The Center for Consumer Information & Insurance Oversight

The Affordable Care Act's Early Retiree Reinsurance Program

Rising health care costs have made it difficult for employers and unions to provide quality, affordable health coverage for workers and retirees while also remaining competitive in the global marketplace. The percentage of large firms providing workers with retiree health coverage dropped from 66 percent in 1988 to 29 percent in 2009.1. Many Americans who retire before they are eligible for Medicare without employer-sponsored health coverage see their life savings disappear because of medical bills and exorbitant rates in the individual health insurance market. Health insurance premiums for older Americans are over four times more expensive than those for young adults,2, and the deductible these enrollees pay is, on average, almost four times that in a typical employer-sponsored insurance plan.3

The Affordable Care Act creates a new program called the Early Retiree Reinsurance Program to help address this challenge that employers and older employees are facing. The Early Retiree Reinsurance Program (ERRP) provides much-needed financial relief to businesses, schools and other educational institutions, unions, State and local governments, and non-profits, in order to help retirees and their families continue to have quality, affordable health coverage.

Applicants who are approved to participate in the program receive reinsurance for the claims of high-cost retirees and their families. Approved applicants can use these funds to provide premium relief and other health care cost relief to their retirees and workers and their families, to offset increases in their own health care premiums or costs, or for a combination of these purposes. 

Strong Nationwide Interest in the Program

There has been a tremendous amount of interest from businesses and organizations from across the country since the Early Retiree Reinsurance Program was announced just a few months ago in April. The Department of Health and Human Services has received applications from more than 50 percent of Fortune 500 companies, all major unions, and government entities in all 50 States and the District of Columbia.

In the first few months of the program, nearly 3,000 applications were approved representing a wide range of organizations that are interested in support from the Affordable Care Act to provide health care coverage to their early retirees. Applications have been approved in every State and the District of Columbia, and more applications are being reviewed every day. Starting in October, they will begin to submit claims and receive reinsurance payments on those claims.


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The approved applications represent nearly every sector of the economy: 32 percent of applications came from businesses, 26 percent from State and local governments, 22 percent from union sponsors, 14 percent from schools and other educational institutions, and 5 percent from non-profits.