Wal-Mart's Prescription for Employee Health Care is Bad Medicine - An American Association for Employees and Self-Employed Persons Employee Alert -

(PRWEB) October 27, 2005 -- The American Association of Employees and Self-Employed Persons (“AAESEP”) issued an “Employee Alert” today in response to a proposed plan by Wal-Mart to offer high-deductible insurance plans to its’ employees. Wal-Mart announced Monday that it is making an attempt to offer affordable health care options to their employees by offering a new insurance plan called the Wal-Mart “Value Plan.”(1) While AAESEP applauds the recognition by Wal-Mart that the retailer must take steps to offer health insurance to the nearly 50% of Wal-Mart employees who currently have no coverage, the specifics of this offering doom the plan to fail and risk the physical and financial well being of hard working American employees.

The “Value Plan” involves considerable employee cost-sharing since employees will be enrolling in a high-deductible health insurance policy. The lower premiums that are typically found in such policies will appeal to many Wal-Mart employees and, in theory, get many employees “off the books” as uninsured. However, Wal-Mart employees are required to pay a $1,000 deductible for individuals and $3,000 for a family before insurance coverage begins.(2) The benefit of a high-deductible plan is that because of the lower risk to the insurer (since a large percent of the claims filed for employees fall beneath this deductible rate) monthly premiums can be lowered dramatically. Here Wal-Mart’s monthly insurance premiums will average $25 for an individual, $37 for a single parent and $65 for a family. To put those numbers in perspective, the average individual policy in New York City today is nearly $500 per month!

While lower monthly premiums do go a long way to reducing the barriers to entry into the health insurance market, their initial benefit masks a potentially catastrophic danger. It is important to note that high-deductible policies provide several benefits on top of lowering monthly premiums. First, when pared with a Health Savings Account (“HSA”) they have an element of tax savings that makes them beneficial for certain individuals. Further, AAESEP agrees that in the post-managed care world, in order to reign in health care costs, patients themselves need to become educated consumers and make decisions that are not only healthy but financially responsible. AAESEP believes that placing some of the initial financial burden on the consumer may help facilitate this needed change. However, while AAESEP believes that HSAs used in conjunction with high-deductible policies may be the best health insurance solution for certain individuals there is, ironically, one group of employees that this type of insurance scheme specifically will not help – Wal-Mart employees.

According to Wal-Mart, the firm’s full-time U.S. employees earn on average $9.68 per hour, putting the pre-tax annual salary of a full-time employee at $20,134.40.(3) For an individual (much less a family) at this income level a high-deductible health insurance policy risks access to needed care and risks the financial stability of such individuals due to increased medical debt. High-deductible plans are particularly risky for American employees with incomes below $35,000. A 2005 publication by The Commonwealth Fund predicted that “44 percent of people with incomes below $35,000 and with a deductible of $500 or more would experience cost-related access problems.”(4) The study also specifically stated that, “(M)edical bill problems and medical debt are greater among lower-income adults with higher deductibles”. The least suited individuals for high-deductible policies are those Wal-Mart intends to cover with such policies.

The problem inherent in the high-deductible approach to offering health insurance to low-income individuals is that it places too great of importance on reducing the premium payment and too little on the most important measure of health insurance affordability: total out of pocket expenses. According to The Commonwealth Fund, for low-income individuals and families “the ceiling on out-of-pocket expenses (in a typical high-deductible policy) constitutes 26 percent of income for single individuals and families at twice the federal poverty level.” AAESEP believes this is an unacceptable solution for the problem of insurance access for low-income individuals. The further risk is that the Wal-Mart plan, being trumpeted as a success, will be followed by other large employers of low-income Americans. While these employers will be quick to tout statistics showing that high numbers of their employees have health insurance, those employees will be covered by policies that risk their physical and financial health.

The Wal-Mart plan will not work for the average Wal-Mart employee as it stands. AAESEP calls upon Wal-Mart to address the weaknesses found in the insurance offering and contends that the retailer, like all employers, will benefit from having healthy and financially stable employees. Specifically AAESEP asks that the following changes be made to the proposed policy:

-    Wal-Mart should give each employee with an annual salary of less than $35,000 a year a one-time payment of $500 to seed their Health Savings Account.

-    Wal-Mart should exempt all primary care and preventive services from the deductible requirement.

-    Wal-Mart should work with State and Federal officials to explore whether individual Wal-Mart employees may qualify and benefit from subsidized comprehensive health plans. (In New York for example individuals may be better served by a policy under the State’s “Healthy New York” plan.)

Further, it should be noted that AAESEP recommends vast changes to Wal-Mart’s health insurance eligibility requirements which currently require six months of service before benefits begin. Recognizing the need to press ahead and develop programs that will assist employees if the Wal-Mart Value Plan goes ahead as planned on January 1, 2006, AAESEP has already begun the process of submitting applications for private and Government assistance to offer “HSA Jump Start” funds for Wal-Mart employees meeting certain criteria including having a high-deductible policy. At AAESEP we are committed to helping all American employees make smart health insurance decisions. AAESEP is also committed to reducing financial barriers to quality care and protecting employees against financial hardship related to health insurance bills and costs.

AAESEP endeavors to deliver information to the public on issues related to work and employment in America; support high-quality research into areas of interest to working and self-employed persons, provide referrals to a variety of services including legal services, retirement planning, health insurance, education and job skills training; become the premier source of information to policy makers, the business community, political leaders, and academic researchers on issues related to employment and link a wide variety of professional associations and related groups dedicated to meeting the changing needs of today’s workforce. For more information about AAESEP, please visit our website at www.aaesep.org

Sources:

1. Michael Barbaro, Wal-Mart to Expand Health Plan for Workers, N.Y. Times, October 24, 2005, at http://www.nytimes.com/2005/10/24/business/24mart.html

2. Victoria Colliver, Health insurance for $25 Wal-Mart offers various lower-cost coverage plans for workers, S.F. Gate, October 25, 2005, at http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2005/10/25/BUGV7FDB421.DTL

3. The Institute for Policy Studies, Wal-Mart’s Pay Gap CEO Compensation 871 times as high as U.S. Wal-Mart Worker Pay; 50,000 times Chinese Worker Pay, April 15, 2005, at http://www.laborrights.org/projects/corporate/walmart/Wal-mart_pay_gap041505.pdf

4. How High Is Too High? Implications of High-Deductible Health Plans, Karen Davis, Ph.D., Michelle M. Doty, Ph.D., and Alice Ho, The Commonwealth Fund, April 2005, at http://www.cmwf.org/publications/publications_show.htm?doc_id=274007

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Press Contact: Tyler Malin
Company Name: AAESEP
Email: tyler.malin@aaesep.org
Phone: 212-759-9740
Website: http://www.aaesep.org

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