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Wal-Mart Weighs Big Health Care Changes

Posted on: Tuesday, 25 October 2005, 21:01 CDT

By MARCUS KABEL

SPRINGFIELD, Mo - Wal-Mart is considering sweeping changes in health care and other employee benefits to halt rising costs and mounting criticism, including switching to health savings accounts, opening more in-house health clinics, hiring more part-time employees and recruiting healthier workers.

A 31-page report under review by the company's board acknowledges that Wal-Mart's critics are correct in saying its health coverage is expensive for low-income families and that a significant portion of employees and their children are on public assistance.

But it defends Wal-Mart's benefits as on par with those of other retailers and says critics are holding it up to standards of big national employers like Microsoft Corp. or General Motors Corp., whose industry economics differ from retail.

The report comes as Chief Executive Lee Scott this week announced new lower-premium health plans to make insurance more affordable to employees, or "associates" in Wal-Mart parlance.

The document shown to The Associated Press by Wal-Mart lays out nine "limited-risk" changes and five "bold steps" that together would halt a recent 15 percent annual rise in benefits costs and counter attacks from an increasingly united front of labor and other groups.

The proposals drafted with the help of consultants McKinsey & Co. were presented to the full board of directors in September and will be discussed again in the coming months with an eye to adopting changes next year, said Susan Chambers, executive vice president of benefits administration at the Bentonville, Ark.-based company.

The report found that Wal-Mart's workers were getting sicker more often than the national average, especially with obesity-related problems such as coronary artery diseases and diabetes.

Besides controlling costs, the review is also aimed at giving employees more choices and responding to criticism.

"Wal-Mart's health care benefit is one of the most pressing reputation issues we face because well-funded, well-organized critics, as well as state government officials, are carefully scrutinizing Wal-Mart's offering," the report said.

The nine "limited-risk initiatives" include changing eligibility rules to allow part-time workers to qualify sooner than the 24 months they now have to wait; reducing spouse coverage; raising the percentage of part-time staff in stores; developing "high-performance provider networks" of preferred doctors and hospitals; and opening in-store health clinics for customers and staff that offer lower cost care.

The five "bold steps" are more controversial.

They include introducing so-called health savings accounts in place of traditional insurance plans. The accounts would have an employer match a worker's annual contribution to set up a fund, which the employee uses to pay directly for medical costs under a higher than traditional deductible.

The idea is to make employees more aware of medical costs and give them an incentive to stay healthy and shop for lower prices.

Other "bold steps" would include redesigning jobs and benefits to encourage healthier living and attract healthier employees. The report said this could include having cashiers do some cart gathering and giving employees discounts on healthy foods like fruits and vegetables.

In total, all 14 changes could save enough to keep the costs of all benefits including health, retirement and paid time-off at or below the current level of 1.9 percent of sales.

It also said Wal-Mart should make an effort to reframe the debate on health care costs as a wider problem, not just a Wal-Mart issue, and recommended that Wal-Mart become a more important national player in the debate.

"Establishing Wal-Mart as a leader on this critical issue will help deflate our critics. It will also put us in a position to help shape the outcome of the public debate about the health care crisis in a way that is at least somewhat advantageous to our interests," the report said.

Source: Associated Press/AP Online

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