By Julian Pecquet - 08/31/10 04:18 PM EDT
The Department of Health and Human Services (HHS) on Tuesday announced that almost 2,000 employers and unions have been accepted into the Early Retiree Reinsurance Program created by the healthcare reform law. The law set aside $5 billion to help employers and unions cover the healthcare costs of retirees who are older than 55 but don't yet qualify for Medicare.
The program is aimed at stemming the tide of businesses dropping their retiree health coverage. The percentage of large firms offering such a benefit dropped from 66 percent in 1988 to 29 percent in 2009, according to HHS, largely because of rising costs.
"In conversations with business leaders throughout the country, I hear over and over again about the escalating healthcare costs for employees and retirees," U.S. Commerce Secretary Gary Locke said in a statement. "The new reinsurance program in the Affordable Care Act will directly reduce companies’ health premiums for many retirees, offering critical cost relief for American businesses in a difficult economy and an important bridge for early retirees who are not yet eligible for Medicare."
The program provides an 80 percent subsidy for retiree claims between $15,000 and $90,000. Approved applicants will be able to begin submitting claims dating back to June 1 starting in September, with payments starting to trickle in a month later.
Critics of the program say it's underfunded, however. As HHS began accepting applications in June, the Employee Benefit Research Institute said that if the subsidy were drawn down for all retirees and their dependents, the money would run out in 2012.
The program is supposed to last until Jan. 1, 2014, when many people will start receiving subsidies to buy insurance on the new state health insurance exchanges. More information, including a list of approved applicants by state, is available here.