An Interesting Unintended Consequence. Whom Can You Trust?

Stanley Feld M.D.,FACP,MACE

I predicted that the healthcare insurance industry would increase healthcare insurance premiums because of President Obama’s healthcare reform plan.

I had also predicted that employers would drop healthcare insurance coverage for employees. It is much cheaper to pay President Obama’s penalty than it is to insure workers.

“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.”

This is the first corporation to threaten to drop healthcare insurance for employees. It is also a first step toward the failure of President Obama’s healthcare reform plan as written.

I have speculated that President Obama wants this plan to fail. Then the public option could be accepted. The public option will fail. The next step will be government controlled single party payer healthcare system.

The infrastructure for this progression is being put into place. The regulations are being written. The agencies are being formed.

An entitlement system of universal care with restriction of access to care and rationing of care will be a necessary part of this new entitlement program.

The government cannot afford a new entitlement that permits citizens to have the freedom of choice they have enjoyed for so long.

Between now and then, we will hear a lot of babble from President Obama about how the government is doing everything to help consumers take control of their healthcare.

McDonald’s decision is a result of the new regulations. The regulations make the kind of healthcare insurance it offers unaffordable to McDonald’s. McDonald’s provides “mini-med” healthcare insurance for workers at 10,500 U.S. locations. Presently 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.

It is a plan that offers an insignificant about of healthcare coverage.

The traditional media has made a big deal out of the McDonald’s story. It is a big deal pre midterm elections for President Obama and Democrats seeking re-election. Potentially 1.4 million people could be added to the count as uninsured.

What is going on?

McDonald’s outsources these “mini-med” benefit plans to healthcare insurance carriers. Carriers are supposed to pay 80% of the premium for healthcare insurance benefits in 2011.The healthcare insurance industry has fought hard to exclude many of its overhead expenses from this calculation.

For example, if McDonald’s pays the carrier $100 for a premium, the amount that goes for insurance overhead is excluded from the medical loss calculation. Let us say fifty cents on the dollar is excluded. Then the healthcare insurance carrier must pay 80% of the remaining fifty cents for benefits. If the insurance carrier does not spend the 80%, McDonald’s should get a rebate on their insurance premium the following year.

President Obama’s healthcare reform law is trying to limit credited expenses claimed by the healthcare insurance industry. President Obama wants to regulate profits by regulation rather than by competition.

The healthcare insurance industry is raising its rates in anticipation of the government’s new regulations. McDonald’s has a high turnover of employees. The carriers claim this high turnover increases its administrative services. Administrative services it will not get credit for as expenses in the new regulations. Therefore, it must increase the premium. McDonalds cannot handle the increase in premium for 30,000 employees

“McDonald’s last week sent a top official at the Department of Health and Human Services a memo saying "it would be economically prohibitive for our carrier to continue offering" its "mini-med" limited benefit plan unless it got an exemption from the requirement.”

Mini-med healthcare insurance plans are becoming a stopgap for employee health care coverage. With more employers than ever cutting back or completely removing health insurance from their fringe benefits, providing this minimal coverage plan is becoming more popular. The employee, not the employer, most often carries the entire premium cost for the plan.

McDonald’s offers its hourly workers two different health care plans, which are known as “mini-med” plans. In one, workers can pay about $730 a year for benefits of up to $2,000. In the other, they can pay about $1,660 a year for benefits of up to $10,000.

The “mini-med” plan is very cost efficient for the employer.

These employees of McDonald’s mini-med plans are in reality uninsured now. However, it makes these McDonald’s look like a good corporate citizen. The healthcare insurance industry makes a lot of money. Employees think they have good healthcare insurance.

Two days later, the Obama administration said its top health official will "exercise her discretion" in enforcing a new health-law requirement.

One commenter said;

RE: "The Obama administration said Thursday that its top health official will "exercise her discretion".
“This is it folks; this is the beginning of the end. We once had a government confined law, now we instead are ruled by "her discretion.””

“We are getting a small taste of the wonderful world of big government bureaucracy and unintended
consequences.”

White House officials said they have sought to ensure that insurance coverage for employees isn’t disrupted as a result of the law.

Aetna Inc., one of the largest sellers of mini-med plans indicated that a potential medical-loss ratio waiver could provide relief to dozens of low-wage employers. Aetna provides min-med plans to Home Depot, CVS, Disney Worldwide Services, Staples Inc., Blockbuster Inc., AmeriCorps teaching-program sponsors, and others.

Kathleen Sibelius issued “her discretion” decision to grant waiver through the HHS bulletin.

“In the case of mini-med plans, the HHS bulletin says plan sponsors can seek a waiver from those limits for 2011 through 2013.”

Howe
ver, the government bureaucracy went to work. A plan sponsor must apply for a waiver, must detail terms of the plan, the number of covered individuals and the plan’s annual limits for approval.

Also required is a statement by the plan administrator or CEO of the issuer of the coverage that says the plan existed prior to Sept. 23, 2010, and that meeting the minimum annual limits would result in a significant decrease in access or a significant increase in premiums for the plan.

Another commenter said;

“ Wonderful. This is exactly the problem with huge government intervention in the marketplace. Large businesses with enough clout can get a waiver but small guys get the shaft.”

There are several important issues;

1. President Obama now has the power to interpret healthcare law at “its discretion.”
2. Healthcare waiver is being used to political advantage to affect the mid-term elections.
3. Lobbying and big business clout is influencing President Obama’s administration to interpret the law in its favor.

We are going to see these unintended consequences repeatedly in the coming years.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.