Health Care Reform Q&A With the VSCPA Insurance Center: Key Points of the Early Retiree Reinsurance Program

Question: What are the key points of the Early Retiree Reinsurance Program?

Answer: Here is an overview of the program:

• Applies to self-insured and fully insured private plans that offer early retiree coverage (age 55 to Medicare eligible) can qualify for claims refunds
• Applicable to 80% of discounted claims amounts between $15,000 and $90,000 per contract (including co-pay/out-of-pocket amounts) incurred beginning in 2010 through 2013
• Payments will be on a first come first serve basis from the fund and will cease when funds are depleted

Application Process/Plan Requirements:

• Health and Human Services (HHS) is expected to release the application in June 
• Applications will be reviewed on a first come first serve basis
• Any errors in the application will cause it to be rejected (i.e. you go to the back of the line)
• Your plan must be certified by HHS
• In the application you will likely be required to describe your expected use of funds, project your anticipated level of claims filings, as well as address other (yet to be determined) items
• Carriers will have to provide claims data for filing purposes (carrier may need to file for fully insured plans) and plan sponsors will need written agreements with their carrier.
• Since these are federal funds the company will be subject to audit and perhaps other requirements
• Funds must be used to reduce plan participant costs and cannot be used as general funds
• You will be required to demonstrate that your plan has programs in place to address high cost disease categories
• You must attest that you have procedures in place to reduce fraud

REIMBURSEMENT EXAMPLE:

1. Contract participants incurred $120,000 in allowable discounted claims during the 2010 year- $100,000 prior to June 1 and $20,000 after June 1, 2010
2. Claims prior to June 1 are not reimbursable but are counted toward the $15,000
3. Reimbursable amount expected to be 80% of $20,000 or $16,000 ($100,000 goes to offset first $15,000 and remaining $20,000 is eligible for 80% subsidy)

Other:

• Application is estimated to take 30 hours of time (one-time application)
• Claims filing process estimated at 40 hours annually

Health Care Reform Q&A is facilitated by the VSCPA Insurance Center. Have a question? Leave a comment, or contact the VSCPA Insurance Center directly. This document is not intended to imply or provide tax or legal advice and is the VSCPA Insurance Center's current interpretation of the Health Reform Bill.