Reinsurance program will help companies provide health insurance for early retirees

Kaiser Health News and USA Today explain the Obama administration's $5 billion program "to provide financial relief to companies that offer health coverage to early retirees. Officials say the effort, mandated by the new health care overhaul law, will help keep firms from ditching those benefits because of the high costs involved, a trend that has accelerated in recent years. Without health coverage, many early retirees find it difficult to get insurance until they're eligible for Medicare at 65. The new program, sometimes called reinsurance, should help retirees 55 to 64. It ends on 2014, when other provisions to make it easier for people to find affordable coverage take effect."

"The program may help offset money the health overhaul will cost firms. For instance, dozens of firms reported last month that they will write down millions of dollars because of tax changes related to retiree benefits. Telecommunications giant AT&T said the tax change would cost it $1 billion, a one-time charge that reflects losses in future years. Verizon wrote off $970 million, and tractor company Deere took a $150 million charge" (Weaver, 5/10).

Los Angeles Times: The White House hopes the law will mean fewer people go without insurance between retiring and receiving Medicare benefits. "According to numbers released by the White House last week, the percentage of large firms offering retiree coverage dropped from 66% in 1988 to 31% in 2008. The new subsidy could mean some employers will choose to continue retiree health coverage rather than cancel it for 2011. Some might reinstate retiree programs they previously dropped."

Some experts say the funds might run out early. "[T]he subsidy pot could run dry in 18 months to two years, even though it is authorized through 2014, says John Grosso, of the benefits consulting firm Hewitt Associates in Lincolnshire, Ill. (The subsidy was chosen to end in 2014 because that is when retired workers who don't qualify for Medicare would be eligible to buy affordable health coverage through insurance exchanges on the open market.) If the money does run out, Grosso says, Congress could vote to extend the funding" (Kritz, 5/10).