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Right Problem, Wrong Solution

Sunday, April 10, 2005; Page B06

JUSTIFIABLY ALARMED by the swelling ranks of uninsured workers in Maryland, state lawmakers are taking a step without precedent in the nation. They are poised to approve legislation that would force Wal-Mart Stores Inc., Maryland's largest private employer, to spend at least 8 percent of its payroll on workers' health insurance or make compensatory payments to the state. Right problem, wrong solution.

Wal-Mart, an unlovable colossus, has more than 15,300 full- and part-time employees at its 52 stores in Maryland, many of them paid a good deal less than $10 an hour. Partly as a result of those modest wages, about half the workers opt out of a company health plan that requires them to contribute premiums and deductibles, reducing their take-home pay. When they get sick or hurt, the cost is borne by emergency rooms or by the state's taxpayers (including Wal-Mart's own unionized competitor, Giant Food Inc. ) in the form of Medicaid. It's little surprise that Giant, which says it spends 20 percent of its payroll on employee health care, was among the bill's most enthusiastic backers.

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But in mandating that one company -- and only one company -- increase its health care spending, the bill is arbitrary and likely to do more harm than good. It raises suspicions that some legislators are piling on the nation's largest company more as a populist stunt than out of a well-considered approach to policy. Perhaps they sense rising resentment of Wal-Mart because of its penny-pinching management style and a wealth of bad publicity, the most recent centering on allegations of illegal union-busting tactics, which the company denies.

The bill singles out companies with more than 10,000 employees whose health care expenses are less than 8 percent of their payroll -- of which Maryland has precisely one, Wal-Mart. The retail giant's spending on health care in Maryland is somewhere between 3.6 and 8 percent of its payroll, depending on whether you believe the company's figures or those of its opponents. Hundreds or maybe thousands of smaller firms in Maryland would also fail to meet the 8 percent threshold, and collectively their workforce may far exceed Wal-Mart's. They are untouched by the legislation.

Then, if the bill's sponsors manage to override a promised veto by Gov. Robert L. Ehrlich Jr. (R), there are the likely and unintended consequences. Wal-Mart might reconsider building a distribution center in the state that would create 1,000 new jobs within five years. It's at least as likely that the company, if forced to pay more on health care, would compensate by cutting wages. Even if offered a somewhat more generous health care plan, many low-wage and younger workers would still choose not to be covered.

The larger problem is 40-odd million uninsured Americans, and the soaring cost of health care, which has made it increasingly difficult for employers to continue providing benefits. The legislation in Maryland is a symptom of that problem, but surely not the solution.

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