A little known element of the Affordable Care Act of 2010 can be a financial windfall for employers that offer medical coverage to retirees who haven’t reached the age of 65.
The Early Retiree Reinsurance Program has $5 billion worth of temporary assistance for employers to continue health coverage for former workers. The program will continue through Jan. 1, 2014.
ERRP payments will be made directly to an early retiree’s employer-sponsored health plan. Payments also can be made for an eligible spouse, surviving spouse and dependents. The program defines an early retiree as someone who is at least 55, not an active employee and not eligible for Medicare.
The amount of assistance an employer can receive is “up to 80 percent of a plan’s cost for a retiree, minus some negotiated price concessions, for health benefits between $15,000 and $90,000.” Every plan in the reinsurance program must require contributions from each enrollee, such as premium payments, copayments and deductibles.
The city of Grand Rapids intends to apply to the program. City Director of Human Resources Mari Beth Jelks has put together an ERRP application and was waiting for the official submission date to be announced when the Business Journal spoke with her.
The initial application date for the program was June 1, and Jelks said she had the city’s application ready to submit then. But she said the Centers for Medicare and Medicaid Services hadn’t issued the final instructions for applicants by that date.
In addition to directing human resources for the city, Jelks also serves as the inside administrator for the city health plans. She works closely with city’s CFO Scott Buhrer and the city’s consultant Pat Coleman to manage the plans the city offers its employees and retired workers. Jelks said between the three of them, they became aware of ERRP on their own, as the program received little, if any, attention from the media.
“My job is to make sure that we’re aware of anything on the health-insurance front. And being an attorney, I recognized that there were regulations coming out on the new health insurance reform,” said Jelks. “But I will say that our health care consultant, Pat Coleman, had been on the forefront of anticipating this part of the legislation even as it was being formed, because he specializes in Medicare.”
Coleman is well versed in Medicare because he is with Part D Advisors Inc., a firm based in Plymouth. The city recently entered into a contract with the company to be able to use his expertise on the ERRP application, and it appears to be a good agreement for the city.
If the city doesn’t get funding from the program, then Part D Advisors collects nothing for his work. If the city does receive funding, then Part D Advisors will collect 20 percent of the amount the city receives. “It’s better to get part of something than all of nothing,” said Buhrer, referring to the contract that won’t cost the city a dime if its application isn’t successful.
The city’s agreement with Part D Advisors is separate from Coleman’s standard consultancy contract with the city, as that pact is with Pat Coleman and Associates. The city also uses Meritain Health, which has an office on Ionia Avenue, as its network provider because the city is self-insured. Meritain Health, though, will offer health management programs to the city’s early retirees in conjunction with ERRP should the city’s application be approved.
Jelks said the city has 468 former employees that qualify as early retirees under ERRP and is spending roughly $10 million this year to cover them. Should the city’s application be accepted, Jelks said any funds received will generally be used to offset the city’s costs related to its health insurance program for pre-65 retirees.
“I think a lot of the language of the regulations and information I’ve read deals with trying to particularly and effectively address health care costs associated with chronic-type illnesses, such as diabetes, obesity, heart disease — all those fundamental things that really, at the end of the day, are the drivers of constant health care costs,” she said.
Any payment an employer receives through ERRP will be retroactive for a plan’s year, so the city will be able to take advantage of the coverage costs it incurs, starting with the date the program is established.
Jelks thought the city should know the fate of its application within a handful of months.
“We expect to hear something by late fall. Because, I think, of how this was set up, I think the number of applicants is going to be smaller than a full cattle drive. Hopefully, they’re able to respond back this year. That would be the timely thing,” said Jelks.
Once that time arrives, Buhrer thought the funds would flow rapidly. “The money will be gone very quickly,” he said, “in days, not weeks.”