SO HEALTH CARE REFORM HAS FINALLY PASSED! Yet, missed amongst the clamor surrounding, “political partisanship”, “the funding of abortion” or “the Cadillac tax” there is a significant subsidy that may provide relief to plan sponsors struggling to reign in retiree healthcare costs. This provision, referenced as the “Reinsurance Program”, creates a “reinsurance” subsidy for plan sponsors of retiree health plans providing coverage for pre- Medicare retirees over the age of 55.

The Medicare Modernization Act of 2003 created an employer subsidy program (“Retiree Drug Subsidy” or “RDS”) for plan sponsors as an incentive to maintain their retiree drug plans in lieu of dropping the coverage and forcing retirees to a Medicare Part D plan. The Reinsurance Program appears to provide employers a similar incentive. The incentive under this program would be for employer groups to maintain the medical plans for their pre- Medicare eligible retirees in return for a significant subsidy.

The Reinsurance Program clearly benefits employers and industries that are union-dominated and saddled with rich and expensive retiree medical plans. Ironically, as the health care reform bills have been touched by so many special interests and tainted by the political reality of compromise, one of the remaining provisions, the “Cadillac tax”, may be neutralized by the subsidy (although at print, labor presumably has worked out a deal with the White House to exempt groups with collective bargaining agreements until 2018). The “Cadillac tax”, which imposes a 40% excise tax on plans with premium costs exceeding pre-established “threshold amounts”, would increase plan costs for many of the same plans eligible for the reinsurance subsidy. For plan sponsors with a considerable retiree population the effect is that every dollar of the retiree plan premium subject to the excise tax could be significantly offset by a corresponding subsidy. Read more…

A recent report from the Congressional Budget Office highlights the continual struggle of providing affordable health insurance to all Americans. Healthcare reform legislation recently passed by the Senate will cost over $800 billion while making significant regulatory and structural changes to the current health insurance system. While the goal of proponents is to extend coverage to the entire U.S. population, it appears that they will fall short in enacting universal health care.

Shockingly, only about 92% of people under 65% years of age will be insured by 2018. Many of the most drastic changes, such as a highly-regulated federal health insurance market with subsidies for low- and middle-income individuals, will not take effect for several years. Moreover, the nonpartisan office estimates that approximately 31 million currently uninsured Americans will have access to affordable health insurance due to the bill. Still, the estimates are sobering to Democrats; they are simultaneously providing ammunition to Republican politicians who claim that the costs are far too high to undertake a strategy that will not even work effectively. The White House points the finger at conservatives in Congress for blocking further expansions of coverage, while touting the Senate bill as a striking improvement from the status quo.

The primary question many have is this: how did so many uninsured individuals and families fall through the cracks? Despite the Senate’s bill clocking in at over 2,000 pages long, some groups are left out, either by accident or on purpose. The former group mainly consists of younger individuals–considered to be those under 30–in good health, a demographic which often chooses to forgo coverage even if affordable health insurance is available to them. Healthcare reform legislation includes a mandate that will soon make that choice more costly. As of 2014, individuals over a certain income level who refuse to buy health insurance will be fined. The goal is to have them become insured; not only is it necessary to avoid possible financial ruin in the event of a catastrophic medical emergency, but their inclusion is also needed in the health insurance pool to reduce medical costs. Read more…