Retiree Reinsurance Program Funds May be Gone in 2011

March 25, 2011 (PLANSPONSOR.com) – Funds the government has put aside to subsidize retiree health costs for employers may run out of money as soon as this year, according to a Congressional report.

Bloomberg reports that an official at the Health and Human Services Department told leadership of the Energy and Commerce Committee in a private briefing that the fund would be exhausted in 2012. “Majority Committee staff believes that the program could exhaust its resources even sooner,” the report authors wrote.  

The retiree reinsurance program is a temporary program that will reimburse eligible employers that sponsor retiree coverage 80% of claims between $15,000 and $90,000 (see HHS Updates Materials for Early Retiree Reinsurance Program).  It will reinsure only the claims for retirees between the ages of 55 and 64 years old (or their dependents) who are not Medicare-eligible.    

Federal officials appropriated $5 billion to pay for the reimbursements until January 2014 when subsidies called for in the health reform law kick in. According to the fiscal 2012 budget, the fund’s balance will fall to $24 million in fiscal 2013 from $1.4 billion in fiscal 2012 and $3.6 billion in 2011, Bloomberg said.  

The retiree health fund paid out $535 million to 253 organizations in 2010, the report found. More than 5,000 additional organizations have been approved for future payments from the fund. If the 5,000 additional applicants withdraw money at the same rate as the first 235, the fund will be exhausted “as early as this year,” the report said.   

Johnson & Johnson of New Brunswick, New Jersey, New York-based Alcoa, and General Electric Co. of Fairfield, Connecticut, are named in the report as among the 253 organizations that have already received money from the fund. The largest amount, $57.8 million, went to the California Public Employees’ Retirement System. The State of New Jersey’s pension office got $38.6 million, Georgia’s employee health benefit plan received $34.9 million, Kentucky was the recipient of $29.7 million, and Texas got $21 million.

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