Cincinnati Enquirer...
Taxpayers funding benefits for big-company, government retirees
Health care law subsidizes coverage until Medicare age
Aug. 24, 2011 

WASHINGTON - Greater Cincinnati employers - including large companies and local governments - are getting millions of taxpayer dollars to help pay for health care benefits for early retirees, people who are often at risk of losing health care until they qualify for Medicare. 

Cincinnati-based Procter & Gamble, Kroger Co., Western and Southern Life Insurance Company and Cincinnati Bell are among the local companies who are using taxpayer dollars to subsidize health insurance benefits for their employees. 

• Find out which organizations have received funding through the Early Retirement Reinsurance Program 

So are other Ohio employers, from Columbus-based American Electric Power and Cleveland-based KeyCorp to the Public Employees Retirement System of Ohio and Sheet Metal Workers Local 24 in Cincinnati. 

The state of Kentucky also received millions, along with dozens of companies, school districts and cities in Indiana. 

The $5 billion Early Retirement Reinsurance Program is a little-known provision of last year’s health care reform law that was designed to encourage companies to provide health care to early retirees, which are people who retire in their 50s or early 60s before Medicare benefits kick in at age 65. Many people between 50 and 64 have health issues that can make it difficult to get affordable coverage on their own. 

The program is supposed to fill that coverage gap by encouraging employers to extend coverage for this group of people until a provision in the the health law kicks in that would ban insurers from denying coverage for pre-existing health conditions. 

Critics, however, call it an unnecessary bailout for local governments or a corporate “slush fund,” particularly for the large Fortune 500 companies that are benefiting. 

“Why in the flip are you giving out so much money of taxpayers so freely and overwhelmingly to companies that are very profitable?” Rep. Cliff Stearns, a Florida Republican, asked at a hearing he held in April. 

Companies didn’t have to demonstrate financial need to apply; they just had to have a health care program for early retirees and have to maintain those benefits until 2014. 

Steve Larsen, deputy administrator of consumer information and insurance oversight at the Center for Medicare and Medicaid Services, said that the program grew out of concern that early retirees would lose health insurance unless their employers got subsidies. 

Only 28 percent of large firms offered retiree health coverage last year, down from 66 percent in 1988, according to the Kaiser Family Foundation. 

“We want to make sure that companies that are currently providing early retiree benefits continue to do so,” Larsen said. “And this program helps ensure that they do that.”

P&G: An ‘obligation to our shareholders’

The program was supposed to run until 2014, when major aspects of the health overhaul law kick in, including a ban against insurers denying coverage for a pre-existing health condition. Many people between 50 and 64 have health issues that can make it difficult to get affordable coverage on their own, according to the administration. 

The early retiree program, however, stopped accepting applications in May after spending roughly half its funds in less than a year. It could run out of money next year unless Congress approves additional funding. 

The program has paid out nearly $142 million to 64 Ohio employers as of June 10. About half went to the Public Employees Retirement System of Ohio. Procter & Gamble, which makes household items like detergent and diapers, received $6.6 million - the most of any company in Ohio. Cincinnati Bell got $1.9 million; Western and Southern Life Insurance Company got $1.1 million; and supermarket giant Kroger got $678,167. 

Christine Wever, a spokeswoman for Procter & Gamble, pointed out that more than half of all Fortune 500 companies, all major unions and governments from all 50 states have submitted applications and received payments from the program. 

“The money P&G has received through this program has supported our efforts to continue offering these important health care benefits to our retirees and their families,” she said. “While P&G did not advocate the establishment of this program ... we have an obligation to our shareholders to participate in cost-savings programs when they are made available to us.” 

Cincinnati Bell said in a statement that it has about 2,400 retirees with health care coverage and funds from the program “help partially offset the rising costs of providing” that coverage. 

Spokesmen at Kroger and Western and Southern Life Insurance Company did not respond to requests for comment. 

Nine employers in Kentucky received $65 million, although most of that amount went to state government, which got $63.4 million. Some 63 employers in Indiana received about $16 million, including Columbus-based Cummins, which got $3.4 million, the most among all recipients in the state. 

Indiana’s Cummins capped the amount it would pay for retiree health benefits in 1996 and since then all increases in cost have been passed along to the retirees, said Janet Williams, spokeswoman for the diesel engine maker. 

Williams said the $3.4 million Cummins has received will be used to recalculate retirees’ share of health insurance costs and reduce their costs. More than 10,000 people are covered by Cummins’ retiree health care program. 

Outside the Tristate area, some corporations have received even larger payments. Telephone services provider AT&T has received $141.5 million, more than any other private company. Verizon ranks second with $91.7 million, followed by GE’s $36.6 million and Boeing’s $34.1 million. 

Gannett Corp., the parent company of The Cincinnati Enquirer and 10 other newspapers throughout Ohio, got $938,551.

‘A big-business subsidy’ 

Rep. Steve Chabot, a Westwood Republican, said this is one of several provisions in the health care law that may need further examination. 

“Earlier this year I voted for a full repeal of the health care law that was passed during the last Congress,” Chabot said. “While it was clear that our health care system needed reform, there are numerous provisions within this law that I, and a majority of Americans, are not comfortable with.” 

Other local lawmakers contacted for this story declined to comment. 

Ed Haislmaier, a health policy expert at the conservative-leaning Heritage Foundation based in Washington, said the program unfairly favors large companies because to qualify for the subsidy, companies must already offer early-retiree benefits. Small companies usually don’t, he said. 

“It’s very much a big-business subsidy,” he said. “There are a lot more people out there who don’t get this who will resent it, and they should.” 

But Timothy Jost, a health care expert and law professor at Washington and Lee University in Lexington, Va., said the program benefits retirees whose out-of-pocket insurance premiums might not be affordable. 

“It’s not intended to be a welfare program for companies,” Jost said. “Rather, it’s a program to help retirees, many of whom are in need and virtually all of whom would be in need if their retiree health benefits were terminated.” 

Other critics have focused on the program’s payments to state and local governments, which accounted for 56 percent of all payments last year, according to Republicans on the House commerce committee’s oversight panel. The subsidy amounts to a bailout for local governments, some Republicans say. 

In Ohio, the Public Employees Retirement System received $70.5 million, or about half of the total that went to the state. In Kentucky, state government got nearly all of the state’s share. 

Julie Graham-Price, a spokeswoman for PERS, said the federal program has helped Ohio provide health care benefits to public employees who retire before they are eligible for Medicare. Last year, more than 179,000 retired Ohioans got health care through PERS, including early retirees, she said. 

“Nearly 90 percent of those retirees live in Ohio spending the vast majority of that money on goods and services in the state,” she said. 

Tim Longmeyer, secretary of the personnel cabinet for Kentucky, said the state applied for the funding as soon as it was available. 

“We’ve been very aggressive in pursuing this program,” he said. “This funding allows us to provide better benefits at a lower cost than we otherwise would have. In tough economic times, it really helps tremendously.” 

In Kentucky, about 300,000 public employees and family members, including 45,000 early retirees, benefit from the health care plan. Because the premiums are pooled across the board, the extra funding benefits everyone, from teachers and police officers to prosecutors and cabinet secretaries, Longmeyer said. 

In Indiana, more than 170 schools and local governments have been accepted into the program, compared to the 67 businesses and unions that are benefiting. 

Read it at the Cincinnati Enquirer