Health plan aids employers with early retiree health plans

Gov. Phil Bredesen may not like many provisions in federal health reform, but his administration hopes one part of the plan will cut health care costs for retired state employees by up to $43.5 million.

Some $5 billion in federal aid will be available over the next three years to pay most of the high-cost claims for people who retire before age 65 and are still covered by their former employer's health plans.

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Tennessee government is among 60 groups across the state that have been approved for a share of the money. Nationwide, nearly 3,600 employer groups have been approved for the Early Retiree Reinsurance Program, including more than a half dozen of the largest employers in the Chattanooga area.

The federal aid aims to encourage employers to maintain health benefits for retirees ages 55 to 65, which is when Medicare benefits kick in. The share of major employers offering such coverage has plunged from two-thirds of all large employers a decade ago to only 29 percent last year, according to the 2009 Employer Health Benefits survey by the Kaiser Institute, a nonprofit group that monitors health care policy.

"By helping employers and unions continue to offer coverage for early retirees, we're helping them compete -- while providing a measure of certainty and security for their former workers at a time when it could not be more important," U.S. Health and Human Services Secretary Kathleen Sebelius said in a news release.

The program is designed to be a bridge until 2014, when federal health care reform is fully implemented and states establish health insurance exchanges for lower-cost options on senior health care coverage.

Without such assistance, early retirees usually must pay health insurance premiums that cost four times more than comparable plans for younger workers, said Tony Garr, deputy director for the Tennessee Health Care Campaign, which supported federal health care reform.

"Too many are priced out of any coverage," he said.

The Early Retiree Reinsurance Program will pay approved employers 80 percent of the cost of high claims -- from above $15,000 up to a maximum of $90,000.

Employers who have signed up said they are trying to continue benefits for early retirees without paying so much of the soaring costs.

Debby Koch, communications director for the Tennessee state employees' benefits administration, said the state could receive up to $43.5 million in the first year. But she said it's not clear how much reimbursement money will be available because the $5 billion allocation could run out quickly.

"The state health plans will use the Early Retiree Reinsurance Program reimbursements to reduce or offset increases in our own costs for maintaining health benefits," she said.

Tennessee has 14,125 retirees ages 55 to 65 who should be eligible for the assistance. The state spends $1.2 billion a year on all of its employee and retiree health insurance.

Bredesen has estimated the state may have to absorb an extra $200 million a year by 2014 for its share of the expanded Medicaid program. He said this week he doesn't like the health care reform package and hopes the new Congress will revamp it to better control costs.

BlueCross BlueShield of Tennessee -- the state's biggest health insurer and the largest private employer in Chattanooga -- also was approved as a participant in the Early Retiree Assistance Program.

"We made a commitment to our retirees, but nothing insulates a company from the rising cost of health care -- even a company in the business of financing health care," BlueCross spokeswoman Mary Thompson-Danielson said.

"By applying for this program, we're able to provide financial assistance to our retirees who need help covering these ever-increasing costs between their retirement and their eligibility for Medicare," she said.

Thompson-Danielson said about 80 BlueCross customers expressed interest in enrolling in the program. But fewer than half of those completed the application and were approved, she said, because of the time and complexity involved in qualifying for the federal aid.