Bloomberg News

U.S. Will End $5 Billion Subsidies for Retiree-Health

December 14, 2011

(Corrects amount for United Auto Workers in fourth paragraph.)

Dec. 9 (Bloomberg) -- A $5 billion program to help companies such as AT&T Inc. pay health premiums for retirees under age 65 will end because it’s almost out of money, the U.S. said.

Claims to the reinsurance program filed after Dec. 31 will be rejected, the U.S. said today in a notice today. The Obama administration projected in February that money for the subsidies would last through the end of fiscal 2012. A total of $4.5 billion has been paid out as of today, the U.S. said.

The program “has significantly benefited employers across the country,” the government said in a statement.

The United Auto Workers union received $387 million from the program through Dec. 2, more than any other organization. AT&T was paid $214 million and Verizon Communications Inc. got $163 million.

By law, entities that receive money from the program must use it to pay the cost of retired workers’ health insurance, said Bennett Blodgett, a spokesman for the Center for Consumer Information and Insurance Oversight. The agency oversees the program, which was created by the 2010 health-care law.

“High health-care costs are hurting businesses across the country and threatening health-care coverage for early retirees,” he said in an e-mail.

The percentage of large companies providing early retirees with insurance fell from 66 percent in 1988 to 29 percent in 2009, according to the Kaiser Family Foundation, a nonprofit research organization based in Menlo Park, California.

--Editors: Adriel Bettelheim, Andrew Pollack

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net


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