Cutting Corners: Wal-Mart’s “Improved” 2008 Health Care Offerings Fall Short

The release of the Susan Chambers memo in the fall of 2005 gave critics and consumers a firsthand look into the internal decision-making process of Wal-Mart’s top leadership – and the results were appalling. Shockingly, Wal-Mart admitted "Wal-Mart’s critics can easily exploit some aspects of our benefits offering to make their case; in other words, our critics are correct in some of their observations. Specifically, our coverage is expensive for low-income families, and Wal-Mart has a significant percentage of associates and their children on public assistance."

Two years later - despite widespread criticism of the strategy outlined in the memo and Wal-Mart’s denial of plans to implement such a strategy - Wal-Mart is following Susan Chambers' advice. Wal-Mart's 2008 health care offering is part of a tactic to reframe the public’s perception about the company’s health care offering and make changes that appear to make the plans more affordable and accessible.  To more fully comprehend the strategy behind Wal-Mart’s newest health care offering, it should be viewed through the lens of the Chambers memo. Although the plan is a step up over its previous efforts, the retailer still has a long way to go.

The Susan Chambers Health Care Equation: More Part Time Workers + High Turnover = Fewer Employees Reaching Health Care Eligibility

Wal-Mart’s failure to disclose the details regarding the premiums employees must pay for the various health care plans does not reveal the true cost to the average employee. In addition, the complexity of Wal-Mart’s offering makes it nearly impossible to discern employee co-pays.

  • Wal-Mart Health Insurance Coverage Lags Far Behind National Average. Nationally, 64% of workers in very large firms (5,000 employees or more) receive their health benefits from their employer. Wal-Mart covers around 50% of its employees.
  • Wal-Mart Fails To Retain Workers. Employee turnover at Wal-Mart is extremely high, even for the high-turnover retail industry. According to company reports, it has stood at around 50% for several years. Some critics have put Wal-Mart’s annual employee turnover at closer to 70%. By comparison, annual turnover for the retail industry as a whole in 2004 was just over 29%.
  • Wal-Mart Employees Still Wait Twice As Long For Health Care Coverage Than Workers At Other Retailers. The Wal-Mart average for full-time workers to qualify for benefits is six months, compared to the retail average of three months. Part-time employees must wait a full year before receiving benefits. Since the majority of workers do not stay a year, the majority never get health care.
  • Wal-Mart Executives Admit They Are Shifting to More Part-Time Workers. “Wal-Mart executives have acknowledged that the retailer will also shift to a heavier reliance on part-time workers, who now account for roughly 20% of the work force, higher than the national average for retailers. A recent JP Morgan report said Wal-Mart plans to increase the ratio of its 1.2 million-member U.S. hourly work force on part-time schedules to 40% from 20%, meaning the hours of as many as 240,000 workers could be cut below 34 a week, the threshold to be considered full-time."
  • Analyst Predicts Wal-Mart’s Use of Part-Time Workers is on the Rise. Citigroup analyst Deborah Weinswig predicted that Wal-Mart’s proportion of full-time workers is declining. In a 60-page research report, she predicted, “Wal-Mart will reduce its ratio of full-time workers to 60 percent over the next year or two, with the remaining 40 percent slated for part-time status. Wal-Mart's proportion of full-time U.S. workers - which currently stands at about 75 percent - could further fall to 50 percent in the future.” 

Plan Specifics: More Choices Don’t Equal Better Choices

  • Employees With Pre-existing Conditions Must Wait At Least One Year For Treatment. After finally reaching eligibility after six months or one year, depending on employment status, an employee must wait an additional year to receive full coverage for a pre-existing condition. If an employee enrolls late, he or she must wait 18 months.
  • Wal-Mart Fails To Cover Preventive Care. According to Wal-Mart’s most recent health plan, preventive care (except for mammograms, pap smears, and well child visits) is not available to associates.   This provision seems to fly in the face of Wal-Mart’s “personal sustainability” program.
  • New Plan Excludes Spouses of Peak-Time and Part-Time Truck Drivers. This exclusion leaves the spouses of many Wal-Mart employees without a viable option for health insurance outside of public assistance.  From the Wal-Mart’s 2008 Associate Benefits Book, “Peak-Time associates and Part-Time Truck Drivers may only cover their Eligible Dependent children and may not cover their spouses. Special rules may apply if you transition from Full-Time to Peak-Time.”
  • Wal-Mart Charges Extra For Ambulance Usage and Emergency Room Visits. Wal-Mart charges an additional deductible of $100 for the use of an ambulance, both land and air, as well as $100 for emergency room visits.  This re-occurring cost on top of the already high deductible devalues the effectiveness of insurance and punishes employees for severe illness and injury.
  • Wal-Mart Lags Behind In Domestic Partnership Benefits. Wal-Mart lags behind the Fortune 500 as a whole concerning domestic partnership health care benefits for same-sex employees.  Of the Fortune 500, eight of the top ten companies provide health care benefits to same-sex partners and 53% of the Fortune 500 overall provide these benefits, and 79% of the Fortune 100 provide such benefits.
  • Wal-Mart Is Not A Leader In The Retail Industry. Costco, which offers short waiting periods for new part-time and full-time employees (three months and six months respectively), low deductibles, and low co-pays, still offers the most comprehensive benefits in the retail industry. Costco offers a $200 deductible for an individual employee and $400 for a family under their Full-time Managed Choice plan, $250 Individual/$1000 family under their Full-time Freedom of Choice, and $500 individual/$1000 family for part-time managed care. At best, Wal-Mart’s 2008 health care plan puts the giant retailer closer to what the average retailer offers.
  • Wal-Mart’s Plan Is Confusing. There are fifty ways for Wal-Mart associates to choose health care under the 2008 plan.  Instead of offering a handful of quality choices, Wal-Mart chose to offer a significant number of choices in a Health Reimbursement Account System, which may in fact be confusing for most associates.  As a result, it may dissuade Wal-Mart employees from getting health care.

Employees Still Rely On Public Health Assistance

  • In Those States That Have Released Data On Companies With Employees Receiving State-Funded Health Care, Wal-Mart Tops The List. Twenty-four states have tracked and reported the number of employees and dependants that the largest employers within their borders have enrolled in state-funded health care programs, and in those states, Wal-Mart is at the head of the line for public assistance. In all states that have released such data - Alabama, Arizona, Arkansas, California, Connecticut, Florida, Georgia, Illinois, Iowa, Maine, Massachusetts, Montana, Nebraska, New Hampshire, New Jersey, Ohio, Pennsylvania, Tennessee, Texas, Utah, Vermont, Washington, West Virginia and Wisconsin - Wal-Mart tops the list. In Arkansas, where Wal-Mart’s own headquarters is located, 3,971 of Wal-Mart’s 45,106 employees are on public assistance. Additionally, two states – Missouri and Oregon – will be releasing reports of their own in 2008.
  • Wal-Mart’s Medicaid Numbers Are Flat. After a year of touting health plan improvements, Wal-Mart still has the same percentage of employees using Medicaid as the year before. During the 2006 enrollment period, almost 2 percent of employees were on Medicaid. In 2007, it was around 2 percent again.
  • Wal-Mart Has Admitted Many Of Its Workers And Their Families Rely On Public Programs. A memo written by Susan Chambers, Wal-Mart Executive Vice President for Benefits, for the Wal-Mart Board of Directors, said: “Specifically, our coverage is expensive for low-income families, and Wal-Mart has a significant percentage of associates and their children on public assistance.”    “Five percent of our Associates are on Medicaid compared to an average for national employers of 4 percent. Twenty-seven percent of Associates’ children are on such programs, compared to a national average of 22 percent (Exhibit 5). In total, 46 percent of Associates’ children are either on Medicaid or are uninsured."
  • Study Found that Wal-Mart is Causing an Increase in State Spending on Medicaid. Michael Hicks, an economist at the Air Force Institute of Technology at the Wright-Patterson Air Force Base in Ohio, conducted a study analyzing state Medicaid data from 1978 to 2003 and found that Wal-Mart causes an increase in state Medicaid spending by as much as $898 per person.

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