Walmart and the End of Employer-Based Healthcare

In dropping coverage for part-time employees, the retailer is only the latest company to take advantage of the Affordable Care Act.

John Gress/Reuters

On Monday, Walmart announced it would begin selling insurance. On Tuesday, it created a whole new set of potential customers: The retailer is cutting off health care for 30,000 employees who work fewer than 30 hours a week.

That's the magic threshold set by the Affordable Care Act. As of January 2015, any employer with more than 50 workers will have to provide insurance to all employees who work more than 30 hours.

You may recall that during the 2012 election, Republican politicians warned darkly that Obamacare was a "job killer" that would create a "part-time economy," in which companies started dropping their workers' hours down below that figure in order to escape the mandate and impoverishing more Americans as a result. That didn't happen. Instead, big companies have simply cut off insurance to the employees working fewer than 30 hours, as Walmart took pains to point out in blog post announcing the move. Home Depot removed almost 20,000 part-timers from its insurance rolls; Trader Joe's and Target have also cut employees.

But Walmart, as the nation's largest private employer and a near-constant antagonist of progressives and labor organizers, gets special attention. The 30,000 figure also appears to be one of the largest, if not the largest, in the group. (Interestingly, Walmart also promoted 35,000 employees to full time last year, for reasons unrelated to health care.)

What happens to the part-time employees? Most of them are likely to end up in the state and federal insurance exchanges established under the Affordable Care Act. And while Walmart's move may be a cold-hearted mathematical maneuver, it might actually be a good thing for many of the workers. When Trader Joe's announced it was cutting insurance for part-timers, it pointed out that workers who depended on their salary were actually likely to benefit: They'd be able to get similar plans on the exchanges for less money than they were already paying. The liberal ThinkProgress also hailed Target's decision as potentially a boon for employees. Under Obamacare, workers with incomes of as much as 2.5 times the poverty level are eligible for subsidies for insurance, and The Huffington Post calculated last year that half or more or Walmart employees make less than $25,000 per year. Making the reasonable assumption that the Walmart employees working less than full time make less, it's a good bet that most of the affected workers will be eligible for subsidies.

There's one big potential exception to this. Obamacare tried to expand Medicaid to cover workers who make less than 138 percent of the poverty level, but the Supreme Court ruled that states could choose not to make the expansion. That means that some states, mostly conservative Southern ones, have refused to expand Medicaid, and the workers in question aren't eligible for subsidies, either. At an average Walmart cashier's salary of $8.48 per hour, a 29-hour-per-week worker could be on either side of the 138 percent line, depending on the size of their household. That means some of these employees could end up much worse, though it's probably impossible to determine how many.

Take a step back and this story looks like another milestone on the changing road of the American health care system, even if there are only 30,000 employees affected by this particular step. And it looks more like a symptom of the same underlying issues that inspired the Affordable Care Act, rather than like a result of that law. In announcing the move, Walmart cited the rising costs of health insurance. Big companies are seeing their costs rise, but they also don't have to worry as much about keeping their employees well, since they can be sure that they'll be insured through exchanges anyway.

Health-policy experts and wonks on both the right and left tend to look askance at the American system of employer-based insurance, which is essentially a historical accident. (They differ on what do in the post employer-based-insurance world, of course: Progressives want a universal national insurance system, while conservatives want individuals to deal with it themselves.) As more and more American workers leave employer-based insurance plans, for one reason or another, the end of this anomalous system seems closer and closer.