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Wal-MartThe US retail giant Wal-Mart Stores Inc. the company recently announced its plans to end healthcare benefits for about 30,000 part time workers in response to mounting healthcare costs and the growth of options available under the Affordable Care Act (ACA). The sudden change is in line with the moves made by fellow retailers like Target Corp. (TGT), Home Depot Inc. (HD) and Walgreen Co. (WAG) that have rolled back benefits in response to the ACA.

Starting from January 1, 2015, Wal-Mart will no longer provide health insurance to those employees working less than an average of 30 hours a week. The new decision will significantly affect 2% of the retailer’s U.S. workforce of 1.4 million.

The introduction of ACA led to more number of employees getting enrolled in health benefit plans than expected, thereby driving up expenses. The company officials assured that they will help those employees who are losing their medical benefits to locate the right, affordable healthcare options. This means that a large number of Walmart employees who lose this coverage will join other insurances which will lead to increased work at their physician offices change insurance plans, getting the eligibility verified and medical billing information changed.

Previous Coverage Cutbacks

Reports suggest that this is not the first time Wal-Mart has pared back health benefit plans in recent years. Prior to 2011, the retailer had offered health insurance coverage to part-time workers who worked for a minimum of 24 hours per week. In the year 2012, they stopped providing coverage to new employees who worked less than 30 hours a week and the recent policy change announced puts an end to coverage given for those working 30 hours or less (even though they were already employed in 2012).

As per reports from Wall Street Journal, the company expects a huge increase of $500 million on its total insurance costs when compared to the $330 million that it had forecast for the year ending January 31. Therefore, the company plans to drop coverage for part-time workers and raise premiums for all other workers by 20% beginning on January 1.

The retail firm’s lowest cost and most popular health benefit plan will climb by $3.50 to $21.90 per pay period. They usually pay their employees biweekly and cover 75% of employee premiums. As per Bloomberg estimates, if an assumption is made that these 30, 000 part-time workers use the lowest cost plan, then eliminating their benefits would enable the company to save around $50 million a year.

However, the retail company’s decision to increase premiums generated strong frustration among employees who earn an average $11.81 an hour. On the other hand, some experts in the healthcare domain are of the opinion that the decision to end coverage for part-timers may actually prove to be an advantage for those workers. Many of those part-time employees can’t even afford their employers’ medical benefit plans and Obamacare subsidies will provide these part-timers much greater financial assistance than the company itself would offer.

Obamacare Rules for Employer Health Coverage

The Affordable Care Act (ACA), the most comprehensive overhaul of the nation’s healthcare system aims to expand healthcare access to the citizens. Even though the ACA does not directly address workers’ compensation issues, certain aspects of the law will have a strong impact on workers’ compensation and medical benefits.

The ACA rules for employer health coverage have been modified by the Obama administration, requiring companies with 100 or more workers to cover 70% of their full time members beginning next year. They need to cover 95% of full timers in 2016 when the mandate is extended to companies with 50 or more workers working at least 30 hours a week or else pay a penalty. Those who don’t abide by this rule may be liable for fines up to $3000 per worker.

The rule necessitates employers to offer coverage to only full time workers and not to part-time staff. As per ACA, a person who works for 30 hours per week (or 130 hours per month or more) is a full time staff and one who works less than 30 hours per week is a part-time staff. On the other hand, people working less than 30 hours a week are eligible to avail subsidies in the new government-run exchanges that opened last year.

Experts observe that the exchanges make it easier for companies to cut back coverage for part-time staff. Many firms have reduced the working hours of their staffs to 29 hours to have more part-time employees and fewer full-time laborers.

Still, medical benefits for part-timers are the exception rather than the rule among retailers. According to a survey conducted by the New York-based consulting firm Mercer, more than 62% of large retail chains did not offer any specific healthcare benefits to part-timers, up from 56% in 2009. With the government run exchanges opened under the ACA, those individuals (who have been denied health coverage) can turn somewhere else in terms of getting coverage for themselves and their families.