ObamaCare’s ‘Reinsurance Program’ Runs Out of Money

ObamaCare’s ‘Reinsurance Program’ Runs Out of Money
January 19, 2012

Greg Scandlen

Greg Scandlen is a senior fellow of The Heartland Institute and founder and director of... (read full bio)

On January 1 yet another ObamaCare provision crashed and burned: the “Early Retiree Reinsurance Program” (ERRP), a $5 billion giveaway to unions, state and municipal governments, and corporations.

The idea was to encourage such entities to continue health benefits for early retirees (ages 55-64) until the wonders of ObamaCare kick in 2014. The program provided “reinsurance” of 80 percent of claims between $15,000 and $90,000.

Using the word “reinsurance” for this program is another case of Orwellian-speak by this administration. “Reinsurance” suggests the beneficiary paid a premium for the coverage. But in this case it was simply a matter of shoveling taxpayer money into the coffers of the chosen organizations.

The program began on June 1, 2010 and was supposed to last until January 1, 2014. But it turns out that getting free money was so popular that all the dough ran out by January 1, 2012—a mere 19 months. No more money will be distributed.

It will be interesting to see what happens next. Virtually all of these organizations have union contracts that require them to provide the benefits, so they are unlikely to suddenly drop the coverage.

Let’s take a look at who got the moolah in a few sample states—Illinois, Ohio, and Pennsylvania. These are the numbers as of December 2, 2011.

Illinois

In Illinois, 146 organizations received funds, with 34 of the grants going directly to unions and 31 to state or local governments. The organizations that received $5 million or more include:

  • Abbott Laboratories            $8,599,923
  • BOT of County Employees and Officers Fund            $6,177,913
  • BP Corporation            $16,179,320
  • Caterpillar, Inc.            $20,335,732
  • Chicago Transit Authority            $6,801,120
  • City of Chicago            $9,476,498
  • Deere & Company            $23,100,529
  • Exelon Corporation            $11,995,923
  • Kraft Foods            $5,401,682
  • Millercoors LLC            $5,899,012
  • Motorola, Inc.            $5,076,088
  • Navistar, Inc.            $13,392,799
  • Public School Teachers Pension Fund            $5,790,870
  • The Boeing Company            $50,160,905
  • United Airlines            $13,983,605

Ohio

In Ohio, 105 organizations received funds, with 36 of the grants going directly to unions and two to state or local governments. The organizations that received $5 million or more include:

  • Bridgestone Americas, Inc.            $5,144,493
  • Firstenergy Corp.            $6,125,591
  • Ohio Public Employees Retirement System            $180,084,872
  • Police and Firemen’s Disability            $16,870,013
  • State Teachers Retirement System            $75,998,236
  • The Proctor & Gamble Company            $19,186,151
  • The Timken Company            $5,378,873

Pennsylvania

In Pennsylvania, 147 organizations received funds, with 24 of the grants going directly to unions and 57 to state or local governments. The organizations that received $5 million or more include:

  • Alcoa, Inc.            $17,404,025
  • Commonwealth of Pennsylvania            $32,192,146
  • GlaxoSmithKline, LLC            $7,641,945
  • Retirees of Goodyear Tire & Rubber            $7,362,723
  • Steelworkers Health & Welfare Fund            $7,720,376
  • United States Steel Corporation            $11,752,168

As noted, the entire $5 billion was depleted in just 19 months instead of the 43 months originally projected. That is swell for the organizations that received the money, but now we are right back where we started.

All these organizations now have to pay for the benefits themselves or drop their coverage. But most are forbidden from dropping coverage because of union contracts. Perhaps they will have to renegotiate these contracts—which is what they should have done 19 months ago.

Greg Scandlen (gmscan@comcast.net) is an independent consultant to the National Center for Policy Analysis, The Heartland Institute, and healthcare organizations. Used with permission from the NCPA’s Health Policy Blog.

Greg Scandlen

Greg Scandlen is a senior fellow of The Heartland Institute and founder and director of... (read full bio)