Wal-Mart's insurance move reveals Obamacare truth

An employee stands outside of Walmart store. Image copyright Getty Images

As the 800-pound gorilla of retailers, Wal-Mart made national headlines when it announced on Tuesday that it was cutting the health benefits for its 30,000 employees who work fewer than 30 hours a week.

A company blog post put the move down to rising healthcare costs, but the 30-hour cut-off gives a clue as to the real cause - President Barack Obama's healthcare reform.

Under the Affordable Care Act, large companies are required, starting this January, to provide subsidised healthcare for every employee who works 30-hours a week or more.

As the Atlantic's David A Graham notes, many of the law's critics said the result would be that large companies cut the hours worked by their employees to fewer than 30 a week. Instead what appears to be happening is that big retailers like Wal-Mart, Target, Home Depot and Walgreens are simply doing away with the health benefits of their part-time workers entirely.

The part-time Wal-Mart employees - only 2% of the company's 1.3 million-person workforce - aren't without recourse, however. They can now enrol in the state and national healthcare insurance exchanges and are likely to receive government subsidies to help pay their premiums.

Whether this is a good or a bad thing depends a great deal on one's view of Mr Obama's healthcare reform and the quality of the private plans offered through the exchanges.

Image copyright Getty Images
Image caption Wal-Mart is raising insurance premium payments for its full-time employees by $3.50 a pay period

The editors of the conservative Investor's Business Daily are quick to assign blame, observing that Wal-Mart also announced it was raising the amount its full-time employees pay for their healthcare packages by 19% (an additional $3.50 (£2.18) a pay period, which still keeps their rates lower than the national average for retail employees).

"If a retail empire built on low prices can't find a way around Obamacare's added costs, we are all doomed," they write.

The Wall Street Journal's editors, also a conservative lot, say Wal-Mart's decision to "jettison" its part-time workers onto the exchanges is a rational response to the healthcare law's incentives.

"With a subsidized government alternative now open for business, and since corporations aren't liable for a penalty for not covering people who work fewer than 30 hours a week on average, cost-control logic says to send such coverage ballast over the side," they write. "The only question now is how many and how fast other companies partake of the new all-you-can-eat entitlement buffet. Get whatever you like, the bill's on taxpayers."

It wouldn't be surprising, writes Bloomberg View's Megan McArdle, if in a few years there were no companies offering healthcare to part-time employees.

She says it's difficult to figure whether the employees will be better off or not on the exchanges, however.

Here's how she breaks it down:

"Wal-Mart's insurance appears to be pretty cheap, and while it has a high deductible, that deductible is comparable to, or better than, many of Obamacare's [lowest-level]'bronze' plans. The out-of-pocket maximum is higher, but the Wal-Mart plan seems to have included a variant of a health savings account, which workers won't get on the exchanges, and most workers won't approach the out-of-pocket maximum. If the part-time workers are earning very little, they'll get a nice big subsidy. But how many people are supporting themselves entirely on part-time work at Wal-Mart? If they have other family income, this may turn out to be a substantially worse deal."

While Obamacare is being tagged as responsible for Wal-Mart's action, it also could end up being main beneficiary. As more and more workers move into the government exchanges, the pool of healthy enrolees grows, keeping costs down. For proponents of the reform efforts, developing a stable, quality source of health insurance that's independent of employers is an achievement worth celebrating.

"Whether you have coverage is no longer dependent on the generosity of your employer, and if you lose your job, change jobs, or set out to start your own business, you can still get covered even if you have pre-existing conditions," writes the Washington Post's Paul Waldman. "Now that everyone can get insurance through the government (if you're eligible for Medicaid) or through an exchange, there's no reason to keep the middleman of the employer."

The Atlantic's Graham calls the US system of employer-provided health insurance a "historical accident" - a result of post-World War 2 wage controls.

"As more and more American workers leave employer-based insurance plans, for one reason or another, the end of this anomalous system seems closer and closer," he writes.

So pop the Champagne. Or batten down the hatches. Change is coming.