Wal-Mart Stores Inc. (NYSE:WMT) will cut back on employee health coverage cost

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By Joseph Carducci on October 7, 2014 Consumer Staples

Wal-Mart Stores Inc. (NYSE:WMT) may have earned $17 billion as profits in the year 2013, but that has not stopped the giant retailer from depriving its part-time work force of health insurance. The announcement was made on Tuesday. The main reason for this cut is apparently the increasing costs of health-care. This will be a huge step and is likely to impact around 30,000 part-time employees of Wal-Mart Stores Inc. (NYSE:WMT). These part-timers work 30 hours or less a week. Before this cut the employees were getting over 75% from Wal-Mart of their total premiums. This is not all, Wal-Mart Stores Inc. (NYSE:WMT) may also increase the coverage premiums paid to their employees. 40% of the total employees who use the retailer’s most popular and least expensive plan will have to pay $21.90 for a pay period of two weeks; this is a 20% increase from the previous cost. The Senior Vice President of the Wal-Mart Stores Inc. (NYSE:WMT), Sally Welborn said that “we can’t take our eyes off costs,” however she did not comment on how much cost will be saved by this move. It is believed that health-care will require Wal-Mart Stores Inc. (NYSE:WMT) to invest about another $500 million this year because 1.4 million more employees will get into the company’s insurance plans. At the moment 1.2 million of its employees are being provided with health insurance.

Wal-Mart Stores Inc. (NYSE:WMT) is not the only retailer to have made such cuts in the health-care package of its part-timers. Target Corp. (NYSE:TGT) also announced a cut in health-care package back in January. The Home Depot, Inc. (NYSE:HD) is another retailer that stopped health coverage of its 20,000 part-timers last year. In August, United Parcel Service Inc. (NYSE:UPS) also announced back in August that it would stop covering its employee’s spouses who were covered by their own employers.

According to the Kaiser Family Foundation and Health Research and Educational Trust study 24% of all those companies that offer health coverage to their employees extend the facility to their part-timers as well. Wal-Mart Stores Inc. (NYSE:WMT) has been cutting health costs for quite some time now. Back in 2011 the retailer cut back on health coverage of those employees who put in less than 24 hours per week. Then again in 2012 another cut was made; this time new workers who put in less than thirty hours per week were targeted. Wal-Mart Stores Inc. (NYSE:WMT) has not left these employees unattended. The company has helped those who qualify for the cut by bringing in a third-party advisor; the advisor will help these employees find health coverage through other insurance policies and companies. Wal-Mart Stores Inc. (NYSE:WMT) opened its trading session today at $77.03 and at 2:13 pm EDT was trading at a value of $77.65 – an increase by 0.39%. Stock’s inst. ownership is 30% whereas its range over 52 weeks has been between 71.51 and 81.37. The Wal-Mart Stores Inc. (NYSE:WMT) closed at 77.35 on Tuesday.