Maryland Goes Anti-Business

The Maryland legislature yesterday voted to override Governor Bob Ehrlich's veto of the so-called Wal-Mart bill. The law essentially mandates that all private employers with more than 10,000 employees in Maryland dedicate at least 8% of their payroll to health care benefits or make a contribution to the state's Medicaid coffers.

WARNING: The spin on the new law causes extreme dizziness and nausea.

The politics behind the bill, while interesting is nothing particularly new. The Democratic majority in the legislature felt that it was criminal that a popular employer was not paying more of their employees health care costs. Thus, the bill was created and to everyone's knowledge, Wal-Mart is the only company that qualifies. The bill is written in a general way, so that any company with more than 10,000 employees would fall under the bill, the common knowledge is that the threshold was picked to get Wal-Mart and no other companies.

From an on-line chat hosted by WashingtonPost.com:

It has been said that one reason why Gov. Ehrlich vetoed the bill is because that although the employee highmark stands at 10,000, eventually it would be lowered (not neccesarily down to 10) in the future to affect more employers and people. In other words, the 10,000 highmark today may turn into 5,000 in the future. Any truth to this?

John Wagner: Opponents of the bill argued that there could be a "slippery slope" like that you describe. Supporters say that is not their immediate aim, though there has been a bill considered -- but not passed -- in recent years that would apply to employers of any size. It would mandate a lower threshold of health spending, however.

and thus, the slide begins.

But here is the key facts. Wal-Mart claims to employ about 17,000 people in Maryland. Given the number of stores that are in this state, this seems about right. Assume for a moment that 1/3 of those employees, some 5500 people or so people are part-time high school or college-age kids, most of whom are still on their parents insurance. That leaves us with 11,500 people who are working adults. Lets further assume that about 2600 of those people, about 1/4 are uninsured or underinsured and would be subject to getting more healthcare paid by Wal-Mart.

According to published reports in the Washington Post, there are some 786,000 or so uninsured people in Maryland. Thus this bill will bring insurance to a whopping .3% of uninsured Marylanders, less than one percent!!

Even the normally liberal Washington Post editorialized on the bill:

But since when do states have the right to penalize firms simply because they are big and successful? The Maryland bill is a legislative mugging masquerading as an act of benevolent social engineering.

If the purpose of the act is to provide health care, perhaps the General Assembly could start with steps to control the skyrocketing health care costs. Health care spending experiences double digit increases every year and insurance premiums have to keep up. Wal-Mart, like any company, and probably more so given its business model, seeks to keep such costs down. How does it do that, by finding cheaper plans--which is often easier since they employ so many people. Wal-Mart may also limit the availability of health care to employees company wide.

So who is going to lose out under this regime? Wal-Mart may lay off people, but that is unlikely. Wal-Mart was considering a distribution center is Somerset County (on the Eastern Shore, one of hte poorest counties in Maryland). Now the company may move it across the border to more business friendly Delaware--cost to Maryland, at least 800-1000 jobs, probably more with the additional need for services, support and other economic improvements in a county that needs it.

No the big losers are going to be two groups. First, the lower classes in Maryland. Like it or not, the Wal-Mart business model is built upon providing consumer goods at a very low price, as low as Wal-Mart can make them and still turn a profit. In fact, in terms of the price breaks, goods and services it provides, Wal-Mart is a better welfare agency than the state government.

Second, the legislature is going to lose out. The Maryland General Assembly acted as if it new better than everyone else in this matter. They assume, wrongly, that people will not understand where Wal-Mart is going to make up the difference between its current health care costs and its 8% rule--on the backs of Maryland consumers. Are the price increases going to be big--no, but they will happen.

Coming in an election year in Maryland, the General Assembly is staking its reputation on a move that will haunt them at the polls. Low income people, middle-class Maryland may very well punish the General Assembly for creating an atmosphere in the state that says to businesses--don't come here.