Wal-Mart Stores Inc will no longer offer health insurance to new part-time U.S. employees who work fewer than 24 hours a week and will charge workers who use tobacco more for coverage as healthcare costs rise, the company said on Friday.
Wal-Mart, the largest U.S. retailer and the nation's largest private employer, is also slashing the amount that it puts in employees' healthcare expense accounts by 50 percent.
The changes, which affect U.S. associates who work for Walmart and Sam's Club, are being explained during the current fall enrollment period before they take effect in January.
Preventive care such as annual checkups remains fully covered. Wal-Mart will now provide $250 for associates to use for healthcare expenses that are not covered, down from $500, and will provide $500 for families, down from $1,000.
Those who use tobacco products will also pay more, with rates varying by the type of plan someone chooses.
"The current healthcare system is unsustainable for everyone and like other businesses we've had to make choices we wish we didn't have to make," said Wal-Mart spokesman Greg Rossiter. "Our country needs to find a way to reduce the cost of healthcare, particularly in this economy."
Wal-Mart said that it will continue to pay the majority of costs for its employees' healthcare.
Not all of the company's 1.4 million U.S. employees sign up for its healthcare plans. Wal-Mart said it currently insures more than 1 million people, including workers' family members.
Wal-Mart is not alone in looking for ways to cut spending on healthcare. Starting next year, Wells Fargo & Co will ask employees to fund their own medical expense accounts or choose to pay higher insurance premiums and have the company fund them, following the lead of companies such as General Electric that offer account-based healthcare plans.
A study last month by the Kaiser Family Foundation found that the average annual premium for family coverage through an employer increased 9 percent to $15,073 in 2011 from the year before. Since 2000, premiums have risen 134 percent.
Employers pay nearly three-quarters of that premium, a rate that has held fairly steady for the last 10 years, according to the foundation's data.
A Mercer survey found that health benefits costs on average will rise 5.4 percent in 2012, the smallest increase since 1997, because employers have been so aggressive about cutting these expenses.
WAL-MART'S CHANGING PLANS
At Wal-Mart, part-time associates become eligible for healthcare coverage after working for the chain for one year.
One of Wal-Mart's basic plans for an associate costs $15 per two-week pay period, or just over $1 per day. A tobacco user will now be charged an additional $10 per pay period.
Associates will use an honor system to say whether they use tobacco products.
Wal-Mart has offered part-time workers the option of signing up for healthcare coverage since 1996, regardless of how many hours per week worked. Now, part-time associates who work less than an average of 24 hours per week will no longer be eligible for the company's health insurance plans.
Those who were already eligible may still participate, even if they work fewer than 24 hours per week.
The changes were met with disappointment from some who have spoken out against Wal-Mart in the past.
"(Wal-Mart) may get away with these attacks on workers' rights in other parts of the country, but we won't stand for it in New York City," said New York City Council Speaker Christine Quinn, who has pushed to keep the chain out of New York City.
Those who work about 24 hours to 33 hours a week can still sign up for coverage for themselves and for their children.
Wal-Mart has not said what percentage of its U.S. associates work fewer than 24 hours a week. Those who work 34 hours a week or more are considered full-time associates.
Changes to the company's healthcare plans were first reported by the New York Times.
Shares of Wal-Mart were up 1.1 percent at $56.98 in afternoon trading on Friday.
(Corrects to show that part-time employees become eligible for healthcare coverage after working for one year, paragraph 13; also adds dropped word "in" to quote in paragraph 19, adds "of" instead of "on" in paragraph 19)
(Reporting by Maneesha Tiwari in Bangalore and Jessica Wohl in Chicago. Additional reporting by Rick Rothacker in Charlotte, North Carolina; Editing by Steve Orlofsky)