Jewish World Review Nov. 24, 2004 / 11 Kislev, 5765

Froma Harrop

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Consumer Reports

Freeloading Wal-Mart, et al. | Californians came oh-so-close to planting the flag of mandated health coverage on the U.S. mainland. Proposition 72 went down by a hair, despite a $9 million campaign to sink it. California's model was Hawaii, which requires employers to insure workers who put in 20 hours a week.

All eyes have now turned to the State of Washington. Lawmakers there are considering a bill that includes much of what was in Prop. 72. It should shock no one that the arguments made in California have been shipped north.

Prop. 72 foes charged it would create a new "health-care tax." Actually, it would have offered a kind of tax cut for those companies already insuring their people — and that must compete against freeloaders on the health-care system.

We speak here of Wal-Mart. Many called Prop. 72 a referendum on Wal-Mart. Employer of 1.2 million, Wal-Mart keeps prices low, in part, by making others subsidize its workers' health care.

The "others" include the taxpayers. Georgia found that over 10,000 children of Wal-Mart "associates" ended up in the state health program. The cost to Georgia: $10 million. California says that uninsured Wal-Mart employees cost its taxpayers $32 million a year. The company's elderly workers, of course, are covered by Medicare, which means the federal taxpayers.

Many Wal-Mart employees find coverage by attaching themselves to their husband's or wife's health plan. That means that other companies are picking up what should be Wal-Mart's health-care responsibilities. And many of them are Wal-Mart's competitors.

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Listen to Craig Cole, who heads Brown & Cole Stores, a chain of 51 supermarkets in Washington State. He's seen the spouses of Brown & Cole workers sign up for his health plan because their own employers won't cover them.

"We're paying the families of people who work for us," he said. "We're also covering the uninsured or underinsured. You have this piling-on effect, where employers who do provide benefits are paying more than their fair share."

The result has been a race to the bottom: Companies that directly compete against the deadbeats are pressured to cut their own benefits. For instance, Wall Street analysts have been beating up on Costco, Wal-Mart's closest competitor, because its labor costs are higher. Based in Issaquah, Wash., Costco covers 96 percent of its eligible workers. Wal-Mart insures only 45 percent of such employees.

Foes of state-mandated health coverage say the burden of providing heath coverage would cause many companies to leave the state. That is highly unlikely. Businesses that don't insure their workers tend to be in the restaurant, retail or other service industries. The list of Prop. 72 opponents was heavy with the likes of Taco Bell, Pizza Hut, Sears and Office Depot. These businesses have to be near their customers.

Sure, Pizza Hut could try to serve Californians from Las Vegas. But wouldn't the pizzas get cold by the time they reached Fresno? Or perhaps Office Depot expects customers in Los Angeles to drive four hours to the Arizona border for a box of envelopes.

What Prop. 72 would have done is make California more competitive for the nice companies that cover their employees. The race-to-the-bottom mindset never considers the possibility that raising labor standards evens the playing field for companies that already take care of their workers.

Finally, there's the moral issue. When it comes to being a good corporate citizen, certain things are off the table. You don't wreck the environment. You don't ignore worker-safety laws. And you shouldn't be able to beggar your workers on benefits — especially if you're one of the richest companies on earth.

"It's especially egregious," says chain-store executive Cole, "when you have the largest employer in the country structuring itself to be the employer of the working poor by intention."

There's a good argument to be made that America's businesses should not be paying for everyone's health care. But that's an argument for another day. As long as public policy puts that burden on employers, all employers should share it.

The sky hasn't fallen on Hawaii, which has mandated employer health coverage for three decades. It wouldn't fall on Washington State, either. On the contrary, it might make Washington a magnet for employers who prefer doing business in a place where others cannot take unfair advantage of their generosity.

Froma Harrop is a columnist for The Providence Journal. Comment by clicking here.