Plan sponsors who wish to participate in the early retiree reinsurance program better act now.
The new healthcare reform law created a program that’ll reimburse plan sponsors for much of the health benefits they provide to early retirees.
But here’s the rub: Because the funding for the program is limited to $5 billion, plan sponsors who apply for the program will be treated on a first come, first served basis.
How can you apply?
The feds just released detailed application requirements as part of the program’s interim final regulations.
A breakdown of the requirements can also be found here.
One word of warning: Make sure you dot every “i” and cross every “t” — because applications that fail to satisfy all of the requirements will be rejected, and resubmissions will be pushed to the end of the line.
A closer look
The program goes into effect June 1, 2010.
The final regs also clarify some of the nuances of the program, such as:
- The definition of “early retiree.” Early retirees are participants in an employer-sponsored health plan who are 55 or older, are not active employees and are not eligible for Medicare. Spouses and dependents of the retiree are also included in the program regardless of their age and Medicare eligibility.
- Amount of reimbursement. For each early retiree, a plan sponsor may receive reimbursement of 80% of the costs incurred for health benefits exceeding $15,000, but not exceeding $90,000, during the plan year. Health benefits are defined as benefits for the “diagnosis, cure, mitigation, or prevention of physical or mental disease.” Costs for an insured plan are defined as actual claims paid, not premium amounts.
- Cost-saving programs. To qualify, plan sponsors must have programs or procedures in place that are meant to generate cost savings for participants with chronic and high-cost health conditions.
- Using reimbursements. Plan sponsors are required to use the reimbursements to lower their health benefit premiums or costs, or lower costs for plan participants — or both.
- The June 1 transition period. Costs incurred prior to June 1, 2010 can be used only to meet the $15,000 cost threshold. So for calendar year plans, for example, only costs incurred from June 1 to Dec. 31, 2010 may be reimbursed (up to $90,000 — and as long as the $15,000 threshold is met). But costs incurred before June 1 can be used to reach the $15,000 threshold.
