A Senate panel last week deepened a probe of co-pay based mini-meds that raised pointed questions about the plans' value and transparency for workers, even when employers are unable to sponsor more comprehensive coverage.

Though the information-gathering session notably excluded testimony from mini-med insurers or brokers, questions are likely to intensify amid health reform implementation that could outlaw the plans by 2014.

The only option

Concurrent with the hearing, American Benefits Council President James A. Klein issued a statement observing that the plans cover more than 1 million part-time workers, seasonal workers and volunteers who may not be able to afford coverage otherwise.

"It is essential that the government not inadvertently add to the ranks of the uninsured by jeopardizing health coverage these individuals depend on today," he warned.

Some witnesses and Senators concurred with this sentiment, arguing that some coverage is better than nothing, while others insisted mini-med participants were worse off due to lack of transparency in the plans.

Whatever their views, the witnesses and lawmakers displayed passionate considerations of the subject, illuminating the polarizing debate over this type of mini-med plans and health care reform in general.

Chairman John D. Rockefeller IV (D-WV) of the Senate Commerce, Science and Transportation Committee opened the hearing, explaining that “more than a million Americans wake up and go to work everyday thinking they have insurance, but the fact is they don’t. They don’t have the kind of comprehensive insurance that most people at this hearing have. They have limited benefit or mini-medical insurance.”

Most commonly, these plans are offered to workers in the restaurant or retail industries and often to young adults and those in part-time or temporary jobs. For many, min-meds may be the only option.

Rockefeller questioned whether one subset of workers (often corporate workers) was more valuable than hourly workers, for example. They will be equally valuable in 2014, he said, once the state health insurance exchanges are up and running. In addition, annual and lifetime limits will cease to exist at that time. The question remains: what to do until that time?

McDonald's plan

This interim period was critical to those present. Rockefeller argued, contrary to testimony by the McDonald’s representative, that the truth is that “McDonald’s mini-med policy will not pay your bills if you have a serious health problem.”

Opponents like Sen. John Ensign (R-NV) and Minority Ranking Member Sen. Kay Bailey Hutchison opined that this coverage was better than nothing, to which Rockefeller responded that these policies fostered a “false sense of security.”

Hutchison also questioned why no one from the department of Health and Human Services was present to explain why 111 employers and insurers covering more than a million workers (including McDonald’s) received waivers of the health care law’s ban on annual limits so that those employers wouldn’t drop their coverage.

She also considered the $750,000 annual limit on health care services, which begins with plan years starting on or after Sept. 23, 2010 and escalates each year, excessive, especially for small businesses.

The first witness, Stephen Finan, senior director of policy, American Cancer Society cited a 2009 ACS CAN study found that stage II breast cancer, for example, costs $111,300 per year for treatment, well above the $2,000 annual limit of many limited medical plans, including the most popular plan for McDonald’s hourly employees.

“The mini-meds are a perfect example of why health care reform is so crucial,” he said. Later he added that the whole purpose of insurance was to protect individuals from catastrophic loss.

Adding to his call for transparent coverage, Eugene Melville of Riverside, CA testified from personal experience that his health insurance coverage from a big box chain didn’t cover his treatment for oral cancer. When he purchased the plan, he believed he had a $20,000 limit, when in reality that amount was divided into benefits sections, leaving him with only $2,000 for outpatient care and doctor visits.

Demographics

A professor of law at Washington and Lee University School of Law, Timothy S. Jost, explained that "high cost-sharing policies expose lower-income Americans to immediate, sometimes unsustainable, costs when they seek medical care. Limited benefit policies, on the other hand, are more insidious, as the persons whom they cover often are not fully aware of how inadequate their coverage is compared to the medical costs they are likely to incur."

Aaron Smith, co-founder and executive director of Young Invincibles, a non-profit that speaks for 18 to 34 year-olds during the health care debate explained that mini-meds disproportionately impact young adults because they are often in retail or part-time positions.

According to Aetna figures, over 40% of mini-med participants are under the age of 30.

He testified that benefit caps from these plans lead to excessive medical debt (one out of 10 young people had $5,000 to $50,000 in medical bills each year). They are also deceptively advertised to a group that already knows very little health insurance jargon. Only 29% of college students understood what a “premium” was, for example.

On the other side of the issue, Richard Floersch, executive vice president, chief human resources officer of McDonald’s Corporation, argued that the limited medical benefits his company provides their crew members are necessary for the betterment of low-income workers’ lives.

Over three-quarters of crew employees work part-time and with these positions come high turnover and short periods of employment. McDonald’s offers the crew at company-owned restaurants four choices for health insurance. One is a higher cost comprehensive medical option; the other three are low cost limited benefit plans with $2,000, $5,000 and $10,000 annual limits.

Even though the $2,000 annual limit plan is "overwhelmingly the most popular choice amongst our hourly employees, approximately 90% of covered employees do not reach the annual limit for these benefits," said Floersch.

"I know that some criticize limited benefit plans not only for their limits but also with respect to the ratio of benefits paid out compared to premiums received," he continued.

"These are largely questions for insurance carriers and were the subject of the regulations recently issued by HHS—but I would offer the following observation regarding our experience.  Based on numbers provided by our carrier, the loss ratio for the limited benefit plans offered to McDonald’s hourly employees apparently has ranged from a low of 78% to a high of 91% over the past five years, with the most recent year being 86%, and would appear to be comparable to the goals established in the recent legislation," he added.

"At McDonald’s we are proud of the benefits that we offer to our employees. We cannot control the rising cost of health care, we cannot dictate what insurance products health insurers are willing to offer—but what we can do, and what we are committed to continue doing, is to strive to make available to our employees, and those of our participating franchisees, benefit options that fit their needs," he concluded.

Health care costs

Sen. Barbara Boxer (D-CA) later questioned Floersch about the company’s 10% to 20% premium subsidy of hourly workers, versus the 70% to 80% subsidy for corporate workers. She urged McDonald’s to reconsider this practice, arguing that this was a moral issue.

Devon M. Herrick Ph.D., senior fellow, National Center for Policy Analysis demonstrated there are few options employers can offer moderaterat- to low-income workers in the short run. "The only other option for affordable coverage is a high-deductible plan that provides little in the way of access to a doctor or prescription drugs without significant cost-sharing," he said.

"High-deductible plans have a place in the market and provide a level of protection against catastrophic health conditions. But they are not popular among many moderate-income families precisely because they do not provide benefits below a high threshold in a manner that limited benefit plans do."

He added that "plans that feature limited benefits in return for a lower insurance premium are not for everybody. Indeed, these plans cap benefits at a predetermined level and are not intended to provide protection in the event of a catastrophic illness. However, they are an affordable choice for many Americans.

Herrick continued: "During the health reform debate, the President told the American people ‘And if you like your insurance plan, you will keep it. No one will be able to take that away from you. It hasn’t happened yet. It won’t happen in the future.’ Limited benefit plans provide a level of benefits many Americans rely on and the loss of coverage would make them worse off."

Whether or not these plans are "fake insurance," a term used by Wendell Potter, a former Cigna executive who testified before the Committee last year, it is clear that dialogue will not cease regarding the beneficial or “insidious” nature of these plans.

As these hearings continue to evolve and a new Congress is signed into office, it’s unclear what the fate of co-pay based mini-meds will be. One thing is for certain: they continue to be representative of the dichotomous and explosive nature of the continued health care reform debate.

"As the U.S. Senate Committee on Commerce, Science, and Transportation discusses these policies, we urge the Committee to consider the well-reasoned and practical views of HHS in providing temporary relief for these plans,” ABC’s Klein said.

"We can all agree that expanding health care coverage is vital and the first step to achieving that goal is to keep existing affordable coverage in place, at least until better options become available, for those who are most vulnerable to becoming uninsured."

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