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Wal-Mart, Obamacare and unfinished business

Wal-Mart’s decision to stop paying for health insurance for employees who work less than 30 hours a week may sound like bad news, especially for those 30,000 workers and their families. But it could become good news — for those families and everyone else — if it generates pressure to deal with Obamacare’s unfinished business.

It’s hardly surprising that Wal-Mart made this decision: The company says its health care costs have increased $500 million this year as more workers enrolled in its plans, no doubt spurred by the Affordable Care Act’s requirement that all Americans have health coverage or pay a fine. The change could save Wal-Mart as much as $50 million a year.

And many of the workers may be eligible for cheaper insurance coverage through the new state insurance exchanges created by the law. The company’s cheapest health plan costs employees about $47 a month. By contrast, a part-time Wal-Mart employee in Washington, D.C. — working 29 hours a week for the average wage of $12.73 an hour — could get federally subsidized insurance for as little as $7 a month, according to Vox’s Sarah Kliff. Those who earn less can enroll in Medicaid, the government program for the poor that Obamacare pays states to expand.

The key phrase is “may be.” Some part-time Wal-Mart workers will find themselves with no good options: If they live in states that decided not to expand Medicaid, they may fall into what’s called the coverage gap: earning too little to qualify for exchange subsidies but too much to qualify for Medicaid.

About half the states have so far declined to expand the program. In those states, the median income limit to qualify for Medicaid is 46 percent of the federal poverty level ($15,730 for a family of two). Return to that average Wal-Mart worker. If she were in, say, Jackson, Mississippi, or Birmingham, Alabama, and worked 25 hours per week at $8 an hour, she would make about $10,400 per year — too much, in either state, to qualify for Medicaid, yet not enough to qualify for a federal subsidy on the exchange. (And that’s assuming she has a child she supports. If not, she couldn’t qualify for Medicaid regardless of her income.)

This coverage gap isn’t just a problem for workers who are newly ineligible for insurance through Wal-Mart. As many as 5 million Americans in non-expansion states are ineligible for either exchange coverage or Medicaid. As more companies stop offering insurance to their part-time, low-paid workers, that gap will only grow, so long as states continue to reject new federal Medicaid money.

There’s a lot to be said, by the way, for decoupling health insurance from employment. It frees people to change jobs more easily. It removes a burden from companies. It gives workers more choice over what kind of insurance they want.

But Obamacare doesn’t sever the link entirely. And Wal-Mart’s decision draws attention to Obamacare’s biggest challenge: convincing governors, legislatures and voters in the 23 states that have yet to expand Medicaid that their decision is hurting people who work for a living but can’t get health coverage.