurance markets where consumers can buy a policy, in many cases with direct government assistance. Early retirees will have options they don’t currently enjoy.

“Employers have been offering these benefits because there is no alternative source of coverage,’’ said economist Paul Fronstin of the Employee Benefit Research Institute. “I think they’re going to be asking themselves why they should continue offering retiree coverage.’’ Preventing employers from rushing to the exits now is one of the main goals of the new subsidy program, authorized under the health care overhaul law. “This is going to be a welcome reform for many businesses that are trying to do the right thing by their retirees, and for the retirees themselves,’’ Obama said to a business group.

-From “Early retirees get health boost; Obama pledges $5 billion to encourage firms to maintain insurance coverage” by Ricardo Alonso-Zaldivar, Associated Press, The Boston Globe, May 5, 2010 http://www.boston.com/business/healthcare/articles/2010/05/05/early_retirees_get_health_boost/, retrieved 5/5/10; “Letter to Hill Leadership from Secretary Sebelius Outlining HHS’s Progress to Date on Implementation Efforts”, http://www.healthreform.gov/newsroom/implementation_efforts.html, retrieved May 13, 2010; “Some Retirees Will Receive Aid to Pay Health Bills”by Robert Pear, The New York Times, May 4, 2010, http://www.nytimes.com/2010/05/05/us/politics/05health.html, retrieved 5/7/10. Cited in/linked from: Barbara Roop & John Goodson, Health Care for Massachusetts; and “Statement by Medicare Rights Center President Joe Baker on New Funding for Early Retiree Health Coverage”, press release, May 4, 2010, http://www.medicarerights.org/newsroom/pressreleases/2010_29.html retrieved 5/7/10.

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