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Walmart, World's Largest Company, Cuts Healthcare to 30,000 Employees

Walmart, World's Largest Company, Cuts Healthcare to 30,000 Employees
Fri, 10/10/2014 - by Jon Healey
This article originally appeared on Los Angeles Times

Walmart gave lawmakers a concise lesson in economics Tuesday when it disclosed that it would no longer offer health insurance to yet more of its part-time employees.

According to the Associated Press, the retail giant has decided not to provide coverage in 2015 for any employee who works less than 30 hours a week on average. The company had stopped offering coverage in 2012 to new employees working less than 30 hours (and in 2011 to new workers putting in less than 24 hours), but the restriction hadn't applied to workers already on the payroll. Starting next year, it will, causing some 30,000 workers to lose their employer-subsidized plans.

Some readers might be quick to complain about corporate greed; in its most recent quarterly filing, Walmart reported more than $4 billion in net income on just under $120 billion in sales.

I won't try to defend the company, other than to point out that the vast majority of its employees are full-timers who do receive coverage, and that the company's health plan is better actuarially speaking than the "silver" plans sold on Covered California and other state health exchanges.

Instead, I'll just argue that what we're seeing is the entirely predictable result of the employer mandate in the 2010 Patient Protection and Affordable Care Act – a mandate, by the way, that Walmart lobbied for. The company was offering health benefits for most employees at the time, and may simply have been trying to force its competitors to do the same.

Now, a little more than four years later, employers are being squeezed by healthcare costs that continue to increase (albeit at a fraction of their pre-recession pace) and a jump in employees signing up for benefits.

Put the blame – or the credit – for the latter directly on the ACA, which required virtually all adult Americans to carry insurance as of January 2014. As a result, Walmart told the AP, it will spend half a billion dollars on healthcare this year, or 50% more than it expected.

Other retailers are feeling the pinch too. Target, Home Depot, Trader Joe's and a number of other chains have eliminated or sharply cut back coverage for part-timers.

Which brings us to the employer mandate, which is due to take effect for large companies in January (after a one-year delay imposed unilaterally by the Obama administration). The mandate applied only to full-time workers, which it defined as anyone who worked at least 30 hours per week.

This threshold, however, gave large employers an incentive to cover only full-time workers, cap part-timers' hours at 29 per week and employ more of them. Although the ACA didn't cause the percentage of part-time workers to surge in the United States – the recession did that – it nevertheless gave employers a reason to continue maximizing part-time positions for as long as the market allowed.

As the labor market tightens, it will grow increasingly difficult for employers to fill part-time positions with people who'd rather be working full-time. Such people make up about 5% of the workforce today, according to data collected by the Bureau of Labor Statistics.

Companies also get better performance, improved customer service and higher loyalty from full-time workers, which can help offset the higher cost of providing health benefits. So that consideration is at work too; witness Walmart's decision last year to convert 35,000 part-time workers to full-timers.

Until then, the ACA's employer mandate is an open invitation for the Walmarts of the world to do what Walmart announced it would do Tuesday. It's a lesson some lawmakers seem to have trouble learning: when the government orders people to do something that's costly, it gives them an incentive to push those costs onto someone else.

The Times' editorial board and I have supported the ACA over the years because it lays the foundation for a more sustainable healthcare system. Nevertheless, I've argued several times in this blog that there are better ways to expand insurance coverage than ordering employers to provide coverage; in fact, that expansion is well underway, and the employer mandate has yet to go into effect.

A better approach would be to decouple health insurance from employment so that workers, not their bosses, would control the tax subsidies that government provides for premiums. The trick is to make sure that employers put the money they're now spending on health benefits into wages going forward. Doing so would put all Americans on equal footing when it comes to buying insurance, while also giving workers full control over which plan to buy. It would be no mean feat, but Walmart's announcement offers another good reason to find a way to get it done.

*

Meanwhile, Al Jazeera America revealed a new report showing that wealthy Americans are giving a smaller share of their income to charity than previously, while low- and middle-income people give more:

Even as the income gap widens, the wealthiest Americans are giving a smaller share of their income to charity, while low- and middle-income people are donating a larger share, according to an extensive analysis of Internal Revenue Service (IRS) data conducted by the Chronicle of Philanthropy.

The Chronicle, a leading source of news coverage on the nonprofit world, said in a report released on Monday that Americans who earned $200,000 or more reduced the share of their income they gave to charity by 4.6 percent from 2006 to 2012. Those earning less than $100,000 donated 4.5 percent more of their income, the report said.

Wealthier Americans still increased their giving over that time period by $4.6 billion, donating a total of $77.5 billion in 2012, using inflation-adjusted dollars, the Chronicle said.

The Chronicle's editor, Stacy Palmer, said that wealthy donors were more likely to support the arts and higher education and less likely to give to social-service charities.

Tami Phillips of the Midnight Mission, a Los Angeles charity serving homeless people, credited gifts from low- and moderate-income people, for helping to sustain its programs during the recession.

"It hits closer to home," said Phillips. "Any day, they too could become homeless."

The Chronicle's rankings were compiled for states and metropolitan areas based on the ratio of contributions to adjusted gross income.

Utah's Generosity

At the state level, Utah residents were the nation's most generous givers, donating $65.60 to charity for every $1,000 they earned. One factor is Utah's large population of Mormons, whose church practices call for them to give at least 10 percent of their income to the church.

Mississippi, Alabama and Tennessee — also with high proportions of loyal churchgoers — were next in the rankings. At the bottom of the list was New Hampshire, where residents gave $17.40 for every $1,000 they earned. Its neighbors, Maine and Vermont, were the next lowest.

All of the states that ranked in the top 17 of charitable giving in the analysis were won in 2012 by the Republican nominee for president, Mitt Romney, while nine of the bottom 10 voted for President Barack Obama, a Democrat.

Palmer suggested that the low rankings for northern New England stemmed in part from low rates of church attendance, but also from residents' "independent streak" and a tradition of self-reliance.

Nevada was the state with the fastest-growing rate of donations as a share of income, jumping nearly 13 percent from 2006 to 2012. Its major metropolis, Las Vegas, was the fastest-growing city in terms of generosity, rising 21 places since 2006 in a ranking of the country's 50 largest urban areas.

North Dakota experienced the biggest decline in giving. Residents reduced the share of income they donated by nearly 16 percent, contributing $24 for every $1,000 earned on average. The Chronicle said that dip could have serious implications, given the increasing demand for social services as newcomers stream in to take advantage of the state's oil boom.

City Giving

Changes in giving patterns were most pronounced in major cities, where the percentage of income that residents donated dropped markedly between 2006 and 2012, according to the report.

In Philadelphia and Buffalo, New York, the share of income given to charity fell by more than 10 percent, and there was a 9 percent drop in Los Angeles, Minneapolis-St. Paul and Washington, D.C.

Among the 50 largest cities, Utah's Salt Lake City had the most generous residents, giving away 5.4 percent of their incomes. It was followed by Memphis, Tennessee; Birmingham, Alabama; Atlanta and Nashville, Tennessee.

In sixth place was Jacksonville, Florida — which trailed only Las Vegas for the biggest growth rate in giving between 2006 and 2012.

The report detailed how Jacksonville donors had rallied behind a campaign to improve the region's public schools via a Quality Education for All fund launched in 2005 with a goal of raising $50 million. The effort has borne fruit, with Duval County's graduation rate rising from 53.5 percent in 2008 to 72 percent in 2013, and a new campaign is underway focusing on 37 of the district's historically lowest-performing schools.

The cities where residents gave the smallest share of their income to charity were Hartford, Connecticut; Providence, Rhode Island and San Jose, California.

Originally published by Los Angeles Times

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