Wal-Mart Cuts Some Health Care Benefits
Published: October 20, 2011 - New York Times
After trying to mollify its critics in recent years by offering better health
care benefits to its employees, Wal-Mart
is substantially rolling back coverage for part-time workers and significantly
raising premiums for many full-time staff.
Citing rising costs, Wal-Mart, the nation’s largest private employer, told
its employees this week that all future part-time employees who work less than
24 hours a week on average will no longer qualify for any of the company’s health
insurance plans.
In addition, any new employees who average 24 hours to 33 hours a week will
no longer be able to include a spouse as part of their health care plan,
although children can still be covered.
This is a big shift from just a few years ago when Wal-Mart expanded coverage
for employees and their families after facing criticism because so many of its
1.4 million workers could not afford or did not qualify for coverage — rendering
many of them eligible for Medicaid.
Under pressure from states saddled with rising Medicaid costs and from labor
unions and community groups, Wal-Mart had agreed to offer part-time employees,
even those averaging less than 24 hours a week, health care insurance after a
year on the job, shaving a year off the eligibility requirement. Wal-Mart also
said that it was offering health plans that cost its employees about $250 a year
for family coverage.
At the time, the moves were considered a departure from some of its major
rivals and large employers, more than half of whom offer no company-sponsored
health plan for part-time workers.
On Thursday, the company would not say what percentage of its work force was
part time or worked fewer than 24 hours a week. Greg Rossiter, a Wal-Mart
spokesman, said the decision to deny coverage to new part-time employees
resulted from the company’s revamping of its health care offerings in light of
rising costs.
“Over the last few years, we’ve all seen our health care rates increase and
it’s probably not a surprise that this year will be no different,” Mr. Rossiter
said. “We made the difficult decision to raise rates that will affect our
associates’ medical costs. The decisions made were not easy, but they strike a
balance between managing costs and providing quality care and coverage.”
The company said the changes were not a result of the new federal
health care law. But the higher rates along with steep spikes in premiums
for other plans this year are likely to stoke the national debate over the
year-old legislation that has pitted President Obama and Democrats against
Republicans opposed to the changes. Challenges to the law by several states are
now before the Supreme Court.
These moves are also occurring in a postrecession period when Wal-Mart has
been struggling to regain its footing after months of disappointing or flat
sales. And with unemployment still hovering around 9 percent, employers may feel
less compelled to offer expansive benefits to people desperate for work.
Nationwide, employer-sponsored health premiums are up 9 percent, and
increases of 5 percent or more are predicted for next year, with workers
shouldering higher burdens on premiums and deductibles.
In 2009, Wal-Mart said 52 percent of its employees obtained health coverage
through it, but on Thursday it declined to give the percentage.
Documents on Wal-Mart’s health and other benefit offerings were obtained by
The New York Times from the Organization United for Respect at Walmart, a
union-backed group of Wal-Mart employees that is seeking to pressure the company
to improve wages and benefits.
In Wal-Mart’s 2012 health offerings, premiums will increase for some plans by
more than 40 percent, although many of their workers pay relatively low premiums
in comparison to more generous plans offered by other employers. But many
Wal-Mart employees complain that their low premiums are accompanied by high
deductibles that sometimes exceed 20 percent of their annual pay.
Wal-Mart’s new health offerings will require many employees who smoke to pay
a significant penalty. They will be required to pay an extra $10 to $90 each pay
period — $260 to $2,340 a year — if they want health coverage.
Several other large employers have begun charging higher premiums to
employees who smoke, according to Mercer, a benefits consulting firm. Among the
largest employers, about 28 percent vary their premiums based on tobacco
use.
Mr. Rossiter defended the penalty for smokers, saying, “Tobacco users
generally consume about 25 percent more health care services than nontobacco
users.”
In its health care brochures, Wal-Mart told its employees that diseases
caused by tobacco result in $96 billion in extra health care costs nationwide.
And it noted that some other prominent companies, including Home Depot, Macy’s
and PepsiCo, charge smokers more as part of their health plans.
Tammy Yancey, a $9.50-an-hour gas attendant at a Sam’s Club in Pinellas Park
, Fla., complained that she would no longer be able to afford health insurance
from the company. Ms. Yancey, a smoker, said her premiums would jump to $127.90
every two weeks — or $3,325 a year — up from $53.80 at present, when she earns
$12,000 a year from her job.
“I won’t be able to afford the insurance,” she said. “And I really can’t go
without insurance because I have a heart problem.”
Dan Schlademan, director of Making Change at Walmart, a union-backed
campaign, condemned the changes.
“No wonder people are protesting in the streets,” he said. “This is another
example of corporations putting profits ahead of what’s good for everyday
Americans. It’s outrageous and damaging to many hard-working families that the
biggest corporation in America is increasing health care costs for many
employees by 40 percent.”
Wal-Mart says that its health care plans are affordable and competitive
compared with those of its competitors. “We are proud to be among a few
companies that continue to offer an affordable associate-only medical option for
about a dollar per day or $15 per pay period,” Mr. Rossiter said. He noted that
many companies offer health plans that start at $75 a week or more for each
two-week pay period.
Companies frequently do not offer coverage to part-time workers. About 42
percent of large employers offer benefits to part-time employers, according to
the 2011 survey by the Kaiser Family Foundation, which tracks changes in
benefits. And some of Wal-Mart’s competitors, like Home Depot, do not offer
their part-time workers the same health plans they offer full-time workers.
Instead, those employees can enroll in plans that sharply limit the amount of
coverage.
Wal-Mart also significantly reduced the amount of money it contributes to the
savings accounts workers can use to pay for medical bills that are not covered
under their plan. Last year, the company put $1,000 into accounts for families
but it will cut the amount by half for next year to just $500. Companies
typically put more money into these accounts as a way of encouraging employees
to choose these plans, which cost employers less than traditional policies.
While Wal-Mart defends its decision to reduce these contributions, few
companies have made similar cuts, according to Mercer. Companies are continuing
to try to do what they can to encourage employees to enroll in these plans, said
Beth Umland, who oversees the company’s benefits research.
Barbara Collins, a sales associate at the Wal-Mart in Placerville, Calif.,
said that the premiums for the H.M.O. plan for herself and her 5-year-old son
would rise to $18 every two weeks from $10. Her big concern, she said, was that
her deductible would jump to $5,000 a year, from $1,000 — a daunting amount
considering she earns $19,000 a year. “I don’t know how I’ll be able to afford
it if I go to a doctor or to physical
therapy,” she said.