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McDonald’s and the Health Insurance Dollar Menu

By Dr. Charlie Preston

Recently, the Wall Street Journal made a big splash in the news by reporting that McDonald’s planned to drop health insurance for its workers if it was required to abide by the ACA’s new medical loss requirements.[1] It turned out that the story was false. And both Secretary Sebelius and McDonald’s HR Director, Steve Russell, put out statements saying just that.[2]

The reason the story made so much news is that opponents used it as an example of the failure of the new health reform law. It was disrupting business, they argued, and it was doing what it made a sacred promise not to do— causing people to LOSE their health insurance!

The truth is that the ACA wasn’t doing any of that. Rather, as some have astutely pointed out, it was simply “disrupting the status quo”[3]. In other words, the law was designed to ensure that everyone receives a basic level of care but some employers are fighting to keep things the way they were before reform.

The health plans provided by companies like McDonald’s offer very minimal coverage and they aren’t generous enough to meet the requirement that 80-85% be spent on medical care. In one version of the health insurance they offer, known as a mini-med plan, McDonald’s employees pay $730 a year for benefits of up to $2,000. That really isn’t much when you consider one MRI can cost $2,000 on its own.

In a memo to HHS, McDonald’s argued it would be difficult to meet the medical loss ratio set by the new law because the low dollar amount of claims and the high employee turnover means that administrative costs are high relative to money spent on care.[4] The translation here is that McDonald’s doesn’t really want to pay for better health coverage.

Unfortunately, HHS gave in to the pressure and granted McDonald’s a waiver through 2014, along with 29 other companies. Their employees will not see a drop in coverage and will be able to keep their insurance, paltry as it may be, until the waivers expire and employees can purchase insurance through the new exchanges.[5]

McDonald’s got a free-please this time, but it won’t be so lucky in the future. The ACA will phase out mini-med plans by 2014 because of rules on annual coverage minimums and ceilings.[6] And at long last, employees will be able to choose real health insurance, not the cheap stuff on the dollar menu. 







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