Wal-Mart Drops Part-Time Employee Insurance Benefits to Meet Obama's Affordable Care Act Mandates

( [email protected] ) Oct 08, 2014 05:56 PM EDT
Wal-Mart shopping carts sit outside of a store on San Lorenzo, Calif. Photo by Justin Sullivan—Getty Images

Wal-Mart Stores Inc., that nation's largest private employer, announced Tuesday that it will manage the rising costs of employee health care by cutting benefits for more of its part-time employees. The Arkansas-based business is just one of many across the nation that has been forced to make drastic changes in answer to the mandates of the Affordable Care Act.

Starting January 1, Wal-Mart will no longer offer health insurance to employees who work less than an average of 30 hours each week. This decision affects about five percent of Wal-Mart's part-time workforce, and leaves 30,000 employees without employer subsidized healthcare.

According to the Associated Press, Tuesday's announcement comes after Wal-Mart said far more U.S. employees and their families are enrolling in its health care plans than it had expected following rollout of the Affordable Care Act, which also requires most Americans to have health insurance or pay a penalty.

"We had to make some tough decisions," said Sally Welborn, Wal-Mart's senior vice president of benefits. "We are trying to balance the needs of (workers) as well as the costs of (workers) as well as the cost to Wal-Mart." Welborn did not know how much Wal-Mart will save by dropping part-time employee coverage. The company will also be using a third-party organization to help part-time workers find insurance alternatives.

To be in compliance with Affordable Care Act at the first of the year, companies with more than 50 employees will be required to offer health insurance coverage to all employees working 30 hours or more each week. Those companies that do not comply will be forced to pay a penalty.

Wal-Mart's total workforce in the U.S. is near 1.4 million employees, and about 1.2 million participate in the company's healthcare plan - including family members. Wal-Mart now expects the impact of higher health care costs to be about $500 million for the current fiscal year, or about $170 million higher than the original estimate of about $330 million that it gave in February, the AP reported.

Wal-Mart is not the only company to feel the backlash surrounding its change in employee benefits for 2015. It joins other larger retailers, including Trader Joe's, The Home Depot and Target that have eliminated health care insurance for part-time employees.

The day before this announcement, Wal-Mart posted details to its website regarding a new partnership with DirectHealth.com, an online health insurance group. The goal of this partnership is to provide customers education on health care options and the benefits that best suit their family.