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Fair Share Health Care

Millions of Americans have lost employer-based health coverage.
Between 2004 and 2005, the number of uninsured Americans grew by 1.3 million. Most of the increase is due to a decline in employer-sponsored coverage.1 Only 60 percent of working-age Americans have employer-based coverage today, compared to 69 percent in 2000.2 Today, 36 million working Americans do not have employer-based health coverage.3
The drop in employer-based coverage disproportionately affects people of color.
Only 51 percent of African Americans and 40 percent of Latinos had health insurance coverage through an employer in 2003. That same year, 71 percent of white employees had health coverage.4
For the first time in recent memory, America’s largest employers are failing to insure their workers.
Historically, large American companies have provided health insurance to their employees. But in recent years, some large companies have cut health insurance benefits to reduce costs. Today, more than one quarter of employees in companies with 500 or more workers do not receive employer-based coverage.5 Those employees’ companies may offer insurance, but pay such a small share of the premium that the coverage is unaffordable.
Wal-Mart is leading the race to the bottom—it provides health insurance for fewer than half of its employees.
Of Wal-Mart’s 1.33 million employees in the United States,6 only 48 percent are covered by the company’s health insurance plan.7 Those employees whom Wal-Mart does cover receive relatively paltry benefits—the company spends only about $2,660 annually per covered employee for health benefits.8 In contrast, Wal-Mart’s leading competitor, Costco, covers 80 percent of its workers9 and spends $5,735 per worker for health benefits.10 Although Wal-Mart announced a lower-premium health insurance option in late 2005, high deductibles, copays, and an overall benefit cap make the plan much less affordable than the insurance offered by competitor companies.
Companies that don’t provide health insurance are, in effect, subsidized by companies that do.
Responsible companies that provide health benefits pay $150 billion to insure their own employees, but also pay $31 billion to insure other companies’ workers through dependent coverage.11 Their actual costs are even higher because insurance premiums are inflated to compensate hospitals for treatment of the uninsured.
Companies that don’t provide health insurance are, in effect, subsidized by state taxpayers.
A few large companies pay such low wages that employees qualify for state public assistance programs. Public programs—mostly Medicaid and SCHIP—pay a total of $8 billion annually to cover workers and their families.12 According to the company’s own internal study, about 65,000 Wal-Mart employees are covered by Medicaid and 27 percent of the children of Wal-Mart employees are enrolled in Medicaid or SCHIP.13
Companies that don’t provide health insurance have an unfair competitive advantage over companies that do.
Businesses with and without employee health insurance coverage compete against each other for customers and contracts. The companies that don’t pay a fair share of health costs have a competitive advantage—and responsible companies are penalized for being good corporate citizens.
States can require large companies to pay their fair share of health costs.
The Fair Share Health Care Act—enacted by the Maryland legislature in 2006—requires companies with 10,000 or more employees to spend at least eight percent of payroll for health care or pay the difference into a fund that expands Medicaid eligibility. The Act recaptures healthcare costs shifted to the state, and it begins to level the playing field between businesses with and without employee health coverage. Although the Maryland law was struck down in the case of Retail Industry Leaders Association (RILA) v. Fielder, the court rejected plaintiff’s argument that the Fair Share concept violates the U.S. Constitution’s equal protection clause. Instead, the court ruled that the statute’s language conflicts with the federal Employee Retirement Income Security Act (ERISA).14 Maryland legislative leaders have vowed to reenact the law in a manner that it is not preempted by ERISA.
Americans strongly support the Fair Share Health Care Act.
A November 2006 Lake Research Partners poll found that American voters support Fair Share Health Care by a margin of three to one.15

This policy summary relies in large part on information from the AFL-CIO and the Maryland Citizens’ Health Initiative.

Endnotes
  1. John Holahan and Allison Cook, “Why Did the Number of Uninsured Continue to Increase in 2006?” Kaiser Commission on Medicaid and the Uninsured, October 2006.
  2. Kaiser Family Foundation/HRET, “Employer Health Benefits: 2005 Summary of Findings,” September 14, 2005.
  3. Sara Collins, Karen Davis and Alice Ho, “A Shared Responsibility: U.S. Employers and the Provision of Health Insurance to Employees,” Inquiry, Spring 2005.
  4. Bradley Shrunk and James Reschovsky, “Trends in U.S. Health Insurance Coverage, 2001-2003,” The Center for Health Systems Change, August 2004.
  5. “A Shared Responsibility: U.S. Employers and the Provision of Health Insurance to Employees.”
  6. Steven Greenhouse and Michael Barbaro, “Wal-Mart Memo Suggests Ways to Cut Employee Benefit Costs,” New York Times, October 26, 2005.
  7. Susan Chambers, Wal-Mart Executive Vice President for Benefits, “Supplemental Benefits Documentation: Board of Directors Retreat FY06,” Wal-Mart Stores, Inc. (internal document released to the New York Times), October 2005.
  8. “Wal-Mart Memo Suggests Ways to Cut Employee Benefit Costs.”
  9. Michael Barbaro, “Wal-Mart to Expand Health Plan for Workers,” New York Times, October 24, 2005.
  10. Annette Bernhardt, Anmol Chaddha and Siobhan McGrath, “What Do We Know About Wal-Mart?,” Brennan Center for Justice, August 2005.
  11. “A Shared Responsibility: U.S. Employers and the Provision of Health Insurance to Employees.”
  12. Ibid.
  13. “Supplemental Benefits Documentation: Board of Directors Retreat FY06.”
  14. Retail Industry Leaders Association v. Fielder, 435 F.Supp.2d 481 (D.Md. 2006).
  15. Lake Research Partners poll, conducted for Center for Policy Alternatives, November 2006.
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