You know those great sales stores offer — the ones that are like buy one, get three free? Usually, they come with a fine-print disclosure, “While supplies last.”

Well, it looks like the feds should have put a bigger “While supplies last” label on the early retiree reinsurance fund, because new numbers from the Employee Benefit Research Institute show the $5 billion program — designed under the Patient Protection and Affordable Care Act to help employers maintain health benefits for early retirees — likely will be exhausted by 2012. “But wait!” you might say. “The program isn’t due to terminate until 2014!”


So, it looks like the program, intended to be an incentive for employers to maintain retiree health benefits, also is incentivizing employers to get while the gettin’ is good if they want a piece of the dough. It makes me imagine employers in one of those money-grabbing machines  you used to see on game shows.
According to EBRI’s Paul Fronstin, although $5 billion is available for the early retiree reinsurance program (which became effective June 1), if the subsidy were drawn down for all eligible early retirees and their dependents, $2.5 billion of the available $5 billion would be exhausted in the next year alone.

Using data to calculate how many early retirees there are and how much they tend to spend on health care services, Fronstin concludes the $5 billion would last no more than two years and would not be available in 2012 or 2013, the study finds.

This assumes that all employers eligible to apply do so and is contingent on other assumptions outlined in the study.  Oops.

The program provides an 80% subsidy on claims between $15,000 and $90,000 for retirees over age 55 and not yet eligible for Medicare. Claims from dependents are also eligible.

Plan sponsors must be able to show that the subsidies were not used to reduce their level of support for the plan, and that the subsidies were used to generate savings or had the potential to generate savings.

So, if you’re interested, I suggest you apply for the subsidy quickly. Have you applied already? Do you think it will make a significant difference in your retiree health costs? Share your thoughts in the comments.

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