Reprint - McDonald's Dropping Health Insurance...? (Oct 17, 2010)

The threatened repeal of the ACA might lead to the return of Mini-Med health plans - that is, health insurance policies which provide only minimal coverage to beneficiaries with low benefit caps.  Before the passage of the ACA, these bare-bones policies were available largely to retail and food service workers through their employers.

This is a repost of something I wrote in 2010 about these plans in response to concerns that the ACA would cause more Americans to lose coverage than gain it.

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There has been a bit of press lately about the recent healthcare reform laws causing 30,000 McDonald's full- and part-time hourly employees to lose their health insurance coverage. My first thought when I heard this was, “McDonald's offers health insurance coverage to its hourly employees?!?” I was surprised that their employees were ever offered any health insurance options, even if they're possibly being discontinued now. As such headlines are quite politically fraught as of late, I decided to dig in to this a little bit.

First, according to Yahoo! finance, McDonald's employs 385,000 full time employees – over one tenth of a percent of the United States population. It does not specify if this counts all franchise employees or non-American employees, and it specifically excludes part-time employees. However, it does mean that, at most, only 7.8% of McDonald's employees take advantage of these benefits. Upon review of the benefits, it's easy to see why.

According to the Wall Street Journal, the lowest tier plan offered costs $727.48/year in premiums with an annual benefit cap of $2000, offered through the commercial branch of BCS Insurance Group. This is great if you have a monthly generic prescription that costs you $171/month (with $5/prescription copay, not including the office visit to get the prescription), but pretty worthless otherwise. If you're not planning to get sick this year, you're better off paying for a $100 physical out of pocket. If you are planning to get sick, $2000 won't cover much surgery or many visits to a specialist.

The top tier plan costs $1679.60/year. The outpatient benefit still caps out at $2000, but it includes $8000 of inpatient coverage. This won't cover anything catastrophic, but it might cover an unexpected accident.

These are pretty lousy benefits, but they're not necessarily as bad as they appear on the surface. A less obvious benefit to having health insurance is that, even in excess of service caps, members are often eligible to pay the insurance company's contractually allowed amount for medical care, rather than the full charge amount. Insurance companies have contracts with providers to pay the lesser of the billed amount or the amount stipulated in their contracts. These adjustments happen even to charges that are deemed to be patient responsibility. Of course, this isn't particularly helpful to an individual earning $15,080/year at the federal minimum wage level, or 140% of the federal poverty line for a family of one.

I recognize that not all McDonald's employees make as little as minimum wage, and I recognize that many employees probably have circumstances where this level of health insurance coverage makes financial sense. However, many of these employees are better off navigating the bureaucracy of getting coverage through Medicaid, if eligible. If not, they're probably better off declaring bankruptcy, rather than paying a sufficiently large hospital bill.

My point is that it doesn't really matter if McDonald's stops offering health insurance coverage, as they aren't really offering it to begin with.

Comparison of 6 Proposed ACA Replacements

The Kaiser Family Foundation just published a comparison of six proposed replacements to the ACA.  The issue brief spells out changes to Medicare that would result if each of these proposed replacements to the ACA went into effect.

A few interesting things to note across the six bills:

• Three proposals would repeal the ACA creation of the CMMI
• Two proposals would repeal the ACA phasing out of the Part D Coverage Gap
• Four would repeal the ACA fee on branded drug manufacturers; one does not specify

There are also a few positive ideas:

• One would consolidate all MSPs and require states to have a uniform eligibility test for them.  QMB, SLMB, and QI as they currently exist are unnecessarily complex.
• Two would combine Medicare A and B deductibles and out of pocket limits. If done right, this could bring some positive aspects of Part C to traditional Medicare.

Finally, one would limit the amount that could be charged to patients, including Medicare beneficiaries, for out-of-network emergency care.  Traditional Medicare beneficiaries have protections against this already - providers who do not accept assignment from Medicare may only bill the patient up to 15% more than the Medicare approved amount for most charges.  These are called legitimate excess charges.

Overall, these proposals are mostly leaving ACA Medicare benefits alone, such as covering preventive services in full - only two are specifically repealing all ACA Medicare provisions.  However, most of them are repealing ACA sources of revenue including repealing taxes and fees on drug manufacturers, health insurers, and high-earning individuals.