Occupy Walmart: When Companies Cut Health Care, Who's to Blame?

By Derek Thompson

Walmart announced last week that the nation's largest private employer will cut health care benefits for full-time workers and eliminate insurance for new part-time workers. The company will also begin charging smokers higher premiums. ("Tobacco users generally consume about 25 percent more health care services than nontobacco users," a spokesman said.)

Since Walmart's announcement dovetailed with the ongoing Occupy Wall Street protests, it was only natural that some demonstrators would turn their fury against the nation's largest retailer. After all, Walmart's story seemed to prove the point that corporations continue to put profits over people. (Plus, to change a chant to "Occupy Walmart!" required only a one-syllable fix.)

In fact, Walmart's announcement does fit into the OWS narrative of income inequality and unsteady wage gains for the middle and lower class. But the real story is not as simple as profits over people. Walmart's sheer size makes it a target for class warriors, but when it comes to health insurance, the retailer has been ever-so slightly ahead of the curve. Only one out of six employers offer health care to part-timers, as Sarah Kliff notes. Walmart is the 16 percent. (Or it's the 42 percent, if you look at the largest employers, exclusively.)


But if Walmart covers more part-time workers than most companies, it does so with lean insurance packages. A Massachusetts study found that it covered only 52% of premium costs, compared to K-Mart (66%), Target (68%), and and Sears (80%). Today, WalMart offers a $250-a-year health plan. Twenty dollars a month for health care sounds downright charitable, but it comes with stiff deductibles for non-preventative care.

One of Occupy Wall Street's chief complaints is that the middle class isn't making enough money, because the income is going to corporate bonuses and dividends for shareholders. There is something to this. The American C-suite's obsessions with quarterly earnings reports makes labor cost cutting and dividends important indicators of a firm's success, even if it sounds short-sighted to cut one's way to growth. But another force weighing on wages is this tremendous growth in health care costs.

This isn't a Walmart problem, specifically. It's a national problem. Walmart is dealing with the same decisions as thousands of businesses and small families -- only its decisions impact hundreds of thousands of people at a time, rather than a handful. The average premium for family coverage through an employer increased 9 percent in 2011 to $15,000, Reuters reports. Since 2000, premiums have grown by 134 percent. Writ large, health care costs have the effect of literally eating your bonus, as this projection from the president's Council of Economic Advisers shows.

healthcaregraph1.png

A liberal could point to this graph as evidence of wage stagnation and be correct. A conservative could point to this graph as evidence that wage stagnation is all about health care and also have a case. How we take control of insurance costs and make compensation more about disposable wages than mandatory health care premiums is going to be a central challenge of the next generation. Obamacare offers one path. Conservatives will offer their own. The bottom line is that we don't know how to rein in the $1.6 trillion health care industry that almost every middle class family interacts with annually. In this particular challenge, what happens at Walmart might be more important than what happens at Wall Street.


This article available online at:

http://www.theatlantic.com/business/archive/2011/10/occupy-walmart-when-companies-cut-health-care-whos-to-blame/247287/