Ensuring that it keeps health care affordable to its more than 1.3 million associates, Walmart has cut health benefits to part-time employees who work less than 30 hours per week. Meanwhile, it’s still unclear how this portion of the workforce will maintain health coverage going forward.
Randy Hargrove, a Walmart spokesperson, tells EBN the affected population, approximately 2% of its total U.S. workforce, “will decide for themselves what makes the most sense for them.” The global retailer is working with HealthCompare, a company that works with brokers and carriers to help individuals and families enroll in health insurance.
Over the next few days, Hargrove says these associates will receive a “personal letter” explaining their options and how to use the new arrangement. HealthCompare will “personally guide them through the health care plans that are available. [And] that could be a government plan, maybe it’s private health insurance, maybe there is a spouse’s coverage they can tap into – those are things that HealthCompare will be exploring with our associates.”
All current part-time health care benefits will remain intact until the end of the year, Hargrove says.
“In 2012, after passage of the Affordable Care Act, we required new associates work 30 hours or more per week to be become eligible for our health care plan,” he says. “At that time, we continued offering coverage to previously eligible associates who worked fewer than 30 hours. But today, the health care landscape has changed, there’s a much wider selection of affordable quality health care options in the marketplace.”
With tight operating margins and health care trend costs that continue to outpace economic growth, Walmart’s decision to end health care coverage for a portion of its part-time workforce is not surprising, says Brian Marcotte, CEO of the National Business Group on Health. “Low-wage and part-time employees may benefit from subsidized coverage on the public exchanges,” he says.
Moreover, the ACA has shifted what was considered a full-time work week with its employer mandate, which requires employers to offer coverage to employees who work 30 hours or more a week. As that new standard becomes more ingrained, “it’s not surprising, particularly in companies in these industries, that they are moving to that standard established by the Affordable Care Act,” says Marcotte.
One of the reasons companies in the past may have offered coverage to employees who worked 30 hours a week or less was because there was no other market available to these workers to get coverage. But with the public exchanges, now there is an alternative with subsidies available, says Marcotte “and they may pay less for similar coverage in the public exchange.”
While not commenting specifically on Walmart, Mike Thompson, a principal with PricewaterhouseCoopers LLP and head of the consulting firm’s NY-metro health care practice, says the number of retailers offering health care coverage to workers varied prior to the ACA.
“After health care reform, it’s really created a level playing field where more retailers are offering comprehensive benefits for people who work at least 30 hours,” he says. “For many retailers, that’s increased costs substantially and they’ve looked for other ways to mitigate those increases.”
Walmart’s new course, traveled previously by big name retailers like Home Depot and Target Corp., has centered on the ACA and impending rises in health care costs. In fall 2013, Home Depot cut coverage and moved about 5% of its nearly 340,000 employees to government-sponsored exchanges.
“At the time, we said the ACA precludes us from offering the limited liability medical plan we had been offering our part-time associates after Dec. 31, 2013, and that about 5% of our total workforce were enrolled in that plan,” says Stephen Holmes, a spokesperson for the company. He says Home Depot continues to offer other benefits such as dental, vision, critical illness and disability coverage, back-up dependent care and 401(k) plans to this portion of the workforce.
Last January, Jodee Kozlak, executive vice president of human resources for Target, disclosed in a blog post that the retailer would discontinue its part-time health coverage, effective April 1. She added that health insurance marketplace has afforded new coverage options for its part-time employee group, which is about 10% of its total workforce.
“In fact, by offering them insurance, we could actually disqualify many of them from being eligible for newly available subsidies that could reduce their overall health insurance expense,” Kozlak explained.
A Target spokesperson says the company could not provide any additional information or figures relating to the benefits decision.
But Paul Fronstin, director of the Employee Benefit Research Institute’s health research and education program, is not at all shocked by the big retailer moves for change or discontinuation of part-time health coverage.
“It’s no surprise because the ACA enables things like this to happen,” he says. “They [workers] have an option if Walmart, or any other employer, does this. They can go to the exchange and get coverage.” Fronstin notes that the marketplace tax subsidy, mandated by the ACA, may also help these employees.
Traditionally, he says that employers have offered health benefits voluntarily for business reasons, noting there was never a mandate for companies to cover employee premiums.
“The fact is Walmart isn’t first here, and just because they did it, doesn’t mean others will follow them,” he says. “But there will be other stories like this, and there will be stories about employers that didn’t make such a move because they were concerned about what impact it would have on business,” including retention and attraction.
For employers, and particularly those with a large contingent of lower paid workers, balancing access and cost remains an issue. “The fact there is subsidized coverage available in the [public] exchanges for lower paid workers has kind of provided a different safety net for some of these workers as well,” says PwC’s Thompson. “That dynamic of balancing access and cost – both from what’s provided in the company and what’s provided through the government – is really what retailers and other employers are struggling with.”
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