The Early Retiree Reinsurance Program - created under the Patient Protection and Affordable Care Act to help employers offset the costs of maintaining early retiree health benefits - may get another $5 billion worth of funds thanks to a bill introduced in the Senate this spring. However, some industry insiders don't expect the bill to gain much traction.
"I'm sure there are employers who have early retiree coverage, which tends to be fairly expensive, who might have thought, 'Let's get out of this and let them go into the exchanges in 2014,'" says Fran Bruno, an attorney and principal with Mercer's Washington Resource Group. "And I think this program was designed to ease the expense of early retiree programs for the next couple of years so employers and plan sponsors would stay in the game a little bit longer and not dump everybody into the exchanges."
The program reimburses 80% of claims incurred by an early retiree that exceed $15,000 and up to $90,000 in a particular plan year.
The bill - sponsored by Senators John Kerry (D-Mass.), Debbie Stabenow (D-Mich.), Richard Blumenthal (D-Conn.) and Ben Cardin (D-Md.) - seeks to amend PPACA to raise current funding of ERRP to $10 billion, from $5 billion. But, given Washington's current budgetary woes, it's unlikely to pass anytime soon.
"In the current budget situation, I can't imagine that happening," says Rich Stover, principal and consulting actuary with Buck Consultants. "What I'm hearing more of is, 'Why is Congress basically throwing $5 billion down the drain by giving all this money to large, profitable corporate employers to help offset their retiree costs?'"
Bruno agrees. "Given what's going on in Washington right now, I doubt this is even on the radar screen," she says. "It may come back again, but I think right now it's not being considered."
And while the original $5 billion has not been exhausted yet, Health and Human Services stopped accepting ERRP applications back in early May and, says Bruno, there's been a slowdown in reimbursements because - starting last April - HHS began requiring plan sponsors to submit extremely detailed files, including all the claim level details for each retiree who exceeded that $15,000 limit and for whom they were requesting reimbursement.
"I'm not sure anything has really gone out since then," she says. "I think it's just a matter of getting the computer systems up and running with all the right information before it can start flowing again. But that may have slowed the process a bit."
HHS, meanwhile, issued new guidance for employers about how they can use ERRP funds (see related story on page 24). Plan sponsors are prohibited from using reimbursements from the program as revenue. ERRP reimbursements can be used for one of two purposes, explains Stover. "The employer can use them to offset increases in their own costs, or they can use them to offset increases in plan participant costs," he says. "This is pretty comprehensive guidance on the first part of that, if the employer's going to keep the money for themselves."
He adds that, in his experience, not that many employers are giving the money back to retirees. Employers "view it as a lot of work and effort to collect the money, to distribute it to retirees and meet all the HHS requirements, with no benefit to the employer," he says. "So, most of them are keeping the money for themselves."
The Centers for Medicare & Medicaid recently released additional guidance that sets out what plan sponsors who use ERRP reimbursements to reduce their health benefit premiums and/or costs must do to comply with the prohibition against using ERRP reimbursements as general revenue.
The guidance addresses a number of issues related to what's known as the "maintenance of contribution" requirement. This stipulation requires that plan sponsors provide at least the same level of contribution - minus any ERRP reimbursements - to support the plan it provided before participating in ERRP. The new guidance clarifies that this maintenance of contribution requirement applies to:
* Plan years for which the plan sponsor receives ERRP reimbursements.
* Plan years during which the plan sponsor receives ERRP reimbursements.
* Plan years for which the plan sponsor possesses ERRP reimbursements that have not yet been used for permissible purposes.
"The maintenance of contribution requirement will apply not only to the plan years during which the plan is directly participating in ERRP, but also to any subsequent years in which the plan sponsor continues to hold ERRP reimbursements that have not been used as permitted," notes Buck Consultants in a newsletter on the topic.
To determine whether they satisfy the maintenance of contribution requirement, plan sponsors need to compare health benefit premiums and/or costs to those in a baseline period, and the guidance offers three different ways of calculating the baseline period. In addition, the guidance expands on how plan sponsors can show they've met the maintenance of contribution requirement, offering four different methodologies.
Additional topics covered include ERRP funds and stop-loss insurance, allocation of ERRP reimbursements to health reimbursement accounts and required notice to plan participants.
In general, says Stover, the new guidance "gives employers more flexibility than probably they had anticipated they would get."
He cautions, however, that employers need to be vigilant in documenting the methodology they use to support compliance, since HHS is able to conduct random audits to ensure ERRP funds are being used for their intended purpose.
"Employers are going to need to go through the testing requirements and document what they've done so, if they do get audited, they can show they used the funds appropriately and met all the requirements," he says.
ERRP Q&A Here's a sample of frequently asked questions and answers from the ERRP website, errp.gov.
Q: Does a sponsor need to make HHS aware of any changes or corrections in information reported on the sponsor's application?
A: Yes. We understand that information on a sponsor's application may need to be updated or corrected as the program progresses. A sponsor should update information on its application as soon as the sponsor is aware of any change to the information provided in the application. Depending upon the update or correction, the applicant may make the change in the Early Retiree Reinsurance Program Secure Website, once it has access, or a separate process may be established. The details as to how sponsors should update HHS on specific issues will be provided in further guidance.
Q: If an applicant has not been informed whether its application has been approved or denied, what should it do?
A: No action is required. When the application is processed the Authorized Representative and Account Manager identified in an application will both be notified of the application's status.
Q: If a sponsor combines plans during or at the end of a plan year but after it has submitted its application to participate in the program, does the sponsor have to submit a new application?
A: If the plans are being consolidated into a new plan, the sponsor will need to submit a new application.If plans are being combined into an existing plan that has been certified for ERRP purposes, the sponsor should not submit a new application. The sponsor will need to make HHS aware of the change in plan structure through a process that will be developed and announced by HHS.
For plans that are combined during a plan year, the question of how claims will accrue for each early retiree, early retiree's spouse, surviving spouse and dependent across plans arises. Claims do not accrue across plans so if a new plan is created, the claims accrual (including costs which accrue toward the $15,000 ERRP subsidy threshold) begins on the date when the new plan begins. If plans are combined into an existing plan, the claims from the consolidated plans will not be affected by the consolidation. In such cases, HHS intends to roll the consolidated claims into the plan that ultimately exists and the claim accrual will not start over during a plan year.
Q: For what types of health benefit items and services can a sponsor receive reimbursement?
A: A sponsor can receive reimbursement for health benefit items and services for which Medicare would reimburse under Parts A, B, and D. For general reference as to what items and services are covered by Medicare Parts A and B, please refer to the Centers for Medicare & Medicaid Services' "Medicare & You 2010" and "Your Medicare Benefits" publications, which are available on the Medicare.gov website.
Ultimately, it is the ERRP plan sponsor's obligation to determine whether a given drug is a Medicare Part D drug, and to ensure that it is not submitting claims for non Part D drugs.
Further guidance will be provided in the near future on what health benefit items and services may be credited towards the cost threshold and reimbursed, and on what Detailed Claims Data will be required when submitting a reimbursement request.
