Law to Expand Health Coverage Limits Health Coverage

By John Payne on Oct 6, 2010

The Patient Protection and Affordable Care Act passed last March requires insurers to spend at least 80 to 85 percent of their earnings from premiums on health care for its customers. That certainly sounds like a good idea — who wants 20 cents of their health insurance dollar going to administrative costs? — but it would eliminate limited-benefit health insurance plans known as “mini-meds,” which are used by 1.4 million Americans. The Wall Street Journal reported on the situation last week:

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.

Last week, a senior McDonald’s official informed the Department of Health and Human Services that the restaurant chain’s insurer won’t meet a 2011 requirement to spend at least 80% to 85% of its premium revenue on medical care.

McDonald’s and trade groups say the percentage, called a medical loss ratio, is unrealistic for mini-med plans because of high administrative costs owing to frequent worker turnover, combined with relatively low spending on claims.

Brian Hook of Missouri Watchdog points out that McDonald’s is among the top 20 employers in the Saint Louis metro area, with between 5,000 and 9,999 employees. Furthermore, this problem is hardly limited to McDonald’s employees:

Insurers say dozens of other employers could find themselves in the same situation as McDonald’s. Aetna Inc., one of the largest sellers of mini-med plans, provides the plans to Home Depot Inc., Disney Worldwide Services, CVS Caremark Corp., Staples Inc. and Blockbuster Inc., among others, according to an Aetna client list obtained by the Journal. Aetna also covers AmeriCorps teaching-program sponsors, who are required by law to make health coverage available.

Aetna declined to comment; it has previously indicated that the requirement could hurt its limited benefit plans.

Granted, these plans are far from perfect, but for many of the people who use them, it is likely the best they can afford. If the plans are outlawed, these people will either seek taxpayer-subsidized coverage or opt for no coverage at all. Mini-med plans are evidence that the market can insure the overwhelming majority of people, but not when it is so frequently hobbled by government restrictions.