A Few Fries Short of a Happy Meal

The Wall Street Journal offers the following report, which will make Kathleen Sebelius mad:

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.

The move is one of the clearest indications that new rules may disrupt workers' health plans as the law ripples through the real world.

So why would this happen? Cost, of course:

Last week, a senior McDonald's official informed the Department of Health and Human Services that the restaurant chain's insurer won't meet a 2011 requirement to spend at least 80% to 85% of its premium revenue on medical care.

McDonald's and trade groups say the percentage, called a medical loss ratio, is unrealistic for mini-med plans because of high administrative costs owing to frequent worker turnover, combined with relatively low spending on claims.

That makes sense -- if you have a lot of turnover, you are almost certainly going to have larger administrative costs. It's not as if you can just put someone's policy in a file cabinet and forget about it. Apparently the great minds in Congress didn't think about that, or didn't care.

What drove the decision to require such ratios? Anyone who understands how Democrats think won't be surprised at the answer:

Democrats who drafted the health law wanted the requirement to prevent insurers from spending too much on executive salaries, marketing and other costs that they said don't directly help patients.

One might ask how losing a health plan entirely benefits a patient, but that would be churlish. But we're all about solutions here. So if the regulations are a problem, they can fixed, right?

"Having to drop our current mini-med offering would represent a huge disruption to our 29,500 participants," said McDonald's memo, which was reviewed by The Wall Street Journal. "It would deny our people this current benefit that positively impacts their lives and protects their health—and would leave many without an affordable, comparably designed alternative until 2014."

The health law expands Medicaid and offers large subsidies to lower-income people to buy coverage, but those provisions don't kick in until 2014.

Oh, snap! But surely it's just those greedy capitalist bastards under the Golden Arches who would do something like this, right?

Insurers say dozens of other employers could find themselves in the same situation as McDonald's. Aetna Inc., one of the largest sellers of mini-med plans, provides the plans to Home Depot Inc., Disney Worldwide Services, CVS Caremark Corp., Staples
Inc. and Blockbuster Inc., among others, according to an Aetna client list obtained by the Journal. Aetna also covers AmeriCorps teaching-program sponsors, who are required by law to make health coverage available.

Aetna declined to comment; it has previously indicated that the requirement could hurt its limited benefit plans.

"There is not any issuer of limited benefit coverage that could meet the enhanced MLR standards," said Neil Trautwein, a vice president at the National Retail Federation, using the abbreviation for medical loss ratio.

Sounds like something Congress really ought to fix, right? Oops -- not gonna happen, since Congress has adjourned until after the election.

If you want to know why the economy stinks, this is why: a company needs to be able to plan. When a government acts in a capricious way, it can't. And people get hurt.