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UPDATE 3-McDonald's, US say health insurance report false
September 30, 2010 / 1:21 AM / 7 years ago

UPDATE 3-McDonald's, US say health insurance report false

* McDonald’s denies it cutting health insurance

* U.S. officials also deny report (Adds background on mini-med use, analyst and restaurant industry comment)

DETROIT, Sept 30 (Reuters) - McDonald’s Corp (MCD.N) and federal health officials denied on Thursday a newspaper report that the fast-food chain may drop health insurance for nearly 30,000 of its hourly workers.

The Wall Street Journal, citing a company memo, reported that McDonald’s might cut the insurance unless U.S. regulators waived a requirement of new U.S. healthcare laws.

McDonald’s officials called the report “completely false.”

“This story is wrong,” U.S. Department of Health and Human Services spokeswoman Jessica Santillo said in a statement. “The new law provides significant flexibility to maintain coverage for workers.”

The fast-food restaurant chain is at odds over the new law’s stipulation that so-called “mini-med” insurance plans spend at least 80 percent of premium revenue on medical care, the Wall Street Journal reported on its website on Wednesday.

That rule was designed to put limits on funds being used for marketing, executive salaries, and other nonmedical uses.

McDonald’s told federal regulators in the memo that it would be “economically prohibitive” for its insurance carrier to continue to cover hourly workers unless it receives a waiver to the 80 percent minimum requirement, the newspaper reported. It said federal officials said there was no guarantee a waiver would be granted.

“This story is premature as guidance on the new medical loss ratio rules has not even been issued,” Santillo said. “The administration is working closely with businesses like McDonald’s that are committed to providing health benefits to protect health coverage for their employees.”

“McDonald’s is committed to providing competitive pay and benefits,” Steve Russell, the company’s head of human resources, said in a statement.

“We’ve had the opportunity to speak with regulatory agencies directly to better understand the implications of the law and to share our point of view,” he said.

McDonald’s did not disclose its current medical-loss ratio.

SMALL BENEFITS, SMALL MARKET

Federal regulators, McDonald’s and the National Restaurant Association said they do not want U.S. workers to lose health coverage during the transition compliance with the new healthcare laws.

“This is one issue where I think we’re on the same page,” said Angelo Amador, the National Restaurant Association’s vice president for labor and workforce policy.

McDonald’s had about 14,000 U.S. restaurants in 2009. Most of the company’s franchisees offer a limited-benefit plan and nearly 30,000 employees have chosen to be covered by the “mini-med” policies, Russell said.

Employees pay around $14 per week for a plan capping annual benefits at $2,000 per year, or a similar plan in which they pay $32 per week and annual benefits are capped at $10,000, according to the Wall Street Journal report.

Restaurants and retailers are more likely to offer such bare-boned plans because they have a high percentage of part-time and temporary workers and higher employee turnover than private sector employers overall.

The total market for limited benefit plans is about 1.4 million people, with Aetna Inc (AET.N) and Cigna Corp (CI.N) among the health insurers with the biggest presence, Wells Fargo analyst Peter Costa said in a research note.

Aetna’s largest limited benefit customer is retailer Home Depot Inc (HD.N) with 24,000 of those members, said Costa, adding that limited benefit plans account for a small portion of the overall health insurance market. (Reporting by Ben Klayman in Detroit, Lisa Baertlein in Los Angeles and Lewis Krauskopf in New York, editing by Dave Zimmerman)

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