Wal-Mart (NYSE:WMT) Healthcare Insurance Could Become a Financial Nightmare for Employees Facing Serious Illness

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By Chris Hillman on October 9, 2014 Consumer Staples, Economy

The news made headlines that health insurance for part-time employees of Wal-Mart (NYSE:WMT) had a serious cutback. Wal-Mart claims that since the number of part-time employees using health benefits from health insurance is low so only 30,000 have been affected out of 1.4 million U.S. employees. Insurance program details revealed by Wal-Mart (NYSE:WMT) however points out towards more serious issues. In case of serious illness or hospitalization, thousands of Wal-Mart (NYSE:WMT) employees would be financially broke because deductibles and out-of-pocket expenditures would be much larger, which would consume a good part of their yearly income.

Randy Hargrove, Wal-Mart (NYSE:WMT) spokesperson apprised that Wal-Mart has decided not to transfer costs to their employees despite rising Healthcare expenses every year. As a cost control measure, about 30,000 associates who have averaged less than 30 hours per week from Oct 5, 2013 to Oct 5, 2014 will be denied healthcare coverage. Hargrove further explained that many of these workers were not utilizing the healthcare coverage because they were either on their spouse’s or parents’ insurance plan. About 40 percent of Wal-Mart (NYSE:WMT) employees are part timers meaning working less than 34 hours per week. Besides these 30,000 employees, there may be thousands of other part time workers not even considered while gathering this data for example newly hired workers and those who are not eligible for Wal-Mart insurance coverage due to turnover.

The issue is that in case of any eventuality employees might face financial turmoil even with Wal-Mart (NYSE:WMT)’s most preferred and cost effective plan, which is presently providing individual coverage at the cost of $18.40 per two week pay period and will increase to $21.90 from January. According to Affordable Care Act, the compulsory deductible beyond preventive care is $2750 and after that the plan provides coverage of 80 percent of total expenditure. Employees are required to pay an out-of-pocket maximum of $5000 per annum, with Wal-Mart (NYSE:WMT) offering at least $250 as health reimbursement.

As per Federal government data, average hospital stay bill was $ 9700 in 2010 but it is calculated for all types of patients, including those paying full amount or reduced bills due insurance negotiations. In order to assess Wal-Mart (NYSE:WMT) insurance, one might assume that an employee is hospitalized and receives a $30,000 bill. With $2750 deductible minus $250 reimbursement ($2500), he is left with $27,500 and 20 percent of this is $5500. Wal-Mart (NYSE:WMT) employee is required to pay $5000. The retailer’s employees getting higher salaries might afford it but the problem is that majority of its full-time employees make $13 per hour on average. Gross annual income of an employee putting in 40 hours a week for 52 weeks comes around to $27,040 before taxes; therefore medical expense amounting to 28 percent of his/her income would hit really hard.

According to Mercer the consulting company, Wal-Mart (NYSE:WMT) in fact is the last to slash insurance of part-time workers. Many other retailers are offering even less coverage to their employees.