Mini-Med Plans & Unintended Consequences of Health Reform – 10/01/10


The gap between health insurance affordability and accessibility may have just become wider. Current economic conditions are driving employers to consider hiring hourly and part time workers and labor statistics underpin that this trend may persist for some time.

For some time, health insurers have offered “mini-med” plans as an inexpensive way to cover basic medical needs (primary care doctor visits, or prescriptions) for part-time or hourly employees who otherwise could not afford or necessarily want full coverage insurance (e.g. a major medical plan).

Health Reform (aka ObamaCare) has set in motion a series of dictates from agencies like the National Association of Insurance Commissioners, a coalition of state insurance regulators. High on this organization’s list of priorities is how to address the Medical Loss Ratio (MLR) constraints being thrust on health plans. The MLR is a financial metric that calculates the percentage of premium dollars that are directed to medical costs versus general business and administrative overhead. The ratios aren’t yet finalized and will vary by size of employer from 80% – 85% (which is a higher, more efficient ratio than found in most health plans where some industry sources cite an average MLR in the mid seventies); but it is clear that those who don’t meet federal thresholds, will pay a penalty (possibly in rebates to members).

Yesterday, news broke through various sources that McDonald’s Corporation may be considering dropping its mini-med health plan for nearly 30,000 workers unless the MLR constraints for its health plan (BCS Insurance Group) are modified. The news, as reported in Wall Street Journal, stated “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.” The rationale for missing this threshold stems simply from the nature of employment in the food service industry…high turnover; low claims revenue and high administrative costs.

The debate continues as additional posts and stories emerge which both support and debunk what the Journals and other outlets initially reported.

Regardless, it brings to light a few realities:

  • Small health plans and specialty plans will consider exiting the market altogether
  • Effectively modeling the impacts of health reform is absurdly difficult
  • Federal spending on simply “explaining” to the U.S. citizenry what the heck is going in will cost billions (if not more)
  • In their quest to become more efficient, health plans continually scramble for solutions to address product marketing, pricing and packaging aimed at consumers, and not employers or groups
  • Employers will need to quickly begin a steady campaign of internal messaging to concerned employees
  • Self-insured employers (e.g. Wal-Mart) will look increasingly brilliant as they side-step these federally placed economic land mines
  • Mini-med plans will likely fade from memory in the next three years

Let us know what you think, and have a great weekend!

Chris Hoffmann
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