Employers who still want to participate in the Early Retiree Reinsurance Program (ERRP) through HHS/CMS will have to get their applications submitted quickly. Although the program has proven quite popular – as of last month, HHS had approved approximately 5850 applications – one of the concerns from the beginning was that the $5 billion allocated to the ERRP might not be sufficient to last until 2014. HHS said from the start that they would only accept applications as long as they had enough available funding. They have now announced that they will not accept any new applications after May 5, 2011.
Health insurance can be a major hurdle for people who want to retire before age 65, when Medicare eligibility begins. If the former employer does not provide early retiree health insurance coverage, the employee will have to search for a policy in the individual market. The two main obstacles there are cost and underwriting. Health insurance premiums are based largely on age, and are much more expensive for people in their late 50s and early 60s. To illustrate this, I ran a quote for two imaginary women living in northern Colorado – one 32, the other 62. Premiums varied considerably depending on the coverage selected, but the policy options for the 32-year-old ranged from $39/month to $470/month, while the policy options for the 62-year-old ranged from $123/month to $1191/month. In addition, the older we are, the more likely we are to have pre-existing conditions, and this can complicate the process of obtaining individual health insurance. As of 2014, all individual policies will be guaranteed issue. But for the next few years, early retirees who don’t have health insurance provided by their former employers will still have to qualify medically for an individual policy.
Because individual health insurance can be difficult to get (depending on the person’s health) and quite expensive for early retirees, many people who are contemplating early retirement depend on their employer’s continued support with health insurance in order to retire. The Early Retiree Reinsurance Program is helping employers continue to offer health insurance coverage to their retirees who don’t yet qualify for Medicare. Obviously the program could have used a lot more funding, but that is the case with most government programs, and there’s only so much money to go around.