McDonald's Fights Back Against Report It Will Drop Health Care Plan

Wall Street Journal: Fast food giant is considering dropping 'mini-med' plan.

September 30, 2010, 8:43 AM

Sept. 30, 2010— -- 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.

"Mini-med" plans, which provide limited coverage at minimal employee cost, came into the spotlight after the Wall Street Journal reported today that McDonald's is planning to drop them because of the new health care law.

The Journal reviewed a memo by McDonald's asking federal officials to determine if their most basic health insurance plans can be exempted from the medical loss ratio (MLR) requirements of the new health care law.

The law requires that 80-85 percent of the premiums received go directly to patient care, not to other expenses like overhead, executive salaries or dividends for shareholders.

McDonald's said the company has no plans to drop the "mini-med" plan.

"Media reports stating that we plan to drop health care coverage for our employees are completely false," said Steve Russell, a senior vice president and head of human resources for McDonald's, in a written response to the article. "These reports are purely speculative and misleading."

That sentiment was echoed by Health and Human Services Secretary Kathleen Sebelius today.

"The McDonald's story is flat-out wrong, and I am sorry that they were not more accurate in their reporting," Sebelius said at a reporters' breakfast organized by the Christian Science Monitor. "The medical loss ratio issue is one that isn't even settled. ... We have assured the folks at McDonald's and others that as soon as we have a regulation that has a process in it, we will begin those discussions."

Watch Sebelius' full response.

Nearly 30,000 McDonald's employees currently participate in the plan, which provides a maximum of $2,000 to $10,000 a year in basic medical coverage at a cost of $14 to $32 a week, according to the company. Home Depot, Disney, Blockbuster, Staples and other big retail chains with large populations of hourly employees offer similar plans.

The McDonald's plan, according to the report, has higher overhead costs because it provides insurance to a highly transient population of hourly workers in its restaurants and would not likely meet the minimum ratio requirements of the new law.

HHS guidelines on the medical loss ratio will be based on a report issued by the NAIC, due at the end of the year. Today, the NAIC said that "mini-med" plans will be subject to new medical loss ratio regulations and the group has no plans to ask for an exemption for those.

"Mini-med plans that are sold as stand-alone coverage -- and are not supplemental to a comprehensive plan -- will be subject to the MLR requirement, and we have no plans to ask HHS for a specific exemption on their behalf. If they are sold as comprehensive coverage, we expect them to meet the same MLR standards as other health plans," Kansas Insurance Commissioner and chair of the NAIC Health Insurance Committee Sandy Praeger said in a statement to ABC News.

McDonald's Denies It Will Cut Some Health Insurance Plans

Speaker of the House Nancy Pelosi's office also came to the defense of the new law, saying in a statement that, "Under the law, workers and businesses will have access to affordable health coverage choices and we are moving toward a system where more of the premiums will go to provide benefits instead of paying for insurance companies' administrative costs."

Medical loss ratio guidelines -- the ratio of medical expenses to administrative spending -- have not been issued yet but the new law sets new stricter guidelines that raise the percentage of the premium dollar that should go to medical care rather than administrative costs and profits. Some "mini-med" plans are eligible for waivers.

The new limits are due to go into effect in January.

Republicans today painted the report as another support for their argument that the health care law should be repealed.

Speaking at the American Enterprise Institute, House Minority Leader John Boehner, R-Ohio, promised to repeal what he called the monstrosity of a health care bill if Republicans gain majority of the House after the mid-term elections.

"If you believe, as I do, that Obamacare will ruin the best health care delivery system in the world, and, as I do, believe it will bankrupt our country, we've made it clear we want a repeal of Obamacare and to replace it with common sense reforms that will bring down the cost of health insurance," Boehner said. "When I say we're going to do everything to make sure that this law does not go into effect, I mean that we will do everything. Is that clear?"

ABC News' Devin Dwyer, Ben Krolowitz and Brian Hartman contributed to this report.

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