Around 30,000 Walmart (WMT 0.44%) workers will soon lose their employer-sponsored health coverage. The giant retailer has provided health insurance for its part-time workers in the past, but announced earlier this month that it would continue doing so only for employees who work more than 30 hours per week. That cut-off exactly matches the level where the Affordable Care Act, commonly referred to as Obamacare, requires large employers to provide health coverage for workers.
Obamacare's impact certainly appears to be a key factor in the decision, with the retailer stating that the move was made because of higher healthcare costs. Walmart has previously estimated that the health reform legislation increased health costs by as much as $500 million.
So, why did Walmart do it?
To save money. Walmart covers more than 60% of its workers' total healthcare costs and 75% of employees' health insurance premiums. That's significantly better than the retail industry average of paying 54% of total healthcare costs and 68% of employee premiums.
Eliminating those benefits for thousands of part-time employees means that Wal-Mart will hang on to millions of dollars (estimated at around $50 million in premiums) that it would have otherwise spent. This provides an incremental benefit for the company's shareholders, and could even be the difference in beating or missing earnings estimates next year.
Walmart workers may benefit
While Walmart won't cover employees who work fewer than 30 hours per week, that doesn't mean those workers necessarily lose. Actually, many could ultimately win from the company's decision.
Employees will be able to obtain health insurance through the Obamacare exchanges. And since they will no longer have the opportunity for employer-sponsored coverage, many of them will qualify for (often significant) federal subsidies. A significant number of the Walmart workers could potentially pay less overall than they did previously.
Of course, there's a flip side to the argument.
Many will also likely lose from the company's decision.
Some Walmart employees who work less than 30 hours each week at Walmart have other jobs. The combination of income from multiple part-time jobs could reduce the level of federal subsidies for which these individuals are eligible. That means that some workers will pay more under their Obamacare health plans than they would have under their employer-sponsored coverage.
A slow death?
Other winners and losers could emerge over the long run as the impact of Walmart's decision is fully realized. Target, Home Depot, and Walgreen already made similar decisions. Other employers could follow suit. Each move to eliminate health coverage will create its own set of winners and losers.
Perhaps the biggest potential impact could be the shift away from employer-based coverage altogether. Some pundits have predicted that this will be the eventual outcome of health reform. If employer-based coverage suffers a slow death, Walmart's move could be viewed as an early harbinger.