John Carroll

States are considering laws that require businesses to provide coverage for their employees. Wal-Mart is the biggest target.

John Carroll

For years, state legislatures around the country have focused on mandating insurance coverage — specifying what MCOs are required to cover if they want to sell insurance in their states. But after being treated to a rash of reports about companies whose workers depend on state Medicaid programs — at the same time many states are being forced to make huge and politically unpopular cuts in the program — a growing legion of lawmakers has turned its attention to pay-or-play bills that try to force big employers to start buying insurance for their workers.

An alliance of business interests working with some of the more conservative governors has so far managed to stave off some of the most serious efforts. But there's no sign that the current wave of legislative onslaughts has begun to abate.

In Pennsylvania, legislators have taken up a bill, backed by some unions, that would require any company with 20 or more workers to provide detailed annual reports that would show how much state medical assistance is given to their employees. And sponsors aren't shy about discussing Step 2 in the legislative process. Once some big employers like Wal-Mart start detailing how much taxpayer money is consumed caring for their workers, many believe a bill that mandates insurance coverage for workers of at least the biggest employers would become inevitable.

Never mentioned by name

Just a few weeks ago, Maryland lawmakers passed a law aimed directly at Wal-Mart that requires any company with more than 10,000 workers to spend 8 percent of the profits made inside the state on health coverage or get hit with a payroll tax. The bill didn't identify Wal-Mart by name, but there is only a handful of companies with that many workers and only one, Wal-Mart, has large numbers of uninsured employees. The governor, a Republican, squared off against a Democratic majority in the Legislature and vetoed the bill. Lawmakers say they'll be back.

Pay-or-play mandates

In New Jersey, a representative has crafted a similar measure that would make any company with more than 10,000 workers either boost coverage or pay $2.45 per employee hour directly into the state's Medicaid program. As many as nine states have been working on laws that offer a variation on the pay-or-play employer mandate.

The National Conference of State Legislatures is tracking bills in 24 states where lawmakers are studying bills that typically require applicants for public programs to disclose their employer. The information would be collected and reported to the Legislature.

Even if Wal-Mart often appears to be the target in pay-or-play cases, companies of just about every size have mounted intense opposition to the bills.

The National Federation of Independent Business (NFIB) took a vehement stand against the Maryland bill, and within hours of the governor's veto in mid-May, the NFIB was staking out defensive lines against renewed efforts to get a bill passed — this time with much broader implications than Wal-Mart.

"We anticipate a pay-or-play health care fight to continue here," says Ellen Valentino, director of Maryland's NFIB chapter. According to the NFIB, which calls itself the voice of small business, the newly vetoed measure would have given that state a rank smell of antibusiness lawmaking. And if Wal-Mart gets hit today, adds the group, future Legislatures will gladly spread the pain to much smaller businesses.

"It's been a very difficult, very long debate," adds Valentino, "and proponents have indicated they plan to come forward with a new proposal to reduce the employee threshold" beneath Wal-Mart's 10,000.

But not everyone in business adopted the same attitude. Some argued that when companies don't cover workers, the best employers with the most complete coverage end up picking up the tab for the others.

"The new law will help these businesses by reducing the amount that they will have to pay in health insurance premiums to subsidize the few large companies that have stinted on employee health care," wrote Bill Struever, president of Struever Brothers and Bart Varvey, chairman of Enterprise Social Investment, in an op-ed piece for the Washington Post.

"The law also will attract to Maryland large businesses that provide the good jobs we want in our state that would be happy not to have to subsidize competitors."

They refer to it as "the law," but the veto obviously changed all that.

Giant lightning rod

Critics say that Wal-Mart keeps rising to the top of troubling examples of corporations that rely on public programs, a giant lightning rod that inspires some to dub the legislation "Wal-Mart bills." The retailer has 1.2 million U.S. employees and, in state after state, studies show that many of them rely on Medicaid.

Last August, for example, researchers at the University of California, Berkeley concluded that Wal-Mart employees needed $32 million in state health care assistance, a necessary result of earning an average of $9.70 an hour. Wal-Mart, maintained Arindrajit Dube of U.C. Berkeley's Institute of Industrial Relations, had 23 percent fewer workers on a company health plan than any other big state retailer.

There's nothing new about pay-or-play bills, says Laura Tobler, a program director at the National Conference of State Legislatures. They cropped up with some regularity in the mid-1990s, she says. But states today are being crunched by the growing demands of Medicaid beneficiaries at a time that their budgets are hemorrhaging red ink. And when companies shift insurance costs to workers, more people end up uninsured — and in Medicaid. That trend has pushed pay-or-play into the legislative limelight.

"There are definitely more bills that fit into pay-or-play this year than last year, or the year before," says Tobler.

Blame California

Living up to its long-standing reputation as a trendsetter, California laid the foundation for the current round of bills with a proposition that mandated worker coverage for companies with 50 or more employees. And even though the bills were not enacted, other states eastward started to write similar proposals.

"The California bill sort of spurred on activity in other states," says Tobler. Right now, only Hawaii has an employer mandate for health insurance. But Hawaii's law predated ERISA, which opponents maintain invalidates any new act requiring companies to buy insurance for their workers. In California, lawmakers said they had found a way to write a bill that would survive an ERISA challenge. Even if that claim remains untested, it has inspired other lawmakers around the country to try it.

But Tobler doesn't buy that the often repeated use of the phrase "Wal-Mart bill" describes the legislative trend.

"These bills became Wal-Mart bills because of the press," says Tobler. The disclosure bills in general are targeted at employers that do not offer insurance. "Wal-Mart isn't the only offender here."

Some states are commissioning reports on the uninsured only to find that the biggest employers with the largest numbers of families receiving government assistance aren't in the private sector at all.

They're the state and local governments.

Says Tobler: "I just read that New Hampshire found the state was really up there in the number of people enrolled in public programs."

John Carroll, a freelance writer living near Austin, Texas, has been a Managed Care contributing editor for four years.

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