McDonald's Insurer Quizzed On Loss Ratio Compliance

In an October 1 letter to BCS Financial Corporation, which provides medical benefits for McDonald’s hourly employees, Sen. Jay Rockefeller (W.Va.), Chairman of the U.S. Senate Committee on Commerce, Science, and Transportation, has requested premium and claims information to clarify the fast food restaurant chain’s health care coverage, which reportedly will not meet the medical loss ratio requirements instituted by the Patient Protection and Affordable Care Act.

According to the letter, a recent memo from McDonald’s to the Department of Health and Human Services warned that the company would not be able to meet the new minimum loss ratio requirements. Reportedly, McDonald’s provides low level medical coverage, (also called a mini-med plan) for workers at 10,500 U.S. locations, most of them franchised. A single worker pays up to $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.

Citing a recent Wall Street Journal article, Mr. Rockefeller tells BCS, “Your company is apparently spending a significantly lower percentage of McDonald’s employees’ health care premiums on their medical care than the benchmarks established in ACA. 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.”

Mr. Rockefeller added, “In addition to spending an insufficient portion of their premium dollars on medical care, the products BCS is selling to McDonald’s employees are not likely to protect them against the costs of a major health care episode. The $2,000 maximum annual coverage you apparently offer in your McDonald’s 'Basic Plan' would not come close to covering the costs of hospital emergency services or the delivery of a child.”

Just a day earlier, HHS acknowledged that it was working on regulations to clarify the loss ratio requirements. According to Jay Angoff, director of HHS’s Office of Consumer Information and Insurance Oversight, “The issue of the applicability of the medical loss ratio requirements to plans such as mini-med plans has come up. HHS has not yet issued regulations implementing the medical loss ratio requirements because the Affordable Care Act tasks the National Association of Insurance Commissioners (NAIC) with first making recommendations to the Secretary.”

“Although the NAIC is close to completing its work, Mr." Angoff said, “we understand that some employers must soon make decisions regarding coverage options for 2011. As such, we fully intend to exercise [HHS Secretary Kathleen Sebelius'] discretion under the new law to address the special circumstances of mini-med plans in the medical loss ratio calculations. According to the Affordable Care Act, medical loss ratio 'methodologies shall be designed to take into account the special circumstance of smaller plans, different types of plans, and newer plans.' We recognize that mini-med plans are often characterized by a relatively high expense structure relative to the lower premiums charged for these types of policies. We intend to address these and other special circumstances in forthcoming regulations.”

Among the items Mr. Rockefeller requested from BCS by October 15 were the following:
1. the health insurance products BCS currently offers for sale to McDonald’s employees;
2. copies of all materials and communications McDonald’s employees receive in connection to the marketing or purchase of BCS health insurance products;.
3. the number of McDonald’s employees who currently are covered by BCS health insurance products.
4. the business arrangement under which McDonald’s allows BCS to sell health insurance products to McDonald’s employees;
5. for each of the last five calendar years, provide the following information regarding McDonald’s employees covered by BCS plans:
• the amount of premiums employees paid for coverage;
• the amount of all medical claims;
• the number employees who were covered at the end of each calendar year;
• the number employees who made payment claims for health services;
• the number employees covered who reached the products’ annual spending limits; and
• the average time period employees were covered before ending the coverage.

HHS already has initiated a waiver process for mini-med plans in regard to the minimum annual limit provision. According to Mr. Angoff, “HHS has approved dozens of these waiver requests, most often filed by so-called 'mini-med' plans, and in doing so, has ensured the continuation of health coverage for workers and their families. Complete waiver applications were generally processed in 48 hours.”

More information on health reform and loss ratio requirements is available here.