Wal-Mart Stores, facing a raft of state legislation that would require it to increase spending on employee health insurance, will lift several of its long-standing - and most-criticized - restrictions on eligibility over the next year, the giant retailer said this morning.

The changes, which Wal-Mart's chief executive, H. Lee Scott Jr., will formally announce before a meeting of the nation's governors on Sunday, underscores how big a public relations threat the health care issue has become for the nation's largest private employer.

Wal-Mart insures less than half of its 1.3 million employees in the United States and has come under growing criticism for skimping on benefits and shifting the cost of health care to state governments. In the past two months, the Maryland Legislature passed a law that would force Wal-Mart to improve its benefits and legislatures in a dozen more states, including California, Washington and Rhode Island, are considering similar bills.

The new eligibility rules at Wal-Mart are intended to increase the number of employees who can access the company's insurance plan, but it was unclear how significant the impact would be because Wal-Mart released little detailed information.

What is clear is that Wal-Mart would still require workers, whose average pay is less than $20,000 a year, to pay hefty annual deductibles and monthly premiums.

Wal-Mart said it would "significantly" reduce the waiting period before a new part-time employee is eligible for insurance, but it declined to specify by how much. Today, part-time workers must wait two years, compared with 180 days for full-time employees.

In addition, the company will allow part-time employees to enroll their children in the company's health insurance plan. Until now, Wal-Mart covered only the children of full-time workers.

At the same time, Wal-Mart said it would make a new health-care plan introduced in several regions this year, with premiums as low as $11 a month, available to half of its employees by next year.

That plan allows for several prescriptions and doctors visits before a $1,000 deductible kicks in. But it is unlikely to cover a complicated illness or expensive hospital stay during the first year, when there is a $25,000 insurance cap. In addition, out-of-pocket payments range from $300 for prescriptions to $1,000 for hospital stays.

Wal-Mart also said it would expand the use of in-store clinics to treat employees. Such clinics, which the company set up in Northwest Arkansas as a test six months ago, are intended for non-emergency medicine, like flu shots.

"We are trying to make our plans more relevant, accessible and affordable," said Mona Williams, a Wal-Mart spokeswoman.

Asked how many workers are expected to enroll in the company's health insurance plan after the changes, she said: "We think these enhancements are a step in the right direction for associates but don't yet know how they affect take rates."

It is unclear how much the new plan will cost Wal-Mart, a number that investors will be anxious to learn given Wal-Mart's no-frills business model, which emphasizes low labor costs. Ms. Williams said the plan was factored into Wal-Mart's profit forecast for 2006, which the company announced earlier this week.

The changes represent a significant victory for Wal-Mart critics, particularly organized labor, who contend the retailer has skimped on benefits and shifted health costs to state governments.

The groups have tried, with apparent success, to turn Wal-Mart into a symbol of what is wrong with American health care, triggering legislation in numerous states that is directed squarely at Wal-Mart.

AMP Section Name:Retail & Mega-Stores
  • 188 Consumerism & Commercialism

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