Obamacare at Three Years: A Broke Program for Early Retirees

Alyene Senger / March 22, 2013

Newscom

Adding to the list of documented Obamacare failures (see here, here, here, and here) is the Early Retiree Reinsurance Program (ERRP).

Obamacare created the ERRP to provide employers and other health plan sponsors funding for insuring early retirees between the ages 55 and 65 and their dependents. Eligible plan sponsors would receive partial federal reimbursement for health benefit claims beginning in June 2010 until 2014, serving as a bridge program until Obamacare’s government-run exchanges are up and running.

As Heritage research pointed out in 2011, “Based on a report from the Obama Administration, the program appears to be mostly a bailout for public-sector and union health benefit programs for early retirees.” Indeed, that Administration report shows that of the approved ERRP sponsors, government plans accounted for 47 percent of total plans and union plans accounted for 10 percent.

The ERRP experience also provides another glaring example of how government grossly underestimates cost. The program ran into financing issues less than one year after it began. The Department of Health and Human Services (HHS) stopped accepting new applications to the program in May 2011. By December 2011, HHS had spent the $5 billion appropriated for ERRP and stopped paying claims for those already participating—two years before it was supposed to end!

In sum, as Heritage wrote, “Such a program clearly shifts the costs of paying for unsustainable promises made to public and private employees to federal taxpayers, and further underscores how the true cost of implementing the health care law exceeds original estimates.”

Government health programs are notorious for costing more than originally promised. The ERRP is likely just the start. In the time that has been wasted on Obamacare, the U.S. could have implemented real patient-centered health care reform. It’s not too late to get it right.