Health Policy Update

Attached a link http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=32 to a very interesting article about the provisions offered in the Affordable Care Act for early retiree healthinsurance benefits.
Its important that we educate ourselves about the many benefits the Patient Protection and Affordable Care Act can offer to so many Americans and to be able to respond intelligently to stereotypical accusation and falsifications of this important legislation.

THE FACTS (AND NOT FICTION) :

The number of employers offering health insurance coverage to early retirees---former employees older than 55 but not yet eligible for Medicare--has dropped sharply over the past two decades. Employers who have maintained that coverage have increased the share of premiums and other costs paid by enrollees. To help keep this type of coverage in place, the Affordable Care Act established a temporary program under which the federal government will reimburse retiree health plans for high-cost medical claims. This Early Retiree Reinsurance Program will pay 80 percent of each claim that exceeds $15,000, up to $90,000.

The program began in June 2010 and is slated to operate until the end of 2013. It is intended to slow the decline in employer health coverage for retirees and to help tide people over until 2014, when other provisions of the law go into effect. At that point, it will theoretically be easier for early retirees to obtain coverage through new state health insurance exchanges, often with the aid of subsidies. However, it isn't clear whether the $5 billion allotted for the program will cover the anticipated costs between now and 2014.

Among large employers (those with 200 or more workers) who provided health coverage in 2010, only 28 percent offered benefits to newly retired workers, down from 46 percent in 1991. State and local governments and employers with union workers were the most likely to offer retiree coverage. Only 3 percent of small employers (3-199 workers) offered retiree coverage this year . Some retirees are in the same plans as active workers, while others are in plans covering retirees only. In 2007, the most recent year for which numbers are available, an estimated 6.5 million people ages 55-64 had early retiree coverage, on their own or as dependents.

The Affordable Care Act requires the secretary of Health and Human Services (HHS) to establish a temporary reinsurance program. HHS issued implementing regulations on May 5, 2010, and the program took effect on June 1. It will continue through 2013, unless funds are exhausted sooner. Any group health plan that covers early retirees and is sponsored by an employer or union is eligible to participate. This includes private employers and state and local governments, but not federal civil and military retiree plans. Plan sponsors must file an application for each year and meet two key requirements:

1) The plan must have programs or procedures with the potential to generate cost savings for enrollees with chronic and high-cost conditions.
2) Sponsors also must use all reinsurance payments they receive to reduce the total cost of the plan or the costs paid by retirees. To receive the reinsurance payment from the government, the employer or plan sponsor must provide documentation that all the amounts included in its claim were actually paid out. This requirement raises at least two problems.
First, an employer plan commonly deducts the amount for which a participant is responsible--such as the deductible, coinsurance, or copayments--before making payment to a doctor, hospital, or other provider.
Second, there are still some health plans that pay providers on a so-called "capitated" basis, which means that the provider receives a fixed payment at a regular interval to provide all covered care for an enrollee, rather than being paid to provide care service by service. Other plans employ physicians or other professionals on a salaried basis. These plans may not always be able to calculate amounts spent for any particular patient
The Affordable Care Act appropriates $5 billion to cover claims and administrative costs for the reinsurance program through 2013. If at any time HHS anticipates that the funds are likely to be exhausted, it may stop accepting new applications from plan sponsors. To help HHS project future draws on the funds, each application is required to include a two-year projection of expected reimbursement amounts.

As of late October, HHS reported that nearly 3,600 employer plans had been accepted into the reinsurance program. These include more than half of the Fortune 500 companies, all major unions, and government entities in every state.

Some employers may not be certain that they will have enrollees with large enough claims to make applying worthwhile. The Employee Benefit Research Institute (EBRI) has estimated that 13 percent of early retirees or dependents incur claims of $15,000 or more during a year. However, this small share of enrollees accounts for 61 percent of all costs. EBRI calculates that subsidies from the reinsurance program would cover about one-fourth of total costs for an average employer's retiree plan.

However, some plans may have healthier populations or less-generous benefits, meaning that fewer enrollees would meet the $15,000 threshold. And in plans with fewer participants, claims experience is likely to fluctuate considerably from year to year. The rules appear to allow a plan sponsor to apply for the program after it has incurred the costs for which it will be seeking reimbursement. Although the estimated cost of applying is not high--about $2,000 per plan per year--some employers may be waiting to see if their potential subsidy is large enough to be worth the trouble.

Earlier this year, both EBRI and the Congressional Budget Office (CBO) projected that the $5 billion appropriation for the program would be exhausted before the program expires at the end of 2013. EBRI concluded that funds would be used up in 2011, while CBO expected them to last through part of 2012. However, EBRI assumes that all employers providing early retiree coverage will participate, and CBO's projection is likely similar. If employer participation remains low, the funds might stretch further. If the Affordable Care Act works as intended, people who retire in 2014 or later will have access to affordable and often subsidized coverage through state health insurance exchanges. This means that they may have less of a need to rely on coverage through their former employers. As a result, employer-provided retiree coverage is expected to continue to decline, and will no doubt play a steadily smaller role in the coverage of future retirees


Yours

Bernd