| Copyright: | Business Wire |
| Source: | Business Wire |
| Wordcount: | unknown |
Companies Offering Pre-65 Retiree Medical Benefits Intend to
Pursue Reimbursement but are Unsure How They Will Use Proceeds
LINCOLNSHIRE, Ill.--(BUSINESS WIRE)--
As U.S. employers continue to digest the provisions within the health
care reform law, a new survey by Hewitt Associates, a global human
resources consulting and outsourcing company, found most companies that
offer pre-65 retiree medical benefits intend to apply for the Early
Retiree Reinsurance Program (ERRP) to offset a portion of health care
claims costs for retirees ages 55 to 64 and their families.
Conducted in May 2010, Hewitt’s survey of 245 large employers that offer
medical benefits to more than 1.3 million retirees found that more than
three-quarters (76 percent) of companies plan to pursue reimbursement
under the ERRP, a provision in the newly enacted health care reform law
that goes into effect June 1, 2010. Under the new program, companies can
receive an 80 percent reimbursement on claims incurred by early retirees
and dependents between $15,000 and $90,000 over the course of a year.
Eligible claims include medical, prescription drug and behavioral
health. The ERRP will last until January 1, 2014, or until the $5
billion set aside for the program is exhausted.
Hewitt estimates that the average federal reimbursement will represent
between $2,000 and $3,000 per pre-65 retiree per year, or approximately
25 percent to 35 percent of total health care costs. As an example, for
a company that covers 1,000 pre-65 retirees, participation in the ERRP
could result in $2 million to $3 million in reinsurance proceeds per
year.
“The number of employers eliminating pre-65 retiree medical benefits has
grown over the past decade as health care costs continue to rapidly
increase,” said Milind Desai, FSA, senior consulting actuary and
co-leader of Hewitt's Retiree Health Care Task Force. “The early retiree
reinsurance program encourages employers to continue offering coverage
to pre-65 retirees and their families by providing some temporary relief
from expensive pre-65 retiree medical claims. But because so many
companies plan to apply for the ERRP, employers will need to act quickly
to secure a share of the proceeds, since the federal funds earmarked for
this program are limited.”
While the law requires that employers use the ERRP reimbursements to
reduce the cost of the plan, Hewitt’s survey showed that most have not
yet decided on a specific approach. Hewitt’s survey was conducted just
as interim final rules with additional guidance around the ERRP were
issued by the Department of Health and Human Services (HHS). At that
time, two-thirds (66 percent) of companies that intend to apply for the
reimbursement said they were unsure about how they plan to use the
proceeds and were waiting for this guidance before making a decision.
Sixteen percent said they are considering using the reimbursement to
reduce premiums—including both employer and retiree share, and another 5
percent said they are considering reducing the retiree share of premiums
only.
“While the interim final rule on the ERRP was released in early May,
most employers are still looking for more details about how these funds
can and cannot be used,” said John Grosso, FSA, senior consulting
actuary and co-leader of Hewitt's Retiree Health Care Task Force. “We
expect additional guidance by the end of June, and we believe companies
will then make final decisions on how to best allocate these
reimbursements to offset the cost of the plan. Employers will be
required to describe how the proceeds will be used to support the plan
in their ERRP application.”
About Hewitt Associates
Hewitt Associates (NYSE: HEW) provides leading organizations around the
world with expert human resources consulting and outsourcing solutions
to help them anticipate and solve their most complex benefits, talent,
and related financial challenges. Hewitt works with companies to design,
implement, communicate, and administer a wide range of human resources,
retirement, investment management, health care, compensation, and talent
management strategies. With a history of exceptional client service
since 1940, Hewitt has offices in more than 30 countries and employs
approximately 23,000 associates who are helping make the world a better
place to work. For more information, please visit www.hewitt.com.
Hewitt Associates
Media Contacts:
MacKenzie Lucas,
847-442-2995, mackenzie.lucas@hewitt.com
Maurissa
Kanter, 847-442-0952, maurissa.kanter@hewitt.com
Media
Helpline: 847-883-1000
Source: Hewitt Associates
