Should We Mourn for McHealth Insurance?

By guest blogger Robert Field:

Imagine owning a $200,000 house and paying $73,000 for homeowners insurance.  For anything short of a certified firetrap, most people would consider that a pretty poor deal.  Yet, McDonald's offers its employees something similar for health insurance.  For $727.24 a year, you can get individual coverage with a maximum benefit of $2,000.  (See this in the Wall Street Journal.)

There are 29,500 participants in what is billed as "mini-med."  Presumably, the emphasis is on "mini".  The plan would barely get most patients past the first day of a major hospitalization.  And that is with a co-payment of 30 percent.

To be fair, mini med has other options that are a bit more generous.  For $1,679.60 a year, the plan will cover up to $10,000 in expenses.  However, that is still a remarkably low payout compared with the typical employer-sponsored health plan.  Even this higher coverage limit is only a fraction of the cost of treatment for many major illnesses.

McDonald's is one of several companies that offer mini med plans.  Others include Home Depot, Disney, CVS Caremark, Staples, and Blockbusters.  The terms differ, but the policies all cover substantially less than conventional employer-sponsored insurance.  Many of these companies are retailers, and they say they can't afford to offer hourly workers more generous plans.  That may be true, but the employees' health care needs are no less real.

The single biggest cause of consumer bankruptcy is medical expenses, and a large number of those affected have health insurance.  However, their coverage is limited and leaves significant expenses unreimbursed.  Gaps can result from high deductibles and copayments and from low limits on coverage.   That is where mini med would leave most patients with serious illnesses.

This is exactly the kind of situation that health reform was designed to address.  The new law requires employer plans to meet minimum coverage standards.  If they do not, starting in 2014, employees can turn to exchanges, where individual policies that comply with minimum levels of coverage will be available with subsidies for those with low incomes.

McDonald's says the new coverage requirements may force it to drop mini med because of the added cost, although it is still weighing its options.  The same could be true for the other companies that provide such plans.  If this were to occur, their workers could remain insured only by seeking coverage in the individual insurance market, where they could be turned down because of age or preexisting conditions.  They would also have to pay the full premium cost without subsidies.

In response to McDonald's protests, the federal Department of Health and Human Services has granted it and the other employers that offer mini meds a waiver from the new insurance requirements until 2014.  This will allow the plans to continue in operation until the exchanges kick in.  Existing coverage for their workers will not be disrupted.

This solves the problem in the short-term.  In the long-term, the eventual demise of these plans should not be cause for concern.  The only thing worse than not having health insurance is thinking you have coverage and then discovering it does not protect you when you need it.  This is the situation that many patients with limited policies have faced.

It is true that minimum coverage standards under health reform may add to the cost of some plans.  But in return, patients will know that their coverage is real.  After paying the premiums, patients shouldn't still face the threat of bankruptcy from the expenses even a minor medical intervention can impose.

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