HR 3962: Why is Government Insuring the Already Well-Insured?

HR 3962 provides current retirees with protection against reductions in retiree health benefits now offered by companies or employee organizations. Historically, this has been a popular benefit with unionized companies, particularly in manufacturing. This bill does not mean that such plans must continue the same benefits for current employees. Most retiree health plans will not be able to as they tend to be underfunded given usage patterns and health status. With the Cadillac health plans provided, these employees are accustomed to going to the doctor for every sniffle. These retirees also tend to have metabolic syndrome - obesity, diabetes and hypertension, as well as, cardiovascular disease and tend to need joint replacements to a greater degree than the general population.

However, retirees need not worry because under this bill the US government becomes the reinsurer of retiree health benefits. This means the US taxpayer will underwrite future benefits for these folks. Here's how it works: If the retiree has a large claim, the plan will pay the first $15 thousand in medical expenses. The government will pay 80% of the next $75 thousand in claims up to $90 thousand in claims. If there is a $90 thousand claiming a given year, the US Government will reimburse the plan $60 thousand or in this example 2/3 of the costs. Benefits will be paid from the Retiree Reserve Trust Fund, with $10 billion from the US Treasury. It would seem these people are better off than most retirees. What reason would our politicians in Washington have for being so generous with our tax dollars for people who already have retiree health benefits?

According to this legislation, the DHHS Secretary can stop taking applications for participation in the program or reduce payouts at any time to ensure the government reinsurance program does not exceed the appropriated  funds. This gives the government considerable leverage over private retiree health plans. It also gives the government considerable leeway in how to administer the trust fund, who may receive reimbursement and at what levels should the fund run out of funds. Given this $10 billion is a one time appropriation according to the CBO budget analysis  (Page 11), what happens when the money does run out? This would seem to place the current politicians in Congress in a powerful position for future elections with one of the most active and well-mobilized voting blocks.