Walmart, Employer Mandates, and Health Care Reform

Posted on July 13, 2009


Walmart made headlines late last month when, together with one of the country’s largest labor unions and a left-leaning think tank, the company wrote an open letter to President Obama endorsing the idea of an employer health care mandate. “We are for shared responsibility,” the letter states, “Not every business can make the same contribution, but everyone must make some contribution.”

Critics of Walmart immediately assumed the worst and looked for various explanations as to why the world’s largest retailer had suddenly come out in favor of what many consider to be one of the most business un-friendly ideas that has been raised in the health care debate.

Fuel was added to the fire this week, when another open letter – this one from the National Retail Federation, which is the main lobbying group for the retail industry (well, most of the industry; Walmart is not a member) – was published, slamming Walmart for its position. In the letter, NRF President and CEO Tracy Mullin writes:

One of retailers’ biggest concerns in the health care debate is the idea of an employer mandate provision, which would be catastrophic for our industry. Mandates would drive up costs for retailers while doing nothing to address waste, inefficiencies and lack of competition. Ultimately, employers forced to spend more on insurance would have little choice but to reduce payrolls or raise prices – and that’s the last thing retail employees or shoppers need right now.

An article in Monday’s Wall Street Journal does a good job summarizing the argument to date. The article also makes two interesting points that are of particular relevance to employers and employee benefits professionals:

  • According to the article, part of Walmart’s thinking is that, ultimately, reform will help curb costs: “Walmart. . .believes a government health-care program could be beneficial to its bottom line, if it helps curb a nationwide trend of surging health-care expenses.”  This is a key point in the reform debate that, unfortunately, is often not emphasized: as a nation, we must find ways to reduce the rate of increase in health care spending. If we don’t, we will all pay the price – whether as employers, employees, or taxpayers.
  • Some retailers are starting to understand that investing in benefits in general – and health benefits in particular – may be a smart thing to do from a business perspective (the article mentions Costco as an example of a retailer who has long viewed generous benefits as important to its corporate strategy).  According to the article:

While retailers have typically opted for the bare minimum in health benefits, firms including Wal-Mart, Toys R Us Inc. and Home Depot Inc. have begun tinkering with more expansive programs in hopes of reducing employee turnover, said Shub Debgupta, who conducts benefits research for more than 300 large companies as part of Corporate Executive Board Co.

“Retail organizations have thin margins and have ignored investing in benefits for the longest time, but some are learning that smartly designed programs can be huge,” Mr. Debgupta said. However, he added that most regard government mandates as a “huge burden,” and predicted many firms would exit health care altogether and pay a payroll tax to the government.

I wonder if it’s really the case that if an employer mandate is ultimately included as part of health care reform that many companies would abandon company provided health benefits. I suspect that, unless the government structures the employer mandate in such a way that it’s intentionally designed to encourage people to opt for a public plan, most employers will still see value in providing health benefits to employees.  On the other hand, it’s also possible that the strongest critics of Walmart’s recent about-face on health care are on to something: maybe the company believes that employer-provided health insurance is on the way out and they might as well be on the winning side of the debate earlier rather than later.