Maryland bill a big blow for Wal-Mart?
Other states also considering bills that penalize companies for falling short on healthcare plans.
By Parija Bhatnagar, CNNMoney.com staff writer


NEW YORK (CNNMoney.com) - By passing the so-called "Wal-Mart healthcare bill," Maryland became the first state in the country to set a law that would fine big companies for not picking up their fair share of employee healthcare coverage.

Is this a sign of things to come? Legislators in at least 13 other states proposed similar "Pay or Play" bills in the past year, according to the National Conference of State Legislators (NCSL).

Although the efforts failed in Arizona, California, Connecticut, New Hampshire and Tennessee, and was vetoed by Maryland's and Vermont's governors, the measure is still alive in five other states.

They include New York, Massachusetts, Minnesota, Oregon, Pennsylvania and Washington.

Burt Flickinger, an independent retail analyst, thinks the Maryland bill could have "massive" implications for the world's largest retailer, particularly since state legislators overrode the governor's veto to pass the bill late Thursday.

Moreover, he thinks the Maryland vote on the healthcare bill could trigger many more states to follow suit.

"Ohio and California are already a major battleground," he said, adding that as many as 30 other states have looked at the issue.

What could it mean for Wal-Mart if more states follow Maryland's example?

Obviously, it wouldn't be good for Wal-Mart, Flickinger said. "Consumers have become so used to Wal-Mart's low prices for so long," he said. If Wal-Mart is forced to incur higher healthcare costs at the same time that it's struggling to grow sales at its stores, "the day of reckoning" could come "when Wal-Mart is forced to raise prices 1 percent to 2 percent and cut its labor force by 1 percent to 2 percent."

"Unhealthy" policies?

The Maryland measure, also known as a "Fair Share Healthcare Bill," would require companies with more than 10,000 employees to spend at least 8 percent of their payroll on health benefits, or pay the balance into a state low-income health insurance fund.

Paul Blank, spokesman for watchdog group Wake-up Wal-Mart, said four companies in Maryland currently are covered under this bill -- Northrop Grumman (Research), Giant Foods, Johns Hopkins University and Wal-Mart (Research).

"Wal-Mart's the only one that fails to meet Maryland's Fair Share requirements," he said.

Wal-Mart has been a lightning rod for criticism about its wage, labor and benefits policies. Critics allege the retailer's high healthcare premiums tilt workers toward opting for taxpayer-funded public healthcare options, such as Medicaid, for their healthcare needs.

At the same time, Wal-Mart's big-box peers such as Target (Research), Home Depot (Research) and Lowe's (Research) could fly under the states' healthcare radar because these companies tend to pay higher monthly and yearly incomes compared to Wal-Mart, Flickinger said. "Some of these companies also approve overtime whereas Wal-Mart's been [reluctant] to do so."

For its part, Wal-Mart maintained that the company does adequately provide for the needs of its 1.6 million associates, including 16,988 workers in Maryland.

"More than three-fourths of Wal-Mart associates have health insurance and every Wal-Mart associate in Maryland -- both full-time and part-time -- can become eligible for health coverage that costs as little as $23 per month," Wal-Mart spokeswoman Sarah Clark, said in a statement.

"There are 786,000 uninsured people in the state of Maryland and less than one-half of one percent work for Wal-Mart. The legislators who voted for this bill have let down hundreds of thousands of Marylanders in need," she said.

Laura Tobler, a health-policy analyst with the NCSL, said 2005 saw a resurgence of states' interest in the Fair Share Healthcare policy.

"Part of the reason is because states' budgets are relatively tight," she said. "So states are looking at other ways to cover workers without tapping into their own budgets. One way to fortify the employer-based healthcare options is to mandate them, which is what Maryland has now done."

Wal-Mart can choose to contest the law under ERISA laws -- the Employee Retirement Income Security Act -- which preclude states from regulating employer benefits, including pension plans and healthcare coverage. "I'm not saying Wal-Mart will do this," Tobler said.

Or Wal-Mart could decide to shutter its 53 stores in Maryland. But Flickinger said that wouldn't be a smart strategic move for Wal-Mart.

"Maryland is one of the top five markets in the country in disposable income. This is a very attractive state for Wal-Mart, which is trying to move more upmarket," he said.

It would also be a public-relations nightmare for Wal-Mart. "A decision to pull out of Maryland could potentially reinforce opposition in other states," he added.

Wake-up Wal-Mart's Paul Blank offers a third option.

"Wal-Mart can change its business model and be fair to its employees," he said.

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For more on the Maryland law, click hereTop of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.