Walmart's New Promise: Always Low Benefits ... Always

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Walmart's New Promise: Always Low Benefits ... Always Starbucks, Costco, Whole Foods, Walmart. For years, these companies offered some of the very few modest-paying retail jobs at which part-time workers could hope to at least get access to affordable health insurance.

This list got shorter by one name last week: Walmart (WMT).

On Friday, the nation's largest employer (1.4 million workers and counting) announced it was rolling back is health benefits for part-time workers. These were benefits that Walmart expanded just a few years ago in response to criticism that by underpaying workers -- and refusing to provide them with access to health insurance -- the company effectively shifted much of its labor costs to the federal Medicaid program.

Under the new plan, Walmart will no longer provide health insurance for employees who work fewer than 24 hours per week. Those who work from 24 to 33 hours per week can still get coverage for themselves and their children -- but their spouses must now seek their insurance elsewhere.

Passing on Costs to Workers

Even those lucky few employees who get to keep their coverage aren't going to like the new plan very much. According to Walmart, spiking insurance costs (expected to rise as much as 40% for some plans in 2012) necessitate cutting costs for even those plans that remain in effect. So beginning in 2012, Walmart will slash its contribution to workers' health-care expense accounts by half.

Henceforth, Walmart will subsidize employee health-care costs by just $250 (and remember, that's $250 that has to last the entire year); benefits for family members will be cut to $500. Employees who've seen details of the plan say that in some cases, the deductible alone on Walmart's new plan (i.e. the amount that comes out of pocket before insurance even kicks in) could amount to 20% of a worker's annual pay.

Aside From That, Mrs. Lincoln, How Was the Play?

Pretty miserable news, right? Here, sit down and have a smoke. Take a moment to calm down.

No -- on second thought, don't. One new provision in Walmart's plan is that tobacco users are going to see their insurance premiums nearly double. (And in some cases, more than double.)

Still, it's not all bad news. The plan does include a grandfather clause. And no, that's not a jibe at Walmart's famously elderly greeters.

The plan "grandfathers in" employees who were working fewer than 24 hours per week before the change, so that they get to keep their benefits even after the changes take effect for new employees. (Just don't get any bright ideas about finding a better job elsewhere. You might get laid off -- and don't come crawling back to Walmart looking for a restoration of your benefits.)

Round Up the Usual Suspects

If I might gaze into my crystal ball for a moment, I suspect a lot of conservatives will rush to blame Obamacare for Walmart's move. Don't. The fact is, Walmart's amended health-care coverage will begin in 2012, but many of the most expensive provisions of President Obama's health care reform law -- requiring insurers to cover pre-existing conditions in children, for example -- don't go into effect until 2014.

Liberals -- don't go blaming greedy insurers, either. This isn't a profit-grab by the insurance industry. Fact is, while they fluctuate from year to year, operating profit margins at UnitedHealth Group (UNH) today are still right about where they were back in 2002 -- and net profit margins are about 10% lower. At WellPoint (WLP), operating profit margins are neck-and-neck with 2003 levels. If the insurers are using Obama's health care reform law as an excuse to rake in extra profits, they're certainly hiding it well.

So Who's Really to Blame?

If one had to identify a single culprit in Walmart's move ... it would be Walmart itself. Consider: As the Dow Jones Industrial Average surged higher, annual revenue at Walmart recently hit an all-time high.
Net profits, too. The company's net profit margin (3.9%) is at its highest level in more than a decade. To top it all off, earlier this month Wal-Mart confirmed to its shareholders that after two straight years of quarterly declines in year-over-year same-store sales, it began growing sales again at its stores last quarter.

In short, Wal-Mart is starting to look like it's finally got its act together. It's growing sales, expanding profit margins, and raking in bumper profits as a result. And now is the time it decides to squeeze the little guy for a bit more margin? Now it cuts benefits for the employees who helped engineer the turnaround?

Maybe this is just the populist in me talking, but it all seems a bit ill-timed, a bit greedy to me. It's almost enough to make you want to run off and Occupy Wall Street. Or at least ... occupy Bentonville.

Motley Fool contributor Rich Smith owns no shares of any companies named above. The Motley Fool owns shares of Wal-Mart Stores, Costco Wholesale, Starbucks, and UnitedHealth Group. Motley Fool newsletter services have recommended buying shares of WellPoint, Starbucks, UnitedHealth Group, Wal-Mart Stores, and Costco Wholesale, creating diagonal call positions in UnitedHealth Group and Wal-Mart Stores.


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27 Comments

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crowley the cat

Isn't it nice that the 6 heirs of sam walton, his brother and a partner are personally worth a total of $93 Billion 1n 2011. That's up from $83.5Billion. Four of them are in the Forbes 400 top ten. Google the Walton Family Wealth article in Forbes Magazine (Nobody, in their right mind, can claim that Forbes is a bastion of liberal propaganda!!!)Can't remember which Walton daughter said it, think Kristy, (but can't google it right this minute) --when we're paid $20 Million a year to run this company we KNOW we're under paid especially when we have too many overpaid $20,000 a year employees!!
I wonder if she's related to Ann Romney--you know the one who said about their tax returns --We're not going to give YOU PEOPLE any more information about our taxes.
Shades of "the french revolution" food rioting peasants--"If they don't have bread, then let them eat cake!"

August 19 2012 at 11:01 AM Report abuse rate up rate down Reply
Elsa

While I was looking for a cheap health insurance my friend told me that there are sites, where people can compare prices from many providers.These sites are the only one way to save money on your insurance, because once you register many companies will make you different offers.The site he suggested me was:

---NationalHealthInsurance.info---

I tried them and I saved more than 30%.Try it.Just register and get free quotes!

January 12 2012 at 3:58 AM Report abuse rate up rate down Reply
suec8

This is actually a taxpayer funded corporate bail out for Walmart. When you pay your employees so little that they qualify for Medicaid and then offer no health insurance, then the taxpayer picks up the tab.

October 27 2011 at 1:07 PM Report abuse rate up rate down Reply
cheechnthong

i wouldnt shop at walmart if they were selling 20$ bills for 5 dollars

October 27 2011 at 1:04 PM Report abuse rate up rate down Reply
phbotham

At least the Walmart employees who work at least 3 days per week have a JOB and access to subsidized health care insurance. Millions are unemployed and have NO health care insurance. Quit whining, someone always has it worse.

October 26 2011 at 2:58 PM Report abuse +1 rate up rate down Reply
spsagd

Since when is health insurance a right? My wife and I owned a company for 25 years and we had health insurance for our employees. For th first 12 years we paid 100% of the costs, then the insurance company started raising our costs until we had to ask our employees to pay some costs. When we did you would have thought we asked them for an arm or a leg. In any event costs kept rising, in fact we were paying almost 300% higher costs when we closed. iN THE ENTIRE 25 YEARS WE NEVER FILED A MAJOR CLAIM.One reason we closed was that we couldn't raise our product costs and be competitive. I think that most employess don't understand that between local, state, and federal taxes, payroll taxes, errors and omissions insurance, liability insurance, health insurance, et. at least 60 cents of every doller sold goes to pay these costs. Add in office space, utilities, sales commissions, office supplies, telephone, payroll and you may keep 5 cents of every doller to grow your company. Now if health insurance goes up and up what do you do. Remember you can't raise product costs and remain competitive. That's what small businesses in this country face every day. If someone doesn't get a handle on taxes, health insurance et. there won't be any small businesses left in this country. I REALLY DON'T THINK MOST EMPLOYEES UNDERSTAND WHAT IT COSTS TO RUN A COMANY AND MAKE A PROFIT.

October 26 2011 at 11:49 AM Report abuse rate up rate down Reply
1 reply to spsagd's comment
Jim

Which is why we have to have a level playing field, and ensure that health care is avaiable to every single person in this country. You won't be at a disadvanatge if your competitor also has to pay for insurance for his/her employees.

January 22 2012 at 10:49 AM Report abuse rate up rate down Reply
davidcpasq

if you want to support the Chinese economy, buy at Walmart

October 26 2011 at 11:11 AM Report abuse +1 rate up rate down Reply
jbjg24m

wife and i just filled out our new insurance forms for insurance with Walmart for the next years coverage, costing us $80 more a month and less coverage,

October 26 2011 at 8:52 AM Report abuse -1 rate up rate down Reply
mrbjaw

If you think this has nothing to do with Obmam-Care and the cost going up, think again. When my son decided to go back to collage, I told him I would pay his health insurance, he lives in another state and is over 26. We just got his new premium for the next year, 2012, it want up 11%, 7% was for the increase for health care cost and 4% was for all the mandates put in place this year for Obama-Care, and I was told, more then likely, there will be more next year, because of more mandates in Obama-Care . I still don't know how much my health insurance will go up till the 1st of the year, but I think it will be about the same if not more. Thank you Obama and the rest of you Dems. Just remember, the next time you have to sign a contract for your own personal business, just sign it first, then read it to find out what in it.

October 25 2011 at 7:32 PM Report abuse -1 rate up rate down Reply
Barbara

Walmart sounds like the typical American company now. Most American companies don't have the COURAGE to honor their commitments they make to their employees.

October 25 2011 at 7:22 PM Report abuse +3 rate up rate down Reply