State May Close “Walmart Loophole” that Lets Big Employers Shift Workers to Medi-Cal

Thursday, May 02, 2013

Large employers, like Walmart, that save money by shifting low-paid, part-time workers to Medicaid from company health insurance programs, may have to rethink plans to accelerate the practice in California and take advantage of a loophole in the Affordable Care Act (ACA).

A bill working its way through the state Assembly, AB 880, would close a loophole in the ACA, also known derisively in conservative quarters as Obamacare. The ACA lets employers with more than 500 workers avoid providing health insurance for part-time workers without paying a penalty.

Walmart, which has a healthcare program for full-time employees, actively manages employee schedules to limit how many can take advantage of it. The result is that taxpayers foot the healthcare bill for many of the employees, rather than the business which, in this case, had revenues of $447 billion in 2011 and is the world’s largest private employer.

Approximately 250,000 California workers at big companies currently receive medical coverage through Medi-Cal, the state’s implementation of the federal Medicaid program. That number could grow by up to 100,000 people in 2014 when the ACA takes effect.

Under the ACA, a single worker making less than $10 an hour for 30 or fewer hours a week would qualify for Medi-Cal. The ACA defines these folks as part-time workers. The state legislation would penalize big employers for each of their employees who works more than eight hours a week and enrolls in the federal/state program. Public employers are excluded.

The penalty, calculated at 110% of the average cost of health care coverage provided by the employer (including both the employee and employer share), would be used to pay for the state’s portion of Medi-Cal.

The bill’s author, Democratic Assemblyman Jimmy Gomez, says it counters an incentive in the ACA for employers to cut wages and hours and eliminate benefits for part-timers. An analysis of the bill notes his observation that several employers, including Walmart, Darden Restaurants (owner of Red Lobster and Olive Garden), Papa John’s Pizza, Universal and Denny’s have already moved to cut hours below the 30-hour threshold.

The bill is cosponsored by California Labor Federation and United Food and Commercial Workers. It is supported by AFSCME, California Nurses Association, Health Access,   California Immigrant Policy Center and Congress of California Seniors.

The “Walmart Loophole” for healthcare insurance is not to be confused with other Walmart “loopholes.” There was the loophole that allowed Walmart to dodge billions in state taxes nationally by renting their buildings from their own subsidiaries, and the 2011 Elk Grove municipal zoning loophole that encouraged Walmart to build a 99,585-square-foot store without a conditional use permit because it would have snuck in under the law’s 100,000-foot limit.  

And then there was the purported loophole that Walmart executives were allegedly using to harass workers who participated in labor actions against the company. A blog claimed to have obtained a company memo that said employees could toss bricks from the roof at protesters as long as the bricks were labeled with price tags because “our advertising warns everyone to watch out for falling prices.”

That loophole, all too believable for critics of Walmart, turned out not to be true.

–Ken Broder   


To Learn More:

Assembly Bill Would Close Walmart Loophole (by Steve Smith, Frying Pan News)

Predicted Medi-Cal Enrollment among Californians Working for Large Firms (by Dave Graham-Squire, Ken Jacobs and Laurel Lucia, UC Berkeley Labor Center) (pdf)

Employer Fair Share for Worker Health Care Fact Sheet (California Labor Federation)

Walmart's New Health Care Policy Shifts Burden To Medicaid, Obamacare (by Alice Hines, Huffington Post)

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