Ironies Abound: Walmart Associates Who Lose Their Benefits Can Buy Obamacare Policies at Walmart!

Walmart stands out as the poster child of Obamacare’s perverse consequences. Last week, the giant retailer announced that it is dropping benefits for workers who put in fewer than thirty hours per week, which is the definition of part-time according to Obamacare. This will affect about 30,000 U.S. workers. For the remaining “associates” still eligible for benefits, their premiums will jump 19 percent, from $18.40 to $21.90 per pay period. Project 2017’s Jeff Anderson has dug up an embarrassing letter published by Walmart in 2009, which championed Obamacare:

…touting “the promise of reduced health care cost increases” that would come from “health care reform.” Walmart and friends wrote, “We are for shared responsibility,” opined that “health care costs more because we don’t cover everyone,” and said that “losing coverage pushes people already dealing with financial hardship to the verge of financial collapse.”

The real reason Walmart was so eager to have Obamacare passed was so that it could socialize the health costs of part-time workers by dropping their benefits:

Think of the 36-year-old Walmart employee here in Washington, D.C. who works 29 hours per week at the company’s average wage of $12.73 per hour. She earns just about $19,000 annually if she works every week of the year.

If Walmart doesn’t offer her insurance, the Kaiser Family Foundation’s subsidy calculator shows that she qualifies for a $1,751 subsidy from the federal government to help buy coverage on the exchange. With that financial help, she can buy insurance for as little as $7 per month. As a low-wage worker, she gets some of the most generous financial help.

But if Walmart does offer her coverage, it becomes her only option. She doesn’t qualify for federal help and the $7 plan disappears. Walmart’s plan, meanwhile, is way more expensive. The average premium there works out to $111 per month. (Sarah Kliff, Vox)

Another way to put it is that the associate who works 30 hours a week suffers a tax hike of $104 per month, or $23.93 per week, relative to the part-time worker. According to another estimate, the average Walmart associate earns $8.81 per hour. With that wage, the breakeven point for reducing hours is 2.72 hours above the cut-off of thirty hours. That is, if he works 33 hours a week, it makes sense for him to stay full time. If he works 30 to 32 hours a week, it makes sense for him to drop back to under thirty hours.

Obamacare supporters have gone to great lengths to dismiss the fact that Obamacare motivates a reduction in working hours. However, this is one example of the type of perverse behavior that NCPA anticipated Obamacare would cause, and illustrated in a series of booklets that describe how Obamacare will affect ordinary people.

One irony is that outfits which support Obamacare have demonized Wal-Mart for hiring part-time workers who were dependent on government for benefits. Just last April, Americans For Tax Fairness accused Walmart of getting $6.2 billion in taxpayer subsidies, which it received indirectly by paying workers’ wages so low that they qualified for food stamps, Medicaid, and such.

A second irony is that Walmart is trying hard to be recognized as an innovative healthcare provider. It was championed by PwC’s Heath Research Institute in April as a major disruptor of the status quo. For example, it has partnered with Kaiser Permanente to put primary-care kiosks in stores, offering consultations with allied health practitioners and telemedicine consultations with doctors off-site. It’s exactly the kind of innovation that will benefit low-income people especially.

Only one day before announcing that it was dropping benefits, Walmart announced that it was expanding into retailing health insurance in a partnership with also manages relationships with licensed insurance agents, enabling customers to compare coverage options and enroll in the plan that is right for them whether that be a Medicare plan or Public Healthcare Exchange plan through online, phone and in-store services.

So, the final irony is that Walmart workers who lose their benefits can buy Obamacare policies in the store once their shift is over!

Two of NCPA’s proposed reforms would effectively correct this needlessly traumatic loss of coverage. First, a universal tax credit would eliminate the incentive for workers to drop hours. Second, allowing workers to claim subsidized health insurance where they prefer, instead of forcing them onto Obamacare exchanges, would allow Walmart to be consistent in its health-benefits strategy. The employer could do this by offering a defined contribution to part-timers’ benefits in a private exchange.

Comments (4)

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  1. allan says:

    “The real reason Walmart was so eager to have Obamacare passed…”

    I recognize the truth in the numbers involved and do not know the answer, but do you think that in 2009 Walmart knew this exact sequence of events would happen?

  2. Jake Sanders says:

    “Obamacare supporters have gone to great lengths to dismiss the fact that Obamacare motivates a reduction in working hours.”

    Is there a better illustration of marginal economics than the 29th and 30th hour of weekly labor?

    lex parsimoniae

  3. Bob Hertz says:

    Ezra Klein wrote a good piece at the time the ACA was being debated in Congress.

    He said that early on, the House Democrats did in fact propose a universal tax credit.

    But the budget cost was stupendous.

    So the Democrats looked for a way to chop back the cost of credits. They came up with the infamous 30 hour rules. There was a deliberate effort to maintain as many persons on employer plans as possible.

    The NCPA alternative is excellent, but by itself it would cost over $200 billion a year, maybe more. The NCPA proposal needs for employer insurance payments to become taxable income.

  4. Bob Hertz says:

    No one is saying much about this interesting post, so let me add my left wing perspective.

    It is a good thing if Walmart employees get some form of public health insurance.

    Do we consider it a scandal if Walmart employees send their children to public schools? Is it a scandal of Walmart employees call the fire department?

    Of course not. Waltmart and its employees pay property taxes and sales taxes to make this happen.

    I do not claim it is easy to figure out what Walmart should pay toward public health care. The ACA fine structure is ludicrous.

    The easy answer is for businesses to pay about 8% of payroll for anyone they do not cover. Germany does this and they are a very prosperous country.

    (Low wage employers like Walmart have done poorly in Germany. Serves them right.)