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Early Retirement Re-Insurance Program

Timeline of Provisions

Early Retiree Reinsurance Program

Summary

The provision provides federal grants to help employers offer group health coverage to early retirees.

The cost of coverage is offset by creating a temporary re-insurance program for employers that provide health coverage for early retirees over age 55 who are not eligible for Medicare. The employer can be reimbursed up to 80% for certain claims between $15,000 and $90,000 (with those amounts being indexed for plan years starting on or after Oct. 1, 2011).

The program became effective June 1, 2010, with claim submissions and reimbursements beginning in October 2010. This is a temporary program, ending in 2014 or when the funds are exhausted, whichever comes first. The program is closed to new applicants and will be complete for those in the program on Jan. 1, 2014.

For More Information

Early Retirement Re-Insurance Program Provision Summary (PDF)

Frequently Asked Questions

What is the new early retiree claims re-insurance program?

The statute establishes a temporary reinsurance program to reimburse participating employment-based plans for the cost of providing coverage to early retirees and their dependents. The program will extend to January 1, 2014 or end earlier if the $5 billion allocated in the statute for the program runs out. The plan sponsors are responsible for submitting the reimbursement claim to HHS and HHS intends to reimburse 80 percent of that portion of each early retiree's or dependent's claims that exceeds $15,000 to a current cap of $90,000.

Which agency is actually administering the program?

The newly formed Office of Consumer Information and Insurance Oversight within HHS is administering the new program. However, written comments should be submitted to the Centers for Medicare and Medicaid Services ("CMS") within HHS.

When will the program start?

The program began June 1, 2010, and started paying the first claims in October 2010.

When will the program end?

The rule says the program will end on the earlier of January 1, 2014, or the date that the $5 billion appropriated to the program is expended. Applications and reimbursement requests may be denied based on projected or actual availability of funds.

When will plans, with plan years that start before June 1, 2010, be eligible to participate in the program?

HHS has determined that a plan with a plan year that starts before June 1, 2010 and ends after that date will be eligible to participate in the program as of the first day the program takes effect. Therefore, a calendar year plan that began on January 1, 2010 would be eligible to participate in the program on June 1, 2010.

Which plan members does the program apply to?

The reinsurance is only for claims for individuals between the ages of 55 to 64 who are not active workers or dependents of active workers of an employer that contributes to the coverage, and who are not Medicare eligible. It also covers eligible spouses, surviving spouses, and dependants of eligible early retirees. Any person on whose behalf a plan sponsor submits an ERRP claim must be a U.S. citizen.

What plans does the re-insurance program apply to?

Employer group plans are eligible if they provide both health benefits to early retirees and use procedures to generate cost-savings for participants with chronic and high-cost conditions. These terms also apply to state and local government plans, multiemployer Taft-Hartley plans, and VEBAs.

Does the program apply to both insured and self-funded plans?

Yes. The law limits eligible claims to costs actually paid by the plan but covers both insured and self-funded plans. The reimbursements are paid to the plan sponsor whether the plan is self-funded or insured.

What costs are eligible for reimbursement?

The program reimburses 80 percent of each early retiree's health care costs between $15,000 and $90,000 during the 2010 plan year. The same reimbursement is available separately for early retirees' spouses and dependents. The dollar range for reimbursable costs will be adjusted annually using the medical care component of the Consumer Price Index-Urban.

What are the restrictions on the use of the reimbursements?

All program payments must be used to lower plan costs and not as general revenue for the receiving organization. Payments may be used to reduce required plan contributions, coinsurance or deductibles. But payments may not be used to cover general business expenses. HHS is required to develop a mechanism to monitor how the payments are used and annually audit plans' claims.

Are claims incurred prior to June 1, 2010 eligible for the subsidy?

Claims incurred prior to June 1, 2010 are not eligible for reimbursement; however amounts up to $15,000 incurred prior to June 1, 2010 may be used as a credit towards the $15,000 threshold, meaning that claims incurred on June 1, 2010 and after for the same individual would be eligible for 80% reimbursement up to the $90,000 cap.

In what order will HHS process the applications for the program?

Applications will be processed "as they are received" by the agency. There is a two step process in obtaining reimbursement. First the application must be processed and the plan certified, and then eligible claims that have been incurred and paid must be submitted and approved. At any point in the process, the program could end, as described above. HHS has assured plan sponsors that it will continue to accept all complete applications and that there is no reason to be the first one in/first one processed.

Will the reimbursement amount be available for each eligible person?

Yes. Separate claim calculations will take place for each eligible person, including the early retiree and his or her spouse, surviving spouse, or dependents.

Do the spouse, surviving spouse, or dependents of the early retiree need to meet the same status conditions as the former employee retiree?

No. Although the early retiree must be age 55 or older, may not be an active employee of the employer maintaining the plan (as defined under the Medicare Secondary Payer Rules), and may not be eligible for Medicare, the spouse, surviving spouse and/or dependents do not have to meet this criteria (e.g., spouse could be eligible for Medicare, or under age 55).

May third parties file a program application on behalf of the plan sponsor?

No. The interim rule makes it clear that the plan sponsor must sign and file the application although it is also clear that third parties may assist in this effort. The key is that the plan sponsor representative needs to certify to the best of his/her knowledge and belief that the filing is true and accurate.

May third parties file claims on behalf of the plan sponsor?

Yes. For insured plans, insurers may file claims directly with HHS. A plan sponsor may also contract with a third party to submit the claims for a self-funded plan.

What kinds of cost-savings programs will be required in order for the plan to qualify for the program?

The interim rule does not explicitly define the plan sponsor's obligations to "generate cost savings for participants with chronic and high-cost conditions." There appears to be flexibility in this and "reasonable" programs will likely be accepted. The rule makes clear that no new programs need to be created in order to satisfy this requirement, and that the programs that a plan has in place need only have the "potential to generate" cost savings for participants.

Are data release agreements required between the plan sponsor, and the plan and the insurance issuer on the fully insured plans?

The plan sponsor must have an agreement with the plan or the insurance issuer to assure that claims information that contains PHI may be delivered to Health and Human Services for the reimbursement claims. UnitedHealthcare has developed forms that meet these requirements.

May a plan sponsor reduce its contribution to the health plan that is participating in the program based on the reimbursements received by the plan sponsor?

HHS expects plan sponsors to "maintain effort" in terms of their contributions to the retiree plan; that is reimbursements may not be used to reduce existing expenditures but may be used to reduce future increases (e.g., premium increases or other increased plan expenses). Program funds may be used for that purpose or to provide assistance to members by reducing co-pays and deductibles.

What does the application look like? What needs to be included?

The following information must be included in the application:

  • Tax ID;
  • Applicant's name and address;
  • Contact information;
  • Summary of how it will use the reimbursement in terms of reducing premium contributions, deductibles, etc.;
  • How the plan sponsor will use the reimbursement to maintain its level of contributions to the plan;
  • Plans to implement cost savings programs for high-cost conditions;
  • Projection of reimbursement amounts for each of the first two plan-year cycles;
  • A list of all benefit options under the plan that any early retiree may participate in;
  • Assurance of written agreement with health insurance issuer or health plan relative to providing information to HHS;
  • Acknowledgement that the information provided is being used to obtain federal funds;
  • Attestation that the plan sponsor has in place policies and procedures to detect and reduce fraud, waste and abuse and that the plan sponsor will upon request substantiate such policies and procedures.
How will claims be submitted to HHS?

HHS has published instructions on the mechanics of confirming the early retiree population and for submitting reimbursement requests.

What must be included in the claim?

The claim must document the actual costs to the plan. The claim may include costs paid by the member, but only if the plan submits "prima facie" proof that the member has paid any applicable out-of-pocket amounts. Otherwise, the plan may limit the claim to amounts that the plan actually reimbursed.

Are expenses not covered by Medicare eligible for reimbursement?

While most health care and prescription drug expenses will be covered, HHS has indicated that the Program will not pay for expenses that are not covered by Medicare. HHS has provided guidance on some Medicare elements that will not be taken into account.

How are provider discounts and other claim cost negotiations treated?

All discounts by providers or suppliers must be netted out of the claim reimbursement submission request. If a discount or price concession is provided after a claim is submitted for reimbursement to HHS, or if a claim is reversed, the plan sponsor will have an obligation to notify HHS.

Are the records of the claims subject to audit?

Yes, the Secretary of Health and Human Services or his or her designee may audit the claim records that support reimbursement requests. All such records must be maintained for 6 years after the expiration of the plan year in which the costs were incurred.

Is there an appeals mechanism for claims that are denied by HHS?

Yes. Health and Human Services has established an appeals procedure for claims that are denied under which an appeal must be made directly to HHS within 15 days of the denial. HHS will not entertain an appeal if there is no funding available for the appealed claim.

Is UnitedHealthcare planning on amending existing Business Associate Agreements?

No. UnitedHealthcare does not plan to amend the existing Business Associate Agreement (BAA) for participation in the ERRP. The program requires an underlying BAA between the plan and UnitedHealthcare. The ERRP Agreement which self-funded plans execute (and which they are required to have under the ERRP Final Interim Rule) only authorizes sharing of PHI with the Plan Sponsor, not between the plan and UnitedHealthcare. It is assumed that there is a BAA in place in that agreement. Any customer that has not signed their BAA should do so immediately.

Can a Business Associate Agreement be signed independent of an Administrative Services Agreement?

No. UnitedHealthcare needs a Administrative Services Agreement, which includes the BAA as part of the contractual documents.

As part of the application process for the funds, a written agreement is needed regarding the disclosure of information to the plan sponsor and to HHS above and beyond what is covered in a BAA. Has UnitedHealthcare developed such an agreement?

Yes, UnitedHealthcare has developed an agreement that will satisfy the ERRP requirement as well as describe services that UnitedHealthcare is providing to the plan and plan and plan sponsor relative to the ERRP. However, that agreement does not serve as a substitute for a BAA.

Does the plan sponsor have to notify plan participants of the Plan Sponsor's participation in the ERRP?

Yes, HHS will require plan sponsors participating in the program to provide notice of its participation to all plan participants (not just the early retirees) within a reasonable time frame after the plan sponsor's receipt of the first ERRP reimbursement. HHS has published a template form for this purpose. It may be sent out before reimbursement and may be included with other documents sent to plan participants.

When calculating the subsidy for Consumer Driven Health Plans where the prescription drug plan is part of the medical plan (prescription claims are not carved out) would these claims be included in the total claims to reach $15,000?

Yes. The pharmacy claims, whether paid for by the member or the plan, would be included.

How are program payments treated relative to the income of the plan sponsor?

Program payments will not be treated as gross income of the receiving organization for federal income tax purposes.

What is "prima facie" evidence that an early retiree or the early retiree's spouse, surviving spouse or dependent paid his or her portion of the claim?

Prima facie evidence is evidence that shows that a claim was incurred by an early retiree or the early retiree's spouse, surviving spouse or dependent during a plan year, and that shows that the claim was actually paid. A receipt for a health care item or service could satisfy this requirement. Some parties have suggested to HHS that an explanation of benefits should meet this requirement. However, an explanation of benefits does not show that a claim was actually incurred or that a claim was actually paid, as is required by the statute and regulations. An explanation of benefits only shows what a plan would have paid had a claim been incurred.

Uncertainties and Limitations

The interim final regulations answer several of the procedural questions but leave many unanswered. In addition, HHS has yet to create a form for use when submitting a claim for reimbursement.