The steady growth of e-commerce has been a source of jobs and benefits as employment in traditional stores declines. But at online retailers taken over by Walmart, workers are finding one benefit in retreat: their company-sponsored health coverage.
In little more than a year, Walmart has spent nearly $4 billion acquiring e-commerce companies with thousands of workers. Last month, many learned that their potential out-of-pocket costs for medical expenses would increase in 2018 at a rate far exceeding the overall rise in health care costs — reaching thousands of dollars in many cases.
Walmart has periodically struggled against the perception that it skimps on health care benefits. Facing criticism from state legislators and worker advocates that too many of its employees relied on public programs like Medicaid — a critique that a 2005 internal memo conceded had a kernel of truth — the company began expanding access to coverage and making it more affordable about a decade ago.
But with costs rising in recent years, Walmart has reversed course in some ways. In 2011, it raised some premiums more than 40 percent. Three years ago, it ended coverage for employees working fewer than 30 hours per week on average. Other large retailers, such as Target and Home Depot, made similar changes.
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Health care benefits tend to be harder to come by in retail than in any other industry, with just over half of all retail employees eligible for company plans, versus more than 90 percent in manufacturing, according to a survey this year by the Kaiser Family Foundation. Retail workers also opt into their company plans at a far lower rate than any other industry’s workers, suggesting that the insurance is not very attractive or affordable even when companies do offer it.
Walmart says the share of its employees eligible for company-sponsored coverage, and of those choosing it, is slightly above the industry norm. But the health benefits it offers in its online operations appear to be inferior to those of many e-commerce competitors.
At Bonobos, an online menswear retailer that Walmart agreed to buy in June for $310 million, workers pay nothing in premiums for medical coverage in exchange for a deductible — that is, the level below which they are responsible for covering their own expenses — of $2,000 for individuals and $4,000 for families. A similar policy under Walmart’s plan will cost an individual about $750 more per year in premiums and a family nearly $4,000 more, according to documents on Walmart’s employee benefits website. Both plans will also feature a deductible that is 50 percent higher than the current one.
Some of the biggest changes appear to be occurring at another recent acquisition, ModCloth, an online retailer that made its name selling hip, vintage-inspired apparel to millennial women. To keep biweekly premiums for ModCloth’s roughly 300 workers relatively close to what they pay now, their deductibles will rise from nothing to several thousand dollars per year.
Some economists say that as Walmart amasses such properties, its practices could put pressure on benefits throughout the e-commerce sector, which had been a relative bright spot for low-wage workers.
“My concern is they bring their model with them regardless of what was going on before they got there,” said Jared Bernstein, a senior fellow at the left-leaning Center on Budget and Policy Priorities, who served as chief economic adviser to former Vice President Joe Biden.
Blake Jackson, a Walmart spokesman, said: “We’ve put a lot of thought into creating a total package, including both compensation and benefits, that offers more than what we’ve had in the past.”
Jackson said ModCloth workers would gain other benefits such as a 401(k) plan with a company match and a stock purchase plan.
Jackson said the company would make sure its benefits largely kept up with those of competitors, and the benefits that Walmart offered hourly e-commerce workers were essentially the same benefits it offered hourly workers in its traditional stores.
In addition to its standard health insurance benefits, Walmart covers 100 percent of the cost of certain types of major surgery, such as transplants, at a top facility.
The group OUR Walmart, which prods the company to improve wages and benefits, alerted The New York Times to the changes in coverage. The group’s campaign seeks to make ModCloth’s customers aware of Walmart’s policies. Neither Walmart nor any of its recent e-commerce acquisitions is unionized.
The new Walmart options for hourly workers prominently feature what are known as consumer-driven plans, in which workers cover all their medical expenses out of pocket, up to a relatively high deductible. A medical-expense account to which the company contributes money helps defray these costs.
One coverage option for a worker and a child, including dental and vision, has a biweekly premium of about $67 (assuming no use of tobacco products). Walmart would in turn contribute $600 to a health reimbursement account. Once that $600 is exhausted, however, the worker would have to shoulder the full amount of family medical expenses up to $5,500.
At companies with 200 or more workers, only 10 percent of those enrolled in such plans face deductibles of $5,000 or higher for family coverage, according to the Kaiser Family Foundation’s 2017 survey.
Larry Levitt, a health insurance expert at the foundation, said that such high-deductible plans had increasingly become the cost-containment strategy of choice among many employers, but that the particulars of Walmart’s plan made it especially ungenerous.
At Walmart’s archrival, Amazon, workers typically pay less for more coverage. A similar type of plan would cost an Amazon worker with a child about $60 in biweekly premiums, with Amazon contributing $1,000 into a reimbursement account, according to the company. (The plan includes dental and vision coverage.) After exhausting that account, the worker would pay all expenses out of pocket up to $3,000.
If a ModCloth worker with a child wanted to lower the annual deductible to $3,500 — the lowest the company offers for this type of plan — and receive a $1,000 company contribution, the biweekly premium would be about $136, or just under $2,000 more per year than the Amazon plan.
ModCloth workers were also given the option of sticking with a more conventional insurance plan, but those who do will face premiums that are roughly double their old premiums for family coverage, and their deductible will rise to $2,000 from nothing.
The average full-time hourly wage at ModCloth is $13.64. (Walmart put the average wage for its full-time store employees at $13.85 per hour.) But ModCloth employees say Susan Gregg Koger and Eric Koger, who started the company when they arrived in Pittsburgh to attend college in 2002 and later married, saw generous health insurance benefits as central to their feminist values. (Gregg Koger declined to comment.)
“The health benefits were really, really good,” said Alicia Faust Ogg, who worked in returns and customer service at ModCloth between 2012 and 2014.
Ogg, who had a baby while at the company, said that she had paid nothing out of pocket for her prenatal visits and that her hospital bill for the delivery had been less than $1,000.
Under ModCloth’s current insurance, workers pay biweekly premiums ranging from $6.65 for the employee alone to $144 to cover a spouse and children as well. They pay no deductible within the company’s network and a modest co-payment for most doctor visits.
But in a tough retail environment, online operations were under pressure even before Walmart’s buying spree.
In 2014, ModCloth imposed the first of several rounds of layoffs and, according to several current and former employees, gradually made its perks less generous. That included cutbacks in health coverage, they said, but it remained comprehensive and affordable before the company was sold.