Health Care Reform Encourages Employers to Help Early Retirees
People retiring before age 65, the eligibility age for Medicare, face a significant challenge when it comes to obtaining retiree medical insurance, as I explained in my recent post Health Care Reform: Don't Count on Retiring Early. But if you're in this camp, good news could be coming your way soon, due to a feature in health care reform.
A temporary program to reimburse employer-sponsored group health plans for some health care costs for early retirees will be one of the first initiatives launched under the new health care reform law. More specifically, a $5 billion fund will help offset certain high-cost claims of Medicare-ineligible retirees and their dependents. The reimbursements must be used to reduce plan costs, and can't be used as general revenue for the employer.
The program will reimburse the employer-sponsored group health plan up to 80 percent of an early retiree's plan-year costs, if those costs are between $15,000 and $90,000. Retired individuals age 55 and older who aren't eligible for Medicare coverage would be covered by this program. The reimbursement limits apply separately to early retirees' spouses and dependents. Eligible health care costs include medical, surgical, hospital and prescription drug costs.
This program is slated for implementation by June 21, 2010. The program will end by 2014, or sooner if its limited funding of $5 billion runs out before then. Many details of the program weren't specified by the health care legislation, so the U.S. Department of Health and Human Services will need to scramble to issue regulations to remove any uncertainties.
Many employers may move quickly to take advantage of this program to benefit their older workers. But other employers may need to see some interest from their older workers, so encouraging your employer to take advantage of this program could be an important part of your retirement planning. This reimbursement program could just be the necessary incentive some employers need to implement or improve medical insurance coverage for early retirees.
If you're considering early retirement in the next few years, I'd encourage you to follow and support this issue.
Image from iStockphoto contributor blaneyphoto
Steve Vernon
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Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops
and authored Retirement Game-Changers: Strategies for a Healthy, Financially Secure and Fulfilling Long Life and Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.
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