U.S. restaurants have asked the federal government to waive health overhaul rules that may force companies to abandon low-cost “mini-med” insurance plans used by 1.4 million minimum-wage and part-time employees.
Cigna Corp., the Philadelphia-based health insurer, has also asked for a waiver on behalf of its “limited-benefit” customers, and expects to hear back soon from federal officials, said Gloria Barone Rosario, a spokeswoman, in an e-mail today. She declined to name the clients involved.
McDonald’s Corp., the world’s largest restaurant chain, yesterday said it may be forced to seek alternative plans to cover 30,000 workers if it can’t get a waiver. The companies are seeking exemptions from two health-law mandates. One requires plans to spend at least 80 percent of member premiums on medical care. The other prevents companies from capping yearly coverage for each worker. Mini-med programs are designed to offer a low- cost way to cover part-time employees with limited benefits.
Without waivers, “mini-med plans would either no longer be offered or lead to a significant increase in premiums,” the National Restaurant Association wrote in an Aug. 27 letter to U.S. health officials asking that all of its members be exempted. “Restrictions found in the regulations would infringe both the spirit and the letter of the law,” the letter said.
Jessica Santillo, spokeswoman for the U.S. Department of Health and Human Services, declined to comment on waiver requests and said she couldn’t immediately provide a list of companies that had asked for the exemptions.
UnitedHealth Group Inc., the biggest U.S. insurer by sales, offers limited plans to about a dozen companies covering “well under 1,000” employees, and hasn’t yet sought a waiver, said Daryl Richard, a spokesman for the Minnetonka, Minnesota-based company. UnitedHealth’s plans typically cover $500 a year in doctors’ visits, and emergency room and hospital stays at about $1,000 a day, he said.
The plans are helpful for companies with workforces that don’t make enough to afford coverage, or for which it might be prohibitively expensive for the company to insure, Richard said. “It at least provides an essential set of benefits for a portion of the workforce that may not have typically had access” to health coverage, Richard said.
Health insurance costs could rise as much as 500 percent for restaurants with more than 50 employees if all employees participate in a company-sponsored plan, said Todd Gordon, president of insurance broker The Benefits Group Inc.
“It’s a frightening time for any company with a small number of salaried employees and a large number of hourly employees,” the Atlanta-based Gordon said in a telephone interview.
Franchisees’ health-care costs could rise from 1 percent of each store’s revenue to as much as 5 percent if they hire a significant number of full-time employees, said Jordan Krolick, president of restaurant consulting firm Tound & Drowth LLC.
“Is it the end of the world? No. But you’ve already got incredibly tight margins. It’s almost like paying a second franchise fee,” Krolick said in a telephone interview.
McDonald’s, based in Oak Brook, Illinois, was granted an exemption to one of the health-law’s provisions on Sept. 24, the health department’s Santillo said in an e-mail. It is seeking another waiver for the rule still being developed that requires plans to spend at least 85 percent of premiums on medical care, known as the “medical loss ratio.”
“The new law provides significant flexibility to maintain coverage for workers,” she wrote. “Guidance on the new medical loss ratio rules has not even been issued.”
Cigna requested a benefit cap waiver from the health department on behalf of its “limited-benefit” customers, said Gloria Barone Rosario, a spokeswoman for the Philadelphia-based health plan. “We hope to hear soon” from the agency, she said by e-mail, declining to name the clients involved.
Companies have stressed “how important these programs are to employees in this interim period between now and 2014,” she said. That’s when the health law would expand Medicaid, the government insurance for the poor, and offer subsidies to buy private coverage for low-income workers who don’t qualify for the government program.
Kristin Binns, a spokeswoman for WellPoint Inc., didn’t return messages seeking comment. The Indianapolis-based company is the biggest health insurer by enrollment.
McDonald’s hint at dropping insurance may be good news for health plans led by WellPoint and UnitedHealth, said Jason Gurda, a Leerink Swann & Co. analyst in Boston. The potential embarrassment of workers losing coverage is likely to make the administration more willing to waive or loosen requirements of the law, among them the medical-spending rules, Gurda said in a note to clients today.
Florida and other states have talked of seeking delays in the spending requirement to keep insurance companies from dropping out of some markets, he said.
McDonald’s letter is “exactly the type of publicity the administration and the Democrats do not want heading into the November elections,” Gurda wrote.
“The political risk of large companies and/or states threatening the loss of health insurance coverage is something the administration will want to avoid, and as a result, we believe waivers aren’t going to be that difficult to receive.”
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