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Guest Article

(From the March 14, 2011 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

ERRP Status Report: State and Local Governments Are Predominant Beneficiaries

The Department of Health and Human Services reports that the Early Retiree Reinsurance Program (ERRP) provided a total of $535 million in reimbursements to 253 participating plan sponsors in 2010. State and local governments were the predominant beneficiaries of the program - representing 47 percent of the approved sponsors, receiving over 50 percent of the dollars reimbursed, and covering over 50 percent of the early retirees whose costs exceeded the threshold.

Established as a temporary program to provide financial support to plan sponsors who provide health coverage to early retirees, the ERRP will expire when its $5 billion in Federal funding is exhausted - or, if earlier, on January 1, 2014, when the key provisions of the Patient Protection and Affordable Care Act take effect (i.e., the individual mandate, insurance exchanges, elimination of annual limits, middle-class tax credits, increased access to Medicaid, etc.). The ERRP reimburses participating plan sponsors a portion of the medical expenses that are paid for early retirees with high-cost conditions (i.e., a portion of the individual's medical expenses that are between $15,000 and $90,000). Sponsors can use the reimbursements to reduce the sponsor's health benefit costs, reduce the participants' health benefit costs (e.g., premiums, co-pays, etc.), or both.

The Department's March 2, 2011 Report for Calendar Year 2010 provides a window onto the ERRP's results so far. It reports:

Over 5,000 plan sponsors were approved to participate in the program as of December 31, 2010. Sponsors were approved from all 50 states, the District of Columbia, and Puerto Rico. Twenty states had more than 100 sponsors that were approved. Topping the list was New York with 521 and California with 518 approved sponsors.
By category, the approved plan sponsors from state and local government was the largest, comprising 47 percent of the total. Of the remaining approved plan sponsors, 27.5 percent were self-identified as commercial, 15.1 percent as non-profit, 10 percent as union, and 0.4 percent as religious.
The state and local government category - which includes states and subdivisions and organizations representing government employees (e.g., state universities) - received over 55 percent of the total $535 million reimbursement.
Of the 60,859 individual plan participants whose high-cost conditions generated reimbursements from the program, 54 percent were covered by state and local government plans. Of the rest, 28 percent were covered by non-profit plans, 15 percent by commercial plans, 2 percent by union plans, and less than 1 percent by religious plans.
By state, the largest number of plan participants whose high-cost conditions generated ERRP reimbursements was from Michigan, which had over 19,500 individuals whose claims exceeded the $15,000 threshold - followed by Texas which had over 8,600 individuals.

The report also cites specific programs created by plan sponsors to generate savings with regard to high-cost participants, including:

A prescription drug utilization management program to encourage the use of cost-effective drugs (which works with prescribing physicians to facilitate changes in therapy and utilization).
Customized telephone counseling from a clinician to enable participants to manage their conditions more effectively.
Case management services to facilitate the coordination of complex care needs and services, and to maximize the participants' effective use of plan benefits and services.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations.

If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact:

Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Erinn Madden 202.220.2692, Bart Massey 202.220.2104, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955.

BenefitsLink is an independent national employee benefits information provider, not formally affiliated with the firms and companies who kindly provide much of the content and advertisements published on this Web site, including the article shown above.