The Maryland General Assembly has passed, over a gubernatorial veto, a law requiring companies with more than 10,000 employees to spend at least 8 percent of their payroll on worker health care or pay the difference to a state medical assistance fund. The new law, which is to take effect within 30 days, is known as the “Wal-Mart bill” because the focus of debate was on that company’s failure to provide health care for its employees. The AP story is here; a story from the Baltimore Sun is here.
The new law raises a host of interesting legal and economic issues, such as:
- Will the law help Wal-Mart employees? The law forces Wal-Mart and other large employers to pay (to some extent) for their employees’ health care. But standard economic analysis would contend that this money will be taken out of employees’ paychecks; they’ll get the same amount overall, just with a chunk of it devoted to health care. This forced expenditure would reduce employee utility unless Wal-Mart employees were irrationally failing to use their income for health care. Interestingly, the bill’s proponents seemed to focus less on helping Wal-Mart employees and more on forcing Wal-Mart to pay the health care costs that the state now shoulders. As the bill’s sponsor, Sen. Gloria Lawlah, said: “Don’t dump your employees that you refuse to insure into our Medicaid system.” But there may be some benefits to employees in having private insurance. Such insurance may be superior to Medicaid, and Wal-Mart may be able to get more health care for the money than individual employees could get.
- Is the law preempted by ERISA? ERISA preempts any state law provisions that “relate to” an employee benefit plan. The Maryland Attorney General says that the law is not preempted, because it does not refer to specific benefits or interfere with a company managing its benefit plans uniformly across the country. However, given the broad scope of ERISA preemption, there seems to be a strong argument that the law is sufficiently related to employee health plans so as to be preempted.
- Will the law be passed by other states? The AFL-CIO hopes to persuade many legislatures to pass their own versions of the Fair Share Health Care Act. This campaign is part of a shift in focus by organized labor from federal to state legislative campaigns. Will the campaign be successful in other states? If so, will these laws forced Congress to consider federal health care reform, or will Congress merely preempt such legislation (if it’s not already preempted) with stricter ERISA preemption provisions?
There’s a lot that could be written on this issue. It will be interesting to watch whether this new law represents a new wave of health care initiatives, or rather a brief blip on the national radar.
Posted by Matt Bodie on January 13, 2006 at 12:28 AM
Comments
I’d suggest the Maryland attorney general look closely at Standard Oil v. Agsalud, a Ninth Circuit case (affirmed summarily by SCOTUS) striking down the Hawaii Prepaid Healthcare Act. Although the opinion didn’t note it explicitly, the Hawaii law expressly provided employers with almost exactly the same “alternatives” as the Maryland law. And yet it was preempted by ERISA.
Posted by: sonya | Feb 3, 2006 3:58:55 PM
It takes small minded people to pass a bill like this. MD is lucky they have a smart Governor. Would MD prefer Walmart to employee less people in MD or is Sen. Gloria Lawlah trying to tell other large company’s don’t expand in MD. Why not just raise the sales tax .125 and negotiate a good deal with health insurance carriers and help supplement residents insurance. This would help increase the tax base rather than decreasing it.
Posted by: Peter | Jan 16, 2006 2:06:42 PM
Kudos to MD for doing what fed gov so far refuses to do, approach universal health care, at least for the working poor. I work for a medical industry entity with multiple thousands of employees, yet the health insurance package very closely resembles WalMartian parsimony, in effect, denying us sick leave absolutely, stipulating a high deductible, seeking the lowest possible employer share contribution, opting for the most sick-person-unfriendly capitated health care plans. The net effect is the well and wealthy achievers are benefitted; the bulk of the company’s employees are kept healthcareless. This will all change when the fed gov addresses the wellness gap. WalMart will compensate by adjusting some other part of its balance sheet: for example, by rolling out RIFD distribution systems and inventory software for improved efficiency. It takes impetus from states such as MD to start the new trend in health maintenance; absent such supermajoritarian countervailing, the WalMarts and UnnamedCompaniesSuchAsMyOwnEmployer, will drift in some amoral limbo inattentive to the health sector. I am glad MD has stood on its brawny hindlegs and begun what I hopes is a trend that will bring the fed gov, i.e. congress, into reconsidering this part of employee benefits. Soon enough some more well situated employees who heretofore had taken as a given their pension plans, may well see the merits of MD’s interest in fringes. What I suggest may resemble France’s social safetynets, but the US will do it ecclectically.
Posted by: John Lopresti | Jan 13, 2006 5:09:13 PM
For informational purposes: If I am understanding the extraordinarily convoluted and ineffective website of the Maryland legislature correctly, the bill involved is SB790, described here. If so, the full text is here.
Posted by: Simon | Jan 13, 2006 11:31:24 AM
As the bill’s sponsor, Sen. Gloria Lawlah, said: “Don’t dump your employees that you refuse to insure into our Medicaid system.” Don’t dump YOUR employees? The bill’s sponsor has lost her mind. No one is moving to Maryland to work for Wal-Mart at $5.50 an hour. The people employed by Wal-Mart were already Maryland residents, who would be sucking much more from the public teat if they were completely unemployed. Wal-Mart is entirely free to take its albeit lousy corporate structure and employee benefit programs to the 49 other states and “dump” its employees entirely. Will that improve life in Maryland or lessen the state’s costs?
Posted by: Lawyer K | Jan 13, 2006 10:05:08 AM
This debate has really irked me because many people are buying the union line that Wal-Mart didn’t provide any healthcare to their employees. The fact is, Wal-Mart does offer healthcare for something like $11 per pay check and a majority of the employees *do* have insurance.
Posted by: Steven | Jan 13, 2006 9:52:05 AM