The Journal Misleads on McDonald’s and Obamacare

And it channels the wealthy-but-stingy employer's cries of poverty

The Wall Street Journal caused something of a to-do yesterday with its front-page story reporting that McDonald’s might drop its health-care plan because of Obamacare.

Kevin Drum of Mother Jones called the piece a “non-story” and “the latest evidence that the Murdoch-ization of the Wall Street Journal proceeds apace.”

McDonald’s issued a statement saying that “Media reports stating that we plan to drop health care coverage for our employees are completely false. These reports are purely speculative and misleading.”

The Obama administration, in the form of Health and Human Services head Kathleen Sebelius called it “flat out wrong.”

Was it?

Well, it was certainly misleading.

The Journal’s headline said “McDonald’s May Drop Health Plan,” and its lede says this:

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.

The WSJ’s evidence seems rock solid, coming as it does from a memo McDonald’s sent to HHS.

Here’s what McDonald’s wrote to HHS, as quoted by the Journal (emphasis mine):

McDonald’s, in a memo to federal officials, said “it would be economically prohibitive for our carrier to continue offering” the mini-med plan unless it got an exemption from the requirement to spend 80% to 85% of premiums on benefits. Officials said McDonald’s would probably have to hit the 85% figure, which applies to larger group plans….

“Having to drop our current mini-med offering would represent a huge disruption to our 29,500 participants,” said McDonald’s memo, which was reviewed by The Wall Street Journal. “It would deny our people this current benefit that positively impacts their lives and protects their health—and would leave many without an affordable, comparably designed alternative until 2014.”

Deep in the story, the Journal quotes McDonald’s saying it plans to continue offering a health-care plan of some sort:

A spokeswoman for McDonald’s said it would look for other insurance options if it couldn’t get the waiver. The company’s chief people officer for the U.S., Steve Russell, said, “McDonald’s will continue to be committed to providing competitive pay and benefits.”

So the Journal’s angle should have been “McDonald’s May Switch Health Plan.” But if you read the paper’s story, you’d think that McDonald’s may drop all health-care coverage for its 30,000 employees.

And that’s flat misleading, even if the story is technically accurate.

But more problematically to me, the story simply channels McDonald’s beefs over the health-care law. The massive corporation argues to HHS that it would be “prohibitive” to meet the new threshold for its workers. That’s baloney. So let’s look at it from the non-McDonald’s-investors’ perspective.

The law says 85 percent of premiums must go toward health care. Let’s say McDonald’s decided to pay more out of its pocket and needed to give, say, 10 percent, to reach that requirement. The low-ball health plan’s premiums are $727 a year. The somewhat better ones costs $1,264 and $1,680 respectively. Let’s say for the sake of a back-of-the-napkin calculation that each of those plans has one-third of McDonald’s insured workers.

A 10 percent hike would cost about $3.7 million to meet the requirements for all 30,000 workers on the plan. McDonald’s Corporation made $4.6 billion last year. “Prohibitive,” huh? That’s 0.008 0.08 percent of its 2009 income.

Or to put it another way, McDonald’s could pay all of those 30,000 extremely low-paid workers’ premiums for them—on the top plan—and only spend $50.4 million a year. That’s about 1.1 percent of its 2009 earnings.

But it’s front page news that they might have to switch their health plan because it’s too expensive.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.