Clear thinking on mini-med plans

The government has decided to exempt limited benefits plans (also known as mini-med plans) from rules requiring minimum medical loss ratios. Under the Patient Protection and Affordable Care Act (PPACA), most plans will be required to pay out at least 80 or 85 percent of premiums on medical care. As I’ve written, I don’t think minimum MLR rules are a good idea. I’d rather my plan figure out a way to keep me healthy and spend as little as possible sending me to the doctor or hospital.

I’m glad, though, to see that mini-med plans are off the hook. These plans are typically offered to low wage workers to provide access to the health care system and protection from unexpected medical expenses. The plans aren’t great, but then again neither is a career making minimum wage. The plans simply are not comparable to the comprehensive plans that are the target of minimum MLR legislation. By their very nature they will have higher administrative costs on a percentage of premium basis –even though such costs are far lower when calculated on a per member basis.

The basic McDonald’s plan for an individual workers costs about $13 per week (~$700 per year) and is capped at $2000 in annual benefits. To put that in perspective, $2000 will barely pay for one MRI and is just a little bit more than the monthly premium for comprehensive family coverage in Massachusetts. There’s no way McDonald’s could offer comprehensive insurance, since paying for a family would cost more than the full time, pre-tax salary of a minimum wage worker.

I’m happy that McDonald’s and other employers provide mini-med plans. They should be encouraged to continue doing so until PPACA is fully implemented, by which time their employees will be able to participate in the insurance exchanges and receive subsidized coverage. Exempting mini-meds from MLR rules does not undermine health reform in any way.

November 23, 2010

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