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Behind McDonald's Odd Denial That It's Dumping Insurance for Hourly Employees


(*UPDATE: The Obama administration is giving so-called mini-med plans, like those McDonald's offers, a one-year exemption from the new rules.)

In a desperate attempt to do damage control on a story it didn't expect to see on the front page of a national newspaper, McDonald's (MCD) is denying that it will dump health insurance for 30,000 hourly restaurant workers, calling a story in today's Wall Street Journal "purely speculative and misleading."
Except the story isn't at all speculative. We know this, in part, because McDonald's brief response to the article offered no examples of wrong facts, misquotes or statements taken out of context. The story is a well-documented piece that cites a McDonald's memo sent to federal officials at the Department of Health and Human Services explaining how the company may have to drop coverage because it can't meet a specific requirement in the new healthcare reform law. The headline -- "McDonald's May Drop Health Plan" -- is merely summarizing what the company itself said.

What seems to be happening here is that is that McDonald's floated a trial balloon that popped. The company is trying to get a waiver to the Obamacare stipulation that insurers spend at least 80% to 85% of their premium revenue on actual healthcare. Threatening to drop coverage probably seemed like a reasonable way to go about getting it. That is, until memos start leaking out, making McDonald's look like the bad guy.

It's understandable that the restaurant chain is upset over having to meet this 85% provision that goes into effect in January 2011. Intended as a way to force large insurance companies to spend money on real healthcare and less on overhead and administration, the stipulation would unfairly penalize employers like McDonald's that have high employee turnover and relatively low spending on healthcare claims. In its memo, McDonald's paints a bleak picture of what happens if the company doesn't get a waiver.

Having to drop our current mini-med offering would represent a huge disruption to our 29,500 participants. 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.
Under McDonald's so-called mini-med plans, a single worker pays $14 a week for a plan that caps annual benefits at $2,000, or $32 a week to get coverage up to $10,000 a year.

Clearly, healthcare is a fight McDonald's doesn't want to be in. If they drop coverage, others will follow, leaving potentially millions more Americans out in the cold without health insurance, and pissed off at either corporate America or Obama or both. A McDonald's spokesperson told the Journal that the company may look for other insurance options if it can't get the waiver.

Which is probably what the company should have said in the first place in its response. Instead, it punted on an opportunity to explain how it wants to do the right thing for its employees, in favor of denying a story that isn't wrong.

Image by Picasa user Sandy
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