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ICYMI – WSJ Editorial: Everyday Low Benefits

October 26, 2011

When Wal-Mart endorsed President Obama’s health-care plan in 2009, CEO Mike Duke said it did so “to remove the burden that is crushing America’s businesses and hampering our competitiveness in the global economy.” That doesn’t seem to be working out too well—for all Americans, and especially for Wal-Mart’s employees.

Last week the largest private U.S. employer announced that it would no longer offer health coverage to part-time workers and would sharply increase premiums for its other “associates.” Wal-Mart says the changes are a response to climbing health-care costs, not the Affordable Care Act per se, though even this is an indictment: The bill that the company claimed would help isn’t helping. But Wal-Mart’s errant political judgment is less important than what its crash benefits diet says about the future of employer-sponsored insurance.

Under the company’s new policy, new workers who put in fewer than 24 hours a week on average won’t qualify for any Wal-Mart health plan, while those under 33 hours won’t be able to add a spouse. Other premiums and deductibles will jump in 2012, some by as much as 40%.

While the company won’t disclose how many of its 1.4 million employees it does cover, Wal-Mart is unusual in that it belongs to the 42% of large businesses that offer coverage to part-time workers, according to a 2011 Kaiser Family Foundation survey.

That and other concessions were part of Wal-Mart’s mid-2000s campaign to placate its liberal critics, a bid that reached its apotheosis in its embrace of ObamaCare. Mr. Duke’s 2009 endorsement was co-signed by Andy Stern of the Service Employees International Union and John Podesta of the Center for American Progress, the Obama Administration’s outside political-policy shop. Expect these political friends with benefits to turn on Wal-Mart now as it is forced into more such triage to manage its health costs, like the rest of the business world.

The larger danger is what happens when the new law’s subsidized insurance exchanges become operational in 2014 and scramble the labor market. The Obama plan exposes businesses to “pay or play” penalties that are supposed to keep the employer market from unraveling and that Wal-Mart supported in part to shackle its smaller competitors. But once the regulations are finalized, many businesses may look rationally at the new incentives and conclude that shedding their health costs and paying the penalties is cheaper than the status quo.

This will be especially true in industries with large numbers of low-wage, low-skill workers—like hotels, restaurants and, yes, retail—so Wal-Mart’s benefit drawdown is especially worrisome if it is a prelude to a taxpayer hand-off. For decades the federal tax preference for job-based health benefits has eroded take-home wages and redirected business capital away from, say, hiring.

But the solution isn’t another vast taxpayer entitlement liability that will undermine the insurance options that are far more value-conscious and responsive to markets than any government alternative. Meantime, the drag on business competitiveness will only accelerate in the bargain.

It’s hard to miss the irony in the Obama health-care revolution eating its own children, but other business leaders looking on agog at the brave new insurance world that Wal-Mart helped to create probably have another word for it.