Wal-Mart and the Employer Mandate
Wal-Mart in West Hills, CA (wikimedia)
I just wanted to briefly re-address the issue of Wal-Mart’s joint call alongside the Service Employees International Union and the Center for American Progress for an employer mandate combined with a “trigger mechanism” to control health care costs as part of an overall health reform package. Various reform skeptics have sort of pushed back against progressives touting this by observing that, hey, Wal-Mart is probably doing this because they think it will give them a business advantage.
To which one can only say: I certainly assume so! The company’s not a charity. In an interview with Ezra Klein, Wal-Mart spokesman David Tovar explains that the firm thinks these proposals “will eliminate waste and increase competitiveness,” that Wal-Mart thinks the “present system is not sustainable” and they “wanted to lend our voices to the momentum behind reform” presumably in order to help shape it. They say that “for our business, this is the right thing to do.” To speculate a bit, if I were Wal-Mart I would be concerned that a mandate of some kind is a very appealing policy option but that it might be implemented in a way that put the firm at a competitive disadvantage relative to other firms. By getting on the bandwagon, Wal-Mart can push for a mandate whose terms are relatively favorable to its own situation.
But the point for progressives is not, at the end of the day, about Wal-Mart at all. The point for progressives is that given that the name of the game is to do reform in a way that expands access and controls costs without blowing up people’s status quo arrangements (a big and somewhat unfortunate given), that an employer mandate is a very appealing policy option. As we see with the CBO’s score of the new HELP bill the inclusion of such a mandate makes the overall structure work much better—more coverage and less cost. But one worries that such a proposal will meet a solid wall of opposition from business. Now, though, it turns out that at least one very large business won’t oppose a mandate. That’s significant, not because Wal-Mart’s endorsement tells us a ton about the merits of the policy, but because it tells us that a policy with some merits may be feasible to enact.
16 Responses to “Wal-Mart and the Employer Mandate”
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July 2nd, 2009 at 3:23 pm
Wal-Mart’s support isn’t worth it if there is a “trigger mechanism”.
CAP is looking less and less progressive to me.
July 2nd, 2009 at 3:26 pm
Now, if only they can get Sens. Lincoln and Pryor(D-Wal-Mart) to toe the company line on this like they have on so many of Bentonville’s other policy proposals, we might actually get somewhere.
If not, then I repeat my earlier call: Blanche Lincoln desperately needs a primary challenger to pull her to the left.
Signed,
One Pissed off Arkie
July 2nd, 2009 at 3:28 pm
“The point for progressives is that given that the name of the game is to do reform in a way that expands access and controls costs without blowing up people’s status quo arrangements (a big and somewhat unfortunate given), that an employer mandate is a very appealing policy option.”
Can any progressives out there explain why requiring employers to provide health insurance for employees is a “very appealing policy option”? What’s so special about health insurance, as opposed to any form of insurance that a person may choose to purchase, that it has to be provided by your employer instead by yourself?
July 2nd, 2009 at 3:38 pm
What’s that sound in the background? Oh yeah, MattY’s Soros[TM]-brand shock collar wasn’t enough, Jennifer Palmieri had to put the shock collar on a leash.
Meanwhile, from this:
See also this.
July 2nd, 2009 at 3:43 pm
Cross-posted from McArldle’s blog:
Well, this liberal’s first reaction was to look for Wal-Mart’s economic interest — they’re obviously pretty good at doing this themselves. I just happen to think this is a case when progressive economic policy happily coincides with the interests of a particular firm.
Government-mandated universal health insurance would take a lot of the wind out of the sails of Wal-Mart’s lefty critics (the argument that Wal-Mart treats its employees poorly). This often very vociferous and public criticism surely causes genuine, profit-reducing problems for Wal-Mart, especially with respect to the firm’s expansion. Since Wal-Mart’s great financial strength will probably enable it to shoulder the burden of any new pay or play tax more easily than most of its competitors, government-imposed UHC with an employer mandate makes sense.
Also, although I haven’t seen what kind of rate the proposed pay or play tax is going to be, I wouldn’t be surprised if Wal-Mart is also simply calculating that the adoption of such a tax is likely to be cheaper for them in the long run than constantly battling the crushing pressure of health insurance inflation (especially in light of the fact that the other proposal on the table is to penalize firms whose workers access Medicaid). I think government-mandated UHC makes sense for plenty of businesses actually, and I expect the tepidness of business community opposition to ObamaCare is one reason it’s going to be more successful than ClintonCare
July 2nd, 2009 at 4:01 pm
Jasper:
Also, although I haven’t seen what kind of rate the proposed pay or play tax is going to be, I wouldn’t be surprised if Wal-Mart is also simply calculating that the adoption of such a tax is likely to be cheaper for them in the long run than constantly battling the crushing pressure of health insurance inflation (especially in light of the fact that the other proposal on the table is to penalize firms whose workers access Medicaid). I think government-mandated UHC makes sense for plenty of businesses actually, and I expect the tepidness of business community opposition to ObamaCare is one reason it’s going to be more successful than ClintonCare
Well put. Their “associates” are a cost in their (successful) equation for profits and market share. Part of the associates’ costs are health care costs and if Wal-Mart can make it more affordable and efficient and effective then they will be helping their bottom line.
What you have is glibertarians ideologically opposed to any sort of government involvement in business affairs because in their mind the market works perfectly and the involvement of “central planners” just screws it up.
Well by looking at the health care system and the financial system, the “free market” doesn’t work very well. Their opposition is ideological and in contrast Wal-Mart is being pragmatic and non-ideological and – surpisingly – working for good PR. Maybe with the election of Obama and a Democratic Congress they see which way the wind is blowing.
July 2nd, 2009 at 4:04 pm
A large number of businesses circumvent the tax code by providing their employees with full or partial health benefits in lieu of a bit more pay. The company’s share of the insurance is deductible as a business expense, but the employee does not pay taxes on the value he receives. Both the employer and employee benefit at the tax collector’s expense. Of course, when someone benefits at the tax collector’s expense, everyone else makes up for it. This translates largely to the working poor and lower middle class subsidizing health care for the middle and upper middle class.
This is a politically tricky injustice to rectify. The bloc of people benefitting from this tax loophole is very large and extends across party lines. So, rather than trying to fund a progressive healthcare measure by taxing those benefits, this plan seeks to extend those benefits to as many as possible.
The progressive nature of the plan is that the benefits are going to be extended mostly to the working poor and lower-middle class.
(I’ve ignored the pooled risk and bargaining power nature of employee provided insurance, because a public plan would do that without a mandate)
July 2nd, 2009 at 4:17 pm
Now, though, it turns out that at least one very large business won’t oppose a mandate.
The objection to this kind of lobbying from Walmart is not just that Walmart is of course operating in their own interest and hoping to influence the final outcome to benefit themselves. There’s also the issue that intrusive government mandates will (relatively) benefit behemoth corporations which can wield great economies of scale, compared to their smaller competitors. Sure, you can exempt companies below a certain size, but that helps *keep* those companies small. Walmart benefits in an environment that adds relatively more per-employee costs to smaller retailers.
July 2nd, 2009 at 4:17 pm
What’s so special about health insurance, as opposed to any form of insurance that a person may choose to purchase, that it has to be provided by your employer instead by yourself?
Health insurance in our modern society is a proxy for “access to healchare and medical treatments.” In other words, it’s an absolute necessity for a productive life. It should therefore be universal. Not many people who are interested in the subject think it’s a good idea for this necessity to be tied to employment, but enhancing the system we have rather than trying to blow it up seems a far more realistic way — from the standpoint of politics — to get to universality.
July 2nd, 2009 at 4:18 pm
So we help Wal-Mart destroy all of its remaining rivals, so that instead of paying 1.3 million Americans poverty level wages Wal-Mart can impoverish 3.8 million Americans, or 10 million Americans, all so we can mandate that almost every working person must accept private insurance, no public option available.
Except, of course, if things go tragically wrong in the shiny new system -strangely similar to the old system- then years from now a “trigger mechanism” magically kicks in and wallah! We are back to square one. Brilliant!
July 2nd, 2009 at 4:49 pm
All the analysis I have read examines Wal-Mart’s position in terms of business expense or public image. But perhaps the company belives there are business opportunities to be found within the framework of a revamped health care system.
July 2nd, 2009 at 6:07 pm
rE: What’s so special about health insurance, as opposed to any form of insurance that a person may choose to purchase, that it has to be provided by your employer instead by yourself?
Risk pools. So that people who are older or in poor health are not charged unaffordable premiums, but pay the same as everyone else in the group. In principle you could achieve this effect by creating other artificial groups (say, by last name, or by SS#) that would mix the sick with the healthy, but so far the employer group seems to be the only natural group this works for.
A second benefit is negotiating power. Insurance companies don’t give a damn about individual subscribers, as anyone who has ever had to fight a mistake of theirs can testify. The custom service depatment at a healh insurer makes the cable company, the cellphone company, even the DMV look like paragons of gracious efficiency. But if an HR rep from Walmart or Ford or Morgan Stanley gives them a call with a problem, they snap to it since many thousands of dollars in premiums are on the line.
Re: So we help Wal-Mart destroy all of its remaining rivals,
Don’t be ridiculous, This isn’t about Walmart’s competition. Target et al have large enough employee pools that they too should be able to bargain for the best rates. (And is Target really in competition with Walmart? Walmart is downscale while Target is middle-brow; they have somewhat different clienteles). As I noted in the thread yesterday Walmart is nost likely thinking about the profitability of its current pharmacy business and its upcoming clinic business. More insured people = more customers there.
July 2nd, 2009 at 11:06 pm
what a load of crap.
Suddenly because Wal-Mart forms a partnership with CAP, Yglesias supports further strengthening employee based healthcare.
How on earth will this reduced expenditures? This will strengthen the status quo. Score a point for the AMA.
July 3rd, 2009 at 12:58 am
JonF
You kidding, right? You don’t think this is about Wal-Mart’s competition? I ask, is ever about anything else when Wal-Mart is concerned?
Wal-Mart can absorb the initial fixed cost of compliance with an employee mandate because they are the largest private employer ever, and have 1.5 million employees over which to amortize the cost. For Mom and Pops, however, this will prove to be very expensive. For start-ups? Forget about it. Don’t even bother. The smaller you are in relation to market share and number of employees you have the more regulation is going to hurt, and an employee mandate will make it much easier for Wal-Mart to pick off the small guys and terminate start-ups in their cribs -two skills at which they are already legendarily proficient.
Wal-Mart’s larger competitors, which they still dwarf in size, like Target, with 350,000 employees, and Macy’s, with 180,000 employees, probably have a better than even chance to survive a Wal-Mart onslaught. Still, they gotta be nervous.
Remember, Wal-Mart is the one that receives a seat at the negotiating table, and they will get the first crack at exercising some of that old fashion “regulation capture” that our beloved bankers have practiced so brilliantly for so long. Too smart Wal-Mart, I must say, you gotta give them credit. They are a company that is never afraid to humble themselves in order to learn at the feet of a Master.
Personally, I must admit to extreme prejudice -whenever the word Wal-Mart passes someones lips, I smell rat. With the SEIU involved, I find the stench of rat overwhelming. To me, it looks obvious. Wal-Mart is out there angling for the biggest prize of all: a guarantee that they can remain Union free, forever.
July 3rd, 2009 at 3:18 am
The point for progressives is that given that the name of the game is to do reform in a way that expands access and controls costs without blowing up people’s status quo arrangements
July 3rd, 2009 at 6:38 am
Re: You kidding, right? You don’t think this is about Wal-Mart’s competition? I ask, is ever about anything else when Wal-Mart is concerned?
As I pointed out I do think this is about Walmart making more money– by filling more prescriptions and seeing more patients at its clinics (also, with universal insurance it will be able to charge more at its clinics). I am certainly not ascribing selfless motives to Walmart, just pointing out that the selfish motive may not be what people assume it is.
Re: For Mom and Pops, however, this will prove to be very expensive.
The Mom and Pop stores are long gone, unless they serve a niche market that Walmart can’t touch. Walmart’s competition consists of other chain stores– bix box retailers like Kmart, grocery store chains, and speciality chains like Best Buy. All of them are large enough to bargain for the lowest premium rates. That effect maxes out once you reach a certain size subscriber group. Meanwhile, the employer mandates will not apply to small businesses. Suzie’s Boutique and Joe’s Deli with maybe a dozen employees won’t be affected.
Re: Wal-Mart is the one that receives a seat at the negotiating table, and they will get the first crack at exercising some of that old fashion “regulation capture”
Maybe, but that regulation will benefit other large employers too. When Goldmann Sachs whispers a wee word in the Fed Chariman’s ear it isn’t just Goldmann that benefits from the regulatory favors– Morgan Stanley, BofA, Citibank et al share in the gravy train. So if Walmart curries the favor of the HHS Sec, Target, Sears, Macys, and the grocery chains will have reason to be grateful to the Behemoth of Bentonville.