"Riley Factor"

This article was featured in the June 2006 issue of Business Matters, the Chamber's monthly print newsletter.

“Wal-Mart Bill” for PA?

In January of this year, in a veto reversal that was closely watched nationally, Maryland lawmakers voted to become the first state to effectively require that Wal-Mart spend more on employee health care.

Maryland Law

The legislation requires private companies with more than 10,000 employees in Maryland to spend at least 8 percent of their payroll on employee health benefits or make a contribution to the state's insurance program for the poor. Wal-Mart, which employs about 17,000 in Maryland, is the only known company of such size that does not meet that spending requirement.

The legislation has resonated in Maryland and beyond in part because it is viewed as a relatively easy and inexpensive way for lawmakers to expand access to health care and because Wal-Mart, a company with a reputation for tight benefits, is considered an easy target.

Opponents of the legislation argue the legislation is an unwarranted government intrusion into business and is a punitive action against an unpopular company and is aimed at helping its unionized rivals. Opponents also predicted that lawmakers would gradually expand the bill to include smaller businesses.

The debate has become national, with more than 30 states introducing similar legislation, including Pennsylvania.

Pending PA Legislation

House Bill 2495 has been introduced by Representative John Taylor (R-Philadelphia) and Representative Kathy Manderino (D-Philadelphia).

House Bill 2495 would require any private employer in the Commonwealth with more than 10,000 employees to spend at least 9% of its payroll on health care coverage for its employees.  Non-profit organizations would be required to spend at least 7% of their payroll on health care.  Employers and non-profit organizations that do not meet this requirement would be required to reimburse the state for the difference.  The revenues would be put into a newly created “Fair Share Health Care Fund” to be used to subsidize the Medical Assistance, Children’s Health Insurance Program (CHIP) and AdultBasic programs.

Business groups are expected to come out in strong opposition because the legislation that has been introduced:

Does nothing to lower the cost of health care. Employers and employees are unable to afford health insurance due to rapidly rising health care costs. 

Does not guarantee that one additional person will receive health insurance.  To the contrary, it will cost people their jobs and with it their health insurance.  That’s why major news papers, including the Wall Street Journal and the Washington Post, denounced similar legislation.

Will cost Pennsylvania jobs.  Imposing a health care mandate on Pennsylvania employers that only one other state has enacted will place our businesses at a competitive disadvantage.  At 1.1 percent job growth, we already lag the rest of the country’s 1.6 percent growth rate (adjusting LA and MS after Katrina).

May violate federal law.  Supreme Court decisions indicate that this legislation would likely violate the federal Employee Retirement Income Security Act (ERISA).  That act supersedes all state laws that relate to an employee benefit plan.  ERISA precludes a direct employer mandate to provide health insurance, and it equally voids a state attempt to do it through the back door with a coercive employer assessment. 

Threatens the viability of all Pennsylvania businesses in the future.  By mandating that certain employers must provide health insurance to their employees, this legislation serves as the framework for the future expansion.  After passing a similar law mandating health care coverage for employers with more than 10,000 employees, the Maryland legislature is now considering legislation that would amend the act and eliminate the employee requirement thereby applying the law to all employers. 

Imposes an arbitrary payroll tax.  If the goal is to expand access to health care, why attack companies that already offer health insurance?  The bill arbitrarily creates a government imposed quota of 9 percent of payroll for health care expenditures for Pennsylvania companies with over 10,000 employees.  There is no rationale for these standards. 

Unfair and bad public policy.  Legislation aimed at singling out particular companies for a new tax is not only unfair, but it is bad public policy.

HB 2495 has been referred to the House Insurance Committee.  The Greater Reading Chamber of Commerce & Industry will monitor the issue closely and will oppose efforts to move this legislation forward.