An Early Exit For Early Retiree Insurance Program | WAMU 88.5 - American University Radio

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An Early Exit For Early Retiree Insurance Program

The clock is winding down on a little known but very popular part of the Affordable Care Act that has helped employers offer health benefits to early retirees.

The $5 billion early retiree fund has already paid out $4.5 billion, and the last day to submit claims for any of the remaining funds is Dec. 31.

The federal health law created the fund to give employers an incentive to keep providing health insurance coverage for retirees between the ages of 55 and 65.

If these younger retirees didn't have employer-sponsored coverage, they might have a hard time finding affordable health insurance because of their age or chronic conditions. The fund was meant to serve as a bridge for early retirees until the health exchanges are up and running in 2014, but the money won't last that long.

"It was a popular program, which is why the money is running out as quick as it is," says economist Paul Fronstin of the Employee Benefits Research Institute.

Did it work? "In terms of keeping employers from dropping retiree health benefits," he says. "It's unclear whether it made any dent there whatsoever."

Laurie Bauer of Minnesota-based Andersen Corporation says it has received about $2 million under the program. "Medical benefits have increased dramatically as we all have seen and we want to be able to keep those affordable for our retirees," Bauer says. "And any opportunity that we have to reduce those premiums to them is very attractive to us."

Bauer says the window and door manufacturer would have kept providing early retiree benefits anyway. But the extra money means the company can keep a lid on rising premiums, at least through 2012. Instead of an 8 percent increase, retirees will only pay 2 percent more.

The program has been popular with all kinds of employers. Thousands have participated. For example, Citigroup has received $8 million, Ernst & Young $3 million and the state of New York $88 million. About half of all recipients have been state and local governments.

Pat Hentges is city manager of Mankato, Minnesota — population about 40,000. He says the program reimbursed his city around $300,000 this year, which largely offset rising health premiums for its early retirees.

"It's worked out well for us," Hentges says, and he's expecting some pain when the funding goes away. "I suspect what's going to happen is that we will go back to double-digit costs for our health insurance plan."

This story is part of a reporting partnership that includes Minnesota Public Radio, NPR, and Kaiser Health News.

Copyright 2011 Kaiser Health News. To see more, visit http://www.kaiserhealthnews.org/.

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