Health Reform Waviers and Why Things Are Easier Said Than Done

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Recently, the Wall Street Journal published an explosive story about how McDonald’s might have to eliminate health insurance for their workers because of the Affordable Care Act. As WSJ reporter Janet Adamy wrote:

The move is one of the clearest indications that new rules may disrupt workers’ health plans as the law ripples through the real world…McDonald’s move is the latest indication of possible unintended consequences from the health overhaul.

The Administration moved swiftly to react, saying the health insurance offered to McDonald’s restaurant workers was likely eligible for a waiver that would allow it to stay in place. Phew, right? Well, yes, except that the insurance offered by McDonald’s is precisely the kind the ACA aims to eliminate.

The waiver the Department of Health and Human Services cited would exempt McDonald’s health plans from a new regulation phasing out annual limits on insurance benefits. The ACA says, without a waiver, health plans must not set annual limits on benefits below $750,000 this year. The plans for McDonald’s employees, according to the Journal, have incredibly low premiums (as little as $56 per month) that only cover health expenses up to $2,000 per year. This is far below the regulatory threshold and not the kind of “coverage” most people would consider health insurance.

The ACA says that by 2014 these so-called “mini-med” plans – which often cover only a handful of medical costs – will not qualify as coverage fulfilling the mandate that all Americans maintain health insurance. By then, the essential benefits package will require insurance to be fairly comrehensive.

But the waiver HHS extended to McDonald’s allows these plans to proliferate in the meantime. HHS has, in fact, already issued waivers to 30 other health plans that cover nearly 1 million Americans.

As Reed Abelson points out in the New York Times today, the annual limit waiver dustup is an indication that when it comes to the ACA, everything is easier said than done. With congressional elections approaching, the Administration is predictably trumpeting all the universally positive changes of the ACA and keeping quiet about the tough choices, exceptions to the rules and (intentional) disruptions to the market caused by new insurance regulations.

The Wall Street Journal described the McDonald’s coverage episode as an “unintended consequence,” but killing off plans like those offered by the fast food chain couldn’t have been more intentional. Policy experts have long known that “mini-med plans,” also known as “limited medical benefit plans,” rarely end up being a good deal for those who buy them. If you have a real medical need – like a broken bone or surgery – this insurance doesn’t come close to covering it. If you only use the coverage for a few doctor appointments, you would have been better off paying cash. Consumer advocates – including some attorneys general and state insurance commissioners – have sought to curb these plans for years. (I wrote a magazine story about these plans as well as scam insurance earlier this year.)

Political pressure and a seemingly paralyzing fear of bad headlines, however, appears to be guiding Administration policy this close to election day. As a result, nearly 1 million people don’t have coverage governed by the new “Patient’s Bill of Rights” the Administration is so eager to advertise.