June 16, 2010

The Patient Protection and Affordable Care Act enacted earlier this year established the Early Retiree Reinsurance Program. The program was created to address the erosion in the number of employers providing health coverage to early retirees. The program sets aside $5 billion to provide reimbursement to sponsors of employment-based plans for a portion of the costs of providing health benefits to early retirees.

The Department of Health and Human Services (HHS) recently made available a draft application and FAQs related to the program. In addition to specific information about the plan sponsor and about the plan itself, the application requires the following information:

• a description of the plan's programs and procedures that have generated or have the potential to generate cost savings with respect to plan participants with chronic and high cost conditions (those for which $15,000 or more in health benefit claims are likely to be incurred during a plan year by one plan participant);
• an estimate of the amount of proceeds the plan sponsor expects to receive under the program;
• a summary of how the plan sponsor will use the reimbursement to reduce the sponsor's health benefit or health benefit premium costs or to reduce premium contributions, copayments, deductibles, coinsurance, or other out-of-pocket costs for plan participants.

Applications will be accepted in the order in which they are received. There is no predetermined number of applications that HHS is planning to accept, but HHS does have the authority to stop accepting applications it if appears that the $5 billion in federal funding is insufficient.

The draft application is available at http://www.hhs.gov/ociio/regulations/index.html. The official application is expected to be available later in June and applications will begin being accepted no later than June 30, 2010. HHS will make an announcement on its webpage when applicants may begin submitting applications. Employers who are interested in submitting an application should review the draft application and begin gathering information so it is ready when the official application is issued.