Yesterday, Walmart announced plans to stop offering healthcare benefits to part-time employees who work less than 30 hours a week. This makes up about two percent of their U.S. staff. The world’s largest retailer joined a growing trend of large retailers who are cutting healthcare benefits for part-time employees. This article overviews the trend of retailers dropping health benefits for their part-time employees.
Walmart Dropping Benefits for Part-Time Employees
In a blog post yesterday, Walmart’s Senior Vice President, Sally Welborn, stated that “like every company, Walmart continues to face rising healthcare costs,” and that “this year, the expenses were significant and led us to make some tough decisions as we begin our annual enrollment.”
The retail giant’s Senior Vice President cited rising healthcare costs as the reasoning for changing eligibility requirements for some of their part-time associates. Walmart will be working with a specialist, HealthCompare, to help part-time employees find affordable healthcare.
Trend: Large Retailers Dropping Benefits for Part-Time Employees
Back in January, Target made a similar announcement about dropping healthcare benefits for part-time employees. Instead of providing their part-time employees a $500 stipend to purchase an individual health insurance through the Marketplace. By doing so, Target ensured that their part-time employees are eligible to receive premium tax credits to help them out with the cost of their coverage.
Trader Joe’s made a similar decision back in August of 2013. The retailer sent a memo to staff notifying that they would receive a $500 stipend to purchase coverage through the Marketplace. In addition, Walgreens, Time Warner Inc., and IBM have all allocated a fixed dollar amount to send their employees to a private exchange to purchase healthcare benefits.
The Drawback to Offering Employees a Stipend
Many of these large retailers are dropping group coverage for part time employees to offer a taxable stipend, with the intention that employees will use the extra funds to purchase healthcare. This arrangement is typical for employers who want to offer health benefits for recruiting and retention, but cannot afford group health insurance.
While this may seem like a beneficial arrangement for both parties, there are several problems with this solution. First, there is no guarantee that the employees will actually spend the money on health insurance with a stipend. Additionally, many employers will lose their desired, top-tiered candidates to employers with formal health benefits in place. While a stipend may be somewhat appealing to candidates, most would prefer a formal, tax-advantaged health benefits program.
Another Option for Employers Dropping Group Health Insurance
With this approach, employers give employees a tax-free healthcare allowance to spend on individual health insurance - instead of purchasing a group health insurance plan. Employees use their healthcare allowance to purchase an individual health plan of their choice and those eligible can access the premium tax credits.