Rockefeller, McDonald's and mini-meds

Last week the Wall Street Journal reported that health reform might compel McDonald’s to drop the health insurance plan it offers it restaurant employees. Why? Because the plan doesn’t pay out a minimum of 85 percent of premiums in medical costs and has annual benefits caps under $750,000. McDonald’s denied the report but it has the ring of truth.

Republicans quickly grabbed the issue an another cudgel to beat over the head of PPACA proponents. Some Democrats, including Senator Jay Rockefeller, want to investigate McDonald’s and its health insurer to see whether workers are getting value from such plans.

In my view, McDonald’s is smart to offer the plans it does, and both Democrats and Republicans are going off in the wrong direction with their criticisms.

McDonald’s offers a “mini-med” plan, also known as a limited benefit plan.These plans are in some ways the opposite of insurance: they pay for routine health care expenses but not catastrophic ones. Benefits are often capped at $25,000 to $50,000 per year. The McDonald’s plans have even lower caps, in the range of $2,000 to $10,000. As a result they are frequently castigated as a bad deal by policy experts and other people with easy access to comprehensive insurance. Back in 2007 (Understanding the appeal of Mini-Meds) I wrote about Tennessee Governor Phil Bredesen, who embraced mini-meds as an affordable solution. Here’s what I wrote:

[From the Wall Street Journal]:

…Gov. Bredesen says he listened to focus groups and queried blue-collar folks, such as a waitress at a waffle restaurant, to devise his plan. “They weren’t interested in buying insurance for catastrophic events. They wanted access to the emergency room next month, access to the pharmacy next month,” he says. “Let’s give people what they want instead of what some advocate says they want.”

What Bredesen understands, but [experts] downplay, is that a $10,000 or $25,000 or $50,000 debt falls into the “catastrophic” category for a lot of people. It can mean filing for bankruptcy or taking many years to dig out of debt. There’s not such a big difference between owing $50,000 and owing $1 million. Both amounts are in the category of not being repayable. Many people who run up debts of either amount are going to be eligible for Medicaid in any case.

On the other hand, if a person of modest means buys a comprehensive policy, it’s likely to be expensive and have high deductibles and co-pays. In addition to having to scrape together the money to pay the premium every month, a moderately expensive episode of care could still end up causing financial hardship or ruin.

For example:

Sherry Slatton, 46, a nine-year veteran in the Pepper Patch kitchen, dropped her comprehensive health insurance through her husband’s employer. The couple enrolled in the CoverTN plan, and their monthly cost will drop to about $175 from $350. Ms. Slatton wasn’t happy with the old coverage, which she says stuck her with $4,000 in charges when she underwent surgery to remove a benign cyst.

According to PayScale, fast food workers make around minimum wage of $7.25 per hour. At 40 hours per week, 50 weeks per year that comes out to $14,500 before taxes. As a comparison, that’s less than what a comprehensive health insurance costs for a family in the Boston area. So there’s absolutely no way McDonald’s can offer such insurance. By contrast, the McDonald’s plans cost $14 to $32 per week, which equates to $700 to $1600 per year.

The real tragedy –which I haven’t seen mentioned– is that even these low wage workers pay into Medicare. Even though the workers don’t have comprehensive insurance they’re paying to cover senior citizens, including plenty of wealthy people who don’t need or deserve the help.

In the meantime, it’s likely the Secretary of Health and Human Services will use her authority to exempt mini-med plans from the law’s provisions.

October 4, 2010

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