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Leader's Edge Cash for Claimants

Qualified plan retirees between ages 55 and 64 are now eligible for free federal cash for claims—until it runs out.

By  Scott Sinder and Rhonda Bolton

One of the first programs to be rolled out under the landmark healthcare reform legislation is a reinsurance program for employers who provide health coverage to retirees age 55 and older who are not eligible for Medicare and to their spouses, surviving spouses and/or dependents. The legislation directed the Department of Health & Human Services to set up the program by June 21.

Under the terms of the new statutory reinsurance program, HHS will reimburse plans for 80% of the claim costs between $15,000 and $90,000 in a plan year incurred by any eligible retiree health plan participant. Congress appropriated $5 billion in funding for the program, and the program will end on January 1, 2014—sooner if the funding is consumed before then.

Any sponsor of a qualifying employer-based health benefits insurance plan may apply to participate in the reinsurance program. To obtain the reinsurance payments, a sponsor will be required to file a single application demonstrating plan eligibility; then, after being approved for the program, the sponsor can file reimbursement for claims above the $15,000 threshold.

Among other mandates, the application requires the plan sponsor demonstrate the following to establish eligibility:

· How the reinsurance reimbursement will be used to reduce premium contributions, co-payments, deductibles, co-insurance, or other out-of-pocket costs for participants; to reduce health benefit or health benefit premium costs for the sponsor; or to reduce any combination of these costs

· How the reinsurance reimbursement will be used to help the plan sponsor maintain its current level of contribution to the applicable plan

· How the procedures and/or programs the plan sponsor has in place have the potential to generate cost savings for plan participants with chronic and high-cost conditions

· That policies and procedures are in place to detect and reduce fraud, waste and abuse

· That a written agreement is in place with the health insurance issuer of a self-insured plan allowing required disclosures to HHS.

Plan sponsors interested in this program should begin assembling this information as soon as possible. This should include data on the dollar amount of claims paid for each eligible retiree plan participant (net of negotiated price concessions for health benefits) from January 1 to June 1, 2010. This information will be needed to initiate the claims process once a plan sponsor is certified to participate. HHS will count up to $15,000 in claims incurred before June 1, 2010, in determining whether a particular retiree has reached the threshold. But keep in mind that HHS will reimburse only for claims that are incurred after June 1, 2010, and that fall between $15,000 and $90,000. Applicants should also be prepared to provide a projection of the amount of reimbursement they expect to receive under the program for the first two plan-year cycles, with specific amounts for each of the two cycles. This will facilitate HHS’s program budgeting.

That the program ends when the funds run out highlights the importance of applying as soon as possible after the official application form becomes available. As with the popular Cash for Clunkers program, funds could be exhausted well before the program expiration date.

It is also critical to avoid submitting an incomplete application. HHS will process applications in the order they are received. Incomplete applications will be rejected and lose their place in the queue (and maybe their chance for any funds).

Interested sponsors should review HHS’s guidance on the program for more details on eligibility requirements, claims and reimbursements, recordkeeping and other obligations of program participants. Guidance is available at www.hhs.gov/ociio/regulations/gate.pdf. And, of course, monitor the HHS website for release of the official application at www.hhs.gov/ociio/regulations/index.html.

Sinder, a partner at Steptoe & Johnson, is CIAB General Counsel. Rhonda Bolton, is Of-Counsel at Steptoe.

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