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[18 comments]

Walmart Reduces Health Care Coverage

October 24, 2011

Rising health care costs are taking a toll on Walmart and its workers. The nation's largest private employer is scaling back health care coverage for future part-time workers while raising premiums for many of its full-time workers.

Among the changes:

  • Premiums will increase for all employees with the amounts depending on the plan. For the most popular health care plan, an associate who paid $11 per pay period will be paying $15 per pay period next year - a 36 percent hike.
  • Walmart will now provide $500 for families to use for health care expenses that are not covered, down from $1,000. For individuals, Walmart will contribute $250 for associates, down from $500.
  • Future part-time workers working less than 24 hours a week will no longer receive health-care coverage. Existing employees working those hours won't be affected.
  • Any new employees who average 24 hours to 33 hours a week will no longer be able to include a spouse as part of their health care plan, although children can still be covered. Existing employees working those hours won't be affected.
  • Tobacco users will see premiums increase by about 40 percent. Those with a spouse would pay $141 per pay period for one plan compared with $108 per pay period for a non-tobacco user.
  • Preventive care such as annual checkups remains fully covered.

"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," Walmart spokesperson Greg Rossiter told The New York Times. "We made the difficult decision to raise rates that will affect our associates' medical costs. The decisions made were not easy, but they strike a balance between managing costs and providing quality care and coverage."

At Walmart, part-time associates become eligible for healthcare coverage after working for the chain for one year. The company defines full-time workers as anyone who works 34 or more hours per week.

MarketWatch noted that according to the Kaiser Family Foundation, U.S. workers paid $3,997 for family health-care coverage they got through their jobs in 2010, 47 percent more than the amount in 2005, while their wages rose only 18 percent. Employers, in contrast, paid 20 percent more toward their employees during the same period.

FINANCIALS:     [NYSE:WMT]

Discussion Questions:

Discussion Questions: How important are health insurance benefits in workers' decisions on where to look for employment? Is health insurance as a benefit any more or less important in retail than it is in other industries?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Is health insurance as a benefit any more or less important in retail than it is in other industries?

Comments:

When you don't have a job and need one badly you will be flexible regarding health insurance benefits. When you have a job and are looking for a new job, then better health insurance benefits are an key objective.

Health insurance is a benefit everyone needs and seeks. But a trend seems to be emerging. Companies such as Walmart and Supervalu are reducing their health insurance benefits -- but not for the same reasons. That trend is likely to spread in retail.

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Gene Hoffman, President/CEO, Corporate Strategies International

Health insurance benefits are always an important element when looking for employment. In today's difficult employment landscape and the outrageous cost of health care it may be the single most important factor when looking for employment. I am aware of situations where salary and hourly rate simply don't matter -- it is the health insurance benefits that are the primary reason for employment. Unfortunately we are in a period where the majority of folks simply need a job and an opportunity to make it through another month, week or day. We are in the part of the cycle where employers know this and they can get willing employees with the minimum expense. It will take years before the pendulum swings back to an 'employee's market'.

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

It's policies like this one at Walmart and other companies like them that give rise to the need for government intervention in healthcare. Shame on Walmart, for sure, but aren't they are driven to these decisions by our friends on Wall Street?

Here's a thought, the CEOs at every company should be required to enjoy the same health benefits as the lowest employee on the pay ladder. Never happen? Why not mandate it? We seem to be good at that. The playing field would be leveled, and the government could stay out of our medicine cabinet.

At the same time, let's get back to Main Street driving Wall Street which would result in companies being able to control their destinies by instituting strategies that support a longer view of their businesses than one quarter.

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Marge Laney, President, Alert Technologies, Inc.

In the retail game, health insurance is (or should be) a huge compensation factor. We have to be realistic though. In these times, how can anyone say no to a job who is actively looking for one? Walmart understands this and knows that this can be the only opportunity to slash and burn benefits to workers. And as long as humans who get sick work in retail, health benefits will be equally (if not more because your chances of getting sick or hurt on the job increase in retail) important than in other industries and sectors.

Doron Levy, President, TheMortgageMachine.ca

Health care benefits have always been a concern, but with rising medical costs they have become more of a concern for both the employee and employer. I have friends who have elected to take lower paying positions with better health care benefits because they figure it's a better situation for them and their families. I also know lower paid employees who turned down health care packages because they wanted the cash instead.

No matter whether you are the employee or the employer, health care costs are a big deal. The employer who understands the impact it can have on employee decisions may be better off to offer a better plan to attract and retain a higher caliber or employee and lower their cost of turnover. The net cost of doing so can be lower than the alternative.

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Steve Montgomery, President, b2b Solutions, LLC

Just ask yourself these questions.
1. How important is health care coverage to you?
2. If you were looking for a job and could get one that offered insurance and one that did not which job would you take?
3. If you had a job that did not offer insurance would you go looking for a job that did while you were still employed?
4. What kind of employee stays with a company that does not offer health insurance? One that can not get a job anywhere else or one that can't?

Retail say they want to be an industry of choice.

Why would anyone choose retail?

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Mel Kleiman, President, Humetrics

Health Care costs will be one of -- if not the -- big discussions in the coming years along with the costs driven by government entitlement programs. It is becoming a major consideration (in some cases more so than pay) in the prospective employees decision to join a company.

While it's easy to throw rocks at retailers for raising their costs to the employees, this is a reflection of the costs increases they are facing, which are growing far faster than any other cost center. It's a complex discussion that can't be covered well here, but there are at least two primary drivers -- expectations fueled by politicians trying to buy votes and a health care industry with inappropriate motivations leading to specious cost decisions and schedules.

This is not just retail. It's every industry.

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Bill Emerson, President, Emerson Advisors

This problem will not go away, as health insurance costs continue to climb way beyond profits and inflation rates. My employees now have a $3000 deductible for their plan, and my family has $9000.

Essentially, it is going back to the original health care plans from many years ago, when catastrophic coverage was the norm. All the extra perks, i.e. dental, vision, brand name drugs, are all gone on my plan, as I can not afford them anymore. With profits squeezed to the bone, as price increases are almost forbidden to compete, what is left to cut? Yes healthcare is the new hatchet for many businesses, and with the Obama care kicking in, it will be interesting to see who can work through the rules and regs to come up with affordable health care for their employees, and still be in compliance. Anyone got a tightrope?

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Tony Orlando, Owner, Tony O's Supermarket & Catering

You know, I'd be more sympathetic if Walmart's earnings were down. They're not. So I find this offensive. It's called "sales aren't so great, so we'll keep our earnings going at the expense of employees." Yuck.

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Paula Rosenblum, Managing Partner, RSR Research

Healthcare coverage is the single most important benefit that attracts and keeps good employees. It's unfortunate that WM has to cut back in this area because in my opinion, employee salaries are probably not high enough to begin with in order for employees to purchase good health care.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

Remember the saying "As GM Goes, So Goes the Nation"? There's a different company to fill in that blank today because what is left of General Motors is owned by the U.S. Government. Which retailer is one of the largest supporters of a government-run healthcare plan commonly known as "Obamacare"? Guess. So goes Walmart, so goes the country.

Walmart's year-over-year same-store sales have been down for an unbelievable number of quarters in a row. Profits? Not so much. The U.S. Government's revenue has not been down but deficits? Way so much.

A perfect match.

Both the situation at Walmart and with the U.S. Government and healthcare are a result of getting what you asked for. There are no real surprises here.

For several decades consumers have responded to Walmart's proposition. That is, the cheapest goods possible regardless of the cost. In the same way, the government has followed suit -- more programs, more control, more, more, and more regardless of the cost.

The problem is, both had a cost. The cost is very real. And, now here we are. Time to cry foul? Sometimes when you get exactly what you ask for, it's not really what you expected it to be even when there are indications all along the way. Then, when it all becomes a bit more clear, its tragic.

Walmart did exactly what consumers asked them to do and responded to when they did it. The U.S. Government did the same. What's so surprising about that?

'Scanner'

And some in Congress think that affordable care isn't a priority. Until the country addresses health care costs, businesses will look at reducing benefits.

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Cathy Hotka, Principal, Cathy Hotka & Associates

It reflects a company's attitude toward its employees. Are you a partner and a participant on the employer's journey or are you an expense to be minimized? Some people get caught up in their own self importance with the company but everyone should remember that the attitude of your company toward the lowest of employees also applies to you.

'DrCellmor'

Retail workers come and go quickly in retail. Most never hang on long enough to qualify for benefits. But with jobs being scarce, it appears people where holding on to the Walmart job longer than they wanted. Many just for the health benefits. So Walmart needs to stop making health insurance so easy to get. It's not just health insurance. If workers stay too long they get raises and retirement benefits. That's just too expensive for many retailers and they need to crank up the employee turnover rate.

Obviously for higher-level retail jobs, health insurance is important. Higher paying jobs make it more difficult to get cheap government sponsored insurance, so a good company health plan is important.

Some retailers like Costco want to hang on to their skilled employees, while other companies simply want warm bodies to cycle through about every 8 months. Look for more retailers to quietly make similar cutbacks.

David Livingston, Principal, DJL Research

No "Shame on Walmart." Walmart is taking the right action and hopefully all other companies follow this lead (which really isn't a lead because it is been going on for several years). The association of employment and healthcare makes no economic sense for the company or the employee.

On a global basis, the fact that U.S. companies pay an enormous amount for the healthcare of their employees simply makes them uncompetitive in the world. No other industrialized country has such a convoluted healthcare system. Companies in other countries don't have 15% to 20% of their employment cost going to healthcare.

There is probably no single element in this country that inhibits entrepreneurship more than the cost and consequences of employment related healthcare. The system is absolutely bizarre and contrary to generating new economic opportunities.

Companies are companies. They are not charities. It is the job of the company to deliver profits. It is not to provide healthcare. And for the health insurance companies, they too are not charities. It is their job to increase revenues (premiums) as much as they can and cut costs (coverage to members) as much as they can. Do people not understand what business is and what it should be about?

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Gene Detroyer, Professor, Independent

With their recent healthcare downgrade, Walmart is sending a message to the Obama administration and to the unions that support him. It's clearly a shot across the bow of Obamacare. Hopefully the administration will understand this message, but I sincerely doubt they have the awareness to do so. Is our current administration familiar with the Law Of Unintended Consequences?

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M. Jericho Banks PhD, President, CEO, Forensic Marketing LLC

Reducing employee benefits, given earnings pressure, is par for the course, especially for Walmart and also for other large companies, both within and outside of retail. Since when has Walmart been a model employer or a model corporate citizen?

While capitalism is built around profit-making, increasingly, there are companies that balance capitalism with social responsibility. This is part of creating an exceptional working environment, again something Walmart has never been accused of doing.

Last, for everyone citing this as another example of Obamacare, health costs and healthcare insurance premiums have been rising for a lot longer than the past three years. Check the facts, people.

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Phil Rubin, CEO, rDialogue

Haven't you heard, we are in the middle of a depression! There aren't enough jobs to go around. If you can find work, you are ahead of the game. If you are a worker, you have little choice. You can only take what is available! Do you know anyone who is out of work? Eating and paying the rent comes way before healthcare. That's what the emergency room is for. Did you ever think you would read something like this in America? Well, we have saved the snail darter and the spotted owl, we have chosen to buy oil from those who would take the proceeds and destroy us rather than develop our own resources, we have failed to call a spade a spade in the hope of being politically correct, we have failed to educate our children and called it kindness, we have spent so much time worrying about the "feelings" of our spoiled hyper sensitive special interest groups that we have been swallowed by the industrious Asians, eastern Europeans, and etc. who are too busy worrying about eating to be concerned with the snail darter, being politically correct, preserving feelings and building self esteem. We are a nation who is long overdue for a dose of ipecac.

We are now experiencing the regurgitation of the misguided governmental policies of the last 30 years. I wish it were not so, but wishing doesn't change anything! Health insurance benefits are not important - jobs are important. Would you have liked it better if WalMart announced they are eliminating 60 thousand jobs so they could maintain their current health insurance benefits?

Ed Dennis, president, Dennis Enterprises

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