The business media this week swallowed whole a story cooked up by Wal-Mart’s “kindler, gentler” PR team that the giant retailer will be offering its associates a new “lower-cost” health care plan, with premiums for an individual plan for as little as 82 cents a day! This remarkable health care breakthrough was described by Ron Pollack at Families USA as “swiss cheese insurance coverage.” The low-cost King of Cheap offers its own workers the kind of cut-rate, low value plans that reflect the company’s overall commitment to price before value. In the health care field, it is easy to produce a bargain-basement, stripped-down health care plan: just raise the deductible sky high, raise the copayments for doctor and hospital visits, and keep the premium low. A Wal-Mart spokesman described the new health plan as “perfect for somebody who needs to go to the doctor once or twice a year with a sinus infection.” In other words, health care premiums can be cheap for people who rarely need health care. But such high deductible plans for healthy people create problems for other Wal-Mart workers. If 18 year old Wal-Mart workers sign up for the low-premium plans, hoping to never need health care, it narrows the risk pool of other workers at Wal-Mart. Those with an actual need for health care will not find the new plans cheaper, and will instead opt to pay higher premiums with lower deductibles. This segments Wal-Mart workers into different risk pools, leaving the sicker workers with a higher cost health product than they would have had if Wal-Mart spread its risk across all its workers in one health plan. In the insurance industry, it’s called “creaming”, or “cherry-picking.” You write insurance for people unlikely to need it. But all those elderly workers at Wal-Mart who have more needs than a sinus infection once or twice a year, will pay higher premiums to make up for the “well” people who have been stripped out of the risk pool. For now, the low-cost plans have one major benefit for the retailer. As a broker with Buckman, Buckman & Reid told Women’s Wear Daily, a cheaper health care plan will “keep the unions out of their doors.”
Business writers don’t seem to grasp that when it comes to health care, you get what you pay for. Wal-Mart may be able to drive down the cost of underwear, but when it comes to health protection, these low premium plans are a gamble for the well, and a bad deal for the sick. Anyone with health care needs will want to skip Wal-Mart’s cheap plans, because they provide low value for the consumer. Wal-Mart could offer zero premium plans to its workers, by covering no health care costs. Instead, they offer swiss cheese in place of real health care. We can only hope that other companies will not assume that their employees are so stupid as to flock to barebones coverage as a solution to their health care needs. As the largest private employer in America, Wal-Mart’s enthusiasm for low cost, low value health care is troubling, because of the danger that other companies will imitate the leader in a race to the bottom, and drive down the value of all of our health plans.
