MANDATORY HEALTH CARE BILLS GET SOME INDUSTRY SUPPORT

SN STAFF / Reporting: Elliot Zwiebach, Jon Springer, Maria Tortoreto and Mark Hamstra

Unions aren't the only ones who want Wal-Mart to pay its "fair share."

As legislation has been introduced in several states around the country calling for large corporations to provide a minimum level of health insurance for their workers, some food retailers have taken the side of organized labor on the issue.

"Businesses are starting to get on the bandwagon because 27% of the health care premiums they pay end up covering uncompensated employees," said Craig Cole, president and chief executive officer, Brown & Cole, Bellingham, Wash., who supports so-called "fair share" legislation in his state. "All employers who provide health care are actually paying a surcharge to cover people without coverage [whose medical costs are paid by government-funded programs]. In my opinion, you can't have broad-based coverage without broad-based participation on the funding side."

Cole said he is a member of Washington's Fair Share Coalition, which is seeking passage of a bill that would require companies with 5,000 or more employees to allocate 9% of their payroll to providing health care benefits for their workers. If they pay less than 9%, they would be required to make up the difference by funding a state health plan. The bill, which stalled in committee this year but could be revised and reintroduced, also calls for government assistance for small businesses to provide health care for low-wage workers.

The proposed legislation in Washington state is similar to a law that passed in Maryland this year with the support of Landover-based Giant Food, despite opposition from the state's retail association. According to a list provided by the Service Employees International Union, 24 states have introduced bills of this type so far this year. A few states, such as Mississippi and Colorado, have already defeated some versions of the bills.

Although Cole said his company is too small to be impacted by the bill as it was proposed in Washington state, he already spends 24%-25% of his wage costs in health care coverage anyway. He said the company covers 90% of its employees with health insurance.

"The legislation is designed for cheapskates like Wal-Mart," he said.

In February, the Seattle Times reported that Greg Sparks, president of Safeway's Seattle division, had sent a letter to Frank Chopp, speaker of the house in Washington, that apparently supports the legislation.

In the letter, according to the newspaper, Sparks complained about having to compete against companies that don't provide health insurance and urged Chopp to take "immediate action" to help ease what he described as a growing health care crisis.

"We share your concern with the impact on the health care delivery system of the cost-shifting by the uninsured, as well as the unfair competitive advantage that employers who do not provide health benefits to their workers have over those of us who do," he said in the letter.

He described Safeway as a "responsible union employer," but said the company has been forced to make some tough decisions on its benefits to remain competitive. The letter did not specifically endorse the bill, the newspaper said, although it did raise several of the same arguments that supporters of the bill have made.

Sparks said "responsible employers" and taxpayers are facing an "increased burden" to cover health care costs for the uninsured - totaling approximately $12 million in Washington state in 2004 to provide state-subsidized health care for more than 3,100 Wal-Mart Stores employees, according to reports cited by the newspaper.

The reports showed that Safeway, with roughly the same number of employees in Washington state as Wal-Mart, had fewer than half as many workers on Medicaid or the state's Basic Health Plan, the newspaper said.

Safeway declined further comment.

GOING AGAINST PRINCIPLE

Jack Brown, chairman and CEO, Stater Bros. Markets, Colton, Calif., said even though supporting such legislation goes against some of his basic principles, he sees no better options.

"While I don't think, as a general rule, that government should mandate retail business to do 'X' or 'Y,' in this case I see no other way for there to be parity in the value of benefits provided to employees across America," he told SN.

He said the magnitude of the health care problem in the United States requires a legislative fix.

"We've never dealt with anything this big before," he said. "Once the tide starts flowing, the only way to build a dam is to get the federal government involved."

California has a bill in its legislature similar to the Maryland law.

Other California retailers are not so sure about their support for government intervention.

Bob Piccinini, chairman and CEO, Save Mart Supermarkets, Modesto., said he has to study the proposals more before forming a definitive opinion.

"On the one hand, if the legislation means Wal-Mart, for example, had to have health care, I would support it," he said. "At the same time, when you start raising the cost of doing business for the little guy, it has an impact on entire communities. For example, when you raise the minimum wage, it affects every small business and changes the whole mix, sometimes for the good, sometimes not."

Peter Larkin, president of the California Grocers Association, told SN the association has tentatively decided to oppose the proposal in the California Senate "because it sets a dangerous precedent that could have a negative impact on our members."

He added that it's too early in the legislative process to determine what direction the bill might take or how it might be amended.

As currently written, the bill would affect employers with 10,000 or more employees, "but that number could be lowered," Larkin said. "The bigger question facing us is what will we do to control rising health care costs, and this bill does nothing to address that."

MISSOURI LEGISLATION

In St. Louis, the Mid-American Retail Food Joint Labor-Management Committee, which represents three area supermarket chains and three union locals, last month introduced legislation that would require companies with more than 7,500 employees in Missouri to meet or exceed the state average spending in benefits per employee. Companies that fall below the average would pay the difference in a surcharge.

"It is very similar to the legislation in Maryland," said Michael Kelley, director of the committee, which represents Schnuck Markets, Dierbergs and Shop n' Save.

He said typically first-time bills such as this one "don't go anywhere à but it's certainly opened the dialogue, and it's found some interesting allies - all kinds of businesses around the state that provide health care have taken notice. They are scratching their heads and saying, 'This is something that may level the playing field.'"

He said he expects the legislation - House Bill 1805 - to receive some hearings this year, "but it's our expectation that we'll be back again with this next year."

"Ultimately we have employers here providing top-notch employee health care," he said. "And we have some competitors offering much less or nothing to their employees. Still, we see municipality after municipality rolling out the red carpet to welcome them. What we're really trying to do is educate elected officials and the public about exactly what our local hometown retailers provide and have them make the decision about the kind of employers they would like to see in their area."

THOSE OPPOSED

Some retailers said they agree with the intent of the various state bills that have cropped up, even though they don't approve of a legislative remedy.

"We support the idea, because we provide health care for our employees, and that's a lot of money," said Nick D'Agostino III, president and chief operating officer, D'Agostino Supermarkets, Larchmont, N.Y. "We support leveling the playing field, but that doesn't mean we support all legislation about it."

Many of the retailers polled by SN said they are opposed to such legislation, or are at least sitting on the sidelines.

Lynne Marmer, a spokeswoman for Kroger, Cincinnati, said the company is opposed to the introduction of laws that target specific companies or industries.

"Legislation that is truly designed to give people more access to high-quality health care is one thing, but if it's designed to target one industry - the retail industry - or even one participant in the retail industry, that's just not good public policy."

She said Kroger has tended to remain neutral on "fair share" legislation that has cropped up in states where the company operates, however.

"Oftentimes these are not bipartisan approaches to this issue," she said. "We think a bipartisan approach is important."

Jeff Lowrance, a spokesman for Food Lion, Salisbury, N.C., said that chain is opposed to such legislation.

"Mandated health care legislation of this type has minimal impact on the overall increasing costs of health care and a huge negative impact on the cost to certain businesses," he said. "We support Congress and other policy makers who are beginning to consider more comprehensive solutions to the health care problem."

Likewise, Jay Campbell, president and CEO, Associated Grocers of Louisiana, Baton Rouge, said that although Louisiana has not introduced such legislation, he is opposed to it.

"I think that's the wrong approach," he said. "I think a company should provide the amount of coverage they are able to afford, and that can be a competitive thing, where employees can be attracted by better benefits. But I think mandating coverage or targeting specific companies is generally the wrong approach."

Similarly, Rich Niemann Jr., CEO, Niemann Foods, Quincy, Ill., said he thinks "the market, as well as how well you take care of your people, should dictate where the benefits should be."

'Fair Share' Health Care Legislation by State

StateBill No.StatusEmployee Threshold*

Ark. HB 449In committee2,000

Calif.SB 1414In committee10,000

Colo.HB 1316Died in committee3,500

Conn.SB 1147In committee5,000

SB 462In committee5,000

Fla.HB 813In committee10,000

SB 1618In committee10,000

Ga.SB 579In committee10,000

IowaHB 2430In committee10,000

SB 2246In committee10,000

Kan.HB 2579In committee10,000

SB 2246In committee10,000

Ky.HB 98In committee10,000

La.SB 69In committee8,000

Md.SB 790Passed10,000

HB 1284Passed10,000

Mass.SB 695In committee99

Mich.SB 734In committee10,000

Minn.Multiple bills In committee10,000

Miss.SB 2684Died in committee10,000

N.H.HB 1704-FN-A Died in committee 1,500

N.Y.SB 6472In committee500

HB 9776In committee500

OhioSB 256In committee10,000

SB 258In committee1,000

HB 471In committee30,000

Okla.HB 2678In committee3,000

R.I.HB 6984Introduced1,000

HB 6917Introduced1,000

SB 2201Introduced1,000

Tenn.Multiple bills In committee10,000

Va.HB 258 Stricken from committee 10,000

Wash.HB 2517In committee5,000

SB 6356In committee5,000

Wis.SB 440In committee10,000

W.Va.HB 4024In committee10,000

SB 147In committee10,000

* Minimum number of employees in the state for the law to apply. Most bills require that employers of this size pay 8%-10% of their payroll costs in health coverage.

Source: SEIU

Giving Workers More Control

As retailers struggle with escalating health care costs, some suggested that giving workers more say in their insurance coverage might help alleviate the burden.

"The things I think would be helpful would be plans where employees are in control of their health care funds," said Nick D'Agostino III, president and chief operating officer, D'Agostino Supermarkets, Larchmont, N.Y. "I also like the idea where some employees pay more based on their lifestyles, such as overweight people or smokers paying a little more."

To help manage its costs, D'Agostino has asked non-union employees to contribute to their health care costs.

Craig Cole, president and chief executive officer, Brown & Cole, Bellingham, Wash., said his company seeks to get its workers involved in their health care by asking them what areas of coverage are most important to them. He said Brown & Cole has had to raise the level of employee contributions to help cover the costs.

Food Lion, Salisbury, N.C., is seeking to educate its employees "about making healthy living and health care choices."

Jeff Lowrance, a spokesman for the chain, said the company's insurance provider also offers "incentives for active living and provides a wealth of information online."

He also suggested that a comprehensive overhaul of the nation's health care system is needed, and said workers need more choices in how to fund their health care needs.

Some companies also seek to reduce their workers' compensation health care costs by having injured employees come back to work in a limited capacity.

"Many people decide that, as long as they are coming back to work, they may as well resume their regular jobs," said Bob Piccinini, chairman and CEO, Save Mart Supermarkets, Modesto, Calif.