Sen. Jay Rockefeller, D.-W.Va., chaired a Dec. 1 commerce committee hearing on the topic, "Are Mini Med Policies Really Health Insurance?" That question answers itself. With payout ceilings of $25,000, $10,000, $5,000, or even $2,000, a mini-med policy is like a fire-insurance policy that covers only the items on your front stoop. The real question addressed by the hearing was whether mini-med policies are "better than nothing." Rockefeller tipped his hand at the start when he said, "I want to destroy that phrase before this hearing is over." But he wouldn't carry the thought to its logical conclusion: If mini-med policies are worse than nothing, then why on earth did the Health and Human Services department flinch from putting them out of business by granting them temporary regulatory waivers? (The mini-meds remain scheduled for extinction in 2014, when health reform's state insurance exchanges replace them with real health insurance.)
Among hearing witnesses, Team Better-Than-Nothing was headed up by Rich Floersch, executive vice-president for human resources at McDonald's Corporation. McDonald's helped win itself a crucial waiver from the health-reform law, Janet Adamy reported two months ago in the Wall Street Journal, by threatening to HHS that if forced to comply it might just have to withdraw health coverage from thousands of fast-food workers. McDonald's offers hourly workers at its 1,500 company-owned restaurants four health-insurance options, Floersch explained. Only one of these options (annual premium: about $6,000 per year, obviously more than most hourly workers can pay) is "comprehensive" (i.e., real) insurance. The other three are mini-meds. The cheapest option (and the one nearly all its hourly workers opt for) costs $710 and has an annual benefit ceiling of $2,000. The other two options cost $1,332 and $1,947 and have annual benefit ceilings of $5,000 and $10,000. These same four options are also available from most of McDonald's' 12,500 franchisees. *
Floersch said that McDonald's surveyed its employees and found only 10 percent willing to pay $21 or more per week for health insurance, as opposed to 55 percent who would be willing to pay $5 to $20 per week. He didn't mention (but a commerce committee fact sheet did) that the sliding premiums for the three insurance options available to corporate suits and some restaurant managers but not to hourly employees actually begin at levels below those paid by hourly workers for mini-med plans even though the suits' policies contain no annual benefit limits. That's right. Some nonhourly employees at McDonald's pay less for their real health insurance—with no annual limits and, indeed, an employee out-of-pocket maximum of $4,000 for covered expenses—than the schmucks shoveling French fries and flipping Big Macs pay for fake health insurance with annual benefit limits of $2,000, $5,000, and $10,000, and no employee out-of-pocket maximum for covered expenses. Oh, and the absolute highest health premium the suits might pay ($1,435 for higher-earning employees in the "no deductible PPO") is less than a quarter the premium McDonald's expects the schmucks to pay for the only policy hourly workers can opt for that isn't a mini-med.
To be sure, there are a lot more fries-shoveling schmucks than corporate suits, and if McDonald's had to subsidize the schmucks' health insurance annually by the same per-employee $6,894 that it subsidized the suits (instead of the zero-to-$120 it does now), then the company might go broke. I make the comparison only to underscore the point that the $710 per year that most hourly McDonald's workers who opt for health insurance choose to pay does not seem out of line with the $682 to $920 that McDonald's' nonhourly corporate employees pay for their health account PPO. Nobody likes to pay through the nose for health insurance. The question is, what are the schmucks getting for their money?
The only substantive answer Floersch provided to that question was that when you buy mini-med McSurance you become eligible for "significantly reduced" drug prices and health care services that the insurer has managed to negotiate. That may actually have value for some people who require medication and doctor visits but never, ever, ever end up in the hospital. How much value would depend on how significant those discounts are; Floersch didn't say. Weighing against these unquantified discounts is McSurance's $150-per-person annual deductible and assorted co-pays, including a $50 co-pay for all brand-name drugs.
The thing to remember, Floersch emphasized, was that "approximately 90 percent of covered employees do not reach the annual limit for these benefits." This was also a favored theme of Devon Herrick, a senior fellow at the National Center for Policy Analysis, a conservative think tank chaired by Pete Du Pont that's dedicated to developing "private, free-market alternatives to government regulation and control." (Since NCPA is headquartered in Dallas, I assume Herrick's participation was the idea of the Senate committee's ranking member, Sen. Kay Bailey Hutchison, R.-Texas.) Apparently urging McDonald's to offer its hourly employees a humane deal on health insurance is not one of those private, free-market alternatives. Herrick pointed out that 98 percent of enrollees in a mini-med run by the state of Tennessee (a $25,000-maximum-annual-benefit plan offered to families with incomes too high to qualify for Medicaid) "would not exceed their annual benefit cap in a given year."
Rockefeller answered with the analogy of a car whose brakes don't work 10 percent of the time. "Your brakes have to work all the time," he said, "or else you're not going to drive the car." The point he was trying to make, however awkwardly, was that it's no use saying insurance works out really wellfor the 90 or 98 percent of policyholders to whom disaster doesn't strike if it works out really badlyfor the 10 percent or 2 percent to whom disaster does strike, because the main reason we buy insurance in the first place (Duh!) is because we might end up being that 10 percent or 2 percent.
That point was driven poignantly home by Eugene Melville, a witness who works part-time for a big-box retailer that he declined to identify. Melville, who choked up several times in the hearing room, said he purchased through his employer a mini-med policy from Aetna with a $20,000 annual limit. In July, Melville said, he went to the doctor "for what I thought was an injury from a car accident." The doctor noticed a lump in Melville's neck, ordered up a biopsy, and diagnosed Melville with oral cancer. Melville figured he had close to $20,000 left to spend on the recommended treatment, but he quickly learned that within that $20,000 ceiling there were smaller ceilings—$2,000 on hospital lab tests, surgical supplies, and drugs; $2,000 for outpatient treatments such as chemotherapy—that effectively prevented him from using his mini-med insurance at all. Eventually he enrolled in a program for the medically indigent that did not offer the surgical options recommended by his doctor. The kicker, Melville said, was that Aetna sent him a letter suggesting that his oral cancer was a preexisting condition.
"You got snookered," Rockefeller said.
The hearing's unanswered question was whether HHS got snookered by granting mini-meds three more years of existence. If, as Rockefeller argued (and I'm inclined to agree) mini-med health insurance is not "better than nothing," then HHS had no reason to exempt it even temporarily from new requirements under health reform. It would have been useful to have the agency explain its actions at the hearing. But alas, no one from HHS was invited. When, after the hearing, I asked Rockefeller why, he said, "It would have turned it into a hearing on waivers."