Recently, Congress threw a $5 billion financial lifeline to employers, unions and state and local governments struggling with the astronomical cost of providing health insurance coverage to “early retirees” through the creation of the Early Retiree Reinsurance Program (ERRP). ERRP was created as part of the Patient Protection and Affordable Care Act and enables employers and unions (“sponsors”) that maintain, whether directly or through an insurer, an employment-based insurance plan to obtain reimbursement for a portion of their medical claim costs for their “early retirees” and their spouses, surviving spouses and dependents (“covered individuals”). “Early retirees” are defined by ERRP as individuals age 55 and older, not active employees of the sponsor and not yet eligible for Medicare. ERRP will reimburse sponsors for up to 80% of the costs for certain medical claims between $15,000 and $90,000 incurred from June 1, 2010, through January 1, 2014. This article provides guidance on what sponsors need to do to obtain a piece of the $5 billion pie before it is all gone.
Generally, claims for items and services that are reimbursable under Medicare also will count towards the $15,000 threshold and for reimbursement under ERRP. This includes health benefits for medical, surgical, hospital, prescription drug and other benefits that may be specified by the U.S. Department of Health and Human Services (HHS), such as coverage for mental health services. However, while Medicare imposes various dollar, duration, and scope limits and restraints on certain items and services, (e.g., home health services and skilled nursing facility care), HHS guidelines clarify that these limits and restraints will not be applied to ERRP claims. Likewise, the guidelines provide that Medicare’s medical necessity determinations, benefit restrictions that require the sponsor to develop a claims history (e.g., that an individual was in a hospital before being admitted to a skilled nursing facility) and restrictions on the site or circumstance of care will not apply. HHS guidelines, however, exclude the following 12 items and services:
- Custodial care (e.g., personal care by non-medically trained personnel, institutional care not meeting the requirements of skilled nursing facility care);
- Routine foot care (e.g., orthopedic shoes);
- Personal comfort items (e.g., hospital room TVs);
- Routine services and appliances for vision (e.g., glasses, contact lenses)
- Hearing aids and auditory implants;
- Cosmetic surgery (except for prompt repair of accidental injury or to improve the functioning of a malformed body part);
- Routine dental services;
- Assisted suicide;
- In-vitro fertilization, artificial insemination, sperm and embryo procurement;
- Abortion services (except where the pregnancy results from rape or incest or endangers the life of the woman);
- Drugs not covered by a standard Part D plan (unless covered under Parts A or B); and
- Items or services not furnished in the United States.
What Should Sponsors Be Doing Now?
In order to participate in ERRP and obtain a slice of the $5 billion pie, a sponsor must file an application with and have its application approved by HHS, be able to document claims and demonstrate it can implement programs and procedures that generate or have the potential to generate cost savings for participants with chronic and high-cost conditions.
Sponsors must complete the application and provide relevant plan sponsor and key personnel information, information concerning the employment-based plan for which it is requesting ERRP payments, a signed plan sponsor agreement designating the plan sponsor’s authorized representative, and a proposed program and procedures for containing chronic and high cost conditions that are defined as health benefit claims in excess of $15,000 per covered individual in a plan year. Sponsors also must include the intended use of the ERRP proceeds and banking information for electronic transfer of funds.
Caution must be exercised in fully completing the application and providing truthful information. Incomplete applications will be rejected, and sponsors accepted for ERRP will be subject to audits by HHS to ensure fiscal integrity.
While its application is pending, the sponsor should begin preparing its early retiree lists so claims can be filed promptly once the application is approved. According to a recent announcement from HHS, the sponsor’s retiree list should be submitted prior to, but as close as possible to, the date on which the request for reimbursement is to be submitted. The list needs to be specific to the plan year for which reimbursement is being requested and must relate only to costs eligible for ERRP payments. Only covered individuals who have accumulated $15,000 or more in claim amounts on an individual basis for the plan year are eligible for reimbursement. The early retiree list should be submitted only after the plan sponsor completes the setup on the ERRP secure web site. Sponsors must designate whether their lists will be submitted through a mainframe connection to HHS’ ERRP Center or through uploading to the ERRP secure web site. If mainframe submission will be used, sponsors are advised to call the ERRP Center as soon as possible to begin the setup process.
After a sponsor submits its early retiree list, the ERRP Center will send a response indicating the periods of time each individual is eligible for ERRP. Plan sponsors should use this response file when making their requests for reimbursement. HHS, on audit, will expect sponsors to demonstrate that only claims on the retiree list were used in their request for reimbursement.
Finally, sponsors participating in ERRP must provide a form notice to all covered individuals, notifying them that because the sponsor is participating in ERRP with respect to the plan, the sponsor may use the reimbursements to reduce plan participants’ premium contributions, co-payments, deductibles, co-insurance or other out-of-pocket costs. The form notice can be obtained from the HHS web site. This notice may be delivered earlier but no later than a reasonable time after the sponsor receives its first ERRP reimbursement. The notice may be delivered to the covered individuals at their last known address, along with other plan materials, by regular mail, courier service or e-mail at the workplace, provided that covered individuals have access to e-mail. Additionally, one notice can be provided per family as long as the form is addressed to all plan participants who are family members.
HHS began accepting claims for reimbursement from sponsors in mid- October. Employers, unions and local and state governments should immediately determine whether they can qualify for ERRP and take the necessary steps to file an application to participate. Since HHS will be reimbursing claims on a first-come, first-served basis, potential sponsors should file applications or requests for claims immediately to ensure they obtain their slice of the pie. Once the $5 billion in appropriated funds is exhausted, the party will be over. Employers, unions and/or governmental entities that have questions regarding their eligibility to participate in ERRP and/or need assistance in completing the requisite forms should contact counsel for assistance.