By N.C. Aizenman
Washington Post Staff Writer
Tuesday, August 31, 2010; 11:15 PM
Nearly 2,000 employers and unions have been approved to seek federal reimbursement for the health claims of their "early retirees," or retired workers aged 55 or older who are too young to get Medicare, Obama administration officials announced Tuesday.
The $5 billion program is a key "bridge" provision of the new health-care law, intended to encourage employers to maintain coverage of early retirees and their families until states are able to establish federally subsidized health insurance exchanges in 2014. At that point, early retirees dropped by their employers presumably could purchase insurance through the exchanges at more affordable rates than the ones currently available to them on the individual market.
But the large number of employers deemed eligible in the first round of applications has prompted concern that the program will run out of funds long before its expiration in 2014.
The applicants approved so far span a broad spectrum: Fortune 500 companies, small businesses, major unions, schools, local governments and nonprofit groups.
Among them is the conglomerate Koch Industries, one of whose principal owners, billionaire David Koch, has been a major funder of groups that lobbied heavily to defeat the health-care law. "Once laws or programs are enacted we will not place ourselves or our employees at a disadvantage by turning our back on incentives offered to our competitors," said the company's director of communication, Melissa Cohlmia. Many state governments that are party to a lawsuit contesting the health-care law's constitutionality also applied successfully.
The new federal fund will reimburse up to 80 percent of a covered individual's medical costs over $15,000 and up to $90,000.
Employers can use the reimbursement to lower early retirees' premiums and other costs. But at a news conference Tuesday, Health and Human Services Secretary Kathleen Sebelius said the principal goal was to halt the steady decline of employers offering coverage to early retirees.
The share of large firms providing such coverage dropped from 66 percent in 1988 to 29 percent in 2009, though not much of that decline occurred recently. Because of their age and higher likelihood of having a pre-existing condition, early retirees attempting to buy insurance on the individual market face premiums that are four times those of young adults, if they get covered at all.
"For many people, early retirement is not their choice. Maybe it's a family situation or a health condition," Sebelius said. "So if employers want to do the right thing . . . we're going to help make it happen."
In a recent analysis, economist Paul Fronstin of the nonprofit Employee Benefit Research Institute says that if all eligible groups were to apply, the $5 billion in the program would run out by the end of next year - two years before health exchanges arrive.
Even if that happens, Fronstin said it is unlikely that many employers will cut the estimated 1.3 million early retirees and family members on their rolls.