The Patient Protection and Affordable Care Act (the “Act”) provides for the establishment of a temporary reinsurance program that is meant to partially reimburse employers providing health insurance coverage to retirees over age 55, who are not yet eligible for Medicare, and their eligible spouses and dependents. This program will begin within 90 days following enactment of the Act (or June 23, 2010) and continue until January 1, 2014.
The program is intended to reimburse employers for the cost of providing certain “health benefits,” including medical, surgical, hospital, and prescription drug benefits, under an “employment-based” group health benefits plan that provides for early retiree coverage. Claims submitted for reimbursement must be between $15,000 and $90,000, and reimbursement itself is limited to 80% of the costs attributable to a claim that exceeds $15,000. Claims must be accompanied by documentation of the actual costs of items and services, and any payments received pursuant to this program are not includible in an employer’s gross income. Note that because there is a finite funding pool, the program is presumably “first-come-first-served.”
There is a catch: reimbursement amounts may not be used as general revenue by the employer sponsoring the plan. Rather, such amounts must be used to lower costs for the plan, which could include reducing premium costs or contributions, co-payments, deductibles, co-insurance, or other out-of-pocket costs attributable to the plan under which coverage is provided.
To date, no additional guidance has been published with respect to this program. Therefore, a number of gray areas remain, such as what it means for a plan to “implement programs and procedures to generate cost-savings for participants with chronic and high-cost conditions” (one of the requirements a plan must meet to be eligible for reimbursement) and how the appeal process will work. We will keep you posted.