When a federal judge in July overturned a Maryland law that would have required Wal-Mart (WMT) to offer more generous health insurance to its workers, "a lot of people were really upset," says Cynthia Murray, who has worked at the retail giant's Laurel (Md.) store for six years. Murray, who makes $9.47 an hour, has the option of buying insurance through the company but says she can't afford the premiums, which cost her and her husband as much as $109 every two weeks.
The law would have required the Arkansas retailer to either spend 8% of its Maryland payroll on health care for its workers in that state or contribute that amount to a state insurance fund. While the law was written to cover any nongovernment employer with more than 10,000 workers, Wal-Mart was the only company that would have had to change its policies as a result. On July 19, U.S. District Judge J. Frederick Motz ruled that the state law, which was adopted last January, violated federal employee-benefits rules (see BusinessWeek.com, 7/19/06, "Rollback Ruling Favors Wal-Mart").
With Washington getting nowhere in its efforts to insure 44 million Americans who don't now have coverage, states are where the action is. More than half of the states, and many municipalities, are considering legislation to prod companies into providing their workers with some health-care coverage.
"CREATIVE APPROACH" NEEDED. Many employees and activists have taken the Maryland decision as an indication that local politicians won't be able to make any progress for the uninsured. And indeed, if the Maryland ruling stands, legal experts say it will be tough for states to copy Maryland's scheme of imposing such a tough mandate on Wal-Mart or other high-profile employers.
But that's not the end of the story. If Maryland provides an example of what states can't do, Massachusetts may offer an example of what they can.
The Bay State earlier this year adopted a landmark law that requires all residents to buy health insurance and imposes a penalty on employers that do not offer coverage. While businesses have fought many mandatory health-care plans, this one has relatively wide support. John Simley, a spokesman for Wal-Mart, says the company backs the overall thrust of the Massachusetts plan, though he says it has concerns about some details. "It is a creative approach," he says.
THE BAY STATE DIFFERENCE. The law has several key differences from the Maryland law. It covers nearly all medium and large employers in Massachusetts, not just a handful. It also imposes a modest penalty on companies that don't offer coverage—just $295 per worker, rather than 8% of payroll.
That makes the Massachusetts legislation look a lot more like a tax, which states can impose without running afoul of federal law, rather than a mandated health-care policy. "In Massachusetts, we are simply taxing employers who don't have a health plan," says Wendy Mariner, a professor of health law at Boston University, "And [the federal government] doesn't preempt anybody from raising taxes to cover people who need health care."
The two states provide contrasting models for politicians and activists around the country who are wrestling with the complex issues of health-care insurance. Many of the uninsured have jobs but are either not offered insurance at work or, like Murray, feel they can't afford the premiums. This is a huge issue for states, because they often end up footing the bill when these workers end up on the Medicaid rolls.
ON THE BANDWAGON. At least 30 states are considering Maryland-type "Fair Share" laws—most aimed at Wal-Mart and other big box retailers. Benefits lawyers say Motz's decision could make it much tougher to impose such an insurance mandate on employers. Although his ruling technically applies only in Maryland, it was written so broadly that other judges could easily adopt the same reasoning.
"It could have a dampening effect on Maryland-type proposals," says Alice Burton, director of the State Coverage Initiatives program of the nonprofit Robert Wood Johnson Foundation. But, she adds, "I don't think it has a dampening effect on the sense of urgency states have to solve this problem."
And states are not alone in jumping on the bandwagon. On July 26 the Chicago city council passed an ordinance that would require Wal-Mart, Home Depot, and other big retailers to provide at least $3 an hour in benefits for workers there, as well as pay a minimum hourly wage of $10—all by 2010. Mayor Richard M. Daley opposes the measure and has until mid-September to veto it.
If it becomes law, the same coalition of retailers that challenged the Maryland law is expected to head back to court to head off this measure. Says Steve Cannon, general counsel of the Retail Industry Leaders Assn., a business group that challenged the Maryland measure: "These laws take different approaches, but the intent and the effect are really the same. They insert the state or the city in between employers and employees and mandate how that relationship should exist."
BROADER MAY BE BETTER. These aggressive new laws are being pushed by unions, who see Wal-Mart as the poster child of the nation's low-wage, low-benefit employers. "We think these are good bills," says Paul Blank, campaign director of WakeUpWalMart.com, a labor-backed advocacy group. "Even if this ruling is upheld, there are other ways to accomplish the same thing." (See BusinessWeek.com, 8/2/06, "Wal-Mart Foes Hop a Bandwagon.")
Simley, the Wal-Mart spokesman, agrees that the battle won't end with Judge Motz. "What they are doing is political," he says. If the Maryland ruling stands, he predicts, "they'll try to design [insurance mandates] in a different way."
Legally, at least, states may have more luck with plans like Massachusetts', broader approaches that don't just target a handful of high-profile businesses. If state politicians can structure legislation that looks more like a broad tax, rather than a narrow, mandated policy, they are likely to fare better in the face of legal challenges.
They may even end up winning over some of the businesses that have been opposing their efforts. Wal-Mart's Simley says that the Massachusetts plan has the benefit of being more evenhanded than some of those proposed elsewhere. "It strikes a balance between the private sector, government, and individuals," he says.