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Wal-Mart's Latest Move May Boost Obamacare

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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Wal-Mart will no longer provide health benefits for most of its part-time workers. My thoughts, in no particular order:

  1. This was expected. Wal-Mart isn't legally obligated to provide health insurance for part-time workers -- there's no penalty for dropping people working less than 30 hours a week. We knew that employers would do this, though we didn't know which ones.
  2. What's most interesting is what this tells you about Wal-Mart: The company cared about its employees having access to health insurance, at least to the extent of worrying that employees might seek other job opportunities without it. Now that the government has provided a ready alternative, they're dropping employees into that plan.
  3. This is not affecting many people -- only about 30,000 out of a workforce that runs well over 1 million. But presumably Wal-Mart is not the only company doing this. I would be surprised if, five years from now, there are many part-time workers still on company-sponsored health insurance anywhere.
  4. This is going to cost taxpayers some money. Employer health insurance gets a tax subsidy, but that tax subsidy is an employee's tax rate times the value of the insurance -- so if you have a tax rate of 20 percent, the government was, in some sense, "picking up the tab" for a fifth of the cost of your health insurance. I don't have data on the household incomes of part-time Wal-Mart workers, but I'm going to assume that in most cases, the government will be picking up a much larger fraction of the cost for an exchange policy.
  5. I was going to suggest that this might make workers better off, but on closer examination, it's complicated. Wal-Mart's insurance appears to be pretty cheap, and while it has a high deductible, that deductible is comparable to, or better than, many of Obamacare's "bronze" plans. The out-of-pocket maximum is higher, but the Wal-Mart plan seems to have included a variant of a health savings account, which workers won't get on the exchanges, and most workers won't approach the out-of-pocket maximum. If the part-time workers are earning very little, they'll get a nice big subsidy. But how many people are supporting themselves entirely on part-time work at Wal-Mart? If they have other family income, this may turn out to be a substantially worse deal.
  6. That said, this will make it easier for part-time workers making more than $12,000 a year to qualify for subsidies. However, those who are below the poverty line may run into problems if their states didn't expand Medicaid.
  7. I'd guess this will be a (small) boost for the exchanges: It means a bigger pool of insured people, and probably a healthier one.
  8. It's a good reminder that you can't just look at the number of people who go on Medicaid or buy an exchange policy; you have to net out the folks who had employer-based coverage and got dropped thanks to the new program.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor on this story:
Brooke Sample at bsample1@bloomberg.net