A Senate panel in December deepened a probe of copay-based mini-med plans 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 care 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 mini-meds 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 consideration of the topic, highlighting the polarizing debate over the plans and health care reform in general.
Senate Commerce, Science and Transportation Committee Chairman John D. Rockefeller IV (D-W.Va.) opened the hearing, saying that "more than a million Americans wake up and go to work every day 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 young part-time or temporary employees, often in the restaurant or retail industries. 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 state health insurance exchanges are up and running. Also, annual and lifetime limits will cease to exist at that time. The question remains: What to do until then?
Debating the McDonald's plan
This interim period was critical to those present at the December hearing. Rockefeller argued that the mini-med plan McDonald's offers its workers "will not pay your bills if you have a serious health problem."
However, Sen. John Ensign (R-Nev.) and Minority Ranking Member Sen. Kay Bailey Hutchison (R-Texas) offered that mini-med coverage was better than nothing.
John Foley, senior vice president of domestic markets at Pan-American Life Insurance Group, agrees with Ensign and Hutchison. "There are a huge percentage of people in our country that have no possible way to afford major medical; if there's not an option for them to have some coverage, it seems that you just put them in a worse place. It doesn't seem to be resonating with the legislators that have been discussing this challenge in the hearings held by Sen. Rockefeller."
Most consumers don't pay attention to benefits unless they need them - something Foley thinks is a cultural issue. Even though he doesn't know the specifics of the McDonald's or similar plans, most mini-meds help promote preventive care by encouraging more visits to the doctor than if these people had no coverage.
"It's not wise to close down options before you actually have an answer," he says.
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 exempting them from 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 hearing's first witness, Stephen Finan, senior director of policy at the American Cancer Society, cited a 2009 ACS CAN study that found stage 2 breast cancer 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, adding that the whole purpose of insurance was to protect individuals from catastrophic loss.
In testimony supporting Finan's arguments, Eugene Melville of Riverside, Calif., 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.
Timothy S. Jost, a professor at Washington and Lee University School of Law, testified 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 nonprofit that speaks for 18-to-34 year-olds during the health care debate, explained that mini-meds disproportionately impact young adults because they often are in retail or part-time positions. According to Aetna figures, over 40% of mini-med participants are under age 30.
Smith 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 knows very little health insurance jargon. For example, only 29% of college students understand what a "premium" is, research shows.
On the other side of the issue, Richard Floersch, executive vice president and chief human resources officer for McDonald's Corporation, argued that the limited medical benefits his company provides its crew members are for the betterment of low-income workers' lives.
Over three-quarters of McDonald's 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 among our hourly employees, approximately 90% of covered employees do not reach the annual limit for these benefits," Floersch said.
"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."
Floersch concluded: "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."
Health care costs
Sen. Barbara Boxer (D-Calif.) later questioned Floersch about McDonald'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 moderate- 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."
Herrick 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.
"During the health reform debate, the president told the American people: '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.
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