Will McDonald's End Health Coverage for 30,000 Workers?

(Updated, 9:15 a.m.) McDonald's (MCD) warned federal officials that it may terminate health care benefits for 30,000 workers, according to a story in The Wall Street Journal.

The concern of the huge fast food chain and other employers of low-paid workers is that they will be overwhelmed by the costs of new regulations. McDonald's offers a limited "mini-med" plan to hourly workers, but as a result of the health overhaul, it must spend a larger amount of its premium revenue on medical care.

The company says the costs of administering the health plans are too high -- due to worker turnover and low spending on claims -- to accommodate the mandated increases. The Journal reports that "Last week, a senior McDonald's official informed the Department of Health and Human Services that the restaurant chain's insurer won't meet a 2011 requirement to spend at least 80% to 85% of its premium revenue on medical care."

Both McDonald's and the government took issue with the characterization by the Journal. McDonald's doesn't plan to drop health care coverage for employees, said Danya Proud, a spokeswoman for the Oak Brook, Illinois-based company, in an interview Wednesday, according to Bloomberg. "We're not going to walk away from health-care insurance completely, but we're going to have to look for alternatives if we can't get the resolution we're seeking from Health and Human Services," Proud said. The federal government also took issue with the Journal story. "The new law provides significant flexibility to maintain coverage for workers." U.S. Health and Human Services spokesperson Jessica Santillo said in an emailed message. "Guidance on the new medical loss ratio rules has not even been issued," Santillo wrote.

But, according to the Journal's report, McDonald's said in documents given to the government that many of its workers would be left without some critical health care benefits unless the fast food retailer is granted an exemption from the new regulations. "Steven Larsen, the HHS official who received McDonald's email memo, said the department doesn't want employers to drop coverage over the law. The agency says it has already given the carrier for McDonald's and others the chance to seek exemption from new annual limits on benefit payouts," the Journal reported.

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