Aug. 31 (Bloomberg) -- The Obama administration will deploy $5 billion to help defray companies’ costs for health insurance provided to early retirees who leave the U.S. workforce at ages 55 to 64.
The program, created with the health overhaul signed by President Barack Obama in March, will pay 80 percent of health insurance costs, up to $90,000 a year, for each early retiree.
Businesses led by financial services company Deutsche Bank Americas Holding Corp., food and beverage maker PepsiCo Inc., drugmaker Pfizer Inc., communications provider AT&T Inc., and carmaker General Motors Co. qualified for U.S. funds. About half of the companies in the Fortune 500 applied for U.S. funds to help cover costs for early retirees, the Obama administration said in a statement on HealthCare.gov.
“In these tough economic times, it is difficult for employers to keep up with skyrocketing health care costs for employees and retirees,” Health and Human Services Secretary Kathleen Sebelius said today. “The Affordable Care Act’s Early Retiree Reinsurance Program will make it a little easier for employers to provide high-quality health benefits to their retirees as we work to put in place market reforms to lower costs for all.”
About 29 percent of large companies that provided health insurance also offered retiree coverage last year, half the proportion that furnished this benefit in 1988, according to the Henry J. Kaiser Family Foundation, based in Menlo Park, California.
Nonprofit organizations, state and local governments and schools were included with companies in the first round of reimbursement applications approved today, according to the statement. Of those, 32 percent were from companies.
The money is offered on a first-come, first-served basis, and there is no limit on the number of eligible workers for which a company may claim reimbursement, as long as funds remain, the administration said. Companies can get the money for any worker whose health-care costs topped $15,000 a year.
“If they’re willing to make that investment, we’re going to help make that happen,” Sebelius said today at a news conference in Washington, where she appeared with executives from companies, unions and universities.
There is a rolling application process to seek reimbursement. Exact amounts allocated to individual companies haven’t been determined, and the administration doesn’t have an estimate on how long the money will last, Sebelius said at a press conference. The first payments will go to companies in the next few months.
Corning Inc., the world’s biggest maker of glass for flat-panel televisions, spent $60 million last year on retiree health benefits, Debra Waggoner, head of government affairs, said at the press conference with Sebelius.
Corning, based in Corning, New York, currently pays 75 percent of the cost for retired employees’ health premiums, Waggoner said. The retirees pay the remaining 25 percent, she said.
To contact the reporter on this story: Drew Armstrong in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Reg Gale at Rgale5@bloomberg.net