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Health Care Reform Splits Retailers

Retailers employ nearly one in five Americans, according to the National Retail Federation. On average, retail employees are less likely to have health insurance than other workers — about 22 percent of retail and wholesale workers are uninsured, compared to about 16 percent of the population as a whole.

But “retail” encompasses a broad range of businesses, from industry titan Wal-Mart to mom-and-pop corner stores. And the debate has split the industry in some unexpected ways.

In one corner is Wal-Mart, long a target of health-reform activists who have criticized the company’s health insurance practices. In July, though, the retail giant joined the Service Employees International Union, among others, in calling for a mandate to require employers to provide health insurance for all workers.

In the other corner is Whole Foods Market, the high-end grocery chain known to be well-traveled by many supporters of President Barack Obama’s health care reform initiative (see this Patchwork Nation analysis of Whole Foods locations and Obama support strongholds).

In an editorial in the Wall Street Journal in August, Whole Foods CEO John Mackey called for a national health care system modeled on the insurance that Whole Foods provides for all of its employees who work more than 30 hours per week — a “consumer-driven,” high-deductible system based on free market exchange that would not include a public government-run insurance option.

In response, angry customers have created a “boycott Whole Foods” Web site and a Facebook page with more than 30,000 members. Opponents of the Democrats’ health care reform plans, meanwhile, have responded with a “boycott,” urging their supporters to buy a week’s worth of groceries at Whole Foods.

The retailers’ positions might seem counterintuitive, but analysts say that both make sense when considered individually.

Wal-Mart has long been a target of criticism for failing to provide for employees’ health insurance. Only four years ago, in fact, Maryland passed a law specifically to require the company to spend more on health insurance. That inspired other state legislatures to attempt to do the same thing, although the law was later struck down by a federal judge.

So why Wal-Mart’s recent change of heart?

“Wal-Mart decided it wanted to clean up its public image,” says Paul Ginsburg, president of the Center for Studying Health System Change. In the past few years, it has increased the percentage of employees insured through the company, and has made efforts to make its policies more affordable and comprehensive.

Perhaps just as importantly, Wal-Mart officials may have decided that supporting health insurance reform — and specifically an employer mandate — could be good for business.

Some analysts speculate that by supporting one version of health care reform, the company may be trying to head off more burdensome legislation.

“By being of use to the administration, Wal-Mart ensures that its concerns will be heard and heeded,” political blogger Ezra Klein wrote in the Washington Post.

And the company may have decided that it is better positioned to handle an employer mandate than other retailers, giving it a competitive leg up.

Paul Fronstin, an analyst at the Employee Benefit Research Institute, points out that there is a long history of some companies favoring an employer mandate. As far back as the late 1980s, he says, American Airlines CEO Bob Crandall testified before Congress in support of such a mandate, because at the time the airline provided more health insurance benefits than its competitors.

“The only way to make it a more level playing field was to bring the other airlines up to where he was,” Fronstin says. “And so in some sense Wal-Mart is doing the same thing.”

Others in the business community certainly believe that Wal-Mart’s motives are self-serving. After Wal-Mart’s announcement, the U.S. Chamber of Commerce, which represents some 3 million U.S. businesses, said in a statement “Some businesses make the decision to use the government as a weapon against their competition.”

Few other large chains have made their opinions on health care reform so public. But the lobbying group that represents the industry, the National Retail Federation, which represents some 1.6 million retailers, strongly opposes any employer mandate.

As for Whole Foods, “That’s more of an idiosyncratic case,” Ginsburg says.

Mackey, the company’s CEO, has long been known for his outspokenness and his largely libertarian political views.

Whole Foods covers health insurance premiums nearly 90 percent of employees. The insurance it offers is a particular type of “consumer-driven” plan with a high deductible — about $1,000 for individuals and $2,500 for families. However, the company and employees also deposit money in tax-deferred Health Savings Accounts that they can use to pay those expenses.

In his Wall Street Journal editorial, Mackey argued that such a plan creates incentives for people to spend their health care dollars more carefully, and that implementing similar plans more broadly could help lower health care costs nationwide.

The editorial put him in company with Steven Burd, CEO of the grocery store Safeway, who’s own recent Wall Street Journal article also suggested market-based health care system reforms.

Even more controversially, Mackey also argued against creating “a massive new health-care entitlement” and said that access to health care has never been a “right” guaranteed by the constitution.

So how much sway do these companies have? How much do their opinions matter in the health care reform debate?

At this point that’s unclear, analysts say.

“They’re as influential as any other organization if they choose to be,” Fronstin says. “Individually and collectively, businesses provide coverage to 160 million people — they have a voice. […] But at the same time, I question at this point how influential any lobbying organization is going to be, given where we have gotten to in the debate. Some people say there’s still a lot of room for lobbying groups to have influence, others say Congress is going to do what it’s going to do.”

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