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Companies Leap at Chance to Share in $5 Billion from Health Care Law

By Jane Norman, CQ HealthBeat Associate Editor

May 25, 2010 -- The White House is looking for good news to spread these days when it comes to the new health care law, and found it Tuesday in the form of a study from Hewitt Associates.

Hewitt, a consulting firm, said it conducted a survey that found that most employers who offer retiree health benefits plan to participate in a new program that would offset their costs for early retiree medical claims.

Authorized under the law, the Early Retiree Reinsurance Program offers businesses a chance to get in line for some $5 billion that will be handed out by the government beginning in June.

People who retire before they're 65 — the minimum age for Medicare — often have trouble obtaining affordable health insurance, and the concept is the temporary program will encourage employers to retain health insurance for their retirees. Nonprofits, religious groups and state and local governments also are eligible, as are both self-funded plans and insured plans.

Employers will have to apply to be in the program and if accepted can use the savings to reduce their own health care costs, provide premium relief to workers and families or a combination of both, according to the administration.

While companies' willingness to accept money from the government might seem unsurprising, the development was highlighted on the White House blog. "We knew business leaders and retirees were excited about this program and a new study confirms that companies are eager to sign up and continue to provide coverage their early retirees," wrote Stephanie Cutter, a top communications aide to President Obama.

They've got to move fast because the money runs out after the $5 billion is gone or Jan. 1, 2014, arrives, whichever is first.

Hewitt surveyed 245 large employers that offer benefits to more than 1.3 million retirees and found 76 percent of them will pursue reimbursement. The program allows employers to claim reimbursement for up to 80 percent of claims costs between $15,000 and $90,000.

The law requires that the money be used to reduce plan costs but the Hewitt survey found two-thirds of companies haven't yet decided how they will do that and were waiting for more guidance from the government. Another 16 percent said they were considering using the money to reduce premiums for both retirees and the employer and 5 percent said they were considering reducing just retiree premiums.

Cutter pointed out that in 1988, 66 percent of large companies offered benefits to retirees but that dropped to 31 percent by 2008. "The early retiree reinsurance program will help maintain current coverage until 2014, when millions of Americans will have affordable coverage options through the new health insurance exchange," she said.

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