Kansas Health Institute | Information For Policy Makers. Health for Kansans.

TOPEKA — Sixteen states have been accepted into the Early Retiree Reinsurance Program, a $5 billion initiative that was included in the federal health reform law to help early retirees – not yet eligible for Medicare – maintain their health insurance.

Kansas is not among the 16 states in the program but has applied and is awaiting federal approval.

“We have applied, we just haven’t heard back yet,” said Peter Hancock, a spokesman for the Kansas Health Policy Authority, which administers the state employees’ health insurance program. “We’re waiting.”

The program, Hancock said, is expected to trim the state’s cost for early retirees’ health-insurance by about $2 million a year.

The federal reinsurance is temporary, slated to end once the other major coverage components of health reform become effective in 2014.

After Jan. 1, 2014, early retirees will be able to buy coverage – at less cost, presumably – through the state’s health insurance exchange.

Earlier this week, federal officials released a list of the program’s first 2,000 participants, a mix of large corporations, governmental units, labor unions, and nonprofit employers.

To be eligible, employers must offer their early retirees access to a health insurance plan.

The program will reimburse the employers for up to 80 percent of an early retiree’s claims that cost the plan between $15,000 and $90,000.

The program assumes the employer will use the reimbursement to maintain or lower early retirees’ premium costs.

For the programs initial participants, reimbursement is retroactive to June 1.

Eligible early retirees are employees who are at least 55 years old and not yet eligible for Medicare. Often, their retirements are driven by issues unrelated to work – caring for a disabled family member, for example.

For many early retirees, health insurance otherwise would be unaffordable.

“Our (early) retirees are allowed to stay on the city’s plan until they turn 65, but they have to pay all the costs. The city doesn’t pay part of it,” said Lori Carnahan, director of human resources for the City of Lawrence. “It’s expensive. The problem is, if they go out and try to buy insurance on their own it’s even more expensive and that’s if they can find someone who’ll insure them. They’re an at-risk group.”

Lawrence is one of three Kansas cities accepted into the program.

Nationally, studies have found that, on average, early retirees’ premiums are almost four times those in a typical, employer-backed health plan.

At a press conference Tuesday, U.S. Department of Health and Human Services Secretary Kathleen Sebelius said early retirees have become “...prime targets for insurance company discrimination.”

Sebelius said the program is expected to maintain – rather than lower – early retirees’ health care costs.

“The goal is not necessarily directly to lower retirees' health costs but to keep this very important coverage in place, knowing if they lose the coverage, their costs are going to skyrocket,” she said. “And they are often in a market where they either will have to be totally uninsured or pay double, triple, quadruple what they are paying right now to participate as an early retiree in their employer plan.

“So it's really to stabilize what has been a dwindling market for a very vulnerable group of individuals,” Sebelius said.

Seven of the 16 states participating in the Retiree Reinsurance Program have filed lawsuits challenging the Affordable Care Act’s requirement that most Americans have health insurance by 2014.

Those seven states are Arizona, Idaho, Indiana, Louisiana, Michigan, Nebraska and Nevada.

The other nine states in the program are Arkansas, Connecticut, Delaware, New Hampshire, New Jersey, New York, North Dakota, Tennessee, and Wyoming.

State and local governments account for 26 percent of the program’s initial participants. The remainder:

• Businesses - 32 percent.

• Labor unions - 22 percent.

• Schools and universities - 14 percent

• Nonprofits - 5 percent.

“We have received applications from more than 50 percent of Fortune 500 companies, all major unions, and government entities in all 50 States and the District of Columbia,” Sebelius said in a prepared statement issued prior to the press conference.

Kansas participants accepted so far are:

• Associated Wholesale Grocers, Inc.

• BAC Local Union 15 Welfare Fund.

• Blue Cross and Blue Shield of Kansas, Inc.

• Boilermakers National Health and Welfare Fund.

• Cement Masons & Plasterers Local 518 Health Care Fund.

• City of Lawrence.

• City of Leawood.

• City of Overland Park.

• Construction Industry Laborers Welfare Fund.

• Greater Kansas City Laborers Welfare Fund.

• IBEW Local Union No. 226 Open End Health and Welfare Trust Fund.

• International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers.

• Kansas Building Trades Open End Health and Welfare Fund.

• Koch Industries, Inc.

• Plumbing and Pipefitting Industry Health and Welfare Fund.

• Sprint Nextel Corporation.

• Kansas City School District 500.

• De Soto School District 232.

• Waddell & Reed, Inc.

• Water District No. 1 of Johnson County

• Westar Energy, Inc.

• Wolf Creek Nuclear Operating Corporation.