September 30th, 2010

McDonald’s meets Obamacare

This is one of those fabulous unintended consequences of Obamacare:

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.

The mini-med plans are a way for a fast-food business, which employs many young, low-earning, high-turnover employees, to offer them at least something in the way of health insurance. What the present administration and Congress seem to neither know nor care is that decisions about such things are not generally arbitrary; they are based on financial considerations and real limitations.

Businesses—unlike government—have to make a profit or they will go out of business. Likewise, insurance companies, which are a type of business. Most business people are not evildoers out to screw their employees, although such types certainly do exist. But to merely declare a rule should be implemented is not the same as to make it possible for a business to implement it without losing a significant amount of money. And businesses are not in the business of committing suicide.

Aetna, the company that writes the policies for McDonald’s and many other large corporations (such as Home Depot and Staples) that offer similar deals, has declined to comment. But this guy has something to say:

“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.

Ah, but Obamacare will take up the slack, right? Wait; not so fast. Because of the delayed-action effect of the HCR bill, designed to allow the CBO to score it so that it could pass muster, the provisions that might do so (and that we all will pay for) won’t kick in till 2014. Till then, “workers on mini-med plans would have few affordable alternatives for coverage.”

Good going, Obama, Pelosi, Reid, and company. Of course, it’s possible that McDonald’s and Aetna will get a waiver. But don’t sit on a hot stove till they do:

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.

[NOTE: For those who do the math and find the premiums for these mini-med plans very high compared to the benefits, that is correct. But the policies are voluntary, as far as I know. No one is holding a gun to their heads and forcing employees to take them. And for a worker who believes he/she will incur medical bills that are higher than the premiums will be, they represent a savings.]

25 Responses to “McDonald’s meets Obamacare”

  1. Mike Mc. Says:

    $14/week is not high. That’s $728 for an entire year. I’m not far from that in my monthly payment with IBX.

    Assuming a 40 hour week, $14 is what, two hours of that for a McD’s worker? An hour and a half’s worth?

    In a given 40 hour week, they already work for the government probably 10 hours of that.

    Democrats and their government workers and political patronage programs will correct that error of course. They’ll make it 30 out of 40 hours you work to pay them

    They were getting a great deal.

    Obama is all about helping the little guy. Right.

    Defeat Obama and the Dems.

    Anyone, anywhere in this country, who votes Dem this November is effectively an enemy of the people.

  2. John Says:

    “McDonald’s and the Obama administration are firing back at a report that the fast food giant is considering dropping its “mini-med” health insurance for hourly workers, even as the National Association of Insurance Commissioners said it won’t ask for an exemption for such plans. ”

    http://abcnews.go.com/Politics/HealthCare/mcdonalds-fights-back-report-drop-health-care-plan/story?id=11764596

    What happens if McDonald’s doesn’t get the waiver?

  3. Mr. Frank Says:

    The impasse is not a bug, it’s a feature. The objective is to wipe out insurance companies and crash the health care system. At that point people will be forced to accept government health care as the only option.

  4. neo-neocon Says:

    Mike Mc.: it’s not high in the absolute sense. It is high considering the benefit caps. But it’s still a good deal for some people, and the ones who judge it not to be don’t have to take it.

  5. Mike Mc. Says:

    Neo,

    Okay. I see. I was reading that $2000 as an out of pocket max for some reason.

  6. william Powell Says:

    Probably a lot of the overhead for the insurance company for this type of coverage is the “churn.” With workers signing up and then departing quickly, that has to cost more than someone with a policy in effect for several years.

  7. Artfldgr Says:

    I know and we all know the truth… Deep down they made the mistake of not making an Obama happy meal toy… now it would be too ingratiating, but before, it could have secured them an writ excusing them from certain laws.

  8. Bob from Virginia Says:

    Artfldgr, you are right, an Obama Happy Meal with a toy unicorn would have excused them from certain oversights, just like Freddie and Fannie were excused from certain oversights by their judicious contributions to the Obama campaign.

  9. anna Says:

    I know the plan of Obamacare was to crash the system and make people think that socialized medicine is the only way. But what if that fails? Most of the people I know (in real life and online), even average d-bags who read the MSM, know exactly what Obamacare was and exactly what it was supposed to do. So what if enough people are onto it? What if the bug/feature backfires?

    Although, the actions of the citizens were not enough to stop Obamacare from passing, probably the same thing will happen with SocMed too, governing against the will of the populace.

  10. Richard Aubrey Says:

    Thing is, young folks mostly need help with accidents, a substantial proportion of which happen on the job–work comp covers–or in cars–auto insurance covers in most states, and even some illnesses are job-related.
    On the other hand, McD workers are not likely to have $500 on hand to take care of the minor stuff that they are likely to have happen to them that isn’t covered. A sprained ankle here, a rash there, and maybe pinkeye. Adds up if you have no slush fund. For a young person not making much, this is pretty good.

  11. Artfldgr Says:

    I worked for what is called or was called an insurance rating bureau. specifically ISO. Insurance Services Offices (a good company and one i wouldn’t mind returning to and working hard at).

    anyway, at the time i worked for them they were a monopoly with a ‘waiver’ under mcgarren Ferguson act… (cant spell it, sorry).

    their job was to aggregate all the data that goes into computing information that then is used to develop numbers for what you pay.

    as a software engineer who was part of this process i can tell you INTIMATELY how and why and what goes into determining what you pay.

    by the way, these databases are MASSIVE, including information on almost every car ever made and licensed in the US, and other databases details can tell you how many feet from your residents front door to the fire hydrant, how many hydrants are around, and whether your area is in an indentation that can hold water and lead to a flood situation.

    and what i just said was a light scratch….

    basically they develop mathematical formulas that then are used to figure out the break even point on insurance. that is, how much you have to charge in order to break even over time.

    so what makes the prices different?
    overhead costs, which is what the companies add. advertising, salaries, etc, etc… and profit.

    so its a tight margin industry… it starts with the margin, then companies add what they think is what they will need. and then they try to stay under budget so there is a profit.

    loyds works differently…
    [but will literally insure anything]

  12. Assistant Village Idiot Says:

    Don’t be ridiculous. The purpose of businesses isn’t to make a profit but to make jobs for people – good jobs with full benefits. They can do it somehow, and are just being evasive when the say they can’t. Look under the cushions or something. The larger a corporation is, the more this is true. Everyone knows you get lots of money just by being a corporation, and they should give it to other people. I mean, don’t those people deserve it?

  13. rickl Says:

    Mr. Frank Says:
    September 30th, 2010 at 3:15 pm

    The impasse is not a bug, it’s a feature. The objective is to wipe out insurance companies and crash the health care system. At that point people will be forced to accept government health care as the only option.

    Hell yes it’s deliberate. Cloward-Piven.

  14. Mr. Frank Says:

    Now, if we could just get Wal-Mart and a few really big companies to push back. The few Dems who survive November will have had their minds concentrated and would join a repeal effort.

  15. DerHahn Says:

    Really big companies with older workforces, especially workforces that have dependents, are quite likely to be very happy to push their medical insurance costs onto their competitors via taxation.

  16. strcpy Says:

    This was one of the things that industry people said would happen and the HCR bill supporters told them they were idiots. The assumption was that money went two places – to pay claims and profit and there was too much in the way of profits.

    Not so, there are other costs and they are *not* taken into account. So in order to meet these guidelines they also have to increase claims payouts to cover their costs so they need more than 100% of their revenue to do that. Case closed, company/division folds up. They can’t print money or force people to pay them more – even then that is going to fail us at some point.

    Frankly thier plan was taken from South Park:

    step one: pass bill
    step two: ???
    step three: FREE HEALTHCARE!

    Frankly I do not care if someone is liberal or conservative as long as they realize that step two almost guarantees radical failure. Liberals/leftist seem to depend on step two MUCH more heavily than conservatives but both do to some extent. However as long as step two is relatively reasonable then it will typically work out (though I do think most ideas with a reasonable step two push one towards conservatism).

    Obama care’s fun is just starting. Everyone calls it that too – it is hung entirely on his neck. The dems are already talking about having to force cost reducing preventive care or tax “unhealthy” things out of existence because they are in the same boat – face spiraling costs that no amount of revenue can cover or “save costs” by simply dropping all coverage.

    Further since it is incremental it is the gift that keeps on giving. Politically if it all went into effect immediately they could hope for acceptance/forgetfulness before the elections, but no every few months a bold new step is going to happen that screws most people and gets it back in the news and the forefront of their minds. If it were to be passed (and I think it pretty much inevitable after the 08 elections) then the republicans couldn’t have crafted that part better.

  17. Otiose Says:

    Don’t be surprised if a great many companies decide to announce – between now and November 2nd – the impact Obama’s health care plan will have on their financial situation.

  18. Richard Aubrey Says:

    Otiose,
    I think the have to, GAAP and so forth. But the Admin is going to threaten them–already has threatened various insurance companies for discussing increased premiums.
    Fun for all.
    I forget. Who voted for these crooks?

  19. RickZ Says:

    Otiose,

    I sure hope you’re right and companies do make health insurance announcements before the elections. But I’ll wager those brave enough to do so will be hauled before the Star Chamber lame duck Congress and raked over the coals to explain their heresy. Obama will bring back buring at the stake for such witchcraft, in full display on the Mall. That’ll teach Glan Beck and those damn Tea Partiers to hold rallies there.

    Barry the Man-Child is in charge, and you better believe it!

  20. Thomass Says:

    The plans seem to kind of suck, but if your young and don’t have any pre existing medical issues you do not need employer group coverage. You can call an insurance agent and just buy a major medical plan that would work a little in reverse. You pay less per month, but you pay a large deductable if your ill (say $5k), but they cover the rest up to a few million.

  21. Richard Aubrey Says:

    Thomass.
    Right. But I believe obamacare will make high-ded plans illegal. Anybody know?

  22. blert Says:

    All such plans face adverse selection because the really healthy employees rarely enroll. After all, how many teenagers think that ANYTHING can go wrong with their health?

    Further, such plans must find the paperwork burden to be impossible to hold down to 15% of $14 per week.

    Anyhow, mandating MLRs is Central Planning on its face.

    What could go wrong with that?

    Doctor shortages?

    Forced labor?

  23. KBK Says:

    I’d like to see a (fair) accounting of the government plans with greater than 85% payout. Nothing hidden, of course.

  24. Baklava Says:

    3M follows McDonalds..

    http://sayanythingblog.com/entry/another-day-another-american-business-dropping-health-care-for-its-workers/

  25. Flood Damage Mission Viejo Says:

    Took me awhile to see all the comments, but prefer enjoyed the article. It turned out to be very useful to me and most likely to all the commenters at this point! It’s always nice when you can not only be knowledgeable, but also engaged! I’m sure you possessed fun writing this post.

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Previously a lifelong Democrat, born in New York and living in New England, surrounded by liberals on all sides, I've found myself slowly but surely leaving the fold and becoming that dread thing: a neocon.
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