We all knew this day would come, and now it’s here. New applications for the Early Retiree Reinsurance Program (ERRP) will be received only until 5 pm on Thursday, May 5th.
The last time we blogged about this, the ERRP money was going fast. Now the urgency is clear.
So if you’ve been thinking about applying, it’s now or never. Elvis says so.
$1 billion of the original $5 billion has now been paid out under the Early Retiree Reinsurance Program (ERRP), according to an article this month in Business Insurance.
We’ve been watching the ERRP since its inception (posts 1, 2, 3, 4), and didn’t think the $5 billion allocation would last long. A July 2010 EBRI article estimated that it would last two years – and it might go even faster than that. The EBRI article estimates the average reimbursement at about $2,000 per early retiree (Figure 4 on page 5: $2,544m / 1.3m = $1,957) – but there can be huge variations for your own retiree group.
Many of our clients have applied for the ERRP and have been accepted. For employers that haven’t yet, there’s still time. And the application process isn’t as onerous as it initially appeared.
Here’s what you need to do:
1. Check with your health insurer to see if you’re likely to have any individual early retiree claims above $15,000. For midsize and large public-sector employers in Minnesota, Iowa, Indiana and Florida it’s almost a given – because subsidized early retiree coverage (the GASB 45 implicit rate subsidy) is mandated in those states.
2. Fill out and submit the ERRP application. Your health insurer can help with the trickiest parts of the application, i.e. cost control provisions and estimated reimbursements.
3. Once your application is approved, follow the process on the ERRP website to obtain reimbursements. Your health insurer will have an important role in the reimbursement process, since you won’t usually know when you have an eligible claim.
In the retiree benefits world, there is a general consensus that several provisions in the Patient Protection and Access to Care Act (PPACA) may cause employer sponsors of retiree health plans to rethink those programs. These changes include:
– Filling of the Part D “doughnut hole” (2010-2020)
– Guarantee issue insurance with no pre-existing condition exclusions (2014)
– Health insurance exchanges (2014)
These reforms, along with others, will potentially make it less expensive for a retiree to get coverage on the “open market” rather than through their employer-sponsored program. This could be especially true if the retiree only has access to the employer plan and is paying the full premium for coverage.
As reported in the Minneapolis StarTribune recently, 3M is one of the first large employers to disclose that they plan to end their retiree health plan because they feel retirees will likely be able to get better coverage for a lower price under the PPACA reforms. Whether this is a bellwether remains to be seen.
However, the decision to end a retiree health program in anticipation of the full effect of health care reform raises some important issues:
– For retirees who have been on the employer plan for many years, how are they being prepared to “go into the market” and select health insurance?
– If the PPACA provisions are modified or repealed before they fully go into effect, how will this change the insurance options (and costs) for retirees whose employers have decided to eliminate their retiree health plans?
– Would an employer consider reinstating their retiree health plan if PPACA is repealed?
A quick update on the Early Retiree Reinsurance Program (ERRP): Over the past few months, the Department of Health and Human Services (HHS) has been busy gearing up for the implementation of the ERRP. As you may recall from our earlier posts (1, 2, 3), this is a program that’s part of the larger healthcare reform bill and is intended to help employer-sponsored retiree health plans by providing government reimbursement for certain large claim amounts.
Here’s a quick update on HHS’ progress to-date.
1. The HHS posted a new version of the final application to participate in the ERRP. It also clarified that priority status for claims reimbursement is not directly tied to the order your application is received, but rather the order that your claims reimbursement filing is received. Of course, you can’t file a claim reimbursement until your program participation application has been approved so that is still the first step.
2. The ERRP has its own website that does a good job of explaining the whole reimbursement process and contains links to all of the required forms. The application page also has links to several FAQ documents and detailed application instructions.
3. The “News” section of the ERRP website is likely going to be a busy place over the next few weeks and months as plan sponsors anticipate receiving the final details on how to submit their claims filings. Question C1 on the ERRP FAQ page states that HHS is still working on the infrastructure to begin accepting claims filings. The first step, completed on August 30, 2010, was to launch the secure webpage where plan sponsor’s can set up an account to submit claims (when that function is finally available).
4. There’s a neat page on the larger healthcare reform website which lets you see which retiree medical plans in your state have had their ERRP participation application approved already (use the drop-down menu on the bottom of the page to select your state).
We’ve had a couple of initial posts on the new Early Retiree Reinsurance Program (ERRP): the first one gave a quick overview of the amount of funds available, while the second post described options for spending the reimbursement. In this post, I’d like to give a quick overview of some actions plan sponsors can take now in order to speed up their initial application to participate in the ERRP.
The ERRP was designed with $5 billion in funding that will be available from June 21, 2010 until January 1, 2014, unless the money runs out first (very likely). So, it’s essentially first-come, first-served for employers who want to claim their share of the funds. In order to participate, however, a plan sponsor must first submit an application for approval by the Secretary of the Department of Health and Human Services.
As the regulations published on May 5, 2010 note, it is of “paramount importance to applicants that they submit complete applications upon their first submission.” Rejected applications will go to the “end of the line” for resubmission, and the regs hint these applications might not get reviewed again until it is too late (i.e., the ERRP funds are all gone). Fortunately, once a sponsor has the application accepted, they do not have to reapply in future years.
The HHS hasn’t released the actual application forms yet, but there are a few important actions that plan sponsors can take now so that they are able to submit their applications as quickly as possible. Plan sponsors should:
- Figure out who their authorized representative will be. This person will sign the application and certify that it is true and accurate.
- Draft a summary of how you will use the reimbursement money to reduce plan participant or sponsor costs.
- Draft a summary of how you will implement programs and procedures to generate savings for plan participants with chronic and high-cost conditions. (This is one of the requirements of the ERRP program, but you should check whether your current plan already satisfies this condition so that you don’t unnecessarily change your plan provisions.)
- Estimate your projected reimbursement amounts for the first two years of the ERRP. These projected amounts will be required on the application.
- Identify all benefit options in your plan that are available to early retirees. The HHS will use this information to track where funds are being spent.
- Make sure you can attest that there are fraud, waste, and abuse policies and procedures in place.
These are just a few of the items that plan sponsors are required to include in their ERRP application, but they are ones that you can proactively address. By preparing ahead of time, you can get an edge on your competitors in applying to receive ERRP funds.
Last week, the HHS published an interim final rule for the new Early Retiree Reinsurance Program (should we call it ERRP?).
In our first post on this, we noted that a lot was still unknown. There still is, but it’s becoming clearer.
The White House fact sheet says “Employers can use the savings to either reduce their own health care costs, provide premium relief to their workers and families or a combination of both”. But §149.40 of the rules says that the application must also specify “How the sponsor will use the reimbursement to maintain its level of contribution to the applicable plan”.
I’ve had a tough time reconciling those two, but the HHS helps us out: “For example, for a sponsor that pays a premium to an insurer, if the premium increases, program funds may be used to pay the sponsor’s share of the premium increase from year to year, which reduces the sponsor’s premium
costs.” For big plans, that premium increase can be a lot of money.
There’s an intriguing provision in the new health care reform law for retiree medical plans: 80% reinsurance for each early retiree’s claims between $15,000 and $90,000. The official summary is here.
There’s a fixed amount of money available for this, just $5 billion. When it’s gone, it’s gone. And remember that $5 billion doesn’t go as far as it used to, so you gotta get in line right away. The application will be available in June, and it will be a lot like the one for Medicare Part D’s Retiree Drug Subsidy program.
Of course there’s a catch: your retiree medical plan needs certain cost saving provisions to qualify. It’s not clear yet what those should be. Actually, there’s a lot that’s not clear yet. But it sure looks like a sweet deal, so it’s worth a look.
It will reduce OPEB costs for public and private employers, and for their plan members. Exactly how much will depend on your own retiree health plan provisions.