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Get Four
|  | JANUARY 17, 2006
By Aaron Bernstein First Wal-Mart. Then Who?Maryland decrees that the retailer must spend more on employee health care, and other states may follow. Big companies have reason to worryAs political theater goes, it was a thumping defeat for Wal-Mart Stores (WMT ). On Jan. 12 the Maryland legislature overrode the veto of its Republican governor and passed a law requiring employers with 10,000 or more workers in the state to spend at least 8% of payroll on employee health benefits. Labor groups praised the reversal as a victory in stopping low-wage employers from dumping workers onto state Medicaid programs. Should other companies be worried? Yes and no. For now, the Free State's law won't put much of a dent in the bill that taxpayers, employees, and employers pay to cover uninsured workers. Wal-Mart, with 17,000 employees in Maryland, is the only company affected by the new legislation. RETOOLED STRATEGY. In the long run, however, state initiatives by the AFL-CIO and its allies bear watching. The group that pushed the legislation, the Fair Share Health Care Coalition, led by the AFL-CIO, has announced plans to introduce similar bills in 30 states. "We're not singling out Wal-Mart, we're trying to target large employers who are costing everyone else $113 billion a year because they're not paying their fair share for health care," says Naomi Walker, director of the AFL-CIO's State Legislative Program. Next up: Washington State, where on Jan. 19 the Democrat-controlled legislature plans to hold hearings on a Fair Share bill similar to Maryland's. After the Maryland victory, labor groups have retooled their strategy. Even though the governor of Washington is also a Democrat, the first version of the law failed last year, after critics said it was too complex. That bill, one of the first in the country to address the issue, would've required employers with 50 or more workers to pay into a state health-care fund if they didn't meet certain thresholds of health spending. DEEP IMPACT? When even some outfits sympathetic to the legislation complained, the Fair Share coalition switched to the simpler Maryland approach. The revamped bill would require private-sector companies with 5,000 or more workers in Washington to spend 9% of their payroll on health care. Public employers would have to shell out only 7%, a reduction granted since they can't deduct the cost of employee health coverage from their taxes. Supporters say Wal-Mart is the only company they feel certain will be covered, although a few others, such as Home Depot, may also be affected. A Home Depot spokesman says his company is evaluating the bill's potential impact. If Wal-Mart is the primary target, would a slew of state Fair Share laws have much effect? Probably not right away. Passing such legislation won't be easy in any state, so advocates likely will be forced to set the bar so high that only Wal-Mart and a handful of other big companies are hit. Nationally, employers with 500 or more workers spend an average of nearly 12% of payroll on health costs, according to the Bureau of Labor Statistics. Many of the bills pending around the country set thresholds far below that figure, thus exempting most large employers. GRAB ATTENTION. Once the laws are on the books, however, the AFL-CIO and its allies may be able to come back and lower the thresholds so that more employers are covered. That's the long-term goal of both labor and some of its allies -- including even certain business leaders. "I support Fair Share because companies that don't offer health care shift the cost onto emergency rooms and to responsible companies like ours, which offer good health coverage to our workers," says Don Barbieri, the chairman of Red Lion Hotels (RLH ), a Spokane (Wash.) chain that owns 66 hotels in 11 states. The short-term impact in individual states may not be great, but if labor groups can enact minimum set-asides for health care in enough states, and garner some business support, they could grab the attention of more and more large companies as well.  Bernstein is a senior writer for BusinessWeek in Washington
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