ERRP Approvals Consistent with Provision of Benefits in Market

According to the report, the largest share–about 46%–of the $2.7 billion in ERRP reimbursements approved as of June 30, 2011, went to government entities. The GAO noted that government entities are more likely than other types of employers to provide health benefits to their retirees.  

The majority of plan sponsors in the GAO’s review intend to use ERRP reimbursements to reduce a combination of the plan sponsor’s costs and plan participants’ costs. Specifically, 17 of the 25 plan sponsors whose program applications we reviewed indicated that they intended to use ERRP reimbursements to reduce a combination of their own and participants’ costs.   

Of the remaining eight plan sponsors, four indicated that they intended to use ERRP reimbursements to reduce only participants’ costs, and four indicated that they intended to use ERRP reimbursements to reduce only their own costs.  

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.  

The Department of Health and Human Services’ 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. In total, CCIIO approved applications from 6,078 plan sponsors to participate in the reimbursement program--nearly all of those who submitted applications during a 10-month application period. CCIIO officials told the GAO that the applications to participate and subsequent requests for reimbursement they received were processed in the order in which they were received and were not given preference for any reason.  

HHS projects that the $5 billion appropriated for ERRP will be expended by the end of fiscal year 2012--before the January 1, 2014, end date for the program (see Early Retiree Reinsurance Program to End).  

The GAO report can be found at http://www.gao.gov/products/GAO-11-875R.