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When $5 Billion of Your Taxes Is “Free Money”

According to an internal memo from the majority staff of the House of Representatives’ Subcommittee on Oversight and Investigations (requires Adobe):

“The Early Retiree Reinsurance Program (ERRP), a $5 billion fund hailed as one of the key early benefits of the Patient Protection and Affordable Care Act (PPACA), will exhaust its resources long before the planned sunset on January 1, 2014, according to information provided by the Center for Consumer Information and Insurance Oversight (CCIIO).”

The internal memo adds:

“The ERRP was established by Section 1102 of the PPACA.  The PPACA created two programs to act as a bridge to the new health insurance exchanges that would begin in 2014: the temporary high-risk pools for individuals with pre-existing conditions and the ERRP. The PPACA appropriates $5 billion to each of these programs, for a total of $10 billion . . . the ERRP was intended to address trends that have led employers to reduce or eliminate health benefits for early retirees.”

Yet Greg Scandlen writes the following about this ObamaCare program at John Goodman’s Health Policy Blog yesterday:

“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. So, no more money will be distributed, alas.

“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.”

Citing a news report from Kaiser Health News, Peter Suderman, associate editor of Reason magazine, notes in a December 12 blog post that the fund “will stop taking claims for expenses incurred after Dec. 31 because it is running out of money, according to a notice Friday in the Federal Register.” Suderman also provides a link to the internal memo cited above as well as a link to an article he wrote about ERRP that appeared in the April issue of Reason.

And where did the $5 billion go? Scandlen uses data from the internal memo to list who received ERRP money in Illinois, Ohio, and Pennsylvania, just to name three states. Here are what he shows for Ohio:

"In Ohio, 105 organizations received funds, of which 36 went directly to unions and 2 went 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 1-- $16,870,013
  • State Teachers Retirement System -- $75,998,236
  • The Proctor & Gamble Company -- $19,186,151
  • The Timken Company -- $5,378,873"

Scandlen ends his post saying:

“So again, the entire $5 billion was depleted in just 19 months, instead of the 43 months originally projected. That is swell for the organizations that got the money, but now we are right back to where we started. All of 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.”

To paraphrase one popular news media outlet, we report, you decide.

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