Markets & Finance

Wal-Mart Puts on a Happy Face


Cynthia Murray, a 49-year-old store associate at a Wal-Mart (WMT) store in Laurel, Md., chuckled when she heard of her company's plan to offer health-care coverage to more part-time employees. "I've worked full time for six years at Wal-Mart and I can't afford the high-deductible plans," she says. "How is a part-time worker going to afford it?" Murray earns $9.47 an hour, answering phones and taking care of people in the fitting room. Murray doesn't have any health-care coverage and says she hardly ever sees a doctor.

After years of sharp criticism for its poor wages and benefits from policymakers, unions and its own employees, Wal-Mart is working overtime to improve its standing. On Apr. 18, the world's largest retailer opened its second annual media conference, gathering a large group of journalists in Rogers, Ark., near its Bentonville headquarters. The company unveiled several initiatives, including the expansion in health-care coverage.

INCREASED ELIGIBILITY. Wal-Mart employees will be eligible to get health-care benefits after one year of working at the company, down from two years previously. Part-timers will be able to add their children to their coverage for the first time. The company also plans to cut co-pays on some generic medications to $3, from $10, and offer 20% discounts on prescription drugs otherwise not covered.

"We think this is a really big deal," says Susan Chambers, executive vice-president of human resources at Wal-Mart. "If you're not familiar with the retail sector, this is not the norm." The changes, which take affect on May 13, will affect more than 150,000 part-time associates eligible for initial or enhanced coverage during a special enrollment period in mid-May (see BW Online, 12/29/06, "Wal-Mart's Organic Offensive").

The moves drew some plaudits. "It's a huge announcement...and is a big step towards expanding health-care access to the nation's uninsured," says Nicole Garratt, president of World Health Care Congress, an organization that hosts leadership summits for CEOs and senior executives from the healthcare industry. Mark Miller, analyst at William Blair & Co., says the move is a step in the right direction and may even make financial sense for Wal-Mart because it could improve morale.

"You can't look at health-care costs as an individual item," he says. "After all, it is one that has potentially related benefits like better customer service and creating a better shopping environment."

But the reaction of employees like Murray suggests Wal-Mart may have a tough time in making substantial changes in its workers' health coverage. She earns about $16,000 a year, working four days a week. Her husband also works and doesn't have health care. She says the financial burden of Wal-Mart's plans are simply too much. The cheapest policy she can get in Maryland, she says, would run $110 every two weeks, out of a paycheck of $606.

FEW TAKERS. The company's critics are not backing off. "It's an empty public relations stunt," says Chris Kofinis, communications director at WakeUpWalMart.com, a movement started by the United Food & Commercial Workers, the largest union in the U.S. Kofinis says Wal-Mart's low wages make it almost impossible for workers to pay the premiums and high deductibles of its health-care plans. "Wal-Mart knows that it doesn't have to spend much on this health-care coverage because hardly anyone will sign up," says Kofinis. Wall Street may have agreed. The stock barely budged, up 5 cents to $46.45.

A spokesman for Wal-Mart says the company offers as many as 18 different health plans. Premiums can be as low as $11 a month and deductibles range from $350 to $2,000.

Health care is just part of Wal-Mart's effort to improve the perception of the company. CEO Lee Scott has opened up to the media in recent months and has talked publicly about Wal-Mart's image more in the past year than ever before. Wal-Mart recently said it will build 50 stores in neighborhoods with high unemployment or crime rates and establish economic-opportunity zones around 10 of those stores. It also plans to offer development grants to companies within the zones and offer them free advertising in newspapers and on Wal-Mart's in-store radio network (see BW Online, 4/04/06, "Wal-Mart's Urban Renewal").

On Tuesday, at the media event, Wal-Mart executives outlined several other steps to quell community opposition to its stores. They plan to tailor stores to better fit into neighborhoods and work more closely with communities in planning the stores and hiring local contractors. In the past, the company acknowledged it has gone into communities with cookie-cutter stores. "We have to work with communities better than we ever have," said Eric Zorn, president of Wal-Mart Retailing, speaking at the media conference (see BW Online, 10/07/05, "Wal-Mart Gets the Fashion Bug"

LEGISLATIVE PRESSURE. Health care for employees, though, is one of the most sensitive issues at Wal-Mart. More than 20 states have introduced legislation aimed at forcing the company to spend more on health care. A recently leaked memo shows that Wal-Mart's 1.3 million employees, who make an average of $20,000 a year, spend 8 % of their income on health care, nearly twice the national average.

In addition, 46% of employees' children are either uninsured or on Medicaid, the memo said. In February, CEO Scott met with state governors at a meeting of the National Governor's association and urged them not to pass legislation that would burden the retailer, and pledged to work with the governors to move workers off state Medicaid rolls.

The Wal-Mart spokesman says that 615,000 employees have insurance through the company. "And with these new initiatives, the number would seemingly grow," he says. Still, he says there's good reasons the percentage of those employees covered would never reach 100%. "It is important to look at who works for Wal-Mart," he says. "There are a lot of students, second-income providers, and senior citizens, who already have other options elsewhere, like military retirement plans, Medicare, or even parents' insurance plans."


Later, Baby
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