The Wonk Room

Why Wal-Mart Is Now Supporting An Employer Mandate

Today, Wal-Mart, the largest private employer in the country wrote a letter (along with the Center for American Progress and SEIU) to the Obama administration expressing its support for the employer mandate: [Read the full letter HERE]

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….Support for a mandate also requires the strongest possible commitment to rein in health care costs. Guaranteeing cost containment is essential. One way to ensure savings was recently advanced by former Senate Majority Leaders Howard Baker, Tom Daschle and Bob Dole, “Implement pre-specified targets for spending growth and enact a “trigger” mechanism that automatically enforces reductions,” (Crossing Our Lines, Bipartisan Policy Center) President Obama suggested strengthening the role of Med Pac to help enforce spending discipline.

Wal-Mart’s support for an employer mandate is highly significant, but so is its rejection the ‘free rider provision’ — a likely component of the Senate Finance Committee’s bill — and request for a trigger to ensure the reduction of health care costs. By embracing an employer mandate now, Wal-Mart raises its profile on the issue — not to mention cleanses its tarnished reputation — and helps mold a likely component of health care reform: a requirement that every large employer provide adequate coverage or pay a certain percentage of its payroll towards financing health care for its workers.

As the nation’s largest employer of a predominately low-wage, low-skilled work force, Wal-Mart sees the free rider provision — requiring businesses to help finance coverage for workers who receive coverage through Medicaid or subsidized coverage in the soon-to-be-established Health Insurance Exchange — as a competitive disadvantage that raises costs. (The provision also discourages the hiring of lower income workers or workers with disabilities.)

The business argument for supporting reform that lowers the growth of health care costs, even with a mandate (especially when most of the large employers who would be effected by the mandate already provide coverage) is obvious. After all, progressives have long argued that all firms would benefit from the reduction in unpaid medical bills incurred by the uninsured, increased productivity through improved worker health and labor force participation, and the savings due to a reduced rate of health-care cost growth. But Wal-Mart is holding us to it. That is, if the savings from reform don’t materialize, or as David Cutler and Judy Feder argue in their new paper, “if experience falls short of expectations,” the legislation, Walmart argues, should include certain “triggers” that “automatically enforces reductions.” [Read more about the triggers HERE].

On the whole, this is a win-win for reformers. The nation’s largest employer has embraced a mechanism that enhances the existing system of employer-based coverage, levels the playing field between employers and preserves the employer contribution — an important source of funding for health care reform. In turn, it has requested that we guarantee cost reductions and steer clear of a policy that undermines low-wage workers. Let’s hope the Senate Finance Committee is listening.