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1,000 More Employers, Unions Getting Help with Early Retiree Health Costs

By John Reichard, CQ HealthBeat Editor


October 4, 2010 -- Almost 3,000 employers and unions have been accepted by the program created by the health care overhaul law to help pay the medical costs of early retirees, the Department of Health and Human Services (HHS) announced Monday.

That's up from 2,000 in August, when the first round of acceptances were announced for applications to the Early Retiree Reinsurance Program. Payments begin this fall under the program, which will pick up a significant portion of the costs of the medical expenses of early retirees, who often have difficulty finding affordable coverage outside the workplace.

"I am incredibly pleased to see so many employers embrace this important new program to maintain coverage for people who often have a difficult time finding affordable coverage," HHS Secretary Kathleen Sebelius said in a news release. Sebelius was scheduled to appear Monday afternoon at the Mine Safety Appliances Co. in Cranberry Township, Pa., to announce the new approvals.

"Savings may be used to reduce employer or union health care costs, provide premium or out-of-pocket relief to workers, retirees, and their families, or both," the release said.

The announcement came the same day the Wall Street Journal reported that 3M has told its workers and retirees that it plans to stop offering a company-sponsored health plan to early retirees in 2013. Instead, the company will offer unspecified sums of money to help retirees pay for other health coverage. A 3M spokeswoman confirmed the changes.

According to a 3M memo, "the recently enacted health care reform law has fundamentally changed the health care insurance market. Health care options in the marketplace have improved, and readily available individual insurance plans in the Medicare marketplace provide benefits more tailored to retirees' personal needs often at lower costs than what they pay for retiree medical coverage through 3M."

The 3M announcement comes amid reports that the new law has led a number of health insurers to exit the market.

But Paul Fronstin, director of health research programs at the Employee Benefits Research Institute, said that 3M's change of plans is "no surprise whatsoever."

"I think you're going to have a lot of employers lined up behind 3M to do the same thing," he added. That is not a knock on the new law, he said, but rather evidence that it is bringing about changes in the insurance market that will make it easier for early retirees to gain access to coverage. "Companies are saying, 'The insurance market is going to work now. What do we need to be doing this for?'"

Framers of the law expected this to happen when insurance exchanges opened up in 2014 and gave the uninsured access to subsidies to buy coverage, Fronstin said. He added that under the law, the financial assistance offered under the Early Retiree Reinsurance Program comes to an end in 2014 because uninsured early retirees will have access to exchanges.

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