(Reuters) - Wal-Mart Stores Inc will no longer offer health insurance to new part-time employees who work fewer than 24 hours a week and will charge workers who use tobacco more for coverage as healthcare costs rise, the company said on Friday.
Wal-Mart, the largest U.S. retailer and the nation's largest private employer, is also slashing the amount that it puts in employees' healthcare expense accounts by 50 percent.
The changes are being explained to Wal-Mart associates during the current fall enrollment period before they take effect in January.
Preventive care such as annual checkups remains fully covered. Wal-Mart will now provide $250 for associates to use for healthcare expenses that are not covered, down from $500, and will provide $500 for families, down from $1,000.
Those who use tobacco products will also pay more, with rates varying by the type of plan someone chooses.
"We made the difficult decision to raise rates that will affect our associates' medical costs," said Wal-Mart spokesman Greg Rossiter. "The decisions made were not easy, but they strike a balance between managing costs and providing quality care and coverage."
Wal-Mart is not alone in looking for ways to cut spending on healthcare. Starting next year, Wells Fargo & Co will ask employees to fund their own medical expense accounts or choose to pay higher insurance premiums and have the company fund them, following the lead of companies such as General Electric that offer account-based healthcare plans.
A study last month by the Kaiser Family Foundation found that the average annual premium for family coverage through an employer increased 9 percent to $15,073 in 2011 from the year before. Since 2000, premiums have risen 134 percent.
Employers pay nearly three-quarters of that premium, a rate that has held fairly steady for the last 10 years, according to the foundation's data.
A Mercer survey found that health benefits costs on average will rise 5.4 percent in 2012, the smallest increase since 1997, because employers have been so aggressive about cutting these expenses.
WALMART'S CHANGING PLANS
At Wal-Mart, associates become eligible for healthcare coverage after working for the chain for one year.
One of Wal-Mart's basic plans for an associate costs $15 per two-week pay period, or just over $1 per day. A tobacco user will now be charged an additional $10 per pay period.
Associates will use an honor system to say whether they use tobacco products.
Wal-Mart has offered part-time workers the option of signing up for healthcare coverage since 1996, regardless of how many hours per week worked. Now, part-time associates who work less than an average of 24 hours per week will no longer be eligible for the company's health insurance plans.
Those who were already eligible may still participate, even if they work fewer than 24 hours per week.
Those who work about 24 hours to 33 hours a week can still sign up for coverage for themselves and for their children.
Wal-Mart has not said what percentage of its roughly 1.4 million U.S. associates work fewer than 24 hours a week. Those who work 34 hours a week or more are considered full-time associates.
Changes to the company's healthcare plans were first reported by the New York Times.
(Reporting by Maneesha Tiwari in Bangalore and Jessica Wohl in Chicago. Additional reporting by Rick Rothacker in Charlotte, North Carolina; Editing by Steve Orlofsky)