Friday, October 21, 2011

Wal-Mart and Obamacare

One of the lead stories this morning is Wal-Mart’s decision to scale back health care coverage for some of its workers – part-time employees working fewer than 24 hours per week will not be allowed to join the company’s plan, and part-timers working between 24 and 33 hours weekly will not be able to buy spousal coverage, although children can still join an employee’s plan.

The New York Times article outlining the changes quotes the company as saying the changes were not a result of Obamacare.  But a company spokesman said that the continued escalation of health care costs were the prime reason for the change.  And candidate Obama repeatedly promised that he would lower premium costs by an average of $2,500 per family, and do so in his first termSo in reality, Obamacare’s failure to deliver on its promises to lower health costs and insurance premiums resulted in Wal-Mart scaling back coverage for millions of workers and their families.

Other studies have also noted that Obamacare’s employer mandate encourages these types of coverage and employment decisions.  Firms are not subject to penalties under the employer mandate for not covering full-time workers – giving companies an incentive to scale back benefits if they do provide coverage to part-time workers, and/or shift hiring from full-time to part-time employment.

The company’s protestations to the contrary, Wal-Mart’s decision to scale back employee coverage is rooted in the failure of the new law to meet its promises on controlling costs, and the structural disincentives Obamacare provides to firms offering coverage, particularly to part-time workers.  While Wal-Mart may be the first company to make a decision to drop coverage for many of its workers, it likely will not be the last.