Business, unions watching court battle over Md.’s Wal-Mart law

Lawmakers and lobbyists are keeping a close watch on the Maryland courts, where the partisan fight over employer-provided health insurance is primed to explode in the coming weeks as a business trade group tries to strike down a state law forcing Wal-Mart to spend more money on healthcare.

The Retail Industry Leaders Association (RILA), which represents Wal-Mart, Home Depot and other corporate giants, filed a lawsuit in February against a Maryland law that would require any employer of more than 10,000 workers to spend at least 8 percent of its payroll on health benefits or pay a fine to the state. While Wal-Mart is the only company affected by the Maryland law, the bargain-price behemoth chose to band together with its competitors and sue through RILA rather than on its own.

Paul Kelly, the RILA senior vice president who appeared before a House subcommittee last week to blast the Maryland law, attributed the decision of Wal-Mart’s business foes to back its court battle to a fear of similar “fair share” healthcare bills under consideration in 30 states.

RILA’s members “understand how bad these laws are, and they unanimously approved us moving forward,” Kelly said. “They understand it wasn’t an issue of one company. We can make a very strong statement that the whole industry rejects these principles.”

With the Senate preparing to take up its long-awaited bill on small-business health plans and the House taking its first look at fair-share mandates, retailers are moving to the forefront of the healthcare lobbying debate previously dominated by pharmaceutical companies, hospitals and other health-specific groups. Though legislative movement so far has stayed at the state level, Wal-Mart has not ruled out asking Congress to intercede on its behalf in the RILA case.

“In order for this Congress to act, there would have to be a loss … a ruling that says the Maryland law is valid,” said Kate Sullivan Hare, Wal-Mart’s director of health policy. “Then Congress might start getting involved.”

Wal-Mart and RILA argue that state fair-share laws violate the federal ERISA statute, which bars state preemption of federal employer-benefits rules. Yet, when Wal-Mart — whose lobbying expenses topped $2 million last year — initially approached Congress about reinforcing ERISA preemption limits in the wake of the Maryland law, Hare said aides urged a wait-and-see approach.

“I’d certainly never close the door on any sort of [congressional] response,” including new legislation to counter the Maryland law, said House Education and the Workforce Committee spokesman Steve Forde. The court battle has “caused great interest here in Congress,” Forde added.

The most intense interest in the Maryland case has come not from Congress but K Street. Business lobbyists are flocking to Wal-Mart’s side, playing up partisan tensions by pointing to the labor unions that are funding grassroots efforts such as Wake Up Wal-Mart and Wal-Mart Watch.

“This bill was really about the AFL-CIO and [Service Employees International Union, or SEIU] not being able to unionize Wal-Mart employees and trying to figure out what they were politically vulnerable on,” said one lobbyist tracking the Maryland lawsuit. SEIU and the United Food and Commercial Workers split from the AFL-CIO last year to form the Change to Win Coalition, but labor’s disparate halves are working together to take on Wal-Mart.

Wal-Mart Watch, which lobbied heavily on the state level to ensure an override of a veto by Maryland Gov. Robert Ehrlich (R) of the fair-share law, points out that suing through RILA allows Wal-Mart to avoid legal scrutiny of its internal data.

“It’s clear that Wal-Mart is forcing RILA to carry its dirty water around the Hill,” said Wal-Mart Watch spokesman Nu Wexler. “By enlisting a trade association to do its legal maneuvering, Wal-Mart is clearly trying to shield itself from legal discovery and the continuing public-relations fallout over its inadequate employee healthcare plans.”

At the heart of the fair-share fight is the mounting burden of state Medicaid expenses on the federal deficit. Wal-Mart employees and their families top the Medicaid rolls in the home states of at least 12 House Education and the Workforce members.

“One of the issues of concern for everybody here is this cost-shifting” among individuals, businesses and government-sponsored health-insurance programs, said Bruce Josten, executive vice president of the U.S. Chamber of Commerce. About 15 million of the nation’s estimated 46 million uninsured are eligible for Medicaid but unregistered, Josten said. “These people should be enrolled in those types of systems.”

The Chamber and the National Federation of Independent Business (NFIB) have filed briefs in support of Wal-Mart and RILA, underscoring the deep lobbying bench active on the Maryland case. Karen Harned, executive director of the NFIB’s legal center, said businesses of all sizes fear that they could be next in state and federal lawmakers’ sights if the Maryland law is allowed to stand.

“They are going down into our people, going down into employers that are true small businesses,” Harned said. In fact, Maryland recently followed its Wal-Mart-focused law with another healthcare-mandates bill that would cover a larger swath of employers.

While lobbyists continue to await congressional Republican action against the Maryland law, widespread support among Democrats leaves the door open for a federalization of fair-share healthcare after the November midterms.

“What tends to happen is states watch the federal level and the federal level watches the state level,” said Merrill Matthews, director and chief lobbyist at the Council for Affordable Health Insurance. “Especially if [Democrats] take back the House, you might see an explosion of Wal-Mart-type legislation.”