Private Health Insurance: Implementation of the Early Retiree Reinsurance Program

During the last decade the number of large employers offering health benefits to retirees--including early retirees not eligible for Medicare--has declined. Among all large firms that offered health benefits to active employees from 2001 to 2010, the percentage that offered health benefits to retirees decreased from 39 percent in 2001 to 28 percent in 2010. According to the Agency for Healthcare Research and Quality, individuals age 55 to 64 who lack health insurance are vulnerable to high health care costs associated with serious and chronic illnesses. The Early Retiree Reinsurance Program (ERRP) was established pursuant to the Patient Protection and Affordable Care Act (PPACA) to provide reimbursement to participating employment-based health plans The reimbursements provided by the program are intended to cover a portion of the cost of providing health benefits to early retirees-- individuals age 55 and older who are not eligible for Medicare. Sponsors of participating health plans can include commercial organizations, government entities, nonprofit organizations, religious organizations, and unions. Under the program, these plan sponsors can use ERRP reimbursements to reduce their own health benefit costs, plan participants' health benefit costs, or any combination of these costs. PPACA appropriated $5 billion in funding for ERRP and directed the Secretary of Health and Human Services (HHS) to establish the program no later than 90 days after the enactment of PPACA, or by June 21, 2010. HHS's Center for Consumer Information & Insurance Oversight (CCIIO) established the program on June 1, 2010, and is responsible for its implementation--including determining which plan sponsors are eligible to participate in the program and providing reimbursements to the participating plan sponsors. Under PPACA, ERRP is scheduled to end on January 1, 2014. Congress asked us to review the implementation of ERRP. In this report we address: (1) CCIIO's process for implementing ERRP; (2) program expenditures and the types of plan sponsors that had ERRP reimbursements approved as of June 30, 2011; and (3) how plan sponsors intend to use ERRP reimbursements.