Walmart, the world's largest retailer, announced Tuesday that it would no longer offer health insurance benefits to its 26,000 part-time workers.
Nobody likes losing any kind of benefit at work. But for the particular Walmart workers in this case, the end of employer-sponsored insurance could actually turn out to be a great thing.
Employer coverage is too expensive for many part-timers
A small minority of part-time workers are currently offered health benefits at their company. ADP Research Institute estimated in 2013 that about 15 percent of part-timers had the chance to buy into their company plan. And, perhaps even more interesting, only about half of those who had the opportunity actually bought the coverage.
As to why there's such a low take up rate, ADP has speculated that insurance is too expensive for those working fewer hours. They can't afford to buy into the plan the company offers.
Obamacare changes the calculus on getting coverage at work
There are obvious benefits to getting health insurance at work. For one, employer-sponsored insurance is not taxed, meaning that every dollar of compensation provided as medical coverage stretches further. Individual market plans, meanwhile, are purchased with post-tax dollars. The only way to get in on the tax exemption is to buy coverage at work.
But for low-wage workers, Obamacare has introduced a new and big drawback to the employer insurance. Namely, anybody who gets access to affordable coverage at work is barred from getting subsidies through the new exchanges. This is even true for people who don't buy insurance at work; just the act of getting offered employer coverage blocks individuals from getting financial help.
That financial help can be a big deal for those with lower incomes. Think of the 36-year-old Walmart employee here in Washington, D.C. who works 29 hours per week at the company's average wage of $12.73 per hour. She earns just about $19,000 annually if she works every week of the year.
If Walmart doesn't offer her insurance, the Kaiser Family Foundation's subsidy calculator shows that she qualifies for a $1,751 subsidy from the federal government to help buy coverage on the exchange. With that financial help, she can buy insurance for as little as an $7 per month. As a low-wage worker, she gets some of the most generous financial help.
But if Walmart does offer her coverage, it becomes her only option. She doesn't qualify for federal help and the $7 plan disappears. Walmart's plan, meanwhile, is way more expensive. The average premium there works out to $111 per month.
For a worker like that, losing health insurance at work doesn't actually look like a bad deal. Instead, its a pretty good deal: it gives part-time employees the chance to qualify for way more generous financial help than Walmart would ever offer.
This is how Trader Joes' explained its decision to similarly cut benefits for part-time workers last year.
"The law provides [some part time employees] with a pretty good deal for insurance ... a deal that can't be matched by us -- or any company," the company wrote in a September 2013 letter. "However, an individual employee (we call them Crew Member) is only able to receive the tax credit from the exchanges under the act if we do not offer them insurance under our company plan."
The loser in the Walmart decision is the federal budget
Yes, there will definitely be some people who earn more at Walmart and get less generous subsides on the exchange. They could see their premiums increase with this decision. But given that this decision applies only to those who work fewer than 30 hours per week, they are likely lower earners who will be helped rather than hurt.
Does this mean Walmart is dropping coverage for these workers merely out of the goodness of its own heart? Of course not: the company is going to save lots of money by not helping buy insurance for 26,000 workers. Its shifting costs over to the government, which will now take on the financial burden of helping to pay for thousands' of part-time workers' medical bills.
But, at least from the Walmart employee's perspective, losing coverage might not be a bad thing — and could actually be a really good thing for those who earn the least.