Ethical Retailing Memo: Today's Wal-Mart Health Care Announcement

As we wrote yesterday, Wal-Mart, Inc. notified the media that it planned a major health care announcement this morning via a news-conference call.

That announcement, made this morning by Wal-Mart's head of employee benefits Linda Dillman, is that for the first time in the company's 45-year history more than half of its employees had enrolled in its corporate health insurance plan. Twenty percent more employees enrolled in the plan over previous numbers.

This just-published story in the New York Times describes the announcement fairly well. You also can read Wal-Mart's written press announcement here.

In essence, Dillman said after the company revised and improved its health plan last November (2007), the number of workers who signed up reached 690,970, or 50.2% of Wal-Mart's 1.4 million U.S. employees. This is up from 45.5% of Wal-Mart employees who were enrolled in the corporate health benefits plan five years ago, before changes to the plan were made last November.

For a good overview of the changes to the health plan Wal-Mart made last fall, and the issues surrounding those changes, read this November 13, 2007 article from the New York Times.

We aren't sure the fact that only half of Wal-Mart's employees are now covered by the corporate health care plan is exactly news for the retailer to crow about. That leaves the other half not participating in the company's plan.

In the news conference, Dillman explained, with statistics to back it up, that all but 7.3% of the retailer's employees have health care plans.

Those not in the Wal-Mart health care plan are in plans through a spouse's place of employment (22.3% of employees) or in a parent's/school or college plan (4.2%) , or are in government-sponsored plans like medicaid or medicare, she said.

here is a breakdown of those statistics, according to Wal-Mart: 4.3% of employees are on medicare, 1.9% are on state medicaid plans, 1.2% on state plans other than medicaid, 2.3% on military or Veterans' Administration plans, and 2.4% have an individual health insurance policy. The company's statistics show 0.7% having health insurance from "another source." We aren't sure what that means, but it can be a margin of error type statistic we suppose.

This is a good-news, bad news scenario. We're glad these folks are covered. However, one has to ask that if such a high percentage (the 22% in spouse plans) of Wal-Mart associates choose plans other than the company's, why that is? It's likely it's because those plans through their spouse or parent are either more affordable or better, or both than the plan through their employer--Wal-Mart. Frankly, this isn't an impressive fact for Wal-Mart. However, we're pleased that 20% more associates have now got health care coverage through Wal-Mart.

Further, the fact that more than 3% of Wal-Mart employees are on state medicaid plans suggest there still remains an affordability gap at the bottom of the income -scale for company associates.

We strongly encourage Wal-Mart to identify this 3% of its associates who are on state health care plans and do everything the company can to help them get into the retailer's plan. Of course, that's only if the Wal-Mart plan is better than the state medicaid plans are. And the fact is, these workers may be at such a low-income level that they are better off personally to be in the state plans, based on a cost-benefit analysis of the corporate plan. It would also mean Wal-Mart needs to improve its plan, especially for those at the bottom of the income scale.

Lastly, 7.3% of 1.4 million employees is remains a high percentage of workers without health insurance. Dillman said in the news conference that Wal-Mart wants those associates in the health care plan, and is launching a study to find out why they aren't participating. We hope the retailer conducts that study and determines why they aren't in the plan, and does something more to make it affordable for them to join. We think affordability is the primary reason they aren't participating.

The group Wal-Mart Watch, which is funded in part by the service-employees' labor union , issued a statement saying they are surprised Wal-Mart would be proud to report that half of its associates chose not top participate in the company's health plan. Read today's full Wal-Mart Watch statement here. (You also can read a statement here Wal-Mart Watch made in November, 2007, when Wal-Mart made its changes and enhancements to its corporate health plan.)

We think Wal-Mart has made some important, positive steps in changing its corporate health care plan so that more employees are participating, as is evidenced by the statistics. However, there remains that 7.3% who are not only not covered by the company plan, but have no health insurance at all. We encourage the Wal-mart to make getting them insured its top priority. There's also the issue of the current policy cost vs. coverage quality in the company's health plan. At the lower-end of the plan's options, employee costs and co-payments are rather high.

Let's keep in mind its only one measure of health care to say more associates are enrolled. The other equally important measure is how high of a quality and affordable of a plan do the associates have available to them. We think Wal-Mart has more work to do in that regard.

We congratulate the retailer for signing up more employees--but strongly encourage them to make the workers' plans better and more affordable. There is more work to be done on its health care plans by the world's largest corporation, and the country's number one employer.