CMS Says More Than Half of Early Retiree Health Reimbursement Fund Paid Out

The Centers for Medicare & Medicaid Services says it has paid out well over half of a $5 billion fund created by the health care reform law that partially reimburses employers and other organizations that have early retiree health care plans.

As of May 27—the latest date reimbursement information for the Early Retiree Reinsurance Program, or ERRP, is available—just over $2.7 billion had been paid out, up from $2.4 billion as of May 3, and $1.7 billion as of March 17, according to the CMS.

Because of the rapid disbursement of funds, the CMS announced in April that it would not accept new applications after May 5. It is widely expected that the $5 billion fund will be exhausted by the end of 2011.

Under the ERRP, the federal government reimburses plan sponsors for a portion of claims incurred starting June 1, 2010, by retirees who are at least age 55 but not eligible for Medicare, as well as covered dependents, regardless of age.

After a participant incurs $15,000 in health care claims in a plan year, the government will reimburse 80 percent of claims up to $90,000.

Of the $2.7 billion distributed, $220.7 million—unchanged from May 3—was distributed to the United Auto Workers Retiree Medical Benefits Trust. The trust is a voluntary employees’ beneficiary association set up by the UAW under a 2007 collective bargaining agreement between General Motors Corp., Ford Motor Co. and Chrysler and the UAW.

Under that agreement, the automakers agreed to contribute more than $50 billion to the VEBA. In return, the automakers no longer have to provide health care benefits to UAW-represented retirees and their dependents. The UAW is responsible for managing the VEBA and paying retiree health care claims.

Other big recipients as of May 27, and increases, if any, from May 3, of ERRP funds, include:
• AT&T Inc., $141.5 million, unchanged.
• California Public Employees’ Retirement System, $98.7 million, unchanged.
• Verizon Communications Inc., $91.7 million, unchanged.
• State of New York, $88.4 million, up from $47.9 million.
• State of New Jersey Treasury Department, Pension Accounting Services Department, $77.6 million, up from $38.6 million.
• Teacher Retirement System of Texas, $70.6 million, up from $68.1 million.
• Public Employees Retirement System of Ohio, $70.6 million, unchanged.
• Commonwealth of Kentucky, $63.4 million, unchanged.
• Georgia Department of Community Health, $57.9 million, unchanged.  

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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