McGuireWoods Healthcare Reform Guide: Installment No. 4 - HHS Answers Key Questions on the Early Retiree Health Reinsurance Program

The Department of Health and Human Services (HHS) recently issued regulations that implement the Early Retiree Reinsurance Program (ERRP). The ERRP was created under the Patient Protection and Affordable Care Act (PPACA) to provide employment-based health plans (insured and selfinsured) with reimbursement of 80% of health benefit claims between $15,000 and $90,000 incurred by certain retired employees and their covered spouses and dependents. The ERRP takes effect June 1, 2010, and terminates Jan. 1, 2014, or sooner, if the $5 billion of funding earmarked for the program is exhausted before that date.

The following summarizes key aspects of the ERRP, as clarified under the new HHS regulations.

Eligibility Requirements

Participation in the ERRP is open to "sponsors" that maintain "employment-based plans." A sponsor generally is the employer or employee organization maintaining the plan, as designated in ERISA. An employment-based plan is a group health plan maintained by an employer (excluding federal governmental plans) that provides benefits to retired employees age 55 or older not yet eligible for Medicare, and their spouses and dependents of any age.

As a result, group health plans sponsored by private employers, state and local governments, and employee organizations, as well as multi-employer plans, may be eligible for the program. The plan need not limit coverage to retirees. Plans covering retirees and active employees may participate.

The following requirements must be met for a sponsor to participate in the ERRP:

Application. The sponsor must apply to HHS to participate in the ERRP. A sponsor of more than one eligible plan must submit a separate application for each eligible plan it wishes to be certified under the program. HHS will review applications based on when they are received, and reserves the right to close the program to new applicants once it determines that projected claims will exceed the $5 billion appropriated for the program. As a result, sponsors wishing to participate in the ERRP should consider filing their applications as soon as possible once HHS begins accepting applications, as discussed below. HHS Certification. HHS must certify the plan for participation in the program. Certification will occur through review and acceptance of sponsors' applications. Cost-Savings Initiatives. The plan must have programs and procedures that generate (or have the potential to generate) cost-savings with respect to health conditions for which $15,000 or more in benefit claims are likely to be incurred annually by a participant (chronic and high-cost conditions). The plan need not implement new procedures or improve the quality of care for all such chronic and high-cost conditions to...