There’s an interesting article in the NY Times about some of the changes Wal-Mart employees will be seeing in health benefits. The purpose of my post isn’t to praise or trash Wal-Mart or its employment practices. The fact of the matter is, Wal-Mart is the largest retailer in the world, and with over 1.4mm employees, its by far the largest private employer in the United States. From a business perspective, love them or hate them, they’ve done something right.
And because they have become the standard in the realm of low-wage employment, the spotlight is on them to manage a staggering health care burden. In the past, the company, which is famous for industry-leading, almost surgical expense management, got away with encouraging managers to hire more part-time workers who wouldn’t be eligible for health benefits for two years…or offering very bare-bones health packages that only covered basic necessities (many in favor of Socialized medicine want these types of health packages for everyone).
Finally a change in thinking. Being top dog doesn’t mean you get to rest on your laurels…it means even more is expected out of you as a company…at least in a free country. You could make compelling mathematical arguements that the incredibly cheap wares one may purchase at a Wal-Mart probably make up for slightly more expensive or less comprehensive health coverage. In fact, the near extinction of mom-and-pop stores that were charging a 200% markup on a power drill, possibly harmed the low-wage consumer as much if not more (no offense to mom and pop – any business owner wants a monopoly). Although, possibly not. However, I’ll let the non-partisan economist fiddle with such ideas (Steven Levitt – Co-Author of Freakonomics, one of my favorite books, would be perfect man to examine whether the good outweighs the bad at Wal-Mart).
Ok, so what is the change in thinking? Michael J. Critelli, executive chairman of Pittney Bowes, a leader in employee health care, convinced Wal-Mart to think of its employees as an investment rather than an expense. A happy, healthy employee is more productive and more dependable…and more enthusiastic.
How do they plan to implement the change in thinking? Vertical Integration. Wal-Mart has gotten the price of over 2,400 generic drugs down to $4 a prescription for its employees…they can purchase the drugs in a Wal-Mart pharmacy. Wal-Mart has set up a 24 hot-line with the Mayo Clinic for its employees. It’s toying with the idea of in-store fitness centers, and quick clinics are already present in many locations. And I’m willing to bet a company so good at squeezing the dollar will get the efficiencies in place to make these employee benefits net positive to shareholders and keep prices down for customers.
One final comment. Wal-Mart is now offering a variety of health plans to employees ranging from bare-bones to comprehensive. And in response to embarrassing comparisons to competitors like Costco and Target, it has lowered the amount of time a part-time employee must work in order to be eligible for coverage. But in the spirit of competition, Wal-Mart is playing around with the idea of forming its own insurance company. Think of what such an entity would do to the over-glutted, inefficient HMOs we deal with every day!!
Laissez-faire Healthcare Blog 