Friday, October 28, 2005

Wal-Mart's Health Insurance Policies

Health insurance offered through employment is not a terribly good idea not only because many firms decide not to offer insurance. It also encourages firms to try to avoid workers when they get ill or older, even if these workers are perfectly capable of doing the jobs they would be hired to. An excellent example of this is the case of the Wal-Mart company. Wal-Mart has based its whole existence on the concept of offering the products at minimum cost, and this means, by natural extension, that Wal-Mart tries to employ its workforce at minimum cost. Bare-bones benefits and minimum wages.

But there is a public opinion cost to being a skinflint employer, and recently Wal-Mart has been under lots of criticism for how badly it treats the workers. As an example, consider this piece of news:

Wal-Mart Stores Inc., which built its reputation — and a virulent opposition — on rock-bottom prices, has talked a lot lately about becoming a kinder, more responsible company.

But the retailing giant is finding that convincing the world that it is "committed to change," and to keeping costs low, is a tough balancing act.

On Monday, Chief Executive H. Lee Scott Jr. pledged to bring health insurance within reach of his 1.3 million U.S. employees. On Wednesday, a leaked company memo revealed "bold steps" to reign in Wal-Mart's employee benefit costs.

Among the recommendations: using more part-time workers, cutting life-insurance payouts, pushing spouses off health plans through higher premiums and trying to dissuade unhealthy people from seeking jobs by, among other things, requiring cashiers to gather carts in Wal-Mart's vast parking lots.

Wal-Mart found out that the health insurance policies it has been offering were too expensive for healthy people but were snapped up by those who had chronic health problems. But its proposal to change the policies so that they attract younger and healthier workers would only help Wal-Mart keep its costs down, it wouldn't help Americans who can't afford health insurance, and it wouldn't help the Wal-Mart workers who will, inexorably, one day become less healthy and older. The policies would then not look at all good for them as they would require large out-of-pocket payments and coinsurance rates (percentage of costs above the out-of-pocket part to be paid by the insured).

There is no real solution to the health insurance crisis until we disconnect employment and health insurance, but health insurance companies don't want to see that happen. Just remember what happened to the Clintons when they offered an alternative health insurance proposal.

Still, the Wal-Mart case is an especially poignant one. Did you know that forty-six percent of the children of Wal-Mart workers are either uninsured or are covered by Medicaid, the state-based program for funding medical care of certain groups of the poor?