McDonalds: We are not dropping health insurance

The Wall St. Journal reported this morning that McDonalds may have to drop their health insurance because of rising costs, which would affect 30,000 employees:

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. …

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.

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.

I have written about this medical loss ratio before, which is basically designed to help put insurance companies out of business:

One of the biggest problems is their 65 -35 model (65 in claims payment; 35 for administration and claims expense storage for major catastrophes) which has been an industry standard was changed today to 85-15, which leaves the insurance companies only 15% on the dollar to pay for all administrative costs as well as catastrophe savings. It makes all insurance companies financially unstable. That doesn’t include all the colonoscopies and mammograms that are now included under preventative medicine that they have to pay for in full. Insurance companies will go out of business under this model.

Despite all of this, now McDonalds has come out this morning to deny that they are even considering dropping their health plans for their employees:

My guess is that they are trying to avoid the public demonization that would likely come from this administration and this Congress – ya know, those greedy white fatcats stuffing their pockets at the oppression and exploitation of their employees. Yeah that demonization.

Plus, it sounds like they aren’t ready to announce this, and want to avoid the internal implications this could have on employees. Either way, the medical loss ratio is what it is, thanks to ObamaCare, and I wonder how long these insurance companies will be able to stay afloat. Hopefully, long enough for us to regain control and roll this disaster of a health plan back.

Comment Policy: Please read our comment policy before making a comment. In short, please be respectful of others and do not engage in personal attacks. Otherwise we will revoke your comment privileges.