Benefits for Early Retirees in the Affordable Care Act

Early retirement, considered to be between the ages of 55 and 64, has its own set of issues to deal with regarding health insurance coverage.  New measures enacted through the Affordable Care Act (ACA) and signed into law last year will eliminate a lot of these concerns and ease people into retirement with secure options, at least until the law sunsets on January 1st, 2014.   On May 5, 2010, HHS released an Interim Final Rule  referred to as the Early Retiree Reinsurance Program (ERRP) that will directly address retiree issues related to health care coverage.

Early retirement is often forced upon this aging population due to illnesses that stem from chronic diseases.  Prior to the enactment of ERRP most early retirees could only look towards COBRA (Consolidated Omnibus Budget Reconciliation Act) for reasonably priced, post-employment health care coverage. If you are dismissed from your job for other than gross misconduct, or if your work hours are reduced to the point that you are no longer eligible for coverage, COBRA health benefit provisions are available to you.

COBRA is the government-funded health insurance for people who are laid off, allowing them to access health insurance for themselves and their dependents when they have lost their company-provided insurance, at affordable rates, for at least 18 months. Apart from this, your only option becomes to find health insurance on your own in the private market; an option that has been fraught with headaches for early retirees – until recent health care reform was passed.

This age group is more likely than others to have some pre-existing health condition that, prior to the passage of the ACA, would most likely remove them from coverage consideration by the private sector. The new requirements for private insurers no longer permits this type of discrimination nor will they be allowed to increase premiums for any policy holder they have if they become sick under the coverage they initially signed up for.

Another problem that has plagued early retirees is their loss of health care coverage as a result of vanishing retirement packages that companies have traditionally offered their employees. Large firms (200+ employees) saw a drop of 12% from 1991 to 2001 and smaller companies (3-199) saw a drop of 6% according to a study done with the data from the Kaiser/HRET survey of human resource and benefits managers in public and private-sector organizations. New proposals under the health care reform bill allow federal assistance to relieve this loss of coverage resulting from diminishing employer-funded retirement programs.

With the new ERRP guidelines, those retirees 55 or older, along with eligible spouses, surviving spouses, and dependents of such retirees and who are not eligible for Medicaid, may me eligible for this coverage if one or more of their employers have opted to participate in this program.  A current list of these participating employers, which is up-dated monthly, can be found at the website here. The program is aimed at providing health care coverage for those with chronic and high-cost conditions, health issues that would likely not be covered in basic plans.  Regardless if your were employed by a private employer, state or local government, educational institutions, unions or non-profits, ERRP will cover you if your employer has applied for this assistance.

It should be clear that this is coverage that retirees themselves cannot apply for.  It has to a part of an employer-based program that the retirees works through, with all claims being processed through the Health and Human Services Department.

Logo of the United States Department of Health...

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To be eligible the claim must not be less than $15,000 nor greater than $90,000.  These amounts also reflect any out-of-pocket expenses by the retiree or his family.  The plan pays 80% of these costs so if the retiree can afford it, a good supplemental plan to allay the remaining 20% should be considered

Once the provisions of ERRP have expired on 1/1/2014 further relief will come in the form of an “exchange pool” that will be implemented under federal guidelines. Though they have been available to retirees 6 months after the original health care reform bill passed in March, 2010 they become open to all who voluntarily seek them after January 1, 2014.   This exchange pool is a collection of private sector companies that will compete to offer a variety of plans with premium rates and deductibles that suit the individual consumer.

Further assistance is available for those whose resources are scarce paying for long-term health care through federally funded Consumer Assistance Programs(CAPs).  Only 40 states have applied for this assistance however so check this site here to see if your state is a participating member.

Finally, along with the general population, early retirees will not only benefit from those parts of the bill that address their needs but will also share reduced costs that come from the bill’s efforts to streamline paperwork, utilizing easy-to-read forms and processing it all in rapidly available, computerized medical records for doctors and nurses. Stuck in limbo for too long, early retirees can now find some relief through these new measures. With incomes insufficient to buy practical and cost-effective policies, most retirees will no longer have to face purchasing low-cost policies that have limited coverage and high deductibles or being forced to go without altogether.

Preventive care measures are also a part of the new health care reform. Though this 55-64 age group is most likely to have undergone some health treatments for illnesses or physical damage earlier in life, many are relatively healthy and fit currently, needing only encouragement to practice preventative health measures to maintain these conditions. The new reform will cover some of those costs associated with preventive services. Health maintenance is an assurance that more serious and costly potential health care issues will be kept in check as we age.

One of the hallmark’s of the Affordable Care Act is the Community Living Assistance Services and Supports (CLASS) Act, the pet project of the late Senator Edward Kennedy. Early retirement due to ill-health often carries over to expensive long-term health care that has limited coverage under Medicaid, Medicare and standard private health care insurance policies. McKnight’s Long-Term Care News, a business news magazine serving the institutional long-term care field, reported that the CLASS Act offers some relief by creating a voluntary long-term care insurance program that will help defray some of the costs of those who currently use this limited coverage under Medicaid.

Spending on U.S. healthcare as a percentage of...

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The current costs of private sector long-term health care coverage are out of reach for the average American. The costs increase dramatically if you have to be put in a nursing home facility.

In a 2010 issue of AARP magazine (March /April), an article by Mary A. Fischer pointed out that long-term health care requiring a stay in nursing homes averaged “2.5 years and costs about $175,000. In 2008, the most recent year for which numbers are available, 9 million older people required long-term care. That number is expected to reach 12 million by 2020 as the boomer population ages. Currently, only about 8 million Americans have private long-term-care insurance, leaving the government to underwrite care at an enormous cost to taxpayers.”

Stay in touch with what’s new in health care reform and available to you through programs that have arisen through ARA legislation by visiting the website routinely.  Get involved too by making your state and federal legislators know how you feel about their efforts to strengthen or weaken these provisions.  Right now the GOP in both houses of Congress are trying to eliminate all of the benefits that retirees, seniors and young at-risk adults currently have under this bill without any plans to offer a suitable alternative.


Bricker and Eckler Legal website


4 responses to “Benefits for Early Retirees in the Affordable Care Act

  1. I hope this new coverage remains and is not somehow repealed. COBRA is very expensive and with a pre-existing condition out of reach for many people. If someone can or is forced to retire early, retirement should come with affordable health care. Great post.

  2. Agreed, thanks for the informative post. Any predictions on whether the Supreme Court is going to jump into the fray, and if they do, what they might decide?

    • From what I can gather Ron the lawsuits by some 28 states to get the ACA nullified may not reach the Supreme Court for a couple of years. If and when it does it’s a pretty sure bet that Scalia, Thomas, Roberts and Alito will line up with their conservative state AG’s to strike it down as unconstitutional, in part or in whole. That means Justice Kennedy could be the single vote in the nation that this historical piece of legislation could turn on.

      The one that thing that may work in our favor to get Kennedy to vote with the more liberal members of the court, at least for everything except the individual mandate, is that after 2 years it becomes clear that this bill is not the threat to society that the right has been portraying it has and in fact has benefitted millions of Americans.

  3. Federal funds will end in 2014 and employers will tell their “early retirees” to buy insurance from the “exchange pool”. I expect employers will reduce or totally cut their contributions to buy health insurance.

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