In 2013, yet another financial challenge will befall the baby boomer generation as the $5 billion Early Retiree Reinsurance Program, funded under the Affordable Care Act, expires in 2013, to be followed by health insurance exchanges for individual coverage. Self-funded employers have used the subsidy program to help with the costs of premiums for those aged 55-64. The subsidy program was quickly embraced by employers and ERRP stopped taking new applications in May.
Now, a new survey from HighRoads, a health care regulation and compliance company, shows employers are not planning any short-term changes. However, 79 percent did take advantage of the subsidy, indicating they will have to re-evaluate costs once the subsidy expires.
The HighRoads survey set out to determine the impact, if any, to retiree medical plan strategies as a result of the ERRP subsidy and the change in tax liabilities for the Retiree Drug Subsidy Program. Respondents ranged in size from 5,000 employees to 100,000+ employees. The average respondent has between 25,000 and 50,000 employees.
For the majority of respondents, the ERRP either buys time to re-evaluate retiree medical plan strategies or has little impact on current strategy. HighRoads’ survey found that 63 percent indicate that the ERRP subsidy has little current impact on their retiree medical strategy. Of the companies for which the ERRP subsidy plays into their retiree medical strategy, most indicate that the subsidy buys them time to make changes to the retiree medical strategy.
Another 60 percent say the elimination of the deduction for retiree prescription drug expenses will not result in a change to their retiree prescription drug benefit.
The looming question is whether an individual will be able to get retiree group health insurance from their employer after 2014, according to HighRoads. Across the board, employers are cutting retiree costs: The U.S. Postal Service announced in June it was suspending its contributions to its employees' pension fund. The Postal Service makes an annual payment of more than $5 billion as an advance contribution to future retiree medical costs. Around the country, public workers in many states are battling with pension and benefits issues.