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Ronald McDonald v. Health Care Reform

Here's a headline sure to give the White House and its allies grief today: "McDonald's May Drop Health Plan." It's for an article by Janet Adamy in the Wall Street Journal. It's only a matter of time until it becomes fodder for conservative blogs, Fox News, and Republican campaign commercials.

But it's not really bad news about health care reform--at least, not for the reason you might think.

First, the basics: One of the new regulations about to take effect under the Affordable Care Act requires that insurers spend no less than 85 percent (in some cases, 80 percent) of premium dollars on actual patient care, as opposed to overhead, marketing, or profit. McDonald's isn't happy about that. In a memo it submitted to the Obama Administration last week, the company says that the insurance it provides some 30,000 employees won't meet that standard and that, without some kind of special waiver, they would likely drop the policies.

By this morning, both McDonalds and the administration were saying the story is overblown. McDonalds says it has no plans to drop the coverage and that it's been in discussions with the administration over how to make sure it can keep offering the policies. The administration is saying much the same thing--that it's aware of the issue, has been talking to industry representatives, and has already made clear these plans will be exempt from some of the early regulations on insurance.

More important, the administration has yet to finalize the rule about how insurance companies spend their money (or what is known as the "Medical Loss Ratio".) It's entirely possible the administration will phase in the requirement slowly. Most likely, then, McDonald's employees who like these plans will get to keep buying them, at least for the immediate future.

But is that a good thing?

As the Journal story makes clear, the policies in question are so-called mini-med plans with very limited benefits. In the case of McDonald's, according to the Journal, there are two options: Employees who go with the minimum plan pay $14 a week for a policy that won't cover more than $2,000 in medical bills a year. Employees who opt for the "generous" option pay about $32 a week for a policy that maxes out at $10,000.

To call that "insurance" is to distort the definition, since these policies would do very little to help people with even moderately serious medical conditions. (You can blow through $10,000 in medical care with one emergency room visit.) And those are the people whom insurance is supposed to help, since they are the ones who face serious financial hardship or have serious trouble getting access to care. As Aaron Caroll, who now blogs at the Incidental Economist, wrote several months ago when the issue first came up, "There are a host of health insurance plans out there that are cheap.  It’s just that the majority of those also are crappy.  Sure, they’re great if you’re healthy.  They only stink when you get sick; but that’s when you need them." (Actually, they're not even so great if you're healthy--but that's a story for another time.)

In the long run, McDonald's employees need policies that protect them in case of serious medical problems. And they need policies they can afford. They'll get those policies thanks to the Affordable Care Act--but not until 2014, because the administration and Congress couldn't come up with enough money to implement the full scheme sooner.

For now, some fast-food workers can take advantage of the law's early benefits, like the temporary insurance plans for people with pre-existing conditions that the administration and the states have been starting. But for the most part these people will have to wait.

They may get to keep their McDonald's brand insurance. But they still won't have insurance.

Update: As usual, Igor Volsky was all over this story even before I was.