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May 26, 2010 Wednesday 02:10 PM EST
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Hewitt: $5B US Program for Early Retirees to Draw Majority of Major Companies
Jesse A Hamilton
WASHINGTON
A survey of large U.S. companies shows that most of them intend to make an effort to grab a piece of the $5 billion federal program to assist in insuring early retirees. The program is being established under the recent health reforms and is meant to help bridge the period between now and 2014, when health insurance becomes more universally available. Employers who offer health coverage to pre-Medicare retirees can potentially get a portion of it paid for, and Hewitt Associates, a benefits administrator, surveyed 245 of them this month. Of those, 76% plan to apply for help under this Early Retirement Reinsurance Program, the survey said. For a company with 1,000 such retirees, the benefit could be $2 million to $3 million a year, according to Hewitt (NYSE: HEW). Because the program is set to expire when it runs through the last of its $5 billion, its unclear just how long the federal benefits will last. “It’s probably not going to last the full four years,” said John Grosso, a retiree health care strategy consultant and co-leader of Hewitt’s Retiree Health Care Task Force. “It may not last more than two years.”The U.S. Department of Health and Human Services recently issued the regulations for the program, focused on coverage of retirees aged 55 to 64. Employer health plans will be reimbursed out of this fund for some coverage of those retirees. The planned reimbursement rate for retiree medical expenses is up to 80% of claims for an individual’s benefits between $15,000 and $90,000. The point of the temporary program is for employers to use the funds to reduce health care costs or to lower employee premiums (BestWire, May 6, 2010). Though the Hewitt survey said two thirds of the companies were still waiting for details on the program before indicating how they would spending the benefits, 16% wanted to reduce premiums across the board and 5% wanted to reduce the premiums just for retirees. “Most companies are trying to go for it,” Grosso said. “You’ve got some big companies out there that are going to get hundreds of millions of dollars from this program,” he added, offering telephone companies, automobile companies and other major manufacturers as examples. He said the full guidelines for the application process will be available by the end of June. According to HHS, the number of pre-Medicare retirees provided with coverage by large firms has declined from 66% in 1988 to 31% in 2008 (BestWire, May 6, 2010). (Jesse A. Hamilton, Washington bureau manager: Jesse.Hamilton@ambest.com)
May 27, 2010
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