Cover Story: Mid Term Report

For employers thinking of dropping health care coverage, an early warning of the potential PR pitfalls came in late September. The Wall Street Journal reported that McDonald’s Corp. was considering dropping its “mini-med” policies, which cover approximately 30,000 restaurant workers, unless the Department of Health and Human Services (HHS) removed a provision of the health care reform law requiring that 80 to 85 percent of premiums paid into a plan be spent on benefits. McDonald’s says its “mini-med” plans, which place a low cap on annual benefits, involve greater administrative costs because of employee turnover and relatively low claims payouts.

In a memo to federal officials, McDonald’s said “it would be economically prohibitive for our carrier to continue offering” the plan unless it got an exemption from the requirement, the Journal reported.

In the aftermath of the Journal story, both the company and HHS denied that McDonald’s was considering dropping coverage, and HHS added that it was working with companies like McDonald’s to resolve problems the health care reform law poses. The agency also announced that it would grant one-year waivers exempting some 30 mini-med plans from compliance with a provision of the new law that phases out annual caps on coverage. That provision establishes a minimum annual coverage amount of $750,000 for plan years starting between Sept. 23, 2010, and Sept. 22, 2011.

But the media spotlight on the hamburger giant set off a round of criticism in the blogosphere, pointing out that the mini-med plan, which reportedly offers individual coverage for $14 a week for benefits capped at $2,000 a year,, is virtually worthless because any significant medical problem would exhaust the coverage. Just two days after the Wall Street Journal report, Sen. Jay Rockefeller, D-W.Va., opened a probe into the “mini-med” plan, questioning its value to low-wage employees.

In a letter to McDonald’s insurer, BCS Financial Corp., Rockefeller requested five years’ worth of data on benefits, premiums and administrative expenses.

“In addition to spending an insufficient portion of their premium dollars on medical care,” the letter said, “the products BCS is selling to McDonald’s employees are not likely to protect them against the costs of a major health care episode. The $2,000 maximum annual coverage you apparently offer in your McDonald’s ‘Basic Plan’ would not come close to covering the costs of hospital emergency services or the delivery of a child.”