States balk at picking up tab for coverage of large retailer employees

Healthcare Financial Management, June, 2005 by Chris Bandoli

As the cost of publicly funded health insurance continues to burden state budgets across the nation, some citizens and lawmakers are looking at large retail and service corporations as contributing to the problem. Several states have released reports indicating that many employees, including full-time employees, of these large businesses either are not offered health benefits or cannot afford them and therefore rely on public health insurance programs like Medicaid. For instance:

* A report by the Iowa Department of Human Services states that 845 Wal-Mart employees in that state are on Medicaid.

* A report in Wisconsin finds that 3,766 Wal-Mart employees in that state utilize BadgerCare, the state's Medicaid program. The cost to the state is reportedly $1.8 million annually.

* A memo prepared for Georgia governor Sonny Perdue (R) showed that 10,261 children of Wal-Mart employees in 2002 were receiving PeachCare for Kids public health insurance, a number 14 times greater than any other employer.

* A 2004 California study estimated that mega-retailers cost public safety-net health insurance programs $20.5 million annually.

* An article in the Cleveland Plain Dealer stated that a quarter of Wal-Mart workers in Tennessee are enrolled in TennCare, the state's Medicaid program.

The Push for Legislation

According to critics, the millions of dollars these companies save by not paying for employees' health insurance come directly out of the pockets of taxpayers. To this end, legislators in many states have introduced legislation designed to "out" corporations they feel are abusing the system. Although the details of the legislation vary from state to state, a common thread is the requirement that enrollees in the state's medical assistance programs must reveal the names of their employers, or the employers of the persons on whom they are dependent. If a company were found to have more than a certain number of employees (typically 25 or 50) enrolled in the state's public assistance programs, then the name of the employer would be published on a list available to the public. There are no penalties for being placed on the list; however, the negative publicity generated has caused large employers to defend their employee benefit programs.

Public interest in this type of legislative initiative appears high. A large coalition of labor groups, environmentalists, academies, and others has recently formed and is reportedly lobbying in 26 states to get large employer health insurance disclosure bills introduced and enacted. (See Greenhouse, Steven, "Opponents of Wal-Mart to Coordinate Efforts," The New York Times, April 3.)

Tough Measures

A small handful of states are trying to take the matter even further. The Maryland Legislature passed H.B. 1284, dubbed the Fair Share Health Care Fund Act, which requires for-profit employers with 10,000 or more employees to spend at least 8 percent of their payroll on health benefits--or put the money into the state's health program for the poor. The only for-profit employer in the state that would be affected by the legislation is Wal-Mart. The bill also requires not-for-profit employers with 10,000 or more employees to spend at least 6 percent of their payroll on health benefits. Gov. Robert Ehrlich, Jr. (R), has until May 31 to act on the measure. He is staunchly opposed to the bill and is likely to veto it. Democratic leaders in the General Assembly, however, are confident they have enough votes to override a veto.

In Connecticut, S.B. 1147, the Health Care Responsibility Act, seeks to require large and medium-sized employers to provide healthcare coverage for all of their employees. Employers who fail to comply would be required to pay into a state fund that would provide healthcare coverage for low-income citizens. Legislators in Washington introduced so-called "play-or-pay" legislation under the same name in the state's House and the Senate. In both states, the bills generated support and publicity, but neither passed before the legislatures adjourned for the year in late April.

This type of legislation is not without precedent. In 2003, California became the first state to enact into law a play-or-pay bill. However, it was subsequently struck down by a ballot measure in November 2004.

This issue seems to be gaining momentum, and warrants the continued attention of healthcare senior financial executives whose organizations must deal with the inevitable effects of the rising numbers of uninsured and underinsured individuals and states efforts' to manage rising Medicaid expenses.

This report was prepared for hfm by Chris Bandoli, policy associate, NETSCAN iPublishing's Health Policy Tracking Service. His e-mail address is chris.bandoli@netscan.com.