Workers at a McDonald's restaurant in Oak Brook. (Tribune photo by Terry Harris)
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 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.
“Media reports stating that we plan to drop health care coverage for our employees are completely false,” Steve Russell, senior vice president and chief people officer for McDonald’s USA said in a statement. Though, he acknowledged that McDonald’s “had the opportunity to speak with regulatory agencies directly to better understand the implications of the law and to share our point of view.”
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 percent to 85 percent 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.
Democrats who drafted the health law wanted the requirement to prevent insurers from spending too much on executive salaries, marketing and other costs that they said don’t directly help patients.
McDonald’s move is the latest indication of possible unintended consequences from the health overhaul. Dozens of companies have taken charges against earnings — totaling more than $1 billion — over a tax change in prescription-drug benefits for retirees.
More recently, insurers have proposed a round of double-digit premium increases and said new coverage mandates in the law are partly to blame. HHS has criticized the proposed increases as unwarranted.
Democrats, looking toward midterm elections in which the health overhaul is an issue, say it already has stopped insurance practices they call abusive, has given rebates to seniors with high out-of-pocket prescription costs and has allowed parents to keep children on their insurance plans until they turn 26.
McDonald’s, in a memo to federal officials, said “it would be economically prohibitive for our carrier to continue offering” the mini-med plan unless it got an exemption from the requirement to spend 80 percent to 85 percent of premiums on benefits. Officials said McDonald’s would probably have to hit the 85 percent figure, which applies to larger group plans. Its insurer, BCS Insurance Group of Oak Brook Terrace, Ill., declined to comment.
The issue of limited-benefit plans has also hit colleges. They escape the 80-to-85 percent requirement this year because of when their plans were negotiated, and some may seek a permanent exemption.
“Having to drop our current mini-med offering would represent a huge disruption to our 29,500 participants,” said McDonald’s memo, which was reviewed by The Wall Street Journal. “It would deny our people this current benefit that positively impacts their lives and protects their health — and would leave many without an affordable, comparably designed alternative until 2014.”
The health law expands Medicaid and offers large subsidies to lower-income people to buy coverage, but those provisions don’t kick in until 2014.
Federal officials say there’s no guarantee they can grant mini-med carriers a waiver. They say the answer may not come by November, when many employers require employees to sign up for the coming year’s benefits.
The government is waiting for the association of state insurance commissioners to draft recommendations. The head of the association’s health-insurance committee, Kansas Insurance Commissioner Sandy Praeger, said she doesn’t think these types of mini-med plans deserve an exemption.
“If they are sold as comprehensive coverage, we expect them to meet the same 1 8 medical-loss ratio 3 8 standards as other health plans,” she said.
Steven Larsen, the HHS official who received McDonald’s email memo, said the department doesn’t want employers to drop coverage over the law. The department has allowed mini-med plans to apply for a waiver to a rule that would otherwise require them to raise the cap on annual benefits to $750,000.
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.
“There is not any issuer of limited benefit coverage that could meet the enhanced MLR standards,” said Neil Trautwein, a vice president at the National Retail Federation, using the abbreviation for medical loss ratio.
A spokeswoman for McDonald’s said it would look for other insurance options if it couldn’t get the waiver. The company’s chief people officer for the U.S., Steve Russell, said, “McDonald’s will continue to be committed to providing competitive pay and benefits.”
The chain has offered a limited benefits plan for more than 10 years. The current version provides outpatient, inpatient, preventive-care and prescription-drug coverage. McDonald’s says 85 percent of participants have less than $5,000 in medical expenses a year.
The new rules at issue apply only to fully insured health plans and not those where the employer absorbs the risk and directly pays out medical claiThe rules wouldn’t affect Wal-Mart Stores Inc., for instance, because it is self-insured.
Benefit consultants anticipate that, by 2014, most employers will stop offering mini-med plans. Such plans likely wouldn’t meet the definition of adequate coverage for full-time workers. Under the law, employers that fail to offer such coverage will have to pay a fine.
Until 2014, workers on mini-med plans would have few affordable alternatives for coverage. According to a survey by the Restaurant Opportunities Centers United, workers without health insurance were three times as likely to visit the emergency room without being able to pay as their counterparts with health insurance.
“The packages maybe could be better, but for a start, they’re quite good,” said Jerry Newman, a professor at State University of New York at Buffalo, who worked under cover at McDonald’s to write “My Secret Life on the McJob.” He added: “For those who didn’t have health insurance through their spouse, it was a life saver.”
– By Janet Adamy
—
Without Coverage
Some options for low-wage workers if they don’t get health insurance on the job
Under current system: – May be eligible for Medicaid, the federal-state program for the poor, especially families with children
– Can purchase private insurance on individual market, but premiums are likely to be too costly
– Hospital emergency rooms must treat all comers without regard to ability to pay.
– Some 1,200 federally funded community health centers offer low-cost basic care.
Starting in 2014 under health overhaul:
– Everyone with income up to 133 percent of federal poverty level will be eligible for Medicaid. (Poverty level for individual is $10,830 in 2010.)
– People with income between 133 percent and 400 percent of poverty level will be eligible for subsidized health insurance. Premiums are capped at 2 percent of income for those at the lowest end of that scale and 9.5 percent of income at the highest end.
– Additional $11 billion spent on community health centers
Sources: WSJ research, Kaiser Family Foundation
Yeah, I am so sure McD’s isn’t making enough money to provide this!! Meantime, their food is so unhealthy folks need coverage.
So what’s news about this? Everyone pretty much understood the Administration was lying when Obamacare was rammed down our throats and we knew coverage would go down and costs would go up.
What a load of BS.
Maybe these plans would be too expensive to manage 20-30 years ago, but in today’s highly-automated environment, they should have almost no overhead. Employers fill-out an online form and send the hard copies in for archival. That online form then checks the workers SSN against valid numbers and spits-out an debit card sent directly to the employee. If the employee wants to file a claim manually (and not use the card), he or she must fill-out an online form or send in a form by mail.
The only time BCS employees have to do any work is when they archive the application or they need to investigate a claim. Other than that, it’s all gravy.
“possible unintended consequences”
Why is it every time liberals pass bad bills, we get these? Unintended to whom?
This obama care is going to tax all the people who have insurance to pay for everyone else,this plan needs to be repealed to bad we have to wait until after the next election Bone head got it his way again
Why not just drop the kids up to age 26, they’re suppose to be able to be covered on their parents coverage and offer their plan to those who are not in that catagory? There could be a savings there and possibly more coverage for those over age 26. I haven’t been a McDonald’s for a while but I thought they mostly employed young people for the most part.
Well corporate greed really has no limits doesnt it. I think MCD should pay a premium since its their food that contributes to a unhealthy america?
No, just pass the costs to us consumers. I’m sick of paying for things off the dollar menu. Make it the two dollar menu. Good thing ObamaCare was passed so we could see what’s in it. I hope we get free lube while we take it.
If McDonalds does that to it’s employee’s, I will not EVER go there again.
Guys, this kind of thing isn’t “unintended” at all. This is exactly what Obama wanted the law to do.
Why? This will be 10,000 more reasons for him to say “well, we didn’t want a single-payer system, but because of greedy companies dropping their plans, we now have no choice”.
The only question left: When will he give this speech?
The only problem is that he thought he’d have his majority for 2 more years but he won’t. Therefore, his intended consequences will only result in more uninsured Americans.
This is GOOD news! America’s health care system is the best in the world! If you can’t afford to pay for it, go somewhere else! It’s not like the lack of coverage for “them” is going to cost you and me anything. Well, except maybe hours of wait time in the emergency room when they cut their finger or bang their head and need medical care. Go GOP! The system works just fine, for me!
This is a perfect example of the results of Obamacare.. many of these people probably work for minm wage at McD’s in order to get some benefits and now the Medical benefit may be cut??? Well, I hope that those that voted and still support Obama are happy. Dont blame anyone else but your self and the current administration.
People just don’t get it. The problem is that the Dems have decided to get the government involved in everything and regulate how everything works. The health care law requires that only 20% percent of the plans fees can go to administrative costs, such as processing claims, enrolling new insurees, etc. Unfortunately, the problem is these health plans are administratively heavy and if they can’t get the plan within the rules of HHS then they have to drop it because they can’t comply with the law. It is an unintended consequence.
Finally, an honest person in John! Unabashedly and proudly selfish. It’s refreshing when republicans just come out and say that they don’t care a rat’s but+ about anyone but themselves and they don’t sugarcoat it! It’s a perspective of the world, one that I don’t not share of course, but at least John is front and center with it! Bravo!!
Personally, I am glad these sorts of issues come up because its a testimony to what may work and what won’t….in reality, and not the fantasy world of the right wingers. Maybe Obamacare will end up being completely the worst thing…BUT AT LEAST HE TOOK A CRACK AT IT!! Unlike the republicans, who just want to cry and wring their hands about socialism AND DO NOTHING, while secretly being like John.
Like my dad says, “Everyone is a victim”. That’s why there are so many democrats.
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.
I wonder what the workers really pay? Either way, how much medical service can you get for $2000? What a joke. Who cares if they drop coverage. Roll it back into the system.
Here’s more of that hope and change we can believe in. Yup, change alright, from bad to worse!
.
A cheeseburger a day keeps the doctor away.
“I’m lovin’ it”
.
CORPORATE GREED AT ITS WORST!!! How about some of these MULTI-BILLION DOLLAR companies, e.g. McDonalds, Aetna, absorb some of the costs???? McDonald’s will have a HUGE PR problem on its hand if they don’t provide their workers with insurance. They would lose more money from protests than it would cost to absorb the cost.
Mickeys is playing – they are making $ hand over fist – and rather than providing some health care for their hourlys – they are banking $ to pay executives more money. this is a scam that corporate america is playing all over the country – eliminating benefits – asking workers to work longer hours – no raises. this type of management will eventually come back to haunt them -
It is increasingly clear that the effort to ramrod the health care bill through Congress was undertaken without any real appreciation of how badly it would cripple an already-reeling economy. I was talking with a friend a couple of days ago who co-owns a small design business. The added costs to their firm of about 30 that are the direct result of Obamacare are the equivalent of the total cost one full-time employee (salary and benefits) that they hoped to add to their staff in the next couple of months. As a result, they have to forego hiring for that position.
It’s but one example, but this scenario is being repeated thousands of times throughout the land. The inconvenient truth is that the new health care regime is affecting businesses, small and large, in a hugely negative way.
Welcome to ObamaCare…. And this is just the beginning. How’s that HopeyDopeyChangey working out for everyone?
Remember in November.
Chi-Girl, please do a lot more reading. When ANY corporation has its costs raised or, as you say, “absorbs” costs, who do you think pays for it? Those costs either result in higher prices for their products,lower return on investment for investors, or cutting costs elsewhere (layoffs?). Before you say “too bad” on the ROI, we’re talking about impacting countless retirement accounts. These large corps are the drivers behind thousands of accounts that people have to live off.
I hear people like you repeat “corporate greed” and it’s just silly. The phrase is meaningless class-envy. You take comfort in believing the nonsense that a “corporation” equals a bunch of fat cats who profit off the downtrodden. The reality is that large corporations employ millions and provide retirement funds to millions more. When you make them “absorb” costs, you either cause people to be fired or a retired person to make-due with less each month.
You can’t give anything to one person without taking from another.
i had no idea they offered ANY kind of health care to part-time employees.
ya, the execs gotta get their annual bonus no way they can skimp on THAT.
Isn’t it interesting that the only people whining about the damages of ObamaCare are ginormous multi-billion dollar corporations who make obscene profits on the backs of their employees? Insurers are proposing double-digit increases on premiums even though their costs haven’t increased and they don’t even know if, when or how much the costs will go up.
The additional costs to the McD’s system for the new coverage requirement will barely make a dent in their bottom line, and the fact is that they would only have to deal with it for a few years until the low-income insurance provisions kick in.
It’s just another case of wealthy people whining about their misfortunes while the rest of us suffer from the decisions corporate giants made to cause all of our economic strife in the first place!
Until everyone stops this childish game of “liberal vs. conservative”, the corporate giants will continue to pull the government puppet strings to their advantage while American citizens are distracted by their immature petty name calling.
I still struggle with the concept of insurance companies operating a for-profit business off of our health. CEO’s of insurance companies are paid in the multi-million dollar range. Reading the comments out here it just shows how confusing and messed up our insurance system is. Big insurance companies want to make a lot of money off of our health so they pass along high price tags to other corporations who want to pay as little as possible to cover their employees and ultimately pass along other costs in the form of premiums and higher product costs to us. One way or another we pay. Higher premiums, higher product costs all for pretty poor health care.
TOC, they make a profit because a capitalist system that emphasizes competition, improves life for everyone. The profit motive drives advances/improvements to happen much faster.
What is your alternative? To put government in charge and remove the “profit”? Maybe you can name a single thing the government does more efficiently and cheaper than the private sector…..because I can’t.
Capitalist systems allow everyone the ability to succeed….the sky’s the limit. Liberal theology aims for the lowest common denominator….”improvement” happens by making everyone equally miserable.
Give me capitalism every time.
How’s that Obamacare working out for ya folks?
Happy November!
TOC
Name me anything Non-Profit that runs well??????
I love the people who talk about how this bill will increase insurance costs while decreasing their benefits. Hello! Have you been alive these past 10 years?! My wife and I now spend well over $800 a month on health care costs between the two of us. That’s up $600 per month in the past few years. Our plans are more expensive than ever and the benefits are a sham.
Regarding McDonalds. What we have here is another corporation that would like to tell their employees that they’re the lifeline of their company, but would really rather not care one bit about their health, their families health or the health of America. Greed over ethics, the greenback wins every time.
Lets see if you Republicans can follow the math.
14 dollars x 52 weeks = 728 dollars per year premiums.
This policy has a 2000 limit. That means about 1 out of 3 people must be very sick to lose money. McDs has a young healthy population. This will not happen. And even if it did the public would have to pick up the difference somehow as charity or it goes to collections.
A legitimate plan for a single person is about 350 per month or 4200 per year. That is with a million dollar lifetime cap.
The insurers complaint was that they spent too much on admin and profit. Now can you see why? There is no way they could spend 80 or 85% on benefits unless they charged 2 dollars a week. That wont happen either.
And that my friends is why we needed health-care reform.
I’m trying to make sense of this story (or non-story).
Headline:
McDonald’s threatens to drop hourly health plan
McDonald’s representative:
“Media reports stating that we plan to drop health care coverage for our employees are completely false,” Steve Russell, senior vice president and chief people officer for McDonald’s USA said in a statement.
Does this McDonald’s insurance plan sound fishy to anyone else? $14 per week ($728) for $2,000 in coverage? What a scam! McDonald’s is likely making money on this – amazing they pay their workers poverty wages then charge them for what they believe is health insurance. Losing these plans would be an overall benefit for these workers. They would probably be better off investing that money in an MSA, or like via mentioned, hopping on their parent’s plan if they’re under 26.
the big corps blackmail the govt into providing “exemptions” for THEMSELVES while the small businesses get STUCK.
Fred, it’s not interesting that the only complaining you’re hearing about is coming from corporations. It IS interesting that this health care debacle is about 1% in effect and we’re already experiencing major problems.
Here’s the next shoe to drop: Starting on 1/1/12 every company, regardless of size, must issue a 1099 to every vendor with whom they’ve spent over $600. Republicans just tried to reverse this insanity but, of course, the Democrats stopped that.
Why the change? Because Obamacare will so bankrupt us, that the IRS must start auditing every person who received over $600 to make sure they paid every penny of their taxes. Nevermind that most payments made by any company are to OTHER companies and aren’t considered “income”. Very little are to true independent contractors who consider it “income”.
So be prepared with your “corporate greed!!” posts because the results are pre-determined. Large companies will have to hire armies of low-skilled clerical people while firing good employees who are actually necessary for the business. And this is the best-case scenario. The reality is that corporations will simply outsource their entire accounts payable process overseas and let cheaper labor in India process invoices, checks, and the year-end 1099’s.
Small companies are simply screwed. Even a company with just a couple million in sales has hundreds of vendors they’ve paid over $600. This isn’t an administrative task they can absorb so they’ll have massive layoffs or simply close-shop.
So, by then, Obamacare will be around 7% in effect and the economic impact will have been catastrophic.
But, hey, when the goal is to make everyone equally miserable, Obama will consider it a job well-done.
Please try it McDonalds. Under the new laws you will pay either way. The days of making money by shorting your employees are coming to an end. CEO’s and upper management need to bring down their own salary’s to be like the rest of the business world. Only in America do CEO’s make these obscene amounts of money and coincidentally where low level employees work the most with the lowest compensation and benefits including healthcare.
McDonalds CEO made 17.9 Million dollars in 2009 alone.
http://www.usatoday.com/money/companies/management/2010-04-09-mcd-ceo-compensation_N.htm
Fred: “Isn’t it interesting that the only people whining about the damages of ObamaCare are ginormous multi-billion dollar corporations who make obscene profits on the backs of their employees?”
The company I work at just had to switch to a stripped down policy due to cost increases. It employs roughly fifty people (down from about sixty-five two years ago). We hardly qualify as a “multi-billion dollar corporation”.
Also: “The additional costs to the McD’s system for the new coverage requirement will barely make a dent in their bottom line, and the fact is that they would only have to deal with it for a few years until the low-income insurance provisions kick in.”
This illustrates perfectly the blatant arrogance with which Democrats govern. You constantly attempt to persuade the public that you possess some mystical omniscience that allows you to peer into the financial ledgers of every company in existence and determine the best course of action with their dollars, yet you seem to lack the most basic math skills to conclude that even if all executive salaries and bonuses were combined and divvied equally it wouldn’t even come close to filling the gaps of insurance cost increases for employees.
Michael,
There’s no magic here. Companies have been cutting back on health benefits for years now, or increasing the employee portion of the premium, due to increases in health costs that have nothing to do with the healthcare reform bill. It was said up front that because of the order in which the reform bill is being implemented, there would be short term increases until the entire plan kicks in in about 2014. It’s estimated that those increases will contribute about 3-4% on top of whatever increases the health insurance companies already are planning. Our plan has been going up between 10-20% every 18 months or so. We can’t keep going like we have been. No one knows if the healthcare reform bill will be successful in the long run, but it’s hard to imagine how it could possibly be worse than how things already are.
Butkusrules, you do realize that McDonald’s and its franchisees employ over 400,000, don’t you? If you’re right about CEO compensation, that would mean each employee would realize around $.86/week if the guy’s pay dropped to zero.
I’m not defending the CEO’s pay–as with all of us, you are paid what you can command in the marketplace–but the notion that high-flying executive pay suppresses what the Average Joe is paid is the stuff of fairy tales.
McDonald’s:We don’t have a heart, and neither will you if you eat our food.
Thank God Obama is putting these corporations feet to the fire. They have been on easy street for way to long. They essentially buy their own rules.
I find it Ironic that McDonalds of all companies is threatening to make healthcare worse for people. Their crap food is probably responsible for the degeneration of millions of peoples health. McDonalds might as well say “Hey America, you think were bad for your health now, wait to will cut off our own employees healthcare”
BTW for that guy saying happy November? I’m looking to it, I even hope some of your nutbags get elected. Sharon Angle campaigning on repealing maternity leave right now. Ha. Headline: Republicans vote to repeal maternity leave.
This is a bunch of bullsh!t. All you healthcare bashers answer me this. Why have my premiums steadily increased every year for the past 10 years without healthcare overhaul?
What’s with all the whiners? I’ve worked all my life and tax increases haven’t hurt me in the slightest. I still own 2 cars, a $300k home and really have no problems making ends meet and still won’t even with a modest tax increase. Grow up people.
MisterMike
CEO pay is dictated by board of directors which almost always consist of CEO’s of other companies. When they vote to increase a CEO’s compensation they are essentially increasing their own market value. Not exactly supply and demand.
Obama and the Democrats have really screwed up health care. Sure it needed improvements! But as the rules get out, it turns out that Obama and the Democrats are screwing the people! They have destroyed health care! They didn’t read the bill and bragged about not reading the bill. Obviously, they didn’t understand the bill! or maybe not! Maybe Durbin just likes to screw Illinois taxpayers for fun! Obama and this Congress are more dangerous than al Qaeda! People have lost their jobs and poverty levels have increased to levels not seen in 50 years! Obama was a vote for change! He has screwed America!
Obviously, most of you weren’t paying attention. McDonald’s may have to drop their plan because the PLAN does not meet government requirements. This is a low cost affordable plan for low wage earners, albeit one with limited benefits. They could get the same plan on their own, although it would cost more since it’s not part of a “group”.
The health bill is trying to tell the insurers how to spend their money.
This isn’t about McDonald’s. This is the government trying to spin and deflect the criticism away from what they’ve done. If you read the whole article, other companies are affected as well, such as HOME DEPOT and DISNEY. But hey, the article mainly mentions and headlines McDonald’s. Why do you suppose that is? Possibly because they were a big noise when it came to certain food and beverage taxes they wanted to implement?
Quit blaming big business people. They are what create and run the economy, NOT big government. Government provides absolutely no value for the money they spend. YOUR money people. Business only makes money from you if you want to spend it there. Government TAKES it from you.
Remember THAT at the polls in November
Joanne, you’ve worked your whole life without tax increases bothering you because income taxes have only gone down (unless you’re 125 years old). Be sure to thank a conservative. Odd, though, isn’t it, that revenues to the IRS go UP when taxes are cut and DOWN when taxes are raised? That’s not a coincidence.
I have 5 young kids and the cut in the child credit alone will increase my taxes by $2500. Sorry, but that’s quite a hit with high school and college down the road. And this is necessary because too many Americans don’t work hard enough to get good jobs with insurance? Why do my kids have to suffer because that’s somehow MY responsibility now?
The tax increase coming will also raise capital gains and the AMT. The result will be twofold: Less revenue to the government because investors simply won’t sell unless they have to….plus more unemployment.
If raising a stink over Obamacare’s real effects is “whining”, then this little piggy is squealing-away.
I was offered one of these mini-insurance plans by my company and read all of the fine print. If you got sick and were hospitalized, you really didn’t have any coverage. I chose not to waste my hard earned money on this plan and to continue with no coverage. I figured, I would be better off without any and would not lose the payments which were very high for the extremely low level of benefits.
“Yeah, I am so sure McD’s isn’t making enough money to provide this!! Meantime, their food is so unhealthy folks need coverage.” I realize that reading isn’t a strong suit for many of you but try reading it again. Mcdonalds isn’t saying they don’t want to pay for it they are saying the structure of mini med plans make it almost impossible to meet the maximum 14% administrative cost limit. If you cannot read, don’t post.
$2,000 in annual benefits ??!!!!???
So if you really get sick, this insurance is useless. Even for a routine outpatient surgery this insurance is useless. Apparently if you incur additional expenses you are expected to file bankruptcy/go on medicaid. Healthy as you may be, no one ‘plans’ on getting sick!