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Wal-Mart, Union Jointly Endorse Employer Health Insurance Mandate

A letter to President Obama is signed by Mike Duke, Wal-Mart CEO and president; Andy Stern, president of the Service Employees International Union; and John Podesta, president and CEO of the Center for American Progress, a left-leaning think tank.

June 30, 2009
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Wal-Mart, in a letter about health care reform to President Barack Obama, has endorsed an employer mandate, undercutting employer opposition to the provision and delivering Democrats a key victory.

The letter, sent Tuesday, June 30, reflects the company’s effort to bury a Senate proposal that would require employers to pay for employees who get their health coverage with government assistance.

“Not every business can make the same contribution, but everyone must make some contribution,” the letter said. “We are for an employer mandate which is fair and broad in its coverage, but any alternative to an employer mandate should not create barriers to hiring entry-level employees.”

The letter was signed by Mike Duke, Wal-Mart CEO and president; Andy Stern, president of the Service Employees International Union; and John Podesta, president and CEO of the Center for American Progress, a left-leaning think tank.

The letter went on to endorse a proposal to cut reimbursement rates to doctors and hospitals should health spending rise too quickly.

This idea was previously raised in a paper by the Bipartisan Policy Center established by former Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell.

Duke met with senior administration officials Tuesday, June 30, to present Wal-Mart’s views. The company’s stance reflects its opposition to a proposal, floated in the Senate Finance Committee, to replace the employer mandate with a so-called “free rider” provision.

According to an outline of the committee’s policy proposals that became public last week, the free-rider clause would require employers to pay half the average national cost of Medicaid for every employee who receives Medicaid. An employer would have to pay the full cost of any tax credit an employee uses to purchase health insurance.

An employer would not have to pay into the cost of Medicaid if the company offered health insurance that was considered affordable. The proposal says health insurance is affordable if it costs no more than 12.5 percent of a worker’s income.

Employer groups including the U.S. Chamber of Commerce and the American Benefits Council have publicly opposed an employer mandate. But the introduction of the free-rider proposal pushed Wal-Mart to support the employer mandate lest the company be stuck with a law that would be particularly costly to businesses with low-wage workers, such as Wal-Mart.

About 2.5 percent of Wal-Mart employees receive Medicaid, according to the company.

The legislation from the Senate Finance Committee is expected to be released after the July Fourth holiday. Two other drafts of health care legislation, one in the Senate and another in the House, would require employers to provide health insurance to employees.

The Center on Budget and Policy Priorities, a policy group whose work focuses on low- and moderate-income individuals and families, said the free-rider clause could discourage companies from hiring low-income workers and employees with disabilities. People who are poor or disabled are eligible for Medicaid.

The policy group said an employer mandate was preferable because most employers would choose to provide adequate coverage. The fine paid by employers that choose not to provide coverage could help the government recover the cost of insuring workers who do not get insurance through an employer.

Last week, Senate Finance Committee Chairman Max Baucus, D-Montana, said his committee had shaved about $600 million off the cost of health care reform. The new price tag, $1 trillion over 10 years, would be achieved by taxing health benefits and replacing an employer mandate with a free-rider provision.

The tax on benefits and the free-rider provision would save the government as much as $718 billion, according to Sen. Kent Conrad, D-North Dakota and chairman of the Senate Budget Committee.

—Jeremy Smerd

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