Retiree insurance program kicked off today

John Dimsdale Aug 31, 2010
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Retiree insurance program kicked off today

John Dimsdale Aug 31, 2010
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Kai Ryssdal: Some health care news of a Tuesday afternoon. Retirement is a huge factor in health care costs. Medicare doesn’t kick in until 65 for most people. Health care reform should make insurance more affordable for early retirees, but not until 2014. So the government has set up a fund to reimburse employers for some of their retiree health expenses. Today, the Health and Human Services Department announced the first round of companies that are eligible for that money.

Marketplace’s John Dimsdale reports.


John Dimsdale: Nearly 2,000 employers — from businesses, to unions to government — will be reimbursed by the Early Retiree Reinsurance Program. The federal government will pay 80 percent of retiree medical claims above a $5,000 deductible.

HHS Secretary Kathleen Sebelius says the goal is to encourage employers to maintain health insurance for former workers.

Kathleen Sebelius: The percentage of large firms providing workers with retired health coverage is dropping. It was 66 percent of employers in 1988, and it’s now down to 29 percent in 2009.

Congress set up the fund as a carrot to keep company support for health reform. Many firms are locked into insuring their retirees, even though they no longer offer that retirement benefit for new workers. The fund will cover claims between now and 2014, when a more competitive insurance market should lower premiums for retirees. But Congress set aside only $5 billion.

Katherine Sullivan-Hare: Some analysts believe that this will not be sufficient.

Katherine Sullivan-Hare advises companies on health care benefits. She figures $5 billion will only last about two years.

Sullivan-Hare: There’s good precedent for believing so. Health care costs have always exceeded expectations.

If the money runs out, Congress will be left to decide whether to offer more support, or face the prospect of employers throwing retirees off the company health plan.

In Washington, I’m John Dimsdale for Marketplace.

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