29 to get insurance subsidy

Federal money will help some North Carolina employers pay for early retirees' health coverage.

Staff WriterSeptember 1, 2010 

More than two dozen businesses and nonprofit groups in the state will receive federal health care subsidies to offset the cost of insuring their retirees.

The subsidies, announced Tuesday, are the first visible sign of the recently passed Affordable Care Act. The insurance subsidies were added to the new health care law to encourage employers not to cut or drop health benefits for their former workers - and to appease the business lobby's concern about the overhaul's effect on profits.

The 29 organizations selected in this state - which include city governments, universities and Fortune 500 corporations - are just the first wave of employers that hope to benefit from the program. They are among nearly 2,000 employers nationwide named so far that are vying to divide the $5billion pot.

Some employers passed up the opportunity, which required a time-consuming federal application without a guaranteed payout. The effort cost Duke University as much as $20,000 in time and labor, said Kyle Cavanaugh, Duke's vice president of human resources.

The applicants don't know how much money they will receive until they submit details on health costs later this year to the U.S. Department of Health and Human Services. Duke University estimates it could receive up to $1 million to help defray the cost of insuring more than 1,000 retirees.

"This allows us to continue to stand in line," Cavanaugh said. "The number was large enough for us to stay engaged and pursue it."

Nationwide, about 1.3 million retirees and dependents are still covered by employer insurance programs, according to the Employee Benefit Research Institute, a nonprofit in Washington. These people can be difficult to insure because of their age and high health care costs.

According to federal statistics, businesses were dropping those benefits even before the recession. Between 1998 and 2008, the percentage of large companies that offered the plan fell from 66 percent to 29 percent.

The health care law is expected to render retiree coverage obsolete because the new national system will prohibit insurers from charging extra for pre-existing conditions. There will be subsidies for people until they are eligible for Medicare.

The employers who applied for the subsidies in this state include Progress Energy in Raleigh, Duke Energy in Charlotte, Durham County government, nonprofit Research Triangle International in RTP, Lorillard Tobacco in Greensboro and Boddie-Noell Enterprises, the Rocky Mount company that runs Hardee's and other restaurant chains.

The subsidies are designed for early retirees aged 55 to 64 who are not yet eligible for the federal Medicare program. The subsidies pay up to 80 percent of annual medical and drug costs between $15,000 and $90,000 per early retiree. Employers are responsible for all costs for the first $15,000 of coverage.

The $5 billion in subsidies will offset about 25 percent of the cost of insuring early retirees and their dependents over two years, said Paul Frontstin, the institute's director of health research.

Progress Energy has 2,600 retirees and 2,600 dependents on its early retiree insurance plan. But 300 to 350 are expected to incur costs above $15,000 and qualify for the subsidies, company spokesman Mike Hughes said.

Novant Health, a nonprofit hospital chain in Winston-Salem, estimates that 95 of its early retirees will qualify for about $300,000 in subsidies over two years.

john.murawski@newsobserver.com or 919-829-8932

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