Company pushes consumer-driven health plan even as it looks to cut other benefits
Executives at Wal-Mart Inc., the biggest retail company in the U.S., are pondering ways to cut employee benefits costs, even as they move to beef up a health care plan widely criticized as stingy.
The top benefits manager for Wal-Mart, Bentonville, Ark., has proposed significant cutbacks in company benefits spending, including reduced payments to 401(k) accounts and lower levels of group life insurance.
In a memorandum to the company board first reported in The New York Times, the retailer's executive vice president for benefits argued the company was forced to move in the face of benefit cost increases averaging 15% annually since 2002. In that time, Wal-Mart's benefit costs grew from $2.8 billion to $4.2 billion, according to the executive, Susan Chambers.
Chambers proposed changing eligibility requirements for health care insurance to allow more employees and dependents to enroll. To help pay for that and reduce benefit costs overall, Chambers also proposed a number of measures, including:
==Charging higher premiums for spousal coverage;
==Increasing educational efforts to help beneficiaries use more cost-effective care;
==Lowering life insurance coverage to a maximum $12,000 payout;
==Adding health care cost-control programs such as utilization review and case management;
==Offering a choice of alternative benefits packages such as discount cards and paid time off.
==Adding health clinics to stores, a move the company already had planned to offer customers, but which could also reduce emergency room use by Wal-Mart employees.
Two days before the memo came to light, Wal-Mart told employees it planned to switch them in January to a consumer-driven health plan.
The plan would carry an annual deductible of at least $1,000 for individuals and $2,000 for families, covered in part by a health care savings account, to which the employee would contribute tax-free.
Wal-Mart told employees it would also contribute to their HSAs.
The new plan would charge monthly premiums ranging from $25 for individuals to $65 for a family–40% to 60% less than what employees contribute to the company's existing plan. Wal-Mart's hope is that significantly more employees would sign up for the new plan.
Wal-Mart has 1.2 million workers, of whom around 568,000 belong to its current health care plan, paying biweekly from $17.50 for individual coverage to $70.50 for family coverage, according to company documents.
The new plan would offer three doctor visits to employees before they would have to pay the deductible, a feature that Wal-Mart says could encourage many to get preventive care.
Otherwise, the plan would carry a $25,000 cap, applicable only in the first year, and employees would pay up to $300 a year for prescriptions in addition to the deductible.
The key to overall benefits savings is to have most employees participate in the HSA plan, Chambers' memo said.
"Otherwise, only the healthiest enroll, and there is very little cost reductions because healthy people spend so little on health care," Chambers pointed out.
Paul Devore, chief executive of Financial Management Services Inc., Encino, Calif., sees Wal-Mart's health care insurance changes as a way to take the edge off criticism by labor organizations and other groups that its health care insurance plan was out of reach for most employees.
