Md. Enacts ‘Wal-Mart’ Bill

Published March 1, 2006

The Maryland House and Senate voted on January 12, 2006 to override Gov. Robert L. Ehrlich Jr.’s (R) veto of the Fair Share Health Care Fund Act, an act generally known as the “Wal-Mart Bill.” The bill, passed by both houses last year but vetoed in May, will go into effect on January 1, 2007.

According to supporters, the bill will require employers to provide employees with health insurance coverage or send funds to the state for that purpose. For opponents of the measure, such as Sen. Lowell Stoltzfus (R-Somerset), the state Senate minority leader, the bill’s anti-business stance makes it “a disgrace for Maryland.”

In his veto letter, Ehrlich wrote, “In an era where providing affordable access to health care is one of the toughest problems to ever face this country, this legislation does little to address the issues of access to, or affordability of, health care. Instead, [the Fair Share Act] lays attack on successful businesses, simply because they are successful.”

Aimed at Large Companies

The bill provides that any for-profit employer with more than 10,000 employees in the state must demonstrate that 8 percent of the total wages it pays are used for health care. Otherwise, that business must pay to the Maryland state government the difference between what the firm spends on health care and 8 percent of its total wages. Nonprofit employers with more than 10,000 employees in the state must spend at least 6 percent of wages or make similar payments. The Maryland state government is exempt from the requirement.

The bill does not identify particular companies, but supporters and opponents generally agreed only four companies would be covered by the bill at this time: Giant Food Inc., Northrop Grumman Corp., Johns Hopkins University, and Wal-Mart.

Giant Foods and Northrop Grumman, according to published reports, both exceed the 8 percent threshold. Giant Foods, a supermarket chain, greatly exceeds the 8 percent requirement, spending nearly 23 percent of its total wages on health care.

Johns Hopkins is a nonprofit and exceeds the 6 percent threshold.

Wal-Mart appears to be the only company affected. Wal-Mart, which does not release data on health care spending, has nearly 17,000 employees in Maryland. Published reports indicated the firm aggressively lobbied against the measure.

Collateral Damage

Wal-Mart stated after the veto override that it is reconsidering its decision to place an additional distribution center in the state. The planned distribution center would have been located in Maryland’s eastern shore area, Somerset, and would have provided nearly 800 jobs.

“We’re most concerned about the distribution center in Maryland’s poorest county,” said Stoltzfus, regarding the impact of the bill. “The wages at that distribution center would be $2.50 higher than the average hourly wage in the county.”

Economists Steve Hanke and Stephen J. K. Walters wrote in the Wall Street Journal on January 26 that if the distribution center is still built in Somerset, which they believe unlikely, it would boost county employment by 14 percent and private-sector employment in the county by 20 percent.

Figure Disputed

According to Vincent DeMarco, president of the Maryland Citizens Health Initiative, an organization seeking to expand health care coverage in the state, “Our view is that 8 percent is the minimum that a big company should spend on health care.” He also said the estimates he saw showed most companies spend between 7 and 11 percent on health care.

Proponents of the bill argued on the floor that the 8 percent figure was based on an average of what businesses contributed to health care.

Stoltzfus has a different view of the 8 percent figure. “Nobody knows where the 8 percent came from: They pulled it out of thin air.”

According to a Wal-Mart statement, 80 percent of Wal-Mart workers in Maryland are eligible for health care benefits, and more than 50 percent have chosen to enroll in its company-offered health care programs.

Co-Writer Seeks Expansion

Maryland state Sen. Thomas Middleton (D-Waldorf), chairman of the state’s Senate Finance Committee, helped write the bill. “My intention is to expand [the coverage of] the bill right away in the future. It’s not a cure-all for health care in Maryland, but it’s a policy statement: Big companies must pay for health care,” he said. “Nationally, about 7.5 percent of wages from businesses went to health care in 2002, and for many businesses it’s over 10 percent. We think 8 percent is a fair number.

“We’ve noticed a trend of large companies dumping their low-level employees onto the state Medicaid system,” Middleton said. DeMarco echoed that notion, saying the bill “requires big companies to provide health care so that the rest of us won’t have to do it for them [through Medicaid].”

However, Middleton acknowledged the state did not have specific information on the number of Wal-Mart workers who utilized Medicaid. “From some voluntary reporting by individuals we know that about 1,600 of Wal-Mart’s 16,000 employees in the state were enrolled in Medicaid,” he said.

Some insurance experts warn the legislation may result in fewer jobs. “There has been a lot of public discussion about outsourcing American jobs to other countries,” Merrill Matthews Jr., director of the Council for Affordable Health Insurance, points out. “Forcing large companies to spend 8 percent of their payroll on health insurance will surely exacerbate the trend for those jobs suitable for outsourcing. The irony is that instead of creating a job with health insurance, the legislation may mean there is no job at all.”

Opposition, Support Strong

Labor unions and the labor-backed Wake Up WalMart campaign strongly supported the Fair Share bill.

The votes on the override were 30-17 in the Senate and 88-50 in the House of Delegates. In the Maryland General Assembly a 3/5ths majority is needed to override a veto. The override vote was essentially a party line vote in the Senate, with only Democrats voting to override the veto and all Republicans opposing the override. Three Democrats in the Senate voted to sustain the veto.

In the House, only one Republican voted for the override, while six Democrats voted to sustain the veto.

In his veto message to state legislators on the Fair Share Act last May, Ehrlich concluded, “It is not a health care bill; it is a tax bill.”

Michael Coulter ([email protected]) teaches political science at Grove City College in Pennsylvania.