Congress expands McD probe into mini-med insurance

By Dow Jones Newswires-Wall Street Journal
Posted Nov. 30, 2010 at 7:29 a.m.

A congressional committee is widening its investigation of bare-bones health-insurance policies to encompass potentially hundreds of plans offered by low-wage employers.

What started as a probe into McDonald’s Corp.’s insurance plan for store workers is expanding into broad scrutiny of “mini-med” policies that could ensnare large mini-med carriers including Aetna Inc. and Cigna Corp.

Congressional investigators are taking a close look at the two carriers and culling insurance policy data on a range of large and small employers, a Senate aide said.

In a hearing scheduled for Wednesday, Senate Democrats plan to detail how restaurants, pet-store outlets and hair salons are offering workers health-insurance policies with low caps on annual benefit payouts that leave workers footing the bill for care, according to the Senate aide. Lawmakers also plan to press McDonald’s top human-resources executive on the chain’s mini-med plan that covers nearly 30,000 restaurant workers.

An estimated 1.4 million Americans are covered by mini-med plans.

New restrictions in the health overhaul passed in March are expected to effectively eliminate mini-med plans as of 2014, when low-wage workers will qualify for tax credits to help them buy insurance. But whether to impose tougher regulations on such plans to raise annual benefit payouts, or force them to spend more money on medical care in the meantime, has become a thorny issue for the Obama administration.

In recent weeks, federal regulators have granted dozens of waivers to mini-med providers so they can keep the caps on annual payouts.

Also, the Obama administration said last week that mini-med plans could spend half as much as traditional carriers on medical care under health-law rules that take effect next year.

Democrats on the Senate Committee on Commerce, Science, and Transportation, led by Sen. Jay Rockefeller (D., W. Va.), are looking at whether mini-med plans should face tougher regulations.

Committee investigators are building a case that such coverage misleads consumers into thinking they have health insurance, when such policies pay out as little as $1,000 a year for hospital visits and contain loopholes.

“They’re junk plans,” said Stephen Finan, senior director of policy at the American Cancer Society Cancer Action Network. “They have the pretense of providing coverage that is unreal. But, unfortunately, virtually all consumers of these products don’t realize it until it’s too late.”

The insurance industry argues that tighter restrictions on such plans, such as raising the limit on annual benefit payouts, could force employers to drop them altogether.

“For many part-time, seasonal and temporary workers, these types of plans are their only source of affordable health-care coverage,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the industry’s trade group. Officials at Aetna and Cigna didn’t return calls seeking comment.

Mr. Zirkelbach noted that federal regulators are requiring mini-med plans next year to tell enrollees more about plan limits. He said that the insurance industry supports increased transparency.

McDonald’s plan caps annual benefit payouts at between $2,000 a year and $10,000 a year–depending on the premiums workers pay–and excludes coverage for pre-existing conditions, according to a benefits guide for workers at company-owned outlets.

McDonald’s has described the plan to federal regulators as being a valued and affordable option for restaurant workers.

At Wednesday’s Senate hearing, Richard Floersch, McDonald’s chief human-resources officer, plans to make the case that the fast-food giant offers competitive benefits and pay, a company spokeswoman said.

Darren Pound, who lives in Mooresville, N.C., bought a limited-benefit plan from Cinergy Health & Life two years ago after the resort where he works dropped its health-insurance coverage. On Labor Day, Mr. Pound shattered his leg from the knee down while wake-boarding behind a speedboat.

His two-week hospital stay, which included surgery and blood transfusions, ran up a tab of more than $200,000. He is checking exactly how much his insurance will cover, but he estimates “it doesn’t even make a dent.”

Cinergy didn’t immediately respond to requests for comment.

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