Walmart’s rollback of health insurance for employees: just another employer facing higher health care costs?

Walmart is increasing premium sharing costs for employees subscribing to health insurance, and cutting the benefit for part-timers.

Quoted in the New York Times, a company rep said, “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. We made the difficult decision to raise rates that will affect our associates’ medical costs.” In so doing, Walmart told the Times that they will, “strike a balance between managing costs and providing quality care and coverage.”

MarketWatch wrote that Walmart will increase health care premium costs for employees by 36% for those who opt into coverage.

The company has been financially hard hit over the past two years, with nine quarters of revenue decreases at stores open over one year.

Walmart currently covers about 1 million people, including workers and family members. The company has about 1.4 million employees, but not all who are eligible for health coverage sign up for it.

Walmart will also be charging workers who use tobacco more for their health insurance policies. Reuters reported that one of Walmart’s basic health plans costs a worker $15 per two-week pay period. The tobacco user will now be charged an additional $10 per pay period, for a total of $25 every two weeks. Walmart estimates that tobacco users consume 25% more health care services than those who do not use tobacco.

For context, a fulltime employee at Walmart earns an average hourly wage of $12.31. Walmart defines full-time employment status when someone works 34 or more hours a week.

One more contextual point: in 2011, among U.S. firms that offer health benefits, only 16% offered health insurance to part-time workers. Do the math: 84% did not offer part-time workers health insurance.

Health Populi’s Hot Points:  The average annual premium for a family of four is $15,073, according to the Kaiser Family Foundation’s 2011 employer survey on health benefits. On average, an employer picks up nearly $11,000 of the premium and the worker, over $4,000.

Kerry Anne McGeary, the director of Ball State’s Global Health Institute, expects that health insurance premiums will increase between 5% and 10.5% over the next year. She anticipates that employers will work to hold down costs by rewarding employees for healthier lifestyles, and nudge employees to use more preventive health care services through the use of incentives.

Walmart is using more of a “stick” than a carrot approach when it comes to tobacco consumption, levying what calculates out to be a 66% “health tax” on top of the $15 fellow workers will spend on their basic health plan. I applaud the move to nudge workers toward tobacco-freedom; I’d also like to see this coupled with helpful programs that people could use to go smoke-free, integrated wiht the “stick.”

Walmart, the largest private enployer in the world, is facing declining margins in its stores overall in the recovery-less recovery. At the same time, health care costs continue their inexorable upward spiral. The company is doing what most other employers who sponsor health insurance are doing: placing more financial burden for health insurance and out-of-pocket costs onto employees, and eroding the benefit for part-time workers.

They’re just getting more notice for being Walmart.


About Jane Sarasohn-Kahn

Jane Sarasohn-Kahn is a health economist, advisor and trend-weaver to organizations at the intersection of health, technology and people. Jane founded THINK-Health after spending a decade as a health care consultant in firms in the U.S. and Europe. Jane’s clients are all stakeholders in health, including technology, bio/life sciences, providers, plans, financial services, consumer products, public sector and not-for-profit organizations. Jane founded the Health Populi blog in 2007, covering health policy, technology, and consumers.


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