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Early Retirement Health Care: Do Your ERRP Homework

The Early Retirement Reinsurance Program (ERRP) has encouraged corporations to keep post retirement health benefits intact by subsidizing part of the costs in an effort to reduce premiums or increase claim reimbursements for early retirees ages 55-64. The program was funded with $5 billion in 2010, and corporations, both profit and non-profit, were entitled to apply for a grant. As expected, there have been so many applicants that it is likely the fund will be depleted before its intended 2014 expiration date.

Depending upon the open enrollment date for a particular post retirement plan. participants may have already seen the benefit of the ERRP in a reduction in premium increases. While a small reduction in premium is a welcome benefit to early retirees, if multiple plans are offered, the decision process can be more cumbersome than it was prior to retirement.

ERRP beneficiaries will often include their families: spouses and children up to age 26. If any dependents are out of state residents or live outside of the US, it’s important to determine if there is coverage there. Some health insurance is restricted to care in a specific area, so although the premiums may be less at the outset, it could be more costly in the end if the coverage area is restrictive. It’s likely that retiree health insurance will mirror what it offered to active employees, including the addition and deletion of some carriers each year.

Comparing the prescription component of early retirement health insurance options is critical for a retiree and family members. With the evolution of the “tier” system, the cost of prescriptions, both brand name and generic drugs, can be different depending upon the number of tiers. In some plans, the treatment needs to follow a progression of tiered generic prescriptions before a brand name or specialty drug is covered. Drugs in the tiers differ from plan to plan; some plans include specialty drugs in the top tier. A complete list of family medications both brand name and generic, updated regularly, is a critical determining factor each year when an early retiree chooses coverage.

Finally, depending upon the Supreme Court’s decision, health care for everyone could change. For additional information on ERRP, contact Ellen at EAB HealthWorks.