Thursday, December 18th, 2014

The Obameter

Reimburse employer health plans for a portion of catastrophic costs

"Reimburse employer health plans for a portion of the catastrophic costs they incur above a threshold if they guarantee such savings are used to reduce the cost of workers' premiums."

Updates

Limited reimbursements in the final health care bill

It's been a while since we last reviewed President Barack Obama's campaign pledge to "reimburse employer health plans for a portion of catastrophic costs." At the time, we rated the promise In the Works, since both the Senate and House health care bills included a restricted version of the proposal.

Obama signed the Patient Protection and Affordable Care Act into law on March 23, 2010, so we wanted to see if the provision made it into the final bill. Turns out it did, but with a lot more restrictions than Obama envisioned.

Section 1102 calls on the Secretary of Health and Human Services to create a temporary early retiree "reinsurance program." Employees who retire after turning 55 but before being eligible for Medicare are at risk of having to cover the entire cost of insurance from their own pocket, since employers have been shedding their coverage programs for early retirees. That's where the government comes in. The bill created a $5 billion fund to encourage employers to maintain insurance coverage for workers who retire early.

Under the program, employers are eligible to receive an 80 percent reimbursement for health care costs between $15,000 and $90,000. Those numbers are important: In effect, employers will receive reimbursements only for retirees who have significant health issues. Some catastrophic illnesses, however, cost more than $90,000, and employers wouldn't see reimbursements for amounts over that.

The bill also calls on the HHS secretary to conduct annual audits of the claims data and prohibits employers from pocketing the reimbursements.

The program will run from June 1, 2010, until January 1, 2014, at which point the retirees will be able to choose from additional coverage options via the health care exchanges.

Obama promised to "reimburse employer health plans for a portion of catastrophic costs". The proposal made it into the health care bill that he signed, but the program is temporary, only covers early retirees and falls short of providing reimbursements for medical bills in excess of a certain amount. We rate this Compromise.

Sources:

U.S. Government Printing Office, final text of H.R. 3590, accessed May 17, 2010

The White House, FACT SHEET: The Early Retiree Reinsurance Program, May 4, 2010

Social Security Administration, SSA Legislative Bulletin: President Signs H.R. 3590, March 24, 2010

Kaiser Family Foundation, Summary of the New Health Reform Law, accessed June 29, 2010

U.S. Department of Health and Human Services, Regulations and Guidance, accessed June 29, 2010

Health bills include reimbursement plan, but it's limited

During the campaign, Barack Obama suggested reimbursing employer health plans for a portion of catastrophic costs as an element of his health reform plan.

Bills in the House and Senate include such reimbursements, but they include more specifics than Obama mentioned.

For one thing, the reimbursements apply only to retirees aged 55 to 64, an age range that is not eligible for Medicare. They also apply only to 80 percent of health costs between $15,000 and $90,000. Those numbers are important: In effect, employers will receive reimbursements only for retirees who have significant health issues. Some catastrophic illnesses, however, cost more than $90,000, and employers wouldn't see reimbursements for that.

The proposals do require that plans prove they are lowering costs for their other members, not just pocketing the reimbursement.

The health care proposals still need to be finalized and made into law, so we rate this promise In the Works.

Sources:

U.S. House of Representatives Energy and Commerce Committee, HR 3962 - the Affordable Health Care For America Act

U.S. House of Representatives Ways and Means Committee, HR 3962 - Section by Section

Senate Finance Committee, America's Healthy Future Act

Kaiser Family Foundation, Side-by-side comparisons of the major health care proposals

Interview with Edwin Park of the Center on Budget and Policy Priorities