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McDonald's Mini-Med Plan puts Health Reform Under Microscope

October 6, 2010
Related Topics: Financial Impact, Benefit Design and Communication, Health and Wellness, Latest News

The nation’s top health official says issues concerning a McDonald’s Corp. health plan for hourly workers will test the practicality of some requirements in the 6-month-old health care reform law.

So-called “mini-med” plans such as the one Oak Brook, Illinois-based McDonald’s offers to nearly 30,000 employees have relatively low premiums and limited benefits. Plans for individual coverage under the McDonald’s plan start at $14 a week for benefits capped at $2,000 a year.

“We need to work with companies to see what is available,” said Kathleen Sebelius, secretary of the Department of Health and Human Services, at a press briefing Oct. 4. “Our goal isn’t to destabilize the market. The bottom line for some will be: Is this coverage better than no coverage at all?”

The fast-food giant drew attention last week for a memo it sent the department, warning that its mini-med plan would not comply with a section of the new health law requiring 80 to 85 percent of premiums to be paid out in benefits. McDonald’s denied reports that it might drop the coverage if it doesn’t get a waiver.

“There isn’t any question these aren’t full-blown insurance plans,” Sebelius added, speaking about the plans in general. “Some are pretty good for the money that the employee pays and what they cover. Others are just not good at all.”

But she had little to say about an inquiry launched last week into McDonald’s health-insurance coverage by Sen. Jay Rockefeller, D-West Virginia, chairman of the Committee on Commerce, Science and Transportation.

In a letter to the fast-food chain’s insurer, Oak Brook Terrace, Illinois-based BCS Financial Corp., the senator requested five years’ worth of data on benefits, premiums and administrative expenses delivered to him by Oct. 15.

“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.”

Sebelius said congressional supporters of health reform “will continue to pursue questions about—do people really have insurance coverage, what does it provide them, what are the prices, are they served poorly or well by the marketplace—and my guess is that will continue.”

A BCS spokeswoman said in a written statement late last week, “We are cooperating fully and intend to provide any appropriate documents.”

Congress wanted to be sure that premiums weren’t eaten up by high salaries, advertising and other overhead costs.

But according to insurance experts, some mini-med plans find it difficult to comply because a predominantly young workforce with rapid turnover has high administrative expenses and relatively few claims.

And McDonald’s may be held to the higher 85 percent standard because it is a large company.

“They are not unique,” Sebelius said of the world’s largest fast-food chain, estimating that roughly 50 other companies requested similar waivers.

A McDonald’s spokeswoman declined to comment.

The new health reform law provides that state insurance commissioners will advise the department on what outlays constitute medical benefits and overhead expenses so that the regulation can be issued.

“What we’ve told McDonald’s and others is that we don’t even have the definition” of medical-loss ratio, a technical term for the new rule requiring plans to spend at least 80 percent of their premium income on benefits rather than administrative expenses. “We are eager to talk to companies” once that definition is clarified, Sebelius added.  

Filed by Paul Merrion of Crain’s Chicago Business, a sister publication of Workforce Management. To comment, e-mail


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