Democratic senators criticized low-cost, bare-bones health insurance plans on Wednesday, saying the plans designed for low-wage workers can be worse than no coverage at all.

The Senate Commerce Committee heard testimony from several witness that the inexpensive plans with low annual spending limits - known as “mini-med” plans - often fail to cover necessary treatments for people who get sick.

Committee Chairman Jay Rockefeller, a West Virginia Democrat, said mini-med insurance was worse than nothing. “By the time they realize they don’t have any health insurance, it’s already too late.”

But retail and restaurant groups argue the mini-med plans are the only affordable insurance option for the estimated 1.4 million Americans enrolled in the plans, many of whom are part-time or seasonal workers.

The plans will be phased out when subsidies and new coverage options provided for in this year’s new health law come online in 2014. The law prohibits plans from setting annual and lifetime spending limits after that point.

The bare-bones insurance plans generated headlines during the debate on the healthcare bill when McDonald’s Corp said new spending rules might force it to stop offering the plans.

The hamburger chain said the cost of running its plans, the cheapest of which pays out a maximum of $2,000 a year, would prevent it from meeting a requirement that health plans spend most of customers’ premium payments on medical care, not administrative costs or profit.

The Department of Health and Human Services finalized the spending rules, known as medical loss ratios, last week. Mini-med plans have a one-year grace period while the Obama administration decides how to treat them.

More than 25 million people with health insurance are effectively underinsured, Stephen Finan, senior policy director at the American Cancer Society’s advocacy affiliate told Wednesday’s hearing.

Senator Barbara Boxer, a Democrat from California, said during the hearing that mini-med plans often mislead consumers about the level of coverage offered. She said the health department should ensure that consumers receive adequate information about the plans they purchase.

Richard Floersch, McDonald’s chief human resources officer, told the committee that 90 percent of employees on mini-med plans did not reach the benefit limit of their chosen plan.

Neil Trautwein, vice president for health care at the National Retail Federation, argued in a blog post Tuesday that there is currently no affordable alternative for people insured by mini-med plans.

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By Emily Stephenson

WASHINGTON