NCPA - National Center for Policy Analysis

WAL-MART DEDUCTIBLE PLAN TO FACE FIRST BIG TEST

October 9, 2006

For years, proponents of consumer-driven health care have argued that making individuals responsible for spending decisions would slow the sharp rise in medical costs. Wal-Mart Stores Inc. is about to conduct a massive test of that claim.

  • The Bentonville, Ark., retailer announced late last month that as of Jan. 1 its primary health-insurance offering for new hires will be a high-deductible plan with premiums as low as $11 per pay period in some areas.
  • After employees are enrolled in Wal-Mart's coverage for a year, they can pair the high-deductible plan with a health-savings account, which provides them a tax-free method of setting aside their own money -- plus a contribution of up to $2,400 from Wal-Mart -- for medical expenses.
  • The new offering quickly will become the dominant coverage among Wal-Mart's 1.3 million U.S. employees, considering that the average annual turnover rate in the U.S. retail industry is 80 percent for full-time workers.
  • Employees hired before Jan. 1 can retain their older coverage plans, which offer lower deductibles for higher premiums.

Wal-Mart says the new plan, called the Value Plan, will save money for most of its employees.  More than half of its covered associates didn't spend enough last year to exhaust their deductibles, yet they had to pay premiums higher than those in the Value Plan.

Wal-Mart said that the low-premium, high-deductible plan makes its coverage affordable for more of its employees.  Also, Wal-Mart this year shortened the eligibility wait time for part-time workers to one year from two and allowed their children to get coverage.

Source: Kris Hudson, "Wal-Mart Deductible Plan To Face First Big Test," Wall Street Journal, October 9, 2006.

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