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McDonald's denies it will drop health care coverage

McDonald’s Corp. is denying a Wall Street Journal report that the burger giant would consider dropping its health care coverage for hourly workers if federal regulators do not waive certain restrictions for the chain’s benefits provider contained in this year’s health care reform legislation.

“Media reports stating that we plan to drop health care coverage for our employees are completely false,” Steve Russell, senior vice president and chief people officer of McDonald’s USA, said. “These reports are purely speculative and misleading.

“McDonald’s and our franchisees have been a leader in offering a fully insured, limited-benefit plan to hourly restaurant employees for more than 10 years,” he continued. “Regardless of how the regulations evolve over the next several months, McDonald’s is committed to providing competitive pay and benefits and the strongest employment opportunities possible.”

Speculation that McDonald’s would do away with its limited-benefit coverage, commonly known in business as “mini-med plans,” was sparked by a memo from McDonald’s to the U.S. Department of Health and Human Services obtained by the Wall Street Journal.

A McDonald’s spokeswoman said the company “could neither confirm nor deny any information that was reported in the Wall Street Journal article, as that information was obtained through leaked documents or unauthorized means.”

The article said McDonald’s would seek a waiver for its provider of health benefits from a regulation in the Patient Protection and Affordable Care Act regarding mini-med plans. That requirement states that providers of such plans must spend 80 percent to 85 percent of revenues derived from premiums on actual medical care, rather than administrative salaries or marketing, in 2011.

According to the Wall Street Journal, the memo said such a high percentage, known in insurance parlance as “medical-loss ratio,” or MLR, would be an onerous requirement for McDonald’s insurer to meet, given the high administrative costs for mini-med plans due to the high turnover of industries that typically adopt such coverage, like restaurants.

McDonald’s would neither confirm nor deny details of coverage offered to hourly crew members — reported in the Wall Street Journal as a plan capped at $2,000 in annual coverage for a $14 weekly premium for a single worker, or $10,000 in annual coverage for a $32 weekly premium.

The company did confirm, however, that the limited-benefit coverage is offered at the majority of its 10,000-plus U.S. restaurants, and participation has doubled since 2005 to now include nearly 30,000 hourly employees. That figure represents about 5 percent of the chain’s 600,000 hourly crew members in the United States.

“We strongly believe that we offer one of the highest-quality limited-benefit plans available, including a customized medical plan providing outpatient, inpatient, preventive care, and prescription drug coverage,” Russell said. “As we’ve continued to enhance our plan and better educate restaurant employees about the benefits we offer, we’ve seen unprecedented interest and participation.”

If restaurants and other employers of hourly workers were to lose coverage via mini-med plans, options for coverage could be severely limited while many of health care reform’s stipulations are phased in over a period of several years. An expansion of Medicaid and subsidies for low-income Americans to buy individual health insurance plans don’t take effect until 2014, for example.

McDonald’s reaffirmed that it had no plans to eliminate health care coverage for its employees and that it would continue to work with state and federal regulators and insurers to ensure a solution.

“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,” Russell said. “Moving forward, we will continue to have an open dialogue with legislators as well as regulators.”

Contact Mark Brandau at [email protected].

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