The Centers for Medicare & Medicaid Services (“CMS”) announced December 9, 2011 that the Early Retiree Reinsurance Program (“ERRP”) will not accept for reimbursement any medical claims incurred after December 31, 2011. As of December 2, 2011 over 90 percent of the available ERRP funds had already been paid by CMS ($4.5 billion out of $5 billion that was allocated). CMS notes that it will pay future reimbursement requests “in the order in which [they] were received,” so employers have a strong incentive to submit future reimbursement requests as soon as possible.

Overview of ERRP. The Patient Protection and Affordable Care Act established ERRP to reimburse sponsors of retiree health care plans for certain medical expenses. Congress allocated $5 billion of funding for such reimbursements. CMS has previously noted strong demand for ERRP funds. This strong demand caused CMS, in May of this year, to stop accepting new applications from employers and other plan sponsors. However, employers and other plan sponsors who were previously approved could continue to submit claims until the $5 billion was exhausted. With the new CMS announcement, it is clear that the $5 billion is nearly exhausted.

Ensure Proper Cutoff Date for Incurred Claims. The new CMS guidance states that ERRP requests cannot be based on claims incurred after December 31, 2011. Any ERRP request that includes such a claim (e.g., a claim incurred on January 1, 2012) will be rejected in its entirety. Thus, an employer should ensure that its next application does not include such an improper claim.

Do Not Delay — December 31, 2011 is Not a Guarantee. The new CMS guidance does not guarantee that claims incurred through December 31, 2011 will actually be paid under ERRP. It is possible that some claims will be incurred in 2011 but will not be paid under ERRP. CMS will process ERRP requests in the order they are received by CMS. One employer, somewhere, will receive a partial ERRP reimbursement as its claim causes ERRP to reach the $5 billion limit. Thus, employers who quickly submit an ERRP request in the near future will have a better chance of receiving reimbursement than those employers who delay in submitting an ERRP request.

Additional Reimbursements Possible but Unknown. It is possible that CMS will receive some additional ERRP funding. For example, CMS may audit an employer to verify that its ERRP request was accurate. This audit process may discover that too much was paid to a particular employer, who then may return funds to CMS. Such recoveries would be used by CMS to pay outstanding ERRP requests in the order the requests were received.

Effective Date. The CMS guidance is effective immediately.

Links to Further Guidance. The CMS fact sheet describing the new guidance is here: http://www.errp.gov/newspages/20111209-updated-payment-processing-new-incurred-date.shtml. An advance, temporary copy of the new guidance is here: http://www.ofr.gov/OFRUpload/OFRData/2011-31920_PI.pdf.