Maryland's new law requiring Wal-Mart and other large companies to increase health care coverage of their workers

A new Maryland law requiring Wal-Mart Stores to spend more on employee health care sent shudders Friday through the business community while emboldening labor's campaign to enact similar measures in states around the country.

Wal-Mart is an easy target because of its size and wage-and-benefit programs, which critics say are stingy and force too many workers and their children into state insurance programs.

But Maryland's law--which requires companies with 10,000 or more workers to spend at least 8 percent of their payrolls on health care--goes well beyond an attack on Wal-Mart, supporters and opponents of the measure agreed.

For the business community, the legislation opens the door to more interference in employer benefits and, perhaps, edges the country closer to a government-run health-care system. Neither prospect is acceptable, business leaders said.

For labor and its supporters, Maryland's law could help trim the ranks of people with no health insurance, reduce spiraling costs for public health programs and create a more level playing field between employers that offer good benefits and those that don't.

At least 12 states from California to Pennsylvania have considered legislation requiring employers to provide health benefits or contribute to state programs for uninsured workers.

The measures were defeated in six states, according to the National Conference of State Legislatures.

While not a new idea, bills proposing employer-mandated medical coverage in the past asked all but the very smallest businesses to contribute something. Singling out very large employers for a mandate is a more recent approach.

Maryland legislators' vote late Thursday to override a gubernatorial veto reenergizes organized labor's campaign to introduce so-called "fair share" laws in 32 states including Illinois.

"What the Maryland victory shows is that the tide is turning because working people are not just fed up--they are ready to get active to set our country in a different direction, one state at a time," AFL-CIO President John Sweeney said in a statement Friday.

In Illinois, where other health-care reform measures are pending, observers don't expect a bill to be introduced during the current legislative session.

But the issue is likely to resurface here in October, which is the deadline for a state-mandated report that will list Illinois employers with 50 or more workers on Medicaid.

Nineteen states have produced reports tallying the public costs of uninsured workers, company by company. In every state but Massachusetts, Wal-Mart, by virtue of the size of its workforce, topped the list.

An internal company memo released by Wal-Mart executives last year following a New York Times report disclosed that the low-cost retailer has a higher-than-average percentage of workers on public-assistance programs.

Five percent of Wal-Mart associates are on Medicaid compared with an average 4 percent for national employers, the memo said. And 27 percent of their children are on Medicaid compared with a 22 percent national average. In all, 46 percent of all children of Wal-Mart associates were on Medicaid or uninsured, the company's memo said.

Still, health-care experts say laws targeting big employers are misguided because large companies are far more likely than small ones to offer insurance.

Ninety-eight percent of companies with 200 or more workers offered health insurance last year, while only 59 percent of smaller employers did, according to the Kaiser Family Foundation.

Retailers were far less likely than most other employers to offer health-care benefits, the report indicated. Retail wages also tend to be lower than in many other industries and "it's hard for workers to pay for health-care benefits at these salaries, even if the benefits are offered," said Gary Claxton, a vice president at the Kaiser Foundation.

For companies such as Wal-Mart, "the question is, where is the money to spend more on health-care benefits going to come from?" Claxton observed. "If they take it out of payroll, workers may get higher benefits but lower wages," he said.

"The fundamental problem here is we have an employer-based system of providing health insurance that's voluntary," said Alan Weil, executive director of the National Academy for State Health Policy. "If we're going to start telling employers that they have to offer this benefit, we need an overall plan of where we want to go and how we're going to get there. And this (Maryland) legislation doesn't do that."

Business groups said government mandates would hurt U.S. companies' ability to compete globally, and they added that fair share laws would move the country closer to a national health insurance system.

"This is the AFL-CIO's attempt to get national health care by the back door and on the cheap," Neil Trautwein, an officer at the National Association of Manufacturers, said in a statement Friday.

"We think that mandating (employer health benefits) is not a solution to the broken health care system," said John Castellani, president of the Business Roundtable, which represents corporate chief executives. "What we need to do is reduce costs and increase the availability of (health) coverage by making it more affordable."

Groups such as Washington-based Wal-Mart Watch, a labor-backed coalition, said remedies such as the Maryland bill are needed to stop employers such as Wal-Mart from driving down benefits for everyone.