HHS begins accepting applications for early retiree reinsurance program

The Department of Health and Human Services announced today it has begun accepting applications for the early retiree reinsurance program created by the healthcare reform law. The law sets aside $5 billion that businesses, unions and state and local governments can use to cover the healthcare costs of their retirees - and their spouses and dependents - who are older than 55 but don't yet qualify for Medicare.

Obama administration officials praised the program as a way to encourage employers to maintain their retiree coverage even as healthcare costs continue to climb.

"The Early Retiree Reinsurance Program will provide an important bridge to early retirees and their former employers as we move toward a more competitive, patient-centered health care system in 2014," Secretary of Commerce Gary Locke said in a blog post on the White House Web site.

But some observers doubt the money will last that long.

The program provides an 80 percent subsidy for retiree claims of between $15,000 and $90,000, and a new report by the Employee Benefit Research Institute finds that if the subsidy were drawn down for all early retirees and their dependents, half the money would be exhausted in the first year of the program. The $5 billion would last no more than two years and would not be available in 2012 or 2013, the study says.

A May survey by the consulting firm Hewitt Associates found a majority of companies planned to apply for the funds. The firm estimates that annual federal reimbursements would average between $2,000 and $3,000 per retiree per year, about 25 percent to 35 percent of total healthcare costs.