Wal-Mart Contributes $500,000 to Campaign To Repeal Employer-Sponsored Health Coverage Law
Wal-Mart on Tuesday contributed $500,000 to the campaign to repeal SB 2, a state law that will require some employers to provide health insurance to employees or pay into a state fund to provide such coverage, the Sacramento Bee reports (Rojas, Sacramento Bee, 10/27).
SB 2, which is scheduled to take effect Jan. 1, 2006, will require employers with 200 or more employees to provide health insurance to workers and their dependents by 2006 or pay into the state fund. Employers with 50 to 199 employees will have to provide health insurance only to workers by 2007.
Companies with fewer than 20 workers will not have to comply with the law, and the law also will exempt employers with 20 to 49 workers unless the state provides them with tax credits to offset the cost of health coverage.
Under Proposition 72, California residents can vote "yes" to uphold or "no" to repeal SB 2 (California Healthline, 10/26).
Wal-Mart "wanted to stay out of this debate," according to Bob McAdam, vice president for communications for the company. However, the company decided to support the campaign to repeal SB 2 in response to an advertisement that criticizes Wal-Mart's treatment of employees (Herdt, Ventura County Star, 10/26). The ad says that state residents paid more than $32 million for the health care of Wal-Mart employees who went to public clinics because the company does not provide affordable health insurance (California Healthline, 10/25).
Jack Lewin, CEO of the California Medical Association, said proponents of SB 2 targeted Wal-Mart in the ad because it is the most prominent low-wage, low-benefit employer in the state (Ventura County Star, 10/26).
Wal-Mart spokesperson Cynthia Lin said, "We felt compelled to get involved because the proponents are running a multimillion-dollar television ad campaign that specifically targets Wal-Mart, and the claims they make are lies." Lin said that the ads are an attempt by supporters to make Wal-Mart a "scapegoat," adding that nearly two-thirds of Wal-Mart's 60,000 "eligible, full-time and hourly employees" in the state are enrolled in the company's health plan (Sacramento Bee, 10/27).
Wal-Mart's contribution brings the total amount of money raised by opponents of SB 2 to $12.8 million (Selway, Bloomberg/Arizona Republic, 10/27).
Health Affairs recently published two letters responding to a report the journal published earlier this month that found employer and employee responses to SB 2 ultimately could reduce the net effect of the law on the number of uninsured in the state, as well as response from the author. Summaries are provided below.
- Matthew Holt: The report is "precisely wrong" because the increased labor costs from SB 2 "are more likely to result in lower profits" than lower wages, Holt, consultant and author of "The Health Care Blog," writes. According to Holt, "Corporate profits as a share of revenues are currently at an all-time high, while wages are at their lowest in real terms for 30 years. Why should the costs of SB 2 come out of wages rather than profits, given that one of them has been going up and the other down?" Holt states that many of the workers who would be covered by SB 2 currently receive minimum wage or an equivalent "living wage," adding that "the cost of hiring and managing more part-time employees may exceed the increase in labor costs from SB 2." Noting that the "big fast-food chains" and "nonunionized discount stores" have spent more than $8 million on the campaign to repeal SB 2, Holt concludes that if the companies "really believed that they'll be able to push all the costs of Prop. 72 into their 'labor' segment and have none of it come out of their 'profit' segment, why would they bother opposing it?" (Holt, Health Affairs, 10/14).
- Rick Curtis et al.: Although the analysis "correctly indicates that there would be long-term labor-market effects" from SB 2, the study makes "multiple misinterpretations and errors that invalidate" the findings, Curtis, president of the Institute for Health Policy Solutions, and colleagues write. According to the letter, the SB 2 study "dramatically overstates the potential problem" by including employers with 20 to 49 employees, which will not be required to comply with SB 2 unless the state provides tax credits to offset the cost of health coverage and thus "overestimates the costs required to comply with SB 2" by not taking into account the higher prices of current employer-sponsored health plans. In addition, the letter states that the report assumes SB 2 is not a "mandate on individuals" and would allow workers to avoid "paying their share of the premiums"; misinterprets the provision of SB 2 that allows for a risk rating, which would be "difficult to implement"; and oversimplifies a "complex legal issue" by asserting that "state governments can mandate that employers provide coverage" (Curtis et al., Health Affairs, 10/15).
- Anna Sinaiko: The responses to the report "raise good issues and suggest some limits on the economic analysis in the context of political and other realities," Sinaiko, a doctoral student at Harvard University and author of the SB 2 study, writes in a response to Holt and Curtis and his colleagues. Sinaiko concludes that as "state mandates that employers provide coverage to their workers continue to be debated across the United States, economic analyses need to be directed at anticipating and evaluating the impact of the mandates under consideration" (Sinaiko, Health Affairs, 10/26).
Forbes this year included 13 California cities among its list of the 25 most expensive metropolitan areas for business, and SB 2 would "further raise the cost of doing business" and "assumes small businesses are going to blithely absorb an estimated $5 billion in new health care costs," according to a San Diego Union-Tribune editorial. The editorial states that most businesses affected by SB 2 "would do whatever is necessary to avoid or defray the cost of the mandate," including limiting work force size, cutting back on employee hours and wages or passing along the extra health care costs to consumers through higher prices. The editorial recommends that state residents vote "no" on Proposition 72 (San Diego Union Tribune, 10/27).
Additional information on Proposition 72 is available online.