Finding out what’s in ObamaCare: McDonald’s needs waiver for health-care coverage for hourly workers

No good deed goes unpunished.  McDonald’s takes a lot of heat for the nutritive value of its menu, usually from self-assigned food nannies, but the company did try to find ways to improve the health of its part-time staff by offering them a low-cost health insurance plan that was affordable and effective.  That effort will have to end, thanks to ObamaCare, which mandates that certain percentages of revenue have to go to claims rather than administrative costs.  That will leave tens of thousands with no option for coverage except expensive comprehensive plans they can neither afford nor really need:

McDonald’s Corp. has warned federal regulators that it could drop its health insurance plan for nearly 30,000 hourly restaurant workers unless regulators waive a new requirement of the U.S. health overhaul.

The move is one of the clearest indications that new rules may disrupt workers’ health plans as the law ripples through the real world.

Trade groups representing restaurants and retailers say low-wage employers might halt their coverage if the government doesn’t loosen a requirement for “mini-med” plans, which offer limited benefits to some 1.4 million Americans.

The “mini-med” plans offer limited coverage, mainly for routine checkups and acute issues, in exchange for very low rates.  The Wall Street Journal reports that the annual cost of the McDonald’s plan was $728 for an annual maximum of $2000 in payouts, or $1664 for an annual maximum of $10,000.  The premiums were paid each week by the hourly workers whose employment is so volatile that the administrative expense of keeping up with enrollments goes much higher than with traditional employer-based coverage.  For that reason, and because this is a low-risk pool that utilizes the health-care system less frequently than other populations, the plan spent more than 20% of its revenues on administration.

In the ObamaCare world, however, that is no longer allowed.  Regardless of whether the employees and the employer believe the service to be valuable, the federal government has decreed a cost-to-revenue structure that forbids this kind of offering.  McDonald’s and other retailers want an exemption, but it’s difficult to see how HHS will justify it.  The intent of Congress and this administration clearly aimed at exactly these kind of plans — the nimble, niche, low-cost plans for younger and healthier people who don’t need expensive comprehensive health insurance.  They want those people in larger plans to subsidize the risk for those who will now get policies under mandates to cover pre-existing conditions and adult offspring of customers.

In other words, this isn’t a bug at all.  It’s a feature.

However, it once again exposes the dishonesty of Barack Obama’s insistence that those who liked their coverage could keep their coverage.  It also exposes the damage done when politicians in Washington assume the arrogance to reorder an entire industry — two of them in this case, insurance and health care — without any extensive experience or knowledge of either.  To lift a slogan from a McDonald’s competitor, we can’t have it our way any longer.

Note: ABC reports that McDonald’s is denying that it intends to dump the plan, but the WSJ has a memo from McDonald’s asking HHS for a waiver on this mandate:

The Wall Street Journal reviewed a memo by McDonald’s, asking federal officials to determine if their most basic health insurance plans can be exempted from the medical loss ratiorequirements of the new health care law. The law requires that 80-85 percent of the premiums received go directly to patient care, not to other expenses like overhead, executive salaries or dividends for shareholders.

The McDonald’s plan, according to the report, has higher overhead costs because it provides insurance to a highly transient population of hourly workers in its restaurants and would not likely meet the minimum requirements of the new law.

HHS today called the story premature, saying guidance on the new medical loss ratio rules have not even been issued.

New rules will be implemented after the National Association of Insurance Commissioners submits its report, due at the end of the year. The NAIC is still soliciting comments on its draft proposal.

“The medical loss ratio isn’t even settled,” Sebelius said at a reporters’ breakfast organized by the Christian Science Monitor. “As soon as we have a regulation that has a process in it we will begin those discussions.”

What happens if they don’t get the waiver?  They’ll have to dump the plan, regardless of the hedging today by McDonald’s.

And so we come to another problem with ObamaCare: regulatory uncertainty.  The “loss ratios” should have been set by Congress as part of the bill (or not set at all, and left to the market) so that employers could plan for coverage options — which have to be settled by about this time to get enrollments set for 2011.  It’s been more than six months since ObamaCare’s passage, and no one can tell employers yet what the rules are?  Apparently, no one in the government understands the bill, nor do they understand that employers have to negotiate with insurers for plans months ahead of enrollment to budget properly for the next year.

And Democrats wonder why businesses aren’t hiring.

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