Businesses Get $5 Billion for Retiree Health Benefits

Published: Thu 06 May 2010

Wendy Blair

Corporations will receive $5 billion from the federal government to preserve medical care for early retirees, according to an announcement issued on Tuesday by the United States Department of Health and Human Services. Established by the health care reform bill, the Early Retiree Reinsurance Program seeks to subsidize employers that offer medical insurance to retirees age 55 and older who are ineligible for Medicare because of their age as well as their dependents, spouses, and surviving spouses.

"Many Americans who retire before they are eligible for Medicare are worried about losing health insurance coverage through their former employers," explained Kathleen Sebelius, the Health and Human Services secretary. "This new program will provide much-needed relief so that employers can provide more retirees with quality, affordable insurance starting this year."

Employers who are eligible for the program will receive up to 80-percent reimbursement for each individual's health care expenses between $15,000 and $90,000. Only health costs incurred after June 1, 2010 may receive reimbursement. On the other hand, expenses incurred between Jan. 1 and June 1, 2010 may be applied toward the $15,000 threshold.

Government Assistance Essential

Most of the corporate community insists that federal aid for retiree medical expenses is essential to preserve coverage for retirees. "The Early Retiree Reinsurance Program reduces costs and allows many of our member companies to continue providing this critical coverage," explains John Castellani, who is the president of the Business Roundtable group, an organization of chief executives.

Companies can use the reimbursement to lower their own health care expenses, to lower premium costs for employees and their dependents, or a combination of both. Employers will have access to applications beginning in June. The program concludes on January 1, 2014 when medical insurance exchanges become functional.