Walmart, the largest private-sector employer in the United States, said on Tuesday it would no longer provide health benefits to some of its part-time U.S. employees due to ballooning health care costs.
The move affects 30,000 employees, or about 5 percent of Walmart's total part-time workforce.
In a statement Tuesday, the company said it would discontinue health coverage starting Jan. 1, 2015 for employees who work less than an average of 30 hours a week. On that date the Affordable Care Act (ACA) – popularly known as Obamacare – requires all companies employing 50 or more people to offer health insurance to those who work at least 30 hours a week.
The announcement follows similar decisions by Target, Home Depot and other retail companies to completely eliminate health insurance benefits for part-time employees.
"We had to make some tough decisions," Sally Welborn, Walmart's senior vice president of benefits, told The Associated Press.
Welborn said she didn't know how much Walmart would save by dropping part-time employees’ benefits, but added that the company will use a third-party organization to help part-time workers find insurance alternatives. "We are trying to balance the needs of (workers) as well as the costs of (workers) as well as the cost to Walmart," she said.
The announcement comes after Walmart said far more U.S. employees and their families are enrolling in its health care plans than it had expected following rollout of the ACA, which requires most Americans to have health insurance or pay a penalty.
Walmart, which employs about 1.4 million full- and part-time U.S. workers, says about 1.2 million workers and family members participate in its health care plan, and that has had an impact on the company’s bottom line.
Walmart expects the impact of higher health care costs to be about $500 million for the current fiscal year, or about $170 million more than the original estimate of about $330 million that it paid in February.
Still, Walmart is among the last of its peers to cut health insurance for some part-time workers. In 2013, 62 percent of large retail chains didn't offer health care benefits to any of their part-time workers, according to Mercer, a global consulting company. That's up from 56 percent in 2009.
"Retailers who offer part-time benefits are more of an exception than the rule," explained Beth Umland, director of research for health and benefits at Mercer.
Walmart, like most big companies, is also increasing insurance premiums, or out-of-pocket costs that employees pay, to counter rising health care costs.
Walmart told The Associated Press that it's raising premiums for all of its full-time and part-time workers: For a basic plan, of which 40 percent of its workers are enrolled, the premiums will go up to $21.90 per pay period, up from $18.40, beginning in Jan. 1.
Walmart also said that changes in the co-insurance, or the percentage workers pay before coverage kicks in, for health reimbursement and health savings accounts will result in the company paying 75 percent of the eligible costs of doctor visits, tests, hospitalization and other services within the network after employees meet their deductible. That's down from 80 percent.