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Health Care & Insurance

Insurance Break for Early Retirees

Uncle Sam will reimburse some medical claims.

Recent retiree Paul Murrell, 61, of San Francisco and Beaufort, S.C., is adjusting to life after work -- lots of travel and plenty of free time. What hasn't changed since he left Chevron (at least not much): Murrell and wife Sally's health-care benefits. "I'm really grateful to have access to a plan that's fairly well subsidized by the company," says Murrell. Without a company plan, early retirees can face exorbitant health-insurance costs until Medicare kicks in at age 65. But health-care reform aims to keep early retirees like Murrell covered, at least until 2014, when insurance exchanges are expected to provide affordable options to early retirees.

The new law provides a $5-billion kitty to reimburse employers who apply for the program. They can receive 80% of the cost of claims for retirees age 55 and older and not yet eligible for Medicare, up to $90,000 per individual, after the plan has met a $15,000 threshold for that retiree. The plan took effect in June, but earlier claims may be used to meet the threshold. Employers must use the reimbursement to reduce the cost of their plans, lower premiums for retirees, or both. Hewitt Associates consultant John Grosso says early retirees could see a material reduction in premium contributions. Another scenario is that premiums will hold steady, or at least not rise as much as they otherwise would have, given hefty increases expected in the cost of care. It's doubtful that the $5-billion kitty will last until 2014. But for now it'll slow the pace at which companies have been dropping the coverage they promised to early retirees.