NEW YORK (AP) — Wal-Mart Stores Inc. plans to eliminate health insurance coverage for some of its part-time U.S. employees in a move aimed at controlling rising health care costs of the nation’s largest private employer.
Wal-Mart told The Associated Press that starting Jan. 1, it will no longer offer health insurance to employees who work less than an average of 30 hours a week. The move affects 30,000 employees, or about 5 percent of Wal-Mart’s total part-time workforce, but comes after the company already had scaled back the number of part-time workers who were eligible for health insurance coverage since 2011.
The announcement follows similar decisions by Target, Home Depot and others to completely eliminate health insurance benefits for part-time employees.
“We had to make some tough decisions,” Sally Welborn, Wal-Mart’s senior vice president of benefits, told The Associated Press.
Welborn said she didn’t know how much Wal-Mart will save by dropping part-time employees, but added that the company will use a third-party organization to help part-time workers find insurance alternatives: “We are trying to balance the needs of (workers) as well as the costs of (workers) as well as the cost to Wal-Mart.”
The announcement comes after Wal-Mart said far more U.S. employees and their families are enrolling in its health care plans than it had expected following rollout of the Affordable Care Act, which requires most Americans to have health insurance or pay a penalty.
Wal-Mart, which employs about 1.4 million full- and part-time U.S. workers, says about 1.2 million Wal-Mart workers and family members combined now participate in its health care plan. And that has had an impact on Wal-Mart’s bottom line. Wal-Mart now expects the impact of higher health care costs to be about $500 million for the current fiscal year, or about $170 million higher than the original estimate of about $330 million that it gave in February.
But Wal-Mart is among the last of its peers to cut health insurance for some part-time workers. In 2013, 62 percent of large retail chains didn’t offer health care benefits to any of its part-time workers, according to Mercer, a global consulting company. That’s up from 56 percent in 2009.
“Retailers who offer part-time benefits are more of an exception than the rule,” says Beth Umland, director of research for health and benefits at Mercer.
Wal-Mart has been scaling back eligibility for part-time workers over the past few years, though. In 2011, Wal-Mart said it was cutting backing eligibility of its coverage of part-time workers working less than 24 hours a week. And then in 2013, it announced a threshold of 30 hours or under.
Taking into account the latest move, Wal-Mart declined to say what percentage of total part-time workers will not have company-sponsored health care coverage starting next year.
Wal-Mart, like most big companies, also is increasing premiums, or out-of-pocket costs that employees pay, to counter rising health care costs. Wal-Mart told The Associated Press that it’s raising premiums for all of its full-time and part-time workers: For a basic plan, of which 40 percent of its workers are enrolled, the premiums will go up to $21.90 per pay period, up from $18.40, starting Jan. 1.
Wal-Mart also said that changes in the co-insurance, or the percentage workers pay before coverage kicks in, for the health reimbursement accounts and the health savings accounts will result in the company paying 75 percent of the eligible costs of doctor visits, tests, hospitalization and other services within the network after employees meet their deductible. That’s down from 80 percent.