About 2,000 employers have been approved for the extra help to cover early retirees, mainly private businesses. But the list also includes seven states suing to overturn the health care overhaul as an unconstitutional power grab by the federal government.
The seven are Arizona, Idaho, Indiana, Louisiana, Michigan, Nebraska and Nevada.
They are part of a group of 20 states that have challenged the law's requirement for most Americans to carry health insurance or face fines from the IRS. They argue that the government cannot order individuals to buy a particular product. The administration counters that the mandate falls within broad powers conferred on Congress to regulate interstate commerce.
Interested employers include about half the Fortune 500 companies, as well as state and local governments, educational institutions, unions and nonprofit organizations, the administration says. A total of 16 states have been approved, and more are expected to apply.
"In these tough economic times, it is difficult for employers to keep up with skyrocketing health care costs for employees and retirees," said Health and Human Services Sec. Kathleen Sebelius. The program "will make it a little easier for employers to provide high-quality health benefits to their retirees," she added.
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As medical costs soared in the last 20 years, employers have dramatically scaled back retiree health coverage. The share of large companies providing the benefit dropped from 66 percent in 1988 to 29 percent last year.
To try to hold off a steeper drop, the health care law provides $5 billion to help employers maintain coverage for early retirees age 55 and older but not yet eligible for Medicare.
The government subsidy amounts to 80 percent of medical claims between $15,000 and $90,000 - significant assistance to help cover high-cost retirees and eligible family members.
Companies can use the federal money to lower their own costs, or pass on the savings to their retirees through lower premiums and reduced cost sharing. Firms that receive federal help have to formally notify their retirees that they've gotten a subsidy.
The retiree assistance is designed as temporary relief until the health care law is fully in place in 2014. That's when competitive insurance markets will open for business, and eligible individuals can get government tax credits to help pay premiums.
The private employers approved for the subsidy include Levi Strauss, United Airlines, Kellogg Co., Mattel, Hewlett-Packard and Dow Chemical, to name a few.
The Associated Press is also getting the subsidy. AP is a not-for-profit news cooperative, owned by its American newspaper and broadcast members.
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Affordable Care Act's Early Retiree Reinsurance Program
By Associated Press Writer Ricardo Alonso-Zaldivar