Attention Wal-Mart Shoppers: Wal-Mart Shops for Value

Anyone interested in bringing American low wage workers into health insured status ends up having to take a look at Wal-Mart. Wal-Mart employs an estimated 1% of American workers, though it does not insure 1% of American workers.  No one outside Wal-Mart's confidence knows exactly what percentage of its total employees it does insure with commercial insurance.  But this is part of what makes looking at Wal-Mart interesting — Wal-Mart is a brilliant illustration of our larger ambivalence over employer- sponsored health insurance, an ambivalence not entirely resolved by the Affordable Care Act.

Wal-Mart gained notariety for its own ambivalence over providing employer-sponsored health insurance in the public arena in 2005 with the release of internal documents discussing the need to drive down employee health care costs — among other employee benefit costs– by strategizing the hire of younger presumably healthier and perhaps childless individuals.  In a company where only 46% of then current employees received company-sponsored health insurance and 5% of employees were enrolled in Medicaid, the documents were an embarassment for their candor but not for their accuracy.  

In fact, Wal-Mart and every large employer of low-wage and low-skilled employees had  and has every incentive to seek the employment turnover necessary to keep health care costs low and demand for employer-sponsored health insurance lower, particularly for sometimes expensive family coverage.  The origins of employer-sponsored health insurance were, in fact, to reward higher wage skilled workers to remain with their employers in the labor shortage World War II production era.

Looked at from a pragmatic perspective, Wal-Mart's interest (as outlined in the 2005 documents) in advance screening job applicants for better health status by requiring lifting, carrying, and walking in every job description could be lost by accepting the possibly not-so-robust spouses of new employees  screened in this way.  Absent requiring the spouse of a potential Wal-Mart employee to demonstrate the capacity to lift, carry, and walk, Wal-Mart knew it would be difficult to forecast costs.

There have many twists and turns in the Wal-Mart employer-sponsored health insurance story since that time. I cannot do justice to them here beyond noting Wal-Mart expanded the generosity of its employer-sponsored coverage.  

Just recently, presumably in anticipation of the ACA's expansion of Medicaid, Wal-Mart announced a plan to exclude newly hired employees who work fewer than 30 hours a week from employer-sponsored coverage.  The low wage earners among them will have to look to subsidized purchase in the exchanges or to Medicaid. States that do not embrace the optional Medicaid expansion under the ACA are likely to have substantial numbers of low wage workers too poor for subsidized purchase in the exchanges but too rich for Medicaid.

In the same time frame, Wal-Mart has announced plans to expand and strengthen their Centers of Excellence Program where, beginning in a small way in 1996, Wal-Mart has been experimenting with direct contracting for certain procedurally based care with some of the highest quality and lowest cost providers in the country.  And Wal-Mart — master of distribution chain logistics — will transport its eligible employees and their caregiver companions to these centers.  

This is a powerful move towards quality and better outcomes for Wal-Mart employees who are fortunate enough to be covered under Wal-Mart's employer-sponsored insurance.  And we will all benefit, whether or not we are Wal-Mart employees or even Wal-Mart shoppers.  We all benefit because the very largest employers to directly contract in this way (in this Wal-Mart is joined by PepsiCo and Lowe's Companies, Kohl's and others) send a strong signal to the market for commercial insurance that cost-effective quality care will be sought even if health insurance intermediaries lack the interest or incentives to organize health care provider contracting in this way. Sometimes called "steering" in the world of health insurance, we can see that direct contracting steering whatever number of lives Wal-Mart currently controls will make other employers — large and small – consider steering in this way as well.

So, there we have it.  A history of employer-sponsored health insurance designed to serve the interests of higher-wage and skilled employees and their employers struggling to find a place in time and history where the low-wage unskilled want in to the employer-sponsored health insurance tent. And an incipient revolution in  health care service contracting for those lucky enough to be inside the employer-sponsored health insurance tent designed to make the care delivered there higher quality and more affordable.

Here we see further tracings of a three tier health care system: commercially insured, government-funded insured, and uninsured all illustrated and amplified in the employee group of one large American employer.