Source: Health Plan Week
When Wal-Mart Stores, Inc. informed investors on Aug. 14 that it expects to take a $500 million hit in 2014 from an unexpected rise in the number of its own employees buying company health insurance, the news was taken with surprise by analysts who have seen no such trend in the general employer benefits segment. In fact, researchers at Mercer say their data show employees have not shifted in great numbers to employer plans from 2013 to 2014. This is a surprise of its own because of sentiment that the reform law’s individual mandate would likely spur more individuals to take advantage of employer offerings and avoid being penalized.
“We were surprised [by the research]. We thought when the provision went into effect, we would see a big jump,” Beth Umland, Mercer’s director of employer research for health and benefits, tells HPW. Another possibility at work is that employers are tracking hours worked a lot more closely these days to keep part-time workers part time and full-time workers full time, she says. “This is all about managing employees better. If they are supposed to be working 25 hours per week and end up working 31,” that has an impact on their insurance status under the Affordable Care Act since part-time workers under 30 hours do not have to be offered coverage, Umland adds.
Another factor is that some workers just don’t take health benefits, period. “There is always going to be a percentage of employees who will opt out for whatever reason. The typical opt-out rate is 15% and that is typically people who have coverage elsewhere, through their spouse, through their parents. So they don’t need their employer’s coverage because they have other coverage,” Tracy Watts, senior partner and national health care reform leader at benefits consulting firm Mercer, tells HPW. “It is possible that some go without coverage because of financial reasons or they think they don’t need it. And the penalty from the individual mandate is not that much for this year. So we have yet to see a change in the enrollment.”
Wal-Mart Sees Benefits Rise
Other industry observers think the data provided in the Mercer report better reflects the market reality than does the Wal-Mart development. “I would be surprised if much has changed [in employee benefits buying],” Tom Miller, resident fellow at the American Enterprise Institute, tells HPW, citing evidence from multiple sources that show no uptick whatsoever.
Mercer’s survey of more than 700 employer clients (26% with fewer than 500 employees, 49% with 500 to 4,999, and 24% with 5,000 or more) put the average number of workers enrolled in a company plan for 2014 at 69.3%. This is only slightly above the 69.1% level of 2013. And when asked to project to 2015, the survey respondents told Mercer they expect a very small increase in employee uptake to 69.8%.
Wal-Mart Stands Apart From Most Employers
Weighing what the Wal-Mart news means is made difficult by the very fact the company is so large and has been integrating more health care delivery into its operations, sources say. “Wal-Mart has clinics in stores now…Whatever they are doing is not pure employer benefits; a lot of it is customer-facing,” John Graham, senior fellow, National Center for Policy Analysis, tells HPW.
What is known is that during an Aug. 14 conference call to discuss second-quarter 2014 earnings, Wal-Mart executives said that the “most notable headwind” to its operating earnings was health care costs. Specifically, the retailer said health care costs increased $180 million in the second quarter versus the same period of 2013, well above internal company estimates. The primary cause was increased associate enrollment and cost inflation. The company said it expects the trend to continue through 2014 and anticipates more than $500 million in year-over-year expense growth in the benefits segment for the year when compared to 2013.
Graham says even if Wal-Mart is unique in many ways, all employers are in a state of flux on how to provide health benefits to employees, given the uncertainty about the employer mandate and even the individual mandate. The Obama administration has delayed implementation of the employer mandate, for instance, until 2015 (HPW 2/17/14, p. 1). And without mandates to make businesses and consumers act, then rates of insurance uptake are not going to be predictable, he adds.
“Whether they [HHS] will ever clamp down on the employer mandate is increasingly doubtful. And if you have a low-income workforce, like a Wal-Mart, the fact is you look at your workforce and say, ‘even if we pay the fine, they will get a subsidy in the exchange and it’s kind of a win-win situation for the employee.’ The other thing, with the economy fully recovering, we should see an increase in employer-based benefits,” Graham says.
The reform law mandates that all employers with 50 or more full-time-equivalent employees offer coverage that includes mandated essential health benefits. Employers that opt not to offer coverage must pay an annual $2,000 per-employee penalty. Employees are considered full time under the law if they average 30 hours or more a week on a monthly basis. This stipulation has caused some employers with large numbers of part-time, often lower-wage, workers, to weigh the idea of cutting back hours to prevent workers from hitting the 30-hour-per-week threshold.
Employers Stay the Course for Now
Beyond Mercer’s survey, there is much anecdotal evidence that employers are not seeing higher take-up rates among employees, Paul Fronstin, director of the Employee Benefit Research Institute’s Health Research and Education Program, tells HPW. “So it is curious to see what is going on with Wal-Mart. It may be unique and limited to the retail sector,” he adds.
Changes in employers’ benefit designs or distribution strategies also do not seem to be major factors moving employees to enroll in company plans, Fronstin says. “We’ve had consumer-directed health plans for over a decade now…That is a trend that is certainly accelerating. But that is not a major benefit change, it is an acceleration,” he says. Private exchanges are newer and attracting much interest from employers, but some employees may not even know their employer made a switch. “I know of one employer that offered a private exchange last year but employees did not know. The name of the exchange was not used, and workers would only know that they have more choices, from three plans to 20 to 25 now,” Fronstin says.
Shari Davidson, a vice president at the National Business Group on Health, tells HPW that her group actually asked members, which include Wal-Mart, during a January conference whether more people enrolled in employer-sponsored health plans than expected. “Most employers were in the category of ‘increased a little’ but within the realm of what might be expected,” she says.
Percentage of Workers With Health Coverage Through Their Own Job, By Hours Worked, 1999–2012
Research by the Employee Benefit Research Institute (EBRI) shows that full-time workers were much more likely to obtain health insurance coverage through their employer than part-time staffers. In the most recent data, EBRI said 60.5% of workers employed 40 hours or more per week had job-sourced coverage, but only 33.6% of workers employed 30-39 hours per week had such coverage. The numbers go even lower with the fewer number of hours worked. For example, only 12.8% of workers employed fewer than 30 hours per week had insurance through their employer.
