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Health Policy Brief: Early Retiree Coverage



November 29th, 2010
by Chris Fleming

The latest Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation describes a new program to shore up health insurance coverage for early retirees—individuals 55 and older who have left employment and are not yet eligible for Medicare. The number of employers offering medical coverage for this group has declined during the past 20 years.  Those companies that have maintained early retiree coverage have increased the share of premiums and other costs paid by enrollees.

To encourage employers to maintain early retiree coverage, the Affordable Care Act created a temporary program under which the federal government will reimburse retiree health plans for high-cost medical claims.  For expenses exceeding $15,000 and up to $90,000, the program pays 80 percent of each claim. The program began in June of 2010 and is expected to run until the end of 2013. In 2014, when provisions of the Affordable Care Act become fully effective, early retirees must be accepted by all insurers in the non-group market and will be able to purchase coverage through state health insurance exchanges.                                                                                

As of late October 2010, nearly 3,600 employer plans had been accepted into the reinsurance program—a small fraction of the retiree health plans eligible to participate. The brief offers some possible explanations for why enrollment has lagged so far—including the likelihood that some companies have concluded they will not have enrollees with large enough claims to make applying worthwhile.

Updates to earlier Briefs. In addition to the new Health Policy Brief on early retiree coverage, Health Affairs and the Robert Wood Johnson Foundation have also updated an earlier Brief on federal requirements governing “medical loss ratios” — the percentage of premiums that insurers must spend on health care services. The update reflects new regulations issued last week by the Department of Health and Human Services.

About Health Policy Briefs. Health Policy Briefs are aimed at policy makers, congressional staffers, and others who need short, jargon-free explanations of health policy basics. The briefs include competing arguments on policy proposals from various sides and the relevant research supporting each perspective. The information is objective and reviewed by Health Affairs authors and other specialists with years of expertise in health policy.

You can sign up for e-mail alerts about upcoming briefs. The briefs are also available from the RWJF’s website. Please feel free to forward the briefs to any of your colleagues who are tracking health issues. And after you’ve taken a look, we welcome your feedback at hpbrief@healthaffairs.org.

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