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Early Retiree Reinsurance Program Posted: January 26th, 2011

By Melissa Rudy

The turbulent economy and rising health care fees cause many older Americans to worry about the costs of retirement--especially when it comes to health insurance. The Early Retiree Reinsurance Program, a component of The Patient Protection and Affordable Care Act (PPACA), addresses these concerns by offering a temporary financial reprieve for employers, unions and state and local governments.

According to the Center for Policy and Research, many of those who retire without employer-sponsored insurance, and before they are eligible for Medicare benefits, lose a big portion of their life savings because of the high rates in the individual health insurance market. In fact, Healthcare.gov notes that health insurance premiums for older Americans are over four times more expensive than for young adults. With the PPACA, however, retirees may now be able to obtain affordable insurance without sacrificing quality of coverage.

How does the program work?

An early retiree is defined as anyone who is retired, between the ages of 55 and 64, and isn't yet eligible for Medicare. The Early Retiree Reinsurance Program provides $5 billion in financial assistance to employers, unions and state and local governments. These organizations can then use the savings to reduce their own health care costs and pass the benefits on to their employees.

The program provides an 80 percent subsidy for retiree claims between $15,000 and $90,000. This incentive went into effect on June 1, 2000 and ends on January 1, 2013--or whenever all of the available funds have been dispersed.

The Early Retiree Reinsurance Program enables early retirees to maintain coverage through their employers, but does not provide health insurance for retirees directly.

How can employers, unions and government agencies apply for the program?

Applications for employers are available online at www.hhs.gov/ociio. To participate in the program, employers must:

  • Have their applications approved
  • Be able to document claims
  • Have the resources and plans in place to implement programs that generate cost savings for participants with chronic and high-cost conditions
  • Be willing to submit to a possible audit of health benefit plans to ensure fiscal integrity