ERRP - We have to pass this bill so that you can find out what is in it.

This is a follow up to Bob’s Tapped Out post of December 13.

HHS has now reported that, thru December 2, the Early Retiree Reimbursement Program (ERRP) has paid out just over $4.5 billion or almost 91% of the authorized funds. This total amount was distributed among approximately 2,700 group sponsors of pre-Medicare retiree plans.

The HHS report shows that the UAW retiree trust has received over $387 million - which is, all by itself, 8.5% of the total distributed.

Other facts revealed in the report:

• There are 17 plans that each received more than $50 million, and together these 17 plans account for a bit over $1.9 billion, or about 42% of the total ERRP payments.
• Only 3 of these top 17 are corporate plans (Boeing, Verizon, and AT & T) - - the remaining 14 are either union funds or public employer retiree plans.
• There are 66 plans (including the top 17) that each received $10 million or more, and together these 66 plans account for almost $2.9 billion, or about 63% of the total ERRP payments.

If you scroll thru the entire HHS report, you'll see a large number of plan sponsors that are clearly union funds. Some of the corporate retiree plans in the report likely contain a lot of union retirees - for example, Verizon and AT & T probably contains a significant number of retired members of the Communication Workers of America; Boeing probably contains a large number of IAM and other union retirees too. You'll also see a large number of state and municipal plans that I'm sure also contain a lot of public employee union retirees. In other words, while it's not possible using this HHS report to pin down the exact share of the $4.5 billion that was paid to plans covering union retirees - it seems very unlikely that share is less than 50%.

About 12% of the US workforce is represented by unions.

Recall that ERRP's $5 billion funding was part of the health care reform act. The administration says that these funds were intended to provide financial assistance for pre-Medicare retiree group plan sponsors thru 2013 - keeping in mind that the exchanges and other main provisions of the reform act become effective in 2014. The attached document states that HHS stopped accepting new applications for these funds after May 6, 2011 - not even a year after the first applications were accepted. HHS has now announced that even the plans already approved will not be reimbursed for any claims incurred after December 31, 2011.

So how did it happen that the funding was exhausted so quickly? Was it just sloppy actuarial work?

I don't think so. Here's my guess – ERRP was never intended to do what the administration told us. Instead, it was intended all along as a big "thank you" to the unions (including public unions) that had helped with the 2008 election. I recall that the UAW submitted its complete application almost immediately - almost as though they knew in advance what to do. Other types of plans found out about ERRP in due course but in my opinion, payments to other plans were not part of the main intent. However those payments did serve a useful purpose as a smoke screen; I mean, an extra couple billion might cover the tracks nicely and what's another couple billion anyway?

Here’s an additional observation regarding the HHS notice. Its cover text includes 4 whole examples - count 'em, 4 - to illustrate how the ERRP payments "significantly benefitted employers across the country."

And here, verbatim, is what HHS says about these 4:

1. The City of Minot in North Dakota has over 2000 plan participants and has received $112,933 in ERRP reimbursements. As a direct result of these reimbursements the City was able to reduce 2012 premiums by 17 percent.

2. Silgan Containers Manufacturing, located in California, has received $246,152 in ERRP reimbursements. Silgan will use funding to offset claims costs by about 5 percent.

3. To date, Elkhart County in Indiana, has received $84,175 in ERRP reimbursements. They have been able to use this funding to help maintain coverage, and keep costs down, for over 1400 plan participants. Specifically, with the help of ERRP funds, Elkhart County was able to reduce employee and retiree premiums for 2011 and maintain that lower rate for 2012.

4. In Minnesota, East Central Energy has over 250 plan participants and has received $13,272.37 in ERRP reimbursements. East Central Energy has used ERRP funds to offset increases to claims costs by 7 percent.

These 4 plan sponsors appear to include fewer than 5,000 people and the total ERRP payout for these plan sponsors was less than $500,000. Yet the HHS report claims "ERRP has benefited over 5 million people to date" and has issued payments in excess of $4.5 billion..

Why does HHS offer examples including only one-tenth of one percent of the people it claims to have "benefitted ??? Why does HHS offer examples that comprise only one one-hundredth of one percent of the total payments? Is it because HHS tried but could not find better examples among the dozens of large plans that cover many thousands of people? Is it because HHS wants the public to believe that most of the money is going to small plans--rather than to the giant plans such as UAW and The Ohio Public Employee Retirement System? Is it because (as I suspect) there was some hidden agenda behind ERRP that has now been carried out? I doubt we’ll ever know why HHS chose such lame examples or learn whether there was, in fact, some hidden agenda.

Regardless, and whatever the explanation may be, the examples HHS offers are at BEST laughable.

"We have to pass this bill so that you can find out what is in it"

Yes ma’am, we remember. True then, true now.