McHealth Care

Have it their way?

In September the fast-food giant McDonald's announced that its employees might be in for a surprise—and it wasn't a Happy Meal toy. The burger chain warned that it might have to drop health insurance for its 22,000 employees as a result of the Patient Protection and Affordable Care Act, a.k.a. ObamaCare.

The law requires large group insurers to spend at least 85 percent of their revenue from health premiums on "clinical services," leaving only 15 percent for marketing, profit, and administrative costs. That standard might be impossible to meet with the inexpensive "mini-med" plans McDonald's offers its employees. Such plans, which provide employees with capped yearly coverage in exchange for low premiums, tend to be used less than more-comprehensive plans and therefore rack up fewer clinical expenses. They are also typically associated with high job turnover, which increases administrative expenses.

In October the Department of Health and Human Services granted waivers to McDonald's and 29 other companies. But waivers are only a temporary solution, and they won't necessarily be offered to all employers in a similar situation. "The petitioning process is ill-defined, and there is no legal standard at all for granting the waivers themselves," writes David R. Henderson, an economist at the Naval Postgraduate School (and a reason contributing editor), in a paper for the National Center for Policy Analysis. "Asking for such waivers is a crapshoot, dependent on the whims of bureaucrats."