Monday, March 12, 2012

Early Retiree Reimbursement Program Benefited 13 Million Retiree Medical Plan Participants In 2010-11

As of Jan. 20, 2012, the Early Retiree Reinsurance Program (ERRP) has provided $4.73 billion in reinsurance payments to more than 2,800 employers and other sponsors of retiree plans, with an average cumulative reimbursement per plan sponsor of approximately $189,700, according to the Centers for Medicare and Medicaid Services (CMS).

At this time, CMS reported, the ERRP has received requests for reimbursement that exceed the $5 billion in funding appropriated. Therefore, reimbursement requests which exceed the program's $5 billion will now be held in the order of receipt, pending the availability of funds that may become available as a result of overpayment recoupment activities. CMS will continue to report the status of payments to plan sponsors periodically. In December 2011, the CMS had announced that because the ERRP allocated funds were nearly exhausted, it would deny health care claims incurred after Dec. 31, 2011.

Initial results from a recent survey to gauge plan sponsors' experience with ERRP funds indicated the following:

  • Plan sponsors provided health coverage to 19.1 million plan participants.
  • Of these plan participants, 13 million have already benefited, either directly or indirectly, from the ERRP program, as their health plan sponsors have already begun applying the ERRP funds received to offset the plan's increased costs, plan participants' costs, or both.
  • For plan sponsors that purchased health insurance directly from a carrier to cover their workers and early retirees, ERRP funds reduced the increase in sponsor-paid premium costs by up to 27 percent.
  • ERRP not only provided immediate relief to plan sponsors but also provided a bridge to 2014, as survey responses indicated that:
    • Fifty-six percent of responding plan sponsors have used ERRP reimbursements to date. Of these plans sponsors already using funds, 15 percent reported that they have spent some, but not all of their funding.
    • Forty-four percent of survey respondents indicated that they will apply all of their reimbursements to the 2012 or 2013 plan year.
    • Based on survey respondents that indicated that they have not spent all of their ERRP funding, it can be concluded that at least $615 million in ERRP funds of survey respondents will be applied in 2012 or later.
    • The impact of ERRP funds received can be significant, CMS noted. Some survey respondents reported that ERRP reimbursement has been used to offset some (as much as 50 percent) of the premium that would otherwise have been charged to enrollees or offset some (up to 100 percent) of the annual increases in the plan sponsors' fully-insured premium costs.

"This initial snapshot analysis of reimbursement requests shows that ERRP funds are helping to relieve the high costs of care of patients with serious health conditions, with a large proportion of the reimbursements for claims related to chronic and high-cost conditions such as heart disease, cancer, respiratory disorders, arthritis, and diabetes,"
CMS observed. "The funds provided relief from costs of care received from institutional providers, such as hospitals. The largest portion of submitted costs was for items and services delivered in institutional settings, such as hospitals and ambulatory surgery centers."

The survey included responses from 859 plan sponsors, representing 28 percent of those that received funding in 2010 and 2011, and 55 percent of funds disbursed. For more information on the CMS report, Early Retiree Reinsurance Program Status Update, February 2012, visit

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