Unexpected way reform threatens smaller health plans

Many thought that if companies were to drop their health coverage, they’d wait until 2014 to do it — when the “play or pay” mandates kick in. But now it seems some employers may drop coverage this year.
McDonald’s Corp. sent huge waves through Washington when it warned federal regulators that it could drop health coverage for nearly 30,000 workers unless a new requirement of the healthcare reform law is waived.
The requirement in question covers “mini-med” insurance plans, which many lower wage employers — like Home Depot, CVS and Staples — offer to their workers. It says that starting in 2011 insurers must spend at least 80% to 85% of their premium revenue on medical care — a requirement McDonald’s insurer, BCS Insurance Group, says it won’t be able to meet.
McDonald’s and trade groups representing restaurants say the percentage (also called a loss ratio) is unrealistic for mini-med plans due to the high administrative costs low-wage employers owe to high worker turnover, combined with low spending on claims.
In a memo to federal officials, McDonald’s said it may have to drop its mini-med plan unless it got an exemption from the loss ratio requirement — and that could spell trouble for the workers benefiting from the coverage.
While the reform law will expand Medicaid and offer large subsidies to lower-income people to purchase insurance, those provisions won’t kick in until 2014 — leaving them with a long gap in coverage.
Insurers are claiming dozens of other employers could be left in the same boat as McDonald’s, which did state that it if doesn’t get the waiver it will look into other insurance options.
Regulators say they may be flexible

Following a report in The Wall Street Journal that McDonald’s may drop its mini-med plan, the Obama administration said that its top health official will “exercise her discretion” when deciding whether to grant the restaurant chain a waiver.
Administration officials then said that they are hopeful that Health and Human Services secretary Kathleen Sebelius will allow exceptions to the requirement — but she won’t make a decision until she gets a recommendation from the association of state insurance commissioners, which isn’t expected to happen until December.
Senator opens probe
Adding to the drama is Senator Jay Rockefeller (D-WV), who opened a probe into the mini-med plan McDonald’s offers to its employees.
Rockefeller has asked BCS Insurance Group to provide info on how much of McDonald’s employees’ premiums actually go toward medical care. He says he wants to ensure that most of the premiums participants are paying into the plan are going toward medical care, not BCS administrative costs and profits.
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