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Early Retirees Get New Help With Health Insurance

About 2,000 employers will begin receiving payments this month from a new $5 billion program designed to encourage them to provide health insurance to early retirees who are too young for Medicare.

The goal of the program, part of the new health care reform law, is to stop the decades-long slide in the number of employers that offer early retiree coverage. In 1988, 66 percent of employers offered health benefits for retirees between age 55 and 64; by last year only 29 percent did. Retirees who aren’t covered by their former employers often face steep costs on the individual market, because insurers generally charge older customers more than younger ones.

The new program will reimburse employers for large expenses — it will pay 80 percent of retiree claims between $15,000 and $90,000. The employers can use that money to reduce premiums and other costs for their retirees and employees, or to offset increases in their own health care costs.

HHS said that nearly 2,000 employers’ applications were approved, including unions, companies, and local governments from all 50 states. (You can find a list of all those employers, broken out by state, on the HealthCare.gov website.)

The program is supposed to last until 2014, when new insurance market rules intended to make individual coverage less expensive for older adults will go into effect.

But some experts think the $5 billion funding might not last that long. In a study published in July, Paul Fronstin, a researcher at the Employee Benefits Research Institute, found that the money would run out by the end of 2011 if all eligible employers took advantage of it.

In a survey of 245 large employers conducted in May, consulting firm Hewitt Associates found that more than 75 percent planned to apply for the program.

But for now, the 2,000 employers who have been approved are only a small fraction of the eligible pool.

“If there are many employers that don’t apply, the money will last longer than two years,” Fronstin said.

In a press call Tuesday, Health and Human Services Secretary Kathleen Sebelius said that it was too early to estimate how many employers would apply or how long the money would last.

“Until we develop a trend, it’s tough to give you accurate information about what this is going to look like,” she said.