Walmart Rolls Back Employee Health Benefits

November 18, 2011

HealthcareIn mid-October, Wal-Mart Stores Inc., the largest U.S. retailer and the nation’s largest private employer, announced it will no longer offer health insurance to new part-time employees who work fewer than 24 hours a week.  The changes impact the 1.4 million U.S. employees in Walmart and Sam’s Club stores.  Including employees and their family members, Walmart now insures more than 1 million people.

Until this change, part-time employees were eligible for coverage after working for the company for one year.  This was reduced from a two-year waiting period in 2007.  In addition to their long waiting periods for eligibility, Walmart’s basic health plans also had high deductibles.

Walmart has offered part-time employees the option of enrolling for healthcare coverage after the waiting period since 1996 no matter how many hours they work.  Now, new employees who work fewer than 24 hours per week will no longer be eligible for health benefits at all.

Walmart’s decision to roll back health benefits should come as no surprise given the history of state legislative action necessary to get the company to expand its coverage to all employees.

It’s only been a few years since states tried– mostly without success – to force employers to provide health insurance to all their employees or pay into the states’ public health plans.

Although written to apply broadly, it was no secret that the goal of this legislation was to force large employers like Walmart to offer benefits or contribute to the costs the states incurred to cover uninsured employees who received Medicaid benefits.

Bills in California and Washington would have imposed the “pay or play” provisions on businesses with 50 or more employees, while Arizona set the bar at 100 or more employees.  By February 2006, there were 17 states with similar legislation.

As many as 30 states attempted to shame employers into providing health benefits by passing legislation that required applicants for Medicaid to identify their employers so the states could publicly identify employers with a high number of employees on Medicaid.  Studies in 13 states showed a high ratio of Walmart employees on Medicaid.

While the “pay or play” and “employer disclosure” statutes targeted many employers, Maryland took a more direct approach to keep Walmart employees out of its Medicaid program. Maryland’s Fair Share Health Care Fund – which applied only to the four Maryland companies with 10,000 or more employees – required employers to spend at least 8 percent of their payroll on health benefits or pay the difference to the state.

Although the bill was vetoed, legislators who were critical of Walmart for increasing the burden on the state’s Medicaid system were able to override the veto.

Eventually, Maryland’s fair share act was struck down in the federal courts because it violated ERISA.

A recent study from the Harvard School of Public Health projects as many as 22.4 million individuals will be added to the Medicaid roles by 2019 as a result of eligibility changes in the Affordable Care Act.

Walmart’s decision is certain to add even more to a Medicaid system that is already stretched thin.