As news emerged Friday of Wal-Mart’s decision to eliminate health benefits for new part-time workers and substantially increase premiums on existing plans, the retail goliath appears to be joining a larger, decade-long trend: the erosion of employer-provided health insurance.
The largest employer in the world attributed the decision for making the cuts to rising health care costs. Under the plan, new hires who work under 24 hours a week on average will not be eligible for company health coverage, while premiums for some existing plans may go up as much as 40 percent, along with other benefit reductions, The New York Times reported. Additionally, spouses of new hires who work less than 33 hours a week will no longer be covered.
“The current health care system is unsustainable for everyone and, like other businesses, we’ve had to make choices we wish we didn’t have to make,” said Wal-Mart spokesman Greg Rossiter. “Our country needs to find a way to reduce the cost of health care, particularly in this economy.”
While Wal-Mart did experience more than two years of slumping U.S. sales, the company has remained profitable overall — in fiscal year 2011, Wal-Mart’s international net sales exceeded $109 billion. Last week, the company announced that U.S. revenue is now on the rebound.
The company’s decision fits in with a larger historical narrative of the past decade, said Elise Gould, the director of health policy research at the Economic Policy Institute, a liberal research group partly funded by unions. As company’s strive to hold onto profits amid increasingly costly health care, she said, the brunt of the pain is passed along to the employee — and to the American taxpayer. In the past decade, there has been a substantial increase in the number of employees who lost employer health care, went on public assistance or did without any insurance at all.
Between 2000 and 2010, 26.8 million people went on public assistance (a 6.6 percentage point increase), 12.6 million lost employer-sponsored health coverage (9.8 percentage point decrease) and 13.3 million went uninsured (3.2 percent increase), according to Gould, who is preparing a soon-to-be published update to an EPI study.
Across the U.S., premiums for employer-sponsored health coverage shot up by 9 percent for families in 2011, and are expected to continue rising.
“To some extent Walmart’s decision is a symptom of the strain that rising health care costs have on Americans,” Gould said.
“But when you look at Walmart, it’s not clear that profits are really being squeezed, so why are they passing on these costs?” Gould continued. “This is the trend over the last decade: the ongoing effort to pass the costs of health care along to workers.”
In 2008, under pressure from unions and community groups, Walmart announced that for the first time in its history, more than half of its workers would have company health insurance. Now the company declines to give a percentage of the workforce who will receive coverage going forward. The company did say that more than a million people, including associates and family members, are currently insured by Walmart’s plans.
But there are still many unknowns, such as the number of employees who will drop out of Walmart’s coverage plan because they cannot afford the higher premiums. Or whether those who don’t qualify for coverage, or cannot afford it, will qualify for state assistance.
“The people who lose their insurance are going to be picking up the tab,” Gould said. She ran through the potential repercussions: “To the extent that workers won’t go to the doctor, then it’s bad for their health. All that evidence is there. So for people who have to pay more for their prescription drugs, they may be more likely to seek emergency room care.”
“Whether or not it costs workers more,” she said, “it’s also going to cost the health system more.”