(FORTUNE Magazine) - The nation's biggest employer, Wal-Mart (Research) has 1.3 million workers--but fewer than half have company health insurance. In February, CEO Lee Scott (left) said the retailer was beefing up benefits. Here is what's going on.

1 What is Wal-Mart pledging to do? Right now children of part-time employees cannot enroll in health insurance. Scott wants to change that. Part-timers currently have to wait two years before being eligible for coverage. Wal-Mart promises to reduce the wait. Also, the company will expand a basic-coverage value plan that charges premiums of just $11 per month.

2 What forced the retailer to take action? After years of decrying Wal-Mart's benefits, labor unions have gained traction with state governments, which often shoulder the burden of covering uninsured employees. In January, Maryland legislators passed a bill requiring companies with more than 10,000 workers in the state (only Wal-Mart qualifies) to spend 8% of their payroll on employee health benefits.

3 Will this get the critics off Scott's back? Unlikely. Wal-Mart has become a reliable cause celebre for critics on the left. Scott's in a pinch: The retailer's health-care costs have risen 19% a year since 2002. But until the question of who is responsible for Americans' health care--the government or employers--is settled, Wal-Mart can expect continued pressure.

4 What happens next? Unions are lobbying for laws similar to the Maryland bill in about 30 other states. But don't expect anti-Wal-Mart legislation to sweep the nation. The bills appear to have stalled already in states such as Colorado and Wisconsin.