TOPICS > Health

Maryland Bill Requires Health Care Changes for Wal-Mart

February 13, 2006 at 12:00 AM EST
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SUSAN DENTZER: Last month, the Maryland Legislature, housed here in the Annapolis statehouse, fired the latest salvo in a health insurance war.

SPOKESPERSON: Thirty votes in the affirmative, 17 in the negative, the governor’s veto is overridden.

SUSAN DENTZER: The Maryland lawmakers passed so-called “fair share” legislation. It’s aimed at forcing large employers, and specifically Wal-Mart, to beef up their health benefits so that fewer workers are left without coverage or forced onto public health insurance rolls.

From his storefront office in Baltimore, Maryland health care advocate Vincent DeMarco led the drive to pass the law. He’s among many activists now trying to get similar laws enacted in about 30 states, including Washington, Kentucky, Idaho and West Virginia.

VINCENT DeMARCO: Fair share health care is sweeping the nation because average citizens and small businesses are tired of subsidizing large companies who don’t do their fair share on health care. That’s why we succeeded in Maryland and that’s why I think many other states are going to succeed also.

SUSAN DENTZER: The Maryland law, scheduled to go into effect in 2007, applies to companies in the state with more than 10,000 workers. They’ll have to spend at least 8 percent of their payroll up to a certain level on health benefits, or 6 percent for nonprofits. If they don’t, they must pay the difference to a state fund to subsidize Medicaid.

Of the four Maryland employers who fit that category, three are already spending well over that amount, supermarket chain Giant Food, defense contractor Northrop Grumman, and Johns Hopkins University. That means the only one that would be affected is Wal-Mart, which filed suit through a retail trade group last week to overturn the law.

Susan Chambers oversees health and other benefits for Wal-Mart.

SUSAN CHAMBERS: We are disappointed that what I’ll call an employer mandate piece of legislation has been passed that will really do nothing to address the issue of the uninsured. So, we feel like it is misplaced and it will not address anything positive.

SUSAN DENTZER: The fair share debate comes amid growing recognition of a national health cost crisis. According to the latest government data, nearly 46 million Americans are without health insurance.

Small businesses, hurt by skyrocketing premiums, are dropping health coverage right and left. Meanwhile, public insurance rolls are expanding, heaping higher costs on states like Maryland.

John Sweeney, who heads the AFL-CIO, says it’s no wonder Wal-Mart has become a lightning rod for criticism.

JOHN SWEENEY: There is a health crisis in this country, and there’s no question that employers like Wal-Mart are contributing to that crisis by refusing to face up to the fact that they have a responsibility to provide health care for their workers and that they should be doing that without legislation forcing them to do it.

SUSAN DENTZER: Sweeney and other activists argue that since Wal-Mart is the nation’s largest private employer, its policies don’t just affect its own workforce, but have influence well beyond the chain’s stores.

Unions have long claimed that non-unionized Wal-Mart has triggered a “race to the bottom,” spurring competing retailers like supermarket giant Safeway to slash wages and health benefits.

Some Wal-Mart workers, called “associates,” complain that the company’s health benefits are too skimpy, or simply unaffordable given their relatively low wages.

Cynthia Murray, who’s 49, works part-time as a fitting room associate in Wal-Mart’s Laurel, Maryland store. She earns about $15,000 a year, and says she’s uninsured because she can’t afford the standard health insurance Wal-Mart has long offered its employees.

CYNTHIA MURRAY: It’s around $200 a month, which would be $100-something every two weeks. And like I said, that’s just the plan. That’s just what you’re going to pay. That isn’t the cost of when you go to the doctor and use one of them plans, because then you got to pay your deductible. Then you got to pay a deductible for the prescriptions. It’s more worth my while to keep my money. And when I really, really have to go to the doctor, then I’m going to have to pay.

SUSAN DENTZER: In a blockbuster memo leaked to the New York Times last fall, Wal-Mart’s Chambers admitted that many workers like Murray were, in effect, priced out of the company’s health coverage. The memo acknowledged that 5 percent of the company’s 1.3 million workers were on Medicaid, and a stunning 46 percent of the children of workers were either uninsured or on public insurance rolls.

SUSAN CHAMBERS: We think that’s too many, but we have the same number of associates on Medicaid as most of the national average. And what I mean by that is about 4 percent of national employers have their employees on Medicaid; we’re at 5 percent. The rest of national retail is at about 6 percent.

SUSAN DENTZER: Wal-Mart won’t say, and state officials don’t yet know, how many Wal-Mart workers or dependents in Maryland are on public assistance or are uninsured but the knowledge that some are carries special significance in Maryland. That’s because of a unique law that sets hospital payments statewide, and, in effect, forces employers that provide coverage for their workers to help bear the cost of treating the uninsured.

In part, because of this arrangement, Giant Food, an arch competitor to Wal-Mart in Maryland, took a strong stand in favor of fair share legislation. In a letter to the state’s chamber of commerce, Giant argued that it and other employers that do provide generous health benefits end up subsidizing the costs of care for Wal-Mart’s uninsured workers. Some smaller businesses agreed.

Mark Derbyshire owns a small moving and storage company in Aberdeen, Maryland, that offers generous health coverage to its 35 workers.

MARK DERBYSHIRE: Wal-Mart is one of the most profitable companies in the country. And if I can afford it, they should be able to afford it. And what they don’t pay, basically the rest of us pay for it. We pay for it one way or the other.

SUSAN DENTZER: Ultimately, the Maryland battle split the business community with the state’s Chamber of Commerce officially siding with Wal-Mart. The Chamber’s Ron Wineholt:

RONALD WINEHOLT: We were really concerned about the precedent that this was going to set to mandate that employers would have to provide health insurance for their employees.

The bill started with one employer, Wal-Mart, but no doubt in the future would be extended to other smaller employers.

SUSAN DENTZER: In the end, though, the fair share law appeared to pass on a wave of popular support. In a poll taken last year, nearly four out of five Marylanders voiced approval.

We spoke recently with a few outside a Maryland, Wal-Mart store.

LAURA MILTON: Well, we spend a lot of money at Wal-Mart. So the people working and hired at Wal-Mart, they deserve health care like anybody else does.

LYNA RUMBARGER: Anytime I went to get a job with benefits, that was very important, especially when you have a family and children, you know, it’s very important to have health insurance right away when you start working.

SUSAN DENTZER: Wal-Mart won’t say how much it spends on health benefits in Maryland, but the company admits in court papers challenging the fair care statute that the expenditures on health benefits that would be required under the law would “exceed those made by Wal-Mart in prior years.” Nonetheless, says Chambers, Wal-Mart’s outlays for health care are rising, not just in Maryland, but nationwide.

SUSAN CHAMBERS: Our health care costs, like everyone else in the country, continue to increase. In fact, our health care costs have gone up 19 percent each year for the past three years, so our spend is going to go up.

SUSAN DENTZER: What’s more, Chambers says, since the fair share debate got under way, Wal-Mart has improved its health insurance. It now offers a so-called “value plan” for $23 a month, and just $11 in some areas where the company has struck special deals with doctors. The plan covers three doctors’ visits and three prescriptions per family member each year. After that, families must still meet a $1,000 deductible before broad coverage kicks in. Chambers says that nationwide 100,000 workers and their dependents signed up for the new plan this year.

SUSAN CHAMBERS: 70 percent of the people that signed on with us had turned down health care with us before. And, in fact, three-quarters of them had been uninsured. So we know it makes a difference and we know it was relevant and met the need that they had.

SUSAN DENTZER: Another apparent consequence of the fair share debate can be seen in a handful of Wal-Mart stores. The company is testing the idea of in-store clinics like this one, to serve both customers’ and associates’ medical needs.

Chambers says the company also wants to figure out how to do for health care what it’s done for mass retailing: Get rid of the middleman and dramatically lower costs.

SUSAN CHAMBERS: We’re pretty good at taking inefficiencies out of the supply chain by using technology and process improvements. Wal-Mart will throw its commitment and its interest and its capability to taking inefficiency and waste out of health care.

SUSAN DENTZER: Maryland health advocate DeMarco lauds the company’s steps so far.

VINCENT DeMARCO: We hope they will continue on that right track and do the right thing. The best way to reduce this kind of correct criticism is to do the right thing and expand health care coverage for their employees.

SUSAN DENTZER: For now, it remains to be seen just how much the fair share fire set in Maryland will sweep across the country. In two states, Wisconsin and Indiana, opponents recently succeeded in killing fair share bills. Meanwhile, lawmakers in Washington and West Virginia, hope to vote on their states’ legislation soon.