The Secretary of Health and Human Services (“HHS”) released the temporary regulations related to the Early Retiree Subsidy Program earlier this week that are intended to take effect June 1st, 2010. The full text of these regulations can be viewed online at:
The regulations borrow heavily from the Retiree Drug Subsidy process, which we at Part D Advisors are intimately familiar with.
Immediate Action: By June 1st, Be Prepared to File an Application
Many sponsors of early retirement plans are going to file applications, beginning as early as June 1. If they do not get in early or file defective applications, they will likely not get any money.
The Regulation says:
Before a sponsor may submit claims and make a reimbursement request, the sponsor’s application must be approved by the Secretary. Applications will be processed in the order in which they are received. Because funding for this program is limited, we expect more requests for reimbursement than there are funds to pay the requests…. It is therefore of paramount importance to applicants that they submit complete applications upon their first submission, otherwise there may not be an opportunity to submit a new and complete application.
What Must an Application Contain to be Accepted?
The following are the filing requirements for applications specified in the Regulation, followed by our summary interpretation of what the requirement is and how it may be satisfied:
1. The applicant must submit an application to participate in this program to the Secretary, which is signed by an authorized representative of the applicant who certifies that the information contained in the application is true and accurate to the best of the authorized representative’s knowledge and belief.
Ø We believe that this will be the same process as is currently used for the Retiree Drug Program. If so, a high ranking officer of the plan sponsor will have to get onto a yet to be established web site for the Early Retirement Program and electronically sign a two to three page “sponsor agreement” containing many obligations and duties for the plan sponsor (described below) and verifying the accuracy of the information in the application.
2. An applicant must submit an application for each plan for which it will submit a Reimbursement request.
Ø This will require that a plan sponsor identify each separate medical or drug plan and prepare a separate application for each. For private employers, this may not prove too difficult because that can look to their ERISA Forms 5500 or, perhaps, the Summary Plan Descriptions to identify each plan. For governmental employers who are not subject to ERISA, this may prove to be a more difficult task.
3. In connection with each application the applicant must submit the following:
a. Applicant’s Tax Identification Number,
b. Applicant’s name and address,
c. Contact name, telephone number and email address.
Ø While this information should be readily available, Care will need to be taken to properly identify who is the “applicant.”
Ø For example, in some cases, it will be the sponsor of the retiree medial plan, who typically is the employer. In the case of Taft-Hartley Trust Funds it should be the Fund. In the case of governmental employers, however, the governmental unit who employed the early retiree may or may not be the sponsor of the retiree health plan.
4. The applicant must submit an assurance that the sponsor has a written agreement with its health insurance issuer or employment-based plan, as applicable, regarding disclosure of information to the Secretary, and the health insurance issuer or employment-based plan must disclose to the Secretary, on behalf of the sponsor, at a time and in a manner specified by the Secretary in guidance, information, data, documents, and records necessary for the sponsor to comply with the requirements of the program.
Ø This requirement is again taken largely from the Retiree Drug Subsidy Program. It has several purposes. First, to make sure HIPAA is not violated by giving employers access to “protected health information”. Second, to make sure HHS will have access, for six years, to all of the records and data used to calculate and collect the Early Retirement Subsidy.
5. The applicant must submit an acknowledgment that the information in the application is being provided to obtain Federal funds, and that all subcontractors acknowledge that information provided in connection with a subcontract is used for purposes of obtaining Federal funds.
Ø Another requirement borrowed from the Retiree Drug Subsidy Program. Its purposes is to make sure that all entities involved in applying for an Early Retirement Subsidy are on notice that their efforts are for the purpose of obtaining money from the Federal government and that they may be held liable for significant errors.
6. The applicant must submit an attestation that policies and procedures are in place to detect and reduce fraud, waste, and abuse, and that the sponsor will produce the policies and procedures, and necessary information, records and data, upon request by the Secretary, to substantiate existence of the policies and procedures and their effectiveness.
Ø Most administrators and claim processors for medical plans will have documented fraud, waste and abuse programs and reports explaining their effectiveness. These are the documents that the applicant must have and be prepared to supply to HHS upon request. If such programs do not exist, they must be established before an application can be filed.
7. A summary indicating how the applicant will use any reimbursement received under the program to meet the requirements of the program including:
a. How the reimbursement will be used to reduce premium contributions, co-payments, deductibles, coinsurance, or other out-of-pocket costs for plan participants, to reduce health benefit or health benefit premium costs for the sponsor, or to reduce any combination of these costs;
b. What procedures or programs the sponsor has in place that have generated or have the potential to generate cost savings with respect to plan participants with chronic and high-cost conditions; and
c. How the sponsor will use the reimbursement to maintain its level of contribution to the applicable plan.
Ø This is a critical part of the application which, if done incorrectly, may result in the application being rejected and no Early Retirement Program payments. It is beyond the scope of this summary to detail all of the issues involved in preparing this statement except to say that HHS will want assurance that the employer/plan sponsor will not directly benefit from the payment of Early Retirement Subsidies but rather will make sure either the early retirement plan or plan participants will be the beneficiaries of the Federal payments. (Of course, if the medical plans costs are reduced, there should be a benefit to the employer/plan sponsor.)
Ø Again, most administrators and claim processors for medical plans will have documented chronic disease programs and reports explaining their effectiveness, although sometimes they do not emphasize the cost savings to participants. These are the documents that the applicant must summarize and be prepared to supply to HHS upon request. If such programs do not exist, they must be established before an application can be filed.
8. Projected amount of reimbursement to be received under the program for the first two plan year cycles with specific amounts for each of the two cycles.
Ø Essentially, this is an estimate of large claims by Early Retirees over the next two years. The purpose being to give HHS an idea of how fast the $5 billion will be paid out. We believe that HHS may stop taking applications when the estimate on filed applications exceeds $5 billion.
Ø Estimates can be made based on a medical prescription drug plan’s claims history for its Early Retiree population. We believe, however, that at least for application filed in June, that applicants should be able to use nationally recognized health cost surveys for early retirees and reasonably apply those results to their own plans, perhaps with the assistance of a health actuary. There should be additional guidance on this question within the next two weeks.
9. A list of all benefit options under the employment-based plan that any early retiree for whom the sponsor receives program reimbursement may be claimed.
Ø This is another concept borrowed from the Retiree Drug Subsidy Program. Our experience is that this is not as difficult a task as might first appear.
10. Any other information the Secretary requires.
Ø This requirement speaks for itself. Again, we expect more guidance within the next two weeks so that applications can be filed in June.
As you can see there is a tremendous amount of information, which must be compiled to file a completed application by early June.
Plan sponsors must start today compiling the required information, which will give them the opportunity to file an application for the possibility of receiving part of the $5 billion Early Retiree Subsidy. Please contact us with any questions or if we can be of any assistance.
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