Wal-Mart to Expand Health Plan for Workers
By Michael Barbaro
The New York Times
October 24, 2005
Wal-Mart, which has long been criticized for the benefits it offers to its workers, is introducing a cheaper health insurance plan, with monthly premiums as low as $11 (available in a handful of areas), that the company hopes will greatly increase the number of its employees who can afford coverage.
Jumping into a new area, Wal-Mart is also offering health savings accounts, which the federal government introduced last year. Few employers offer them.
The new benefits, which Wal-Mart calls the Value Plan, follow years of complaints that at Wal-Mart, the nation’s largest employer, health insurance is out of reach for many of its 1.2 million workers in the United States, forcing thousands of them to turn to state-sponsored programs or forgo health coverage altogether.
Health insurance specialists generally praised the new plan, saying its lower premiums were likely to attract more employees and thereby reduce the ranks of the uninsured. They also noted, however, that the plan’s $1,000 deductible would be high for Wal-Mart workers…
But the plan is unlikely to cover a complicated illness or expensive hospital stay during the first year, when there is a $25,000 insurance cap. (The cap is lifted for the second year.) Out-of-pocket payments range from $300 for prescriptions to $1,000 for hospital stays.
The company’s health savings accounts will combine low monthly premiums with a requirement that individuals cover a substantial part of their own health care costs.
Several health insurance specialists questioned whether the company, which is working to burnish its public image, was trying to quickly increase the number of workers who use its health insurance at the expense of the coverage’s quality.
http://www.nytimes.com/2005/10/24/business/24mart.html
Comment: Although we do not yet have the details of Wal-Mart’s Value Plan, enough information has been released to raise very serious questions about whether this coverage provides financial security for those with medical needs.
Although the premiums will be very low, they likely would not be affordable for an individual that has no discretionary income, which is the case for most Wal-Mart employees.
Health savings accounts are advantageous for higher-income individuals since they are subsidized by the taxpayer. But most Wal-Mart employees would not receive any tax subsidy for these accounts because their incomes are too low to pay income taxes. Why would they place personal funds in an account that provides no advantage but that would be penalized if they used their funds for other essential needs, such as food or rent? Besides, they simply do not have the extra income to fund a savings account even if they wanted to.
Although three visits are covered before the deductible kicks in (to encourage preventive services), a $1000 doughnut hole so early in accessing the benefits creates a chasm which most would not be able to ford.
And a major catastrophic event would leave many individuals exposed since the costs typically would exceed the $25,000 cap.
We already know that under-insurance perpetuates many of the problems experienced by the uninsured, such as impaired access due to lack of affordability, with resultant impaired health outcomes. But this degree of under-insurance in an employee population with very low incomes creates yet a new category of insurance: pseudo-insurance. It looks like insurance, but it isn’t.