Wal-Mart Controls Health Care Costs

Discussion
Sep 30, 2003
George Anderson

By George Anderson

As a piece in today’s Wall Street Journal points out, Wal-Mart “is famous for cutting costs everywhere it can. Today a giant target for the world’s biggest retailer is
the health-care costs of its employees.”

The retailer’s efforts have helped it hold the average health benefit cost per employee to $3,500, 30 percent lower than the wholesale/retail industry average, based on numbers
from Mercer Human Resource Consulting.

Wal-Mart has managed to keep a lid on costs by focusing its efforts on covering catastrophic costs while not paying for treatments covered by other plans such as flu shots and
immunizations.

Tom Emerick, benefits vice president, Wal-Mart told the Wall Street Journal “the company covers medical bills that exceed $100,000 each on at least 800 employees a year.
A further 20,000 cases a year cost Wal-Mart more than $10,000 each. The company has paid for more than 300 organ transplants in the past five years, costing $1 million or more
each.”

Moderator’s Comment: Will the rest of the retail industry follow Wal-Mart’s lead on employee health benefits?

It’s hard to argue with the numbers. Even the chain’s critics will admit that it knows what it takes to compete. The question becomes whether others will
be able to compete with Wal-Mart if they fail to follow its lead.

The negotiations taking place in California between the grocery chains (Albertsons, Ralphs, Vons and Pavilions) and the United Food and Commercial Workers
(UFCW) union’s Local 770 are just one example of the importance the retail industry is placing on holding the line on costs.

Sandra Calderon, a spokesperson for Von’s told the L.A. Daily News, “We have a lot of nonunion competition and we have to be able to compete with
that. It affects a number of things, including labor costs, health and welfare issues … pensions. We’re looking at all of it.”
[George
Anderson – Moderator
]

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