Wal-Mart's Health Care Benefits are Competitive in the Retail Sector

Providing access to quality, affordable health care is a challenge facing businesses large and small across the country. Health care costs are soaring, some of the most vulnerable Americans are not receiving care, and the current health care system is inefficient and wasteful. Simply put, our health care system is unhealthy, and its deficiencies are profoundly impacting millions of Americans and businesses.

All Americans are affected:

• There are about 46 million uninsured Americans.
•  Disproportionately represented among the uninsured are young adults ages 19 to 34 who make up a quarter of the total U.S. population, but represent 40% of the nation’s uninsured
  population.
• Of the 53 million Americans relying on Medicaid or other public assistance programs, 32%
  are adults who work full or part time.

Working families are affected:

• In 2005, the average annual premium for family coverage was $10,880. Health premiums in 2005 increased 9.2% on average over the year before. Since 2000, premiums have risen 73%.
• Retail prescription drug prices increased an average of 8.3% per year from 1994 to 2004 (from $28.67 to $63.59), more than triple the average annual inflation rate.
• All this despite wages rising only 2.7% in 2005.

Businesses, large and small, are affected:

• Health care costs represent a significant portion of payroll costs for all American businesses, and in particular, for low-margin, labor-intensive businesses like retail. In 2005, 60% of employers offered medical coverage to their employees, down from 69% five years ago.

• The cost of providing health benefits has been increasing faster than the growth in sales and earnings of a typical business. Furthermore, higher spending is often not translated into greater value to employees.

Wal-Mart is affected…

• In FY 2006, Wal-Mart is projected to spend roughly $4.7 billion on associate benefits including, for example, contributions to health and dental plans, 401(K)/profit-sharing plans and associate discount cards. For perspective, Wal-Mart’s net income for FY 2005 was $10.3 billion.
• Benefits spending at Wal-Mart has grown 15% per year over the last three years, increasing from 1.5% to 1.9% of sales between FY 2002 and FY 2005.
• Health care spending alone has grown 19% per year during the same period.

. . and Wal-Mart is responding with solutions:

• We are providing access to private insurance: Wal-Mart provides health insurance to full- and part-time associates after a waiting period considered standard in the retail industry. For many associates, a job at Wal-Mart means new access to health coverage. Surveys of hourly associates showed that 30% had no health coverage before coming to work for Wal-Mart. After joining Wal-Mart, the percentage of associates who are uninsured drops. By our estimates, we have helped over 160,000 associates get off the rolls of the uninsured.
• We are taking people off public assistance programs: According to a survey by The Segmentation Company, 7% of associates join Wal-Mart on Medicaid. Only 3% of associates remain on Medicaid after working for Wal-Mart for two years.

Wal-Mart is exploring ideas and working hard to find solutions to America’s health care challenges. We believe that America’s health care challenges are larger than any individual corporation – even one of the largest. We want and need partners – leaders in government and industry, our loyal associates and customers, and thoughtful associations and academics – to work with us toward these solutions. Together, we are working on some exciting new initiatives, and we’re confident these will lead to many more.

Every business in America is dealing with the rising cost of health care and shares a concern about the number of Americans who are uninsured or relying on government-sponsored health programs. Millions of working Americans put their trust in us, and we take that trust very seriously. That’s why we continue to work hard to find affordable, accessible health benefit solutions for our associates and our customers.

The health care demands placed on Wal-Mart are unique. Understanding the size and diversity of our workforce puts into perspective the range of choices and plans that we offer our associates.

• As the largest private employer in America, Wal-Mart employs approximately 1.3 million people.
• The majority of Wal-Mart’s hourly associates are full-time. (Fulltime at Wal-Mart is 34+ hours per week.) That’s well above the 20% to 40% typically found in the retail industry.
• Many associates – such as students looking for work experience, seniors supplementing their retirement income and individuals working a second job – join Wal-Mart with existing health care benefits.

Wal-Mart’s offerings are tailored to the needs of our diverse workforce, and associates are provided a great deal of choice.

• In some markets, associates can choose from as many as 18 medical coverage options. This gives them the opportunity to tailor their benefits to their individual needs and the needs of their families.
• Wal-Mart offers Health Savings Accounts (HSAs) to our associates, which provide yet another option for families to gain access to health insurance and save for future health care needs. Wal-Mart matches associates’ contributions to their HSAs dollar-for-dollar up to certain amounts, and associates own the accounts. (The match ranges from $250 to $1,000, depending on coverage level selected.) 
• Based on input from associates, in 2006 Wal-Mart introduced a new Value Plan – specifically designed to provide more affordable access to health care coverage with some first dollar coverage for doctor visits and prescriptions – all before associates have to meet their deductibles.

Our plans have some very attractive features.

• Unlike the employees of many of our retail competitors, both full- and part-time Wal-Mart associates can become eligible for health coverage.
• After one year, there’s no lifetime maximum on health care expenses—protecting employees and their families from catastrophic loss. Wal-Mart is one of few retailers to offer this benefit.
• After an annual deductible is met, Wal-Mart’s medical plan typically covers 80% of charges for all services included in the plan. After an associate reaches an annual out-of-pocket maximum, the plan pays 100% of all eligible charges.

New offerings are making health care even more affordable for our associates.

• In some markets, premiums for the new Value Plans are as low as $11 per month and 30 cents more per day for children, no matter how many children an associate insures. Nationwide, every eligible associate – both full- and part-time - has access to individual coverage for no more than $23 per month and 50 cents more per day for children. Family coverage starts at $65 per month.
• Prescription drugs for some common conditions are available for as little as a $3 co-pay.
• Wal-Mart continues to set up “high-performance networks,” which establish a competitive environment among health care providers and continue to lower the costs of health care services and monthly premiums for associates.

Our initiatives are working.

• During our recent open enrollment, about 70,000 associates who had previously waived coverage signed up for Wal-Mart plans.
• Of these associates, 78% of those surveyed said they were previously uninsured.
• Over one-third of those associates, previously uninsured and recently electing coverage, selected the Wal-Mart Value Plan.
• Considering factors that include associates who left Wal-Mart, those that elected to drop coverage as well as those who recently became eligible, this growth in enrollment leaves Wal-Mart in January 2006 with over 615,000 associates, (or over 1 million Americans, including spouses and dependants) on Wal-Mart health plans.

Wal-Mart is also working on behalf of our customers.

• Currently, Wal-Mart is conducting a pilot project that puts health clinics in our stores. With an emphasis on affordability and convenience, these clinics will give the communities we serve access to quality care while providing an alternative to expensive emergency room visits.
• Wal-Mart is committed to sharing our expertise in supply chain management and technology to reduce costs and increase efficiency within the health care system.

These are bold, innovative, outside-the-box solutions that reflect our care for our associates and a desire to be a leader in our industry. They’re just a start and much more is to come. We welcome partners in this effort to further these goals. Additional details on all Wal-Mart health plans can be found at www.walmartfacts.com.

When compared to other retailers with similar business models – such as Target and The Home Depot - Wal-Mart’s health benefits are competitive in the retail sector. In many areas we, along with Target and The Home Depot, are setting the standard.

Eligibility:

Wal-Mart offers health coverage to both full- and part-time associates -- only 23% of all employers offer coverage to their part-time employees.

On average in 2005, 73% of all associates were eligible for Wal-Mart plans and 43% of all associates chose to enroll.  In January 2006, the number of associates covered by Wal-Mart health care insurance increased to 46%.

According to a 2005 survey by the Kaiser Family Foundation, the proportion of Wal-Mart associates eligible for company health care benefits (73%) is comparable to other large employers (79%) and significantly higher than the retail industry average (61%).

Coverage:

We estimate that more than three-fourths of Wal-Mart associates have some health insurance, through either a company plan, a spouse’s plan, or Medicare.

According to a survey conducted by The Segmentation Company, 5% of Wal-Mart associates are on Medicaid. This is lower than the retail sector average of 6% and only slightly higher than the national average of 4%.

27% of the children of Wal-Mart associates are on Medicaid or S-CHIP programs, a proportion lower than the retail sector average of 36%.

Affordability:

Wal-Mart’s deductible for individual coverage starts at $350, which is comparable to our competitors.

We have plans available for as little as $11 per month for associates and 30 cents more per day for children. These innovative plans include some first-dollar coverage for doctor visits and drugs.

Preventive dental coverage with no deductible is available to individuals for as little as $6.52 per month, to associates and their children or spouses for $13.58 per month, and to families for $20.64 per month.

Company Contribution:

Historically, Wal-Mart’s contribution to both individual and family health care coverage has been approximately two-thirds of the total cost.

The total benefits package for a Wal-Mart associate includes, in addition to health care, programs such as company contributions to 401(K)/profit-sharing plans, associate discount cards, paid time off and life insurance. In FY 2006, Wal-Mart is projected to spend roughly $4.7 billion on associate benefits.