Wal-Mart and Legislating Health Care Reform

Wal-Mart and Legislating Health Care Reform

Forget Medicaid and Medicare for just a moment. Most Americans rely on their employers for health insurance. Wal-Mart, with over 1.4 million U.S. workers and 2.1 million workers worldwide[1], is the largest private employer in the world.

In 2009, 52% of Wal-Mart’s employees relied on the company for health insurance[2]. In 2010, it was 54%[3]. Critics often identify this percentage as a much lower figure than the staggering 82% of its biggest rival, Costco[4].This disparity can be partially attributed to the fact that many of Wal-Mart’s entry-level (their official title is “Associate”) employees qualify for Medicaid or state-sponsored health plans and opted for those instead.  “In some of our states, the public program may actually be a better value – with relatively high income limits to qualify, and low premiums,”[5] said Wal-Mart President and CEO Lee Scott.

Back in 2009, a wave of traditionally Republican-leaning businesses, including Wal-Mart, started to embrace a major tenet of the Patient Protection and Affordable Care Act, more widely known as “Obamacare”. This policy required companies with more than 50 employees to offer health insurance benefits to its employees. Wal-Mart sent a letter to Congress, which was about to cast its first round of votes, supporting the measure and pledging its support[6]. Nonetheless, it was viewed as an important step for a giant retailer to support more employer-based care. Around the same time the recession was well under way, and newly cost-conscious shoppers – at least the ones who had shopped at higher-priced Target, a major competitor – went happily back to Wal-Mart.

It disappointed, and certainly angered many groups to see Wal-Mart rolling back its already meager employee healthcare plan offerings. Wal-Mart recently announced substantial changes to its health plan, effective in 2012, due to rising costs and stagnant same-store sales. Wal-Mart would no longer provide coverage for part-time workers who work less than 24 hours a week, while substantially raising premiums and deductibles, by as much as 40%[7].

More importantly, Wal-Mart’s case illustrates the major issues surrounding employer-based care proposed in Obamacare. The first is the erosion of employer-based care. Wal-Mart’s move is hardly singular, and perhaps reflects an industry-wide concession to pass along health care costs to workers. The rationale often invokes the usual suspects—poor sales, rising cost of premiums etc. Nonetheless, the final result works in favor of the employer, since no piece of legislation mandates that employers must provide and carry certain costs associated with employee health benefits. Employers are essentially free to choose any plan as part of health benefits, and carry any portion of the cost.

This problem is further complicated by the healthcare coverage required by state regulations. Massachusetts, with its implementation of Mitt Romney’s reforms in 2006, is one of the few states to legally mandate that employers with more than ten full-time employees provide a “fair and reasonable contribution” to the health care plan premium of its employees[8].

In conclusion, legislators may not rely on corporations to independently provide healthcare out of their own pockets, without state subsidies or incentives. Wal-Mart’s case has come under heavy public scrutiny and has been harshly criticized. Yet it is hardly the exception but the rule, and illustrates the deep reluctance on employers’ part to take up the costly burden of healthcare in America.

The Republican primary season is well under way. Its contenders pledge unilaterally to repeal the current Obamacare bill, including Mitt Romney himself, the architect of Obamacare’s precursor, “Romneycare”. The future of employer-based healthcare, once a fixture of American life, is more than uncertain.


[[1]]http://money.cnn.com/magazines/fortune/global500/2011/snapshots/2255.html

http://www.ngretaileurope.com/news/walmart-does-bigger-always-mean-better/;

[2] http://www.nytimes.com/2011/10/21/business/wal-mart-cuts-some-health-care-benefits.html?pagewanted=all

[3] http://abcnews.go.com/Business/wireStory?id=9866204

[4] http://www.nytimes.com/2005/07/17/business/yourmoney/17costco.html?ei=5090&en=8b3103305fea6d68&ex=1279252800&adxnnl=1&partner=rssuserland&emc=rss&pagewanted=1&adxnnlx=1121705296-Q4tqPzmKJ9sYl9Q2a0xDYA

[5] http://www.aflcio.org/corporatewatch/walmart/upload/walmartreport_031406.pdf

[6] http://www.msnbc.msn.com/id/31667110/ns/business-consumer_news/t/obama-gets-ally-health-care-plan-wal-mart/#.Tqlat5yISKM

[7] NYTimes

[8] An Act Providing Access to Affordable, Quality, Accountable Health Care; Chapter 58 of the Acts of 2006, Massachusetts General Court, www.malegislature.gov

 

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