Do ‘Mini-Med’ Insurers Gouge Low-Wage Workers?

Lindsay Beyerstein

An employee at the oldest operating McDonald’s, in Downey, Calif.

Sen. Jay Rockefeller (D-WV) wants to know whether health insurers are gouging workers for so-called mini-med” insurance plans, also known as limited benefit plans, for reasons that will become obvious.

About 1.4 million Americans, typically low-wage, part-time, and temporary workers, have this kind of coverage. McDonald’s, HomeDepot, Wal-Mart, Friendly’s and other national chains offer mini-med plans.

Under healthcare reform, insurers must spend 80%-85% of their premiums on treating the sick — as opposed to paying executives’ salaries, lobbying, buying attack ads, sleuthing medical files for disqualifying pre-existing conditions, and reaping sweet profits.

The mini-meds say they can’t possibly meet that standard, known as a medical loss ratio. They claim limited benefit plans are unusually expensive to administer because of high employee turnover and because employees don’t use very much healthcare. It’s a clever model. If you know your insurance doesn’t cover anything, you’ll defer care as long as you can. Hitting a $2,000 benefit cap with one ER visit stops claims for the rest of the year.

McDonald’s made headlines last month when it threatened to stop offering health insurance to its 30,000 hourly wage workers if the government didn’t waive the medical loss ratio requirement. The Department of Health and Human Services knuckled under and gave McDonald’s and 30 other employers, including a teachers union, a 1-year extension. DHHS promises that the extensions will end as soon as the state health insurance exchanges are up and running.

For $14 a week, McDonald’s employees are eligible for up to $2,000 a year in benefits. That works out to $728 a year (plus co-pays) for no more than $2,000 worth of care. In other words, the premiums add up to an outrageous 36% of the maximum benefit. This isn’t insurance. It’s a $728 coupon for less than 2/​3rds off the first $2,000 of your medical bill. After that, you’re on your own.

Two grand is a pittance in today’s healthcare system, in which a single ER visit for stitches or X-rays can cost thousands of dollars. According to McDonald’s own figures, 15% of insured employees rack up more than $5,000 a year in medical bills.

For $32 a week ($1664/​year), a McDonald’s worker can get $10,000 worth of coverage. It takes a lot of chutzpah to ask someone making $15,000 a year to cough up over 10% of her income for health insurance that won’t even cover an appendectomy.

If everything goes according to plan, mini-meds will be history by 2014. In the meantime, Jay Rockefeller wants to know whether mini-med plans are delivering value for worker’s money.

The products BCS is selling to McDonald’s employees are not likely to protect them against the costs of a major health care episode,” Rockefeller said a letter to Scott Beacham, chief executive officer of BCS Financial Corp, which runs McDonald’s mini med program. If this is the case, McDonald’s hourly wage workers are setting aside portions of their paychecks for an insurance product that may not be providing them a good value.”

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Lindsay Beyerstein is an award-winning investigative journalist and In These Times staff writer who writes the blog Duly Noted. Her stories have appeared in Newsweek, Salon, Slate, The Nation, Ms. Magazine, and other publications. Her photographs have been published in the Wall Street Journal and the New York Times’ City Room. She also blogs at The Hillman Blog (http://​www​.hill​man​foun​da​tion​.org/​h​i​l​l​m​a​nblog), a publication of the Sidney Hillman Foundation, a non-profit that honors journalism in the public interest.
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