The Department of Health and Human Services ("HHS") recently released an interim final rule (the "Interim Rule") with a 30-day comment period implementing the Early Retiree Reinsurance Program (the "Early Retiree Program") introduced under the Patient Protection and Affordable Care Act ("PPACA"). The Early Retiree Program provides reimbursement to participating plan sponsors for a portion of the costs of providing health coverage to early retirees ages 55 - 64 and their eligible spouses, surviving spouses and dependents who are not yet eligible for Medicare. The Early Retiree Program provides up to $5 billion in financial assistance to plan sponsors and the Secretary of HHS will reimburse plans in an amount of 80% of the portion of health benefits costs attributable to claims between $15,000 and $90,000 (with such amounts being indexed for plan years starting on or after October 1, 2011) for each retiree (and their spouse and dependents), each plan year. Plan sponsors must use the reimbursement to reduce plan participant or sponsor health care costs, or a combination of such costs. The Early Retiree Program becomes effective June 1, 2010 and will end upon the earlier of January 1, 2014 or when the available $5 billion is exhausted.
The Interim Rule provides guidance on various issues related to the Program, including:
Eligibility for the Early Retiree Program. Only "employment-based plans" (as defined by the Interim Rule) that provide health benefits to early retirees are eligible to participate in the Early Retiree Program. This includes fully- and self-insured plans, sponsored by private employers, state and local governments, employee organizations, churches, voluntary employees' beneficiary associations (VEBAs) and multiemployer health funds. Plans sponsored by the federal government are not eligible to participate in the Early Retiree Program. Further, the Interim Rule defines "early retirees" to include former employees age 55 - 64 who are not yet eligible for Medicare and their spouses, surviving spouses and dependents (even if such spouses and dependents are under the age of 55 and/or are eligible for Medicare).
Written Agreement with Insurer or Employment-Based Plan. Plan sponsors must have a written agreement with its health insurance issuer or employment-based plan requiring the health insurance issuer or employment-based plan to disclose information to the Secretary of HHS on behalf of the plan sponsor. This requirement exists because much of the information HHS will need to process reimbursement applications is considered protected health information (PHI) under HIPAA. Often, this information is held by business associates (i.e., third party administrators) of the group health plan and the written agreement will allow the associate to disclose such information to HHS without violating HIPAA requirements.
Applications for the Early Retiree Program. Applications for the Early Retiree Program will be available by the end of June, 2010. Plan sponsors must submit one application per plan and identify the plan year cycle for which the plan sponsor is applying by stating the starting and ending month and day for the plan. Additionally, an "authorized representative" (as defined by the Interim Rule) will need to certify that the information in the application is to the best of the representative's knowledge and belief.
Transition Rule. The Interim Rule allows plan sponsors to apply for reimbursements for plan years that start before June 1, 2010, provided that the plan year ends after that date (this includes calendar-year plans). For claims incurred before June 1, 2010, the amount of such claims up to $15,000 count toward the cost threshold and cost limit. The amount of claims incurred before June 1, 2010 that exceed $15,000 are not eligible for reimbursement and do not count toward the cost limit. The reinsurance amount to be paid is based solely on claims incurred on or after June 1, 2010 and that fall between the cost threshold and cost limit for the plan year.
Contents of the Application. The application must include, among other items, the applicant's tax identification number (TIN), the applicant's name and address and contact information for the applicant. Additionally, an applicant must provide a summary of how it will meet the requirements of the Program, including how it will use the reimbursement to reduce plan participant or sponsor costs, or a combination of such costs. The application must also include a statement describing the applicant's plans to implement programs and procedures to generate savings for plan participants with chronic and high-cost conditions. The Interim Rule provides examples of such programs, including a diabetes management program or coverage of all or a large portion of a participant's co-insurance or co-payments.
Processing of Applications. Applications for reimbursement will be processed in the order received. The Interim Rule cautions that HHS anticipates receiving more applications than there are funds available for reimbursement and warns that applications must be completed correctly. The Interim Rule states that if an application is incorrect or incomplete, the plan sponsor will not be able to amend it; rather, the application will be denied and a new application will have to be submitted. The new application will then be processed based upon the date it is received, not the date of the original application.
Claim Appeals. As a result of the limited funding and temporary nature of the Program, HHS established a one-step appeal process. A plan sponsor may appeal directly to HHS within 15 calendar days of receipt of the determination at issue. Plan sponsors should also note that the right to appeal will end when the $5 billion in funds is exhausted.
Due to the limited availability of this Early Retiree Program, plan sponsors who wish to apply for reimbursement under the Early Retiree Program will need to act quickly if they want reimbursement and should begin to prepare for their applications by taking the following action steps:
- Gather data relating to claims the plan will submit to HHS for reimbursement;
- Determine how the plan will use the reimbursement to reduce plan participant or plan sponsor costs;
- Develop programs to generate savings for plan participants with chronic and high-cost conditions;
- Execute agreements with health insurance issuers or employment-based plans requiring the health insurance issuers or employment-based plans to disclose information to HHS.
- Designate a group of individuals to assist in preparing the application on behalf of the plan; and
- Designate an authorized representative to sign the application and make the necessary certifications.