Wal-Mart gave lawmakers a concise lesson in economics Tuesday when it disclosed that it would no longer offer health insurance to yet more of its part-time employees.
According to the Associated Press, the retail giant has decided not to provide coverage in 2015 for any employee who works less than 30 hours a week on average. The company had stopped offering coverage in 2012 to new employees working less than 30 hours (and in 2011 to new workers putting in less than 24 hours), but the restriction hadn't applied to workers already on the payroll. Starting next year, it will, causing some 30,000 workers to lose their employer-subsidized plans.
Some readers might be quick to complain about corporate greed; in its most recent quarterly filing, Wal-Mart reported more than $4 billion in net income on just under $120 billion in sales.
I won't try to defend the company, other than to point out that the vast majority of its employees are full-timers who do receive coverage, and that the company's health plan is better actuarially speaking than the "silver" plans sold on Covered California and other state health exchanges.
Instead, I'll just argue that what we're seeing is the entirely predictable result of the employer mandate in the 2010 Patient Protection and Affordable Care Act -- a mandate, by the way, that Wal-Mart lobbied for. The company was offering health benefits for most employees at the time, and may simply have been trying to force its competitors to do the same.
Now, a little more than four years later, employers are being squeezed by healthcare costs that continue to increase (albeit at a fraction of their pre-recession pace) and a jump in employees signing up for benefits. Put the blame -- or the credit -- for the latter directly on the ACA, which required virtually all adult Americans to carry insurance as of January 2014. As a result, Wal-Mart told the AP, it will spend half a billion dollars on healthcare this year, or 50% more than it expected.
Other retailers are feeling the pinch too. Target, Home Depot, Trader Joe's and a number of other chains have eliminated or sharply cut back coverage for part-timers.
Which brings us to the employer mandate, which is due to take effect for large companies in January (after a one-year delay imposed unilaterally by the Obama administration). The mandate applied only to full-time workers, which it defined as anyone who worked at least 30 hours per week.
This threshold, however, gave large employers an incentive to cover only full-time workers, cap part-timers' hours at 29 per week and employ more of them. Although the ACA didn't cause the percentage of part-time workers to surge in the United States -- the recession did that -- it nevertheless gave employers a reason to continue maximizing part-time positions for as long as the market allowed.
As the labor market tightens, it will grow increasingly difficult for employers to fill part-time positions with people who'd rather be working full-time. Such people make up about 5% of the workforce today, according to data collected by the Bureau of Labor Statistics. Companies also get better performance, improved customer service and higher loyalty from full-time workers, which can help offset the higher cost of providing health benefits. So that consideration is at work too; witness Wal-Mart's decision last year to convert 35,000 part-time workers to full-timers.
Until then, the ACA's employer mandate is an open invitation for the Wal-Marts of the world to do what Wal-Mart announced it would do Tuesday. It's a lesson some lawmakers seem to have trouble learning: when the government orders people to do something that's costly, it gives them an incentive to push those costs onto someone else.
The Times' editorial board and I have supported the ACA over the years because it lays the foundation for a more sustainable healthcare system. Nevertheless, I've argued several times in this blog that there are better ways to expand insurance coverage than ordering employers to provide coverage; in fact, that expansion is well underway, and the employer mandate has yet to go into effect.
A better approach would be to decouple health insurance from employment so that workers, not their bosses, would control the tax subsidies that government provides for premiums. The trick is to make sure that employers put the money they're now spending on health benefits into wages going forward. Doing so would put all Americans on equal footing when it comes to buying insurance, while also giving workers full control over which plan to buy. It would be no mean feat, but Wal-Mart's announcement offers another good reason to find a way to get it done.