WASHINGTON, Feb. 27 (UPI) -- Health savings accounts (HSAs) -- one of the consumer-driven healthcare strategies pushed by the Bush Administration -- are not enjoying much popularity among the typically modest-income workers at Wal-Mart, the retail giant's CEO Lee Scott told state governors at a weekend conference in Washington, D.C.
As the discount powerhouse mounts an aggressive P.R. campaign to counter a recent firestorm of bad publicity that Wal-Mart short-changes its workers on healthcare and wages, Wal-Mart CEO Lee Scott unveiled changes to its worker healthcare plan on Sunday at the Governors Association Winter Meeting.
Scott said the changes will cover more Wal-Mart workers and make health plans more affordable for the comparatively low-wage work employees that often must turn to state Medicaid programs for healthcare.
The changes include shortening the wait time for part-time workers to sign on to Wal-Mart's health plan and covering part time workers' children once the worker becomes eligible for the plan. Scott told the governors his company wants to partner with the states to move more people off of Medicaid rolls and on to private insurance plans.
The Wal-Mart chief noted that the retailer is launching HSAs as part of its health coverage revamp, but noted that worker uptake has been modest. "We have just started the (HSA) and actually, our take rate on it, being blunt, is not very high," he said.
But critics of HSAs say they aren't surprised that the often financially-strapped Wal-Mart workers aren't snapping up the consumer-driven plans, arguing that HSAs and "every day low prices" just don't mix.
"The notion of Wal-mart workers buying into a plan that has a high deductible is absolutely absurd," Ron Pollack, director of consumer health advocacy group Families USA, told United Press International. "Wal-Mart workers are paid the lowest-level wages and they simply cannot afford to pay the combination of premiums and deductibles, which they need to pay before they get any coverage," he said.
Pollack estimated that a family buying into an HSA would pay about $2,000 up to as much as $10,000. "Unless you know the details, you don't know how ridiculous it is, but (HSAs) make no sense whatsoever for a low-wage family," he maintained.
"They get very little tax breaks because they're in a very low tax bracket, and they simply can't afford to pay the deductibles. For Wal-Mart to be using HSAs as a key element of its so-called reformed health converge really demonstrates the lack of seriousness about truly covering their workers, Pollack said.
He added that Wal-Mart's primary motive in making the changes is to avoid at all cost government regulations of employer coverage of its workforce. "This is undoubtedly a public relations blitz by Wal-Mart. They're trying to fend off state legislation, so this sounds like rather empty rhetoric. For a company that's virtually larger than any company in the world to be crying that they don't have the resources, I don't think too many people are going to give much credence to that," Pollack said.
Several states are considering so-called "fair share" laws like that recently passed in Maryland -- for which the retail giant was the inspiration-- requiring companies with more than 10,000 employees to put at least eight percent of payroll toward healthcare or chip in the difference to Medicaid. At any rate, Pollack said he hoped the Wal-Mart healthcare debacle would "open up a much bigger dialogue about ... what employers should and are paying."
He said he doubted that the Maryland law and similar laws in other states would make much of a dent in the massive company's bottom line. "My guess is it won't have a significant impact. You can't have an employer-based system where such a large portion of the workers have no coverage at all or have lousy coverage."
For his part, Wal-Mart's Scott said he thought workers' lukewarm enthusiasm for HSAs -- which currently have only three million market penetration nationally -- - is due to the fact that the accounts are too complex. "I have (HSA-related) paperwork on my desk to complete and ... it's too complicated," he said.
Scott said his company needs to beef up its healthcare education program for workers in order for HSAs to catch on with workers. "We do think that, fundamentally... we have to cause patients to be better healthcare consumers," he said.
Richard Vedder, distinguished professor of economics at Ohio University in Athens, Ohio, and associated with the conservative think tank American Enterprise Institute, said he generally supported Wal-Mart's HSA launch, but conceded that "whether(HSAs) work for Wal-Mart is perhaps problematic," since its employees on average earn "below the national income."
But in general, Vedder defended Wal-Mart's present worker health coverage. "There are a lot of other companies that pay low wages and relatively limited healthcare benefits. If Wal-Mart feels that it can only offer limited healthcare in order to maintain a competitive advantage, to keep its labor costs under control and to maintain 'every day low prices,' "that's a business decision they've made and I think they have the right to make that decision," he told UPI.
Vedder said he felt labor unions were largely behind the push for more fair share laws, which he said have been "badly beaten" by Wal-Mart, which has for decades successfully remained a non-union operation.
He also argued that Wal-Mart simply can't go much beyond the changes it is currently shopping to state leaders, without seeing a staggering profit loss and losing its place as a major global competitor in the retail market.
For example, if Wal-Mart upped its fringe benefits package from $1,00 per hour to $2.50 per hour and kept prices exactly the same, it would cut profits roughly in half," Vedder estimated. "Something's gotta give is what I'm saying."
Although Wal-Mart could do that and "still remain in the black, the profitability of Wal-Mart would go from being high by industry standards, to being very low by industry standards," Vedder told UPI.
The retailer could always raise its prices, he noted, "but Wal-Mart's competitive advantage in terms of 'every day low prices' price, will erode."
However, Tony Bianco, author of the critical book on the retail powerhouse, "The Bully of Bentonville, How the High Cost of Wal-Mart's Every Day Low Prices is Hurting America," had another suggestion for the global discounter: lower your dividends.
He told UPI that Wal-Mart's announced healthcare changes sound "constructive, but not are transformative, they don't change the fundamentals."
Ultimately, Bianco added, Scott's speech before the Governors Association amounts to "politically effective posturing with the states to manage and deflect the heat (Wal-Mart) is taking. This is politically convenient rhetoric, in my opinion. Let's see what's behind it."
Bianco argued that Wal-Mart finds itself in the current P.R. maelstrom because it turned a blind eye to the fact that, for retailers, the labor market is every bit as critical as the consumer market. The company's meager wage and benefit package mostly attracts part-timers, older workers and those who otherwise have few options in the marketplace, but relatively high health risk factors "If you want quality workers, you've got to pay for it," he said.
But Wal-Mart is now feeling the fallout from the over-zealous frugality that has been its hallmark. For example, the diabetes rate among Wal-Mart workers is three or four times that of the U.S. population, Bianco said.
In his speech Sunday, Scott also said the company would expand the number of health clinics within its stores, which he said are already "very busy"
"The majority of people visiting the clinics are people with no insurance. (The clinics) are doing very basic kinds of medical treatment -- I think it varies by individual state what's allowed for nurse-practitioners -- and it's very positive, which is why we're going from nine to 50 (clinics) this year. We also find that our associates like them because it allows them greater access to healthcare for themselves and their families," he said.
However, Wal-Mart and other large employers stand to gain as well from the retail-based medical sites.
"It actually has the likelihood of taking cost out of the healthcare system. Part of what we have to do together (is) improve the quality of healthcare, while at the same time taking the cost out, so it's more affordable for us as employers, you as a state, and for working families," Scott told the governors.
But Families USA's Pollack said it remained unclear whether the novel clinics have doctors on site and whether patients can keep seeing the same doctor to ensure "continuity of care."
At Sunday's conference, Scott characterized worker wellness programs as "the biggest challenge we had and the thing we have done the poorest job at." He said HSAs "by their very nature," are one way to encourage wellness across the retailer's 1.7 million-strong workforce.
Scott told the governors that the retailer is also encouraging workers to "buy more fresh produce, to buy the right kinds of foods, and reward them for that."
The Wal-Mart chief even invoked the ever-present spirit of Wal-Mart's founder Sam Walton, noting the late billionaire's prescient, if old-fashioned approach to worker wellness.
"I remember when (Walton) came back from Korea one time in the eighties and got all of us doing exercises in the morning. It was quite a sight at a Wal-Mart Saturday morning meeting to have everybody spread out and doing jumping jacks," he said. "I think our healthcare program is better than our wellness program. We have a long way to go,' Scott said.
