Buried in the Health Care Law's Nearly 2,900 Pages: A Bailout for State Governments, Fortune 500 Companies, and Hollywood Unions

March 23, 2011

It has been one year today since Obamacare became law, and in that time, we have certainly continued to "find out what's in it." The latest revelation? A $5 billion bailout fund for state governments, Fortune 500 companies, and Hollywood unions that is rapidly going bankrupt after doling out half a billion dollars much more quickly than anticipated.... So far, fewer than 5 percent of the organizations "approved" to participate in the program have received funds.

So what is this mysterious $5 billion bailout? Known as the Early Retiree Reinsurance Program, it provides federal dollars to employers and unions that provide health coverage to early retirees. Like many provisions and accounting gimmicks in the health care law, it has largely escaped public scrutiny because of the sheer volume of programs and spending crammed into the law without scrutiny or Congressional oversight.

A new staff analysis prepared for Members of the House Energy and Commerce Committee details this $5 billion boondoggle that is barreling toward bankruptcy. Among the key findings:

•...What is it? Created in Section 1102 of the health care law, the Early Retiree Reinsurance Program provides subsidies to employers and unions for the cost of health expenses between $15,000 and $90,000 for early retirees.
•...How much does it cost? The program received $5 billion under the health care law -- the same amount of money the administration is providing for the high-risk pools that offer coverage for people with pre-existing conditions. For comparison, this is almost twice as much as the annual budget for the FDA and almost 14 times as much as the government spends on home and community-based support services for the elderly.
•...Who is getting bailed out? Among the organizations that received funding under this program in 2010 are Hollywood unions and large corporations. But where did most of the money go? More than half of the $535 million spent in 2010 went to government organizations, with a majority of the money going to just five states.
•...Why is the program going bankrupt? The program's $5 billion was supposed to last until 2014, but already, the Director of the Office of Insurance Programs at the Center for Consumer Information and Insurance Oversight projects the program will run out of money in 2012. Yet given the rapid clip at which the money is being shoveled out the door -- with more than 10 percent of the funds doled out to fewer than 5 percent of the approved participants in just the first few months -- committee staff predicts the money will run out even sooner.

With the public debate focused squarely on the spiraling costs of the federal budget, the future spending commitments required by the PPACA, and this administration's lackluster efforts to create job growth, committee staff was surprised to learn that the health care law would subsidize the early retirees of corporate America, Hollywood, state, county and municipal employees, as well as unions. It is inappropriate that a bill sold to the American people as health care legislation would contain a sweetheart deal for unions and Hollywood, and it is grossly inefficient that in troubling economic times the American taxpayer would be asked to subsidize the health care costs of massive corporations. The $5 billion government-corporate-union bailout -- just one more aspect of the law the American people are finding out about one year later.

The staff analysis of the Early Retiree Reinsurance Program is available online HERE.

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