Wal-Mart Argues Against Maryland Law Ditctating Benefits

Wal-Mart and other retailers challenged Maryland’s new law requiring Wal-Mart to spend more on employee health care, arguing before a Baltimore judge last week that only the federal government may dictate health spending by private companies.

Maryland’s law requiring large employers to spend at least 8 percent of payroll on health care or pay the difference in taxes is worded so that only Wal-Mart Stores Inc. would be affected. The Retail Industry Leaders Association, which includes Wal-Mart, argued that the law unfairly targets the world’s largest retailer. Barring court intervention, the law takes effect in January.

“This law is highly discriminatory,” said Eugene Scalia, lawyer for the retailers. Scalia is a former Labor Department solicitor and son of U.S. Supreme Court Justice Antonin Scalia. “This was intended and crafted to affect just one company.”

Lawyers defending the state said Wal-Mart is free to pay the penalty instead of providing better benefits — an estimated $6 million a year by state estimates. Or the retailer could set up health clinics for its employees.

“It doesn’t mandate benefits,” argued Gary Kuc, assistant attorney general.

U.S. District Judge J. Frederick Motz said the argument that Wal-Mart would pay penalties or set up first-aid clinics instead of change its worker benefits didn’t pass his “silliness test.”

“Isn’t it a little silly to suggest that Wal-Mart is going to meet its health care funding requirements by setting up first-aid clinics?” Motz asked.

Motz was tough on the Wal-Mart side, too, asking whether throwing out Maryland’s law would be a signal to states that they can’t experiment with ways to control spiraling health care costs. He cited Massachusetts, where state lawmakers this year instituted expanded health coverage for the uninsured.

Scalia said Maryland’s law was unlikely to do anything but force Wal-Mart to spend more on health care.

Other states have considered bills similar to Maryland’s law, although no other state has adopted one.

In Maryland, where state budget writers were looking for ways to rein in a $4.6 billion annual Medicaid tab, the Wal-Mart law was seen as a way to encourage companies to keep employees off public rolls. It became law last winter when the Democratic legislature overrode a veto the year before by Republican Gov. Robert Ehrlich.

Kuc, the state’s lawyer, argued the law is legitimate because of the state’s interest in reducing uninsured residents.

“We’re all paying elevated rates for people who don’t have health insurance,” Kuc said.

The attorneys also debated whether the law in Maryland will affect residents of other states. Motz said Wal-Mart would likely pass on its health care costs in Maryland to customers, even out-of-state customers.

“Doesn’t that mean that a consumer in South Dakota will be paying more?” the judge asked. “In effect, the consumer in the other state is helping to fund Maryland’s Medicaid.”

Kuc responded that Wal-Mart, based in Bentonville, Ark., could absorb the costs without raising prices.

An advocate who pushed for the Wal-Mart bill, Vincent DeMarco of the Maryland Citizens’ Health Initiative, watched the arguments and said the law should be upheld.

“Invalidating this law would prevent states from doing innovative things to expand health care,” DeMarco said.

Motz has no timetable to issue a ruling.