Big firms pushed to bear health costs

Dozens of states are debating a Maryland law that requires Wal-Mart to spend more on healthcare.

Maryland's new healthcare mandate boils down to $1,472.

That's a reckoning of what it means for Wal-Mart to spend 8 percent of its payroll costs on healthcare for a blue-vested associate who works for $10.11 an hour, 35 hours a week.

As health insurance goes, that's a modest fee. But the 8 percent figure has become a flash point in the nation's growing debate about who should bear workers' health costs.

Maryland stoked the fire last month. The legislature moved to require companies with 10,000 or more employees in the state to spend at least 8 percent of their payroll on health insurance. Long Island's Suffolk County passed its own version last fall: For each hour a worker is on the job, $3 must go toward healthcare.

Businesses are fighting back, filing lawsuits this week against both measures.

The stakes, in one sense, are hardly monumental. Even if the laws succeed, no one sees them as a cure-all for America's uninsured workers. Yet the legislative battles in 30 states, from Colorado to New Jersey, suggest that healthcare accessibility is gaining political traction.

That could mean a range of incremental changes, especially at the state level, to a healthcare system that largely depends on employers.

"Everybody can agree that it's flawed," says William Custer, director of Georgia State University's center for health services research. But while sharp political divides stymie prospects for a wholesale replacement strategy, he says, "trying to shore up the employer-based system seems to be a good 'second best.' "

Currently, most US families have health insurance through the workplace. Others are covered by government programs. But 16 percent of Americans - some 45 million - don't have insurance, and a large majority of those live in households with at least one full-time worker.

The most significant steps states can take may be to coax small businesses to offer insurance. Most large employers already have health plans.

But not all of them are pulling their weight, say labor unions who are pushing the Maryland-style "fair share health care" bills nationwide. As a result, some employees of large companies end up on Medicaid rolls, or burdening hospitals with unpaid bills when they show up for emergency care without insurance. Those costs get passed along to other customers.

With these concerns in mind, lawmakers of both major parties are taking a serious look at the fair share concept. But Naomi Walker, state-level legislative director for the country's largest federation of unions, the AFL-CIO, says the prospects are best in Democratic-controlled states like New Jersey and Washington.

Maryland lawmakers overrode a veto by Republican Gov. Robert Ehrlich. Wal-Mart is the only company with at least 10,000 employees in the state that doesn't spend at least 8 percent of its payroll on healthcare.

But a similar law in other states would affect more employers, many of them retailers that tend to pay relatively low wages. This week, the Retail Industry Leaders Association, a trade association, filed lawsuits to overturn the Maryland and Suffolk County laws. The group says that such benefit mandates are the province of the federal government, not states or localities.

Both laws give big employers an ultimatum: Either they put aside the required amount toward providing health insurance on their own, or they pay the same amount to the state or local government to pay for care.

Critics say such measures will do more to hinder employment than to expand health coverage.

"Such mandates ... do very little, if anything, to control the skyrocketing costs of coverage or improve the quality of care," the US Chamber of Commerce, a business federation, wrote in opposition to Maryland's law. "Added mandates mean less money for job creation."

The company known for "always low prices" employs 1.3 million people nationwide, with pay averaging $10.11 an hour for associates. Not every Wal-Mart employee opts for one of the company's 18 health plans. Wal-Mart spent $3,100 on healthcare per covered employee in 2003, according to an analysis by the Center for a Changing Workforce, a Seattle research group. That's lower than the average spent by companies in the retail/wholesale sector ($4,800 per employee) or in all US industries ($5,600 per employee).

The pressure to contain surging health costs goes beyond the retail industry. Many US employers have been moving to make workers pick up more of the tab, with higher deductibles and copayments.

The percentage of employers offering health benefits has been dropping steadily this decade, so the fair share laws are at best a stopgap measure, experts say.

"Eight or 9 percent of payroll does not buy you much insurance," says Gary Claxton, vice president of the Kaiser Family Foundation in Washington, which studies healthcare issues. The uninsured, who generally have lower incomes, "really need more help."

Still, some say small steps are better than none along the road to a comprehensive solution. "At least it closes the gap a little bit between firms that are providing something and those that aren't," says Thomas Kochan, a policy expert at the Massachusetts Institute of Technology.