U.S. state laws might not solve health insurance issues

February 21, 2006

Free Market Foundation

The Maryland General Assembly in January overrode Gov. Robert Ehrlich’s veto of a bill that requires employers with more than 10,000 workers in the state to spend at least 8 per cent of their payroll on employee health care or pay into a fund for the uninsured. Lawmakers in Colorado, New Jersey, Oregon and Pennsylvania plan to introduce similar legislation this year.

But according to the Philadelphia Inquirer:

It is not at all clear that the Maryland initiative (aimed at firms such as Walmart) or other proposals will do much to solve the problem of health insurance because the Maryland law might only modestly increase Wal-Mart’s health care spending, if at all.

Additionally, the law does not address the problem of workers at small and midsize companies that provide no health insurance; while requiring Wal-Mart and other employers to simply spend more, there is no incentive for the firms to find the best coverage for their workers.

The law also falls short of comprehensively addressing the related problems of rising health care costs and decisions by employers to curtail benefits or eliminate them altogether.

Jack Calfee, a health care expert at the American Enterprise Institute, says it would make more sense to require employees to have a certain level of health insurance, and let the employers decide how they want to do it. Requiring employers to provide insurance might be effective, he says, but the Maryland law does not offer any incentives for them to decrease their health insurance expenses.

Source: Chris Mondics, Forcing firms to spend on health: A Md. law that targets Wal-Mart to pay more for workers’ plans is triggering campaigns nationwide, Philadelphia Inquirer, February 6, 2006.

For text (subscription required): http://www.philly.com/mld/inquirer/business/13792553.htm

For more on Health: http://www.ncpa.org/iss/hea/

FMF Policy Bulletin 14 February 2006