Wednesday, September 29, 2010

Obamacare endangers health coverage for 1.4 million workers

The Wall Street Journal reports (hat tip: HAP):
McDonald's Corp. has warned federal regulators that it could drop its health insurance plan for nearly 30,000 hourly restaurant workers unless regulators waive a new requirement of the U.S. health overhaul.
McDonald's currently offers "mini-med" plans for its low-wage workers. Owing in part to frequent worker turnover, these plans have higher administrative costs so that they cannot meet the payout ratio of 80 to 85% that Obamacare requires. 1.4 million US workers have mini-med plans and, unless the rules change, could lose coverage.

What made Congress think it was smart enough to determine the right payout ratio? In other industries, payout ratios (or the ratio of product direct cost to price) depend on many factors and vary widely. As long as consumers are free to choose the product that best suits them, this is a not a problem. Now that Congress has set payout ratio requirements for medical care, there will likely be a long series of "unintended consequences." Taking just one as an example, health insurance companies spend a lot of money fighting insurance fraud. Obamacare's requirements for a high payout ratio limit this and could result in insurance fraud becoming more common: the criminals will get rich and the rest of us will pay for it with higher premiums.

UPDATE: The government grants waivers.

PREVIOUSLY on the subject of ObamaCare:
ObamaCare threatens child-only insurance
Medical insurance prices rising due to ObamaCare
Obamacare endangers student health
Obama's health care and economic policies explained
Obamacare may raise insurance costs by 54%
Harvard economist explains why Obamacare will raise premiums
HHS says Obamacare will cause costs to go up and cause employers to drop coverage

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