U.S. Will End Retiree-Health Subsidies to Companies, Unions

By Alex Wayne - Dec 10, 2011 4:27 AM GMT+0700

A $5 billion program to help companies such as AT&T Inc. (T) 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 in a notice today. The Obama administration said 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.

A trust fund for retired members of 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. (VZ) got $163 million.

Two retirement systems in Ohio for public employees and teachers received a combined $256 million. Similar systems for public employees or teachers in California, New Jersey, Kentucky, New York and North Carolina were also among the top 10 beneficiaries, records show.

Republicans in Congress have criticized the effort as a giveaway of taxpayer dollars to profitable businesses and unions.

Retirees’ Coverage Costs

“This program is a microcosm of the fundamental, underlying problems with the president’s partisan health spending law,” said Antonia Ferrier, a spokeswoman for Senator Orrin Hatch, Republican of Utah, in an e-mail.

Recipients must use money from the program 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.

The government said in its statement that more than 5 million people have benefited from the program.

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.

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