Wal-Mart & Assymetrical Healthcare

Wal-Mart Memo Suggests Ways to Cut Employee Benefit Costs | NYT | 10.26.05

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An internal memo sent to Wal-Mart’s board of directors proposes numerous ways to hold down spending on health care and other benefits while seeking to minimize damage to the retailer’s reputation. Among the recommendations are hiring more part-time worker…

Memo in (PDF)

Supplemental Benefits Documentation (PDF) | Wal-Mart Board of Directors Retreat | FY06

RISKS

The risks associated with these changes are worth carefully noting. Addressing them will require, among other things, attention to implementation planning, communication, and execution.

Cost risk. If costs saving initiatives are not properly sequenced with those that require investments, costs could increase before they decrease.

Associate satisfaction risk. Some of the proposed revisions to the benefits strategy (e.g., the move to consumer-driven health plans, the changes in the retirement program) have the potential to upset Associates, especially more tenured Associates.

Public reputation risk. Healthcare enrollment will fall several percentage points due primarily to a shift to more part-time Associates, which could draw additional attacks from Wal-Mart’s critics. Also, despite the proposed efforts, the Medicaid problem will not be “solved.” A significant number of Associates and their children will still qualify for Medicaid. Because many of these programs will offer more generous health insurance than Wal-Mart provides, many Associates will still choose to enroll in Medicaid, leaving the door open for continued attacks.

The team believes that the advantages of the proposed strategy outweigh these risks.

TANSTAAFL. A penney saved at a Big Box Mart may cost significantly more due to the asymmetrical healthcare policy—and reverse cream–skimming. But then JibJab says it much better—see their Big Box Mart.