Broken Promise #2: ERRP Would Last until 2014

Mar 20, 2012

The health care law has plenty of acronyms like CLASS and IPAB. I even call the Patient Protection and Affordable Care Act, PPACA for short. There’s another acronym that’s less-well known, the Early Retiree Reinsurance Program (ERRP).

It’s the subject of today’s broken promise: “The Early Retiree Reinsurance Program would last until 2014.”

ERRP was a temporary program that helped employers pay for health insurance for early retirees age 55 and older until they’re eligible for Medicare. It was designed to be a bridge until state-based health insurance exchanges began operating.

The administration cheered:

  • In April 2010, Health and Human Services (HHS) Secretary Kathleen Sebelius touted ERRP as making it “easier for employers to give benefits to the workers who made their companies strong, and give retired workers the peace of mind that comes with quality health insurance.”
  • In May 2010, White House advisor Valerie Jarrett wrote that “this program will provide premium relief for employers, making it easier to give their retirees high-quality, affordable medical coverage.”
  • In June 2010, then Commerce Secretary Gary Locke, wrote that ERRP was “good for business.” Two months later, Secretary Locke was pleased with the “tremendous amount of interest from businesses and organizations from across the country” for ERRP.

Being a temporary program, ERRP’s $5 billion was intended to last from June 1, 2010 to January 1, 2014 when the exchanges came online. However, Centers for Medicare & Medicaid Services (CMS), the agency that runs ERRP, stopped accepting reimbursement claims as of December 31, 2011 and stopped paying claims in February.

The reason? ERRP ran out of money.

The majority staff of the House Energy and Commerce’s Subcommittee on Oversight and Investigations did some math and found ERRP spent 91% of its budget--intended to last 1,310 days—in 579 days.

If ERRP’s costs were incorrectly anticipated, what does that mean for the entire health care law? How much should we expect costs to go up? How much will it add to the deficit?  If, as purported, the PPACA was about taming out-of-control health care costs, ERRP could be foreshadowing the future.

Beyond the important fiscal problems, there’s the human problem. Imagine being a business that expected ERRP to last until 2014? Now, they have to figure out how to cover the additional health insurance costs for their early retirees. That means less for new investments and jobs.

Also, imagine being a 61-year old retiree who thought they would be fine until the health exchanges start? Their former employer might not be able to afford the added costs, and they’ll have to buy health insurance in the more-expensive individual insurance market.

In both cases, there’s more uncertainty, anxiety, and higher costs—all because of another broken promise.

And now, another appropriate musical interlude:

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