My first reaction to this story about McDonald’s potentially dropping its health insurance coverage for employees was to ask myself, “McDonald’s offers health coverage to employees?” The answer is yes. They offer really bad health coverage.
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 requirement concerns the percentage of premiums that must be spent on benefits.
While many restaurants don’t offer health coverage, McDonald’s provides mini-med plans for workers at 10,500 U.S. locations, most of them franchised. A single worker can pay $14 a week for a plan that caps annual benefits at $2,000, or about $32 a week to get coverage up to $10,000 a year.
That’s about $1,600 a year for coverage you can’t really use if you actually get sick. As most people would try to avoid that annual limit by deferring care, this sounds more like a profit center for McDonald’s than a health insurance plan. Given that McDonald’s line workers aren’t making much more than the minimum wage, once the exchanges are up, the basic plan would almost certainly provide better value than the mini-med nothingburger, and would cost less. So who’s exactly threatening who, here? These mini-med plans are gone after 2014, anyway.
McDonald’s does want to cut people off between 2011 and 2014, leaving them in pretty dire straits (although the majority of McDonald’s line workers under 26 could go on their parents’ plans). The company doesn’t want to comply with the medical loss ratio, which forces that 80-85% of premiums be spent on actual medical care (because that would mean less profit for their insurer). They’ve determined that such an MLR is unrealistic for mini-med plans. Yeah, that’s because mini-med plans are unrealistic about the cost of medical care.
Some are calling this an unintended consequence of the health care law. Actually, it looks quite intended to me. If your company doesn’t want to pay for decent health care for your employees, the company can pay a fee and the workers can go on the exchanges. There are problems with the exchanges, of course, but compared to these mini-med non-plans, they look pretty OK to me.
What this shows is that the employer-based insurance system will die out within a couple decades. The employers are looking for any excuse to drop coverage, and will pay the associated fees as part of the cost of doing business – a much cheaper cost than skyrocketing health premiums. This means that the initial estimates for the exchanges and the subsidies necessary to provide affordable coverage are all out of whack. The subsidies will cost much more than expected and more people will need to use the exchanges, or expanded Medicaid. Which is why Republicans are attacking the funding streams as a way to strangle the law.
A push by Republicans to scuttle the U.S. health overhaul by denying funding through the House’s constitutional control over appropriations is gaining momentum.
Representative Todd Tiahrt of Kansas, the senior Republican on the House Appropriations subcommittee, said the “defunding” strategy “is a very serious idea” that’s gaining support among party members emboldened by the response of constituents in their home areas, Bloomberg Businessweek reports in its Oct. 4 issue. “There is definitely going to be a run at it,” he said in a telephone interview [...]
John Murray, a spokesman for Representative Eric Cantor of Virginia, the second-ranking Republican in the House, said that if control of the House flips, possible targets for defunding may be the insurance exchanges, the new agency set up under the law to compare different drugs’ effectiveness and any added staffing that may be sought to manage coverage expansions.
By vetoing spending measures that don’t include money for the law, Obama may set up a situation similar to the 1995 government shutdown triggered by a spending dispute between the then Republican-controlled Congress and Democratic President Bill Clinton.
The simplicity of a single-payer system like Medicare is that everyone gets affected by de-funding, regardless of income or class or political power. Poor people, in general, will be using these exchanges. And they will face an adversary in Congress determined to cut the funding for them. They don’t have a lot of political power, and as a result they’ll have a hard time keeping the subsidy levels. So those percentages of income in the law? You can see those as tentative as well. In fact, you can see this whole thing toppling before it even begins.
UPDATE: McDonald’s probably won’t drop their coverage in the near-term. In the long-term, I certainly hope they do!