McDonald's is talking about dropping their health insurance option for low wage earners, citing high administrative costs.
A couple things:
This quote doesn't make any sense: "caps annual benefits at $2,000, or about $32 a week to get coverage up to $10,000 a year" Annual benefits =2k & yearly 10k? Isn't this redundant?
Either way it's a crappy plan. If it doesn't cover a major medical issue, like coming down with cancer or something, what's the point? Seems to me most people would be better off buying a health plan with a high deductible and then paying their own expenses below a certain level. But low income people would have difficulty affording the low cost/maintenance health care.
And the high administrative costs quoted in the article are in my relatively informed position not very competitive. I believe Medicaid has something like a 4% administrative cost. "Obama Care" is requiring a "80 to 85% payout ratio." McDonalds says they can't make this because of the high employee turnover & low # of claims. My personal opinion on this is that that payout ration could easily be obtained by implementing some efficiencies. Like automating the claims process and the sign up procedure. A mind boggling number of efficiencies need to be implemented within the medical community in general. And those entities that have been progressive enough to try new ideas have enjoyed great rewards. Both in terms of customer service and profits. The average expenditure for administrative costs, depending on various factors such as how these costs are defined, range from 7 to 26% for employer plans (LinkHere). And not-for-profit entities (i.e. many Blue Cross / Blue Shield insurers) have an even lower level of admin costs. And to quote the same article again (LinkHere), "size matters." Newsflash: McDonald's is big. Big enough that they could even administer their own health plan. But that would be out of their comfortable little box.
Gee, what a shame. Maybe if they were a better quality employer they wouldn't lose so many employees. Look at the example of In&Out Burgers. They pay much better than McDonald's & have great benefits. And, surprisingly, they have a much lower turnover rate! Why do you suppose that is? And In&Out is EXTREMELY popular & successful. McDonald's is just stuck in a mindset that puts their lower wage employees in a pre-defined category and they are unwilling to explore other "Progressive" (evil word) ideas and methodologies.
1 comment:
You are correct that McDonald's offers a crappy plan, so no big deal if they drop it.
You are also correct that their employees would be better off, or at least better protected, if they offered a high deductible plan.
You are off the mark in one area and miss another point entirely.
There is a fixed cost to administer a health plan. Costs for setting up the group structure and group enrollment are the same regardless of group size. So a larger group would pay less per person per month than a smaller group.
That part works to McDonald's advantage.
But it also costs as much to write a $100 check as it does to write a $10,000 check.
Because their benefit level is so low, their administrative costs as a percentage of claim costs will be very high.
One solution to their problem might be to increase the benefit level.
But you come close but eventually miss another point.
Health care should not be part of the cost of doing business. Today, health care costs are a competitive disadvantage, and employers are only interested in lowering those costs. They have no interest in providing a social good (health care) more than is absolutely necessary.
They should not have to.
We should have a single payer system.
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