By and  on July 2, 2009

WASHINGTON — Wal-Mart Stores Inc.’s endorsement of an employer mandate for health insurance shook main street retailers on Wednesday.

The move gave momentum to proponents of making the business community help pay for the sweeping, landmark health care reform legislation before Congress, and gave a boost to a centerpiece of President Obama’s domestic agenda.

The ramifications of Wal-Mart’s splash into the political debate over health care run wide and deep. It also sets the stage for a battle with other retailers and businesses that have formed a coalition opposing employer mandates and a government-funded insurance option.

“This fight will be a real donnybrook,” said Marick Masters, a business professor at Wayne State University. “The bulk of the business community is opposed to an employer mandate, and I think this will only stiffen their resistance to it rather than ease it. It raises the scale of intensity of the debate.”

The National Retail Federation came out swinging Wednesday after Wal-Mart’s endorsement.

“We think Wal-Mart is out of step with the mainstream American business community, particularly main street retailers,” said Neil Trautwein, vice president and employee benefits policy counsel at the NRF, which includes such members as Macy’s Inc., J.C. Penney Co. Inc., J. Crew Group, Limited Brands Inc. and Neiman Marcus Inc. “Quite simply, mandates don’t work well for retailers. You can be for reform and against employer mandates.”

The Retail Industry Leaders Association, of which Wal-Mart is a member, as is Target Corp., treads a delicate balance on the issue of employer mandates. John Emling, senior vice president of government affairs at RILA, said his association has not taken a position on the issue.

“From our perspective, we would really like to see the details of a mandate,” said Emling. “There are a lot of questions we’re asking in terms of what a mandate will look like, how it will be structured and whether it addresses part-time employees.”

Leslie Dach, executive vice president of corporate affairs and government relations for Wal-Mart, said in a statement accompanying the letter that Wal-Mart believes a mandate should “cover as many businesses as possible and cover part-time as well as full-time employees.”

Emling said RILA is not opposed outright to a mandate for covering part-time employees, but he noted other RILA members have serious concerns about how a part-time employee will be defined in legislation.

“To have a one-size-fits-all approach that sets the standard very low could be detrimental to hiring part-timers,” said Emling, adding that RILA does not view Wal-Mart’s letter as a “blanket endorsement of employer mandates.”

He said Wal-Mart made it clear it opposes any “barriers to hiring entry-level employees,” a reference to a legislative proposal that would require employers to reimburse Medicaid-eligible, entry-level employees.

Asked its stand on health care reform, a spokeswoman for Target Corp. said in an e-mail: “We are strongly in favor of health care reform and we continue to work with people in Washington. We believe in robust health care insurance for team members, including preventive care and wellness.”

WWD called 12 other retailers on the issue: Three deferred to their trade associations, five declined comment and four did not respond.

Wal-Mart unveiled its endorsement in a joint letter with the Service Employees International Union and the Center for American Progress, a think tank, to Obama on Tuesday.

“This represents a pretty big mind-set change on behalf of the nation’s largest employer, and it’s a recognition first and foremost of the notion that health care costs are increasing at a rate that cannot be sustained even by the largest employer,” said White House press secretary Robert Gibbs in his daily briefing with reporters on Wednesday. “So you can imagine the crushing impact that it has on people that are not seeing gross revenues like they are.”

But Wal-Mart’s move sent shivers through a large swath of the business community opposed to any type of employer mandates, wary of their size and scope.

Stalwart champions of health care reform, such as Sen. Edward Kennedy (D., Mass.) and Rep. George Miller (D., Calif.), were expected to gain an advantage from Wal-Mart’s endorsement as their respective committees continue to mark up legislation.

Rachel Racusen, Democratic communications director for the House Committee on Education & Labor chaired by Miller and one of three committees in the House helping draft legislation, said in an e-mail: “Wal-Mart recognizes that the system will be more fair and efficient if all employers participate in providing health coverage to hard-working Americans, rather than just some. Their letter is another sign that momentum is building for comprehensive health care reform that will reduce costs, guarantee choices of doctors and health plans, and ensure that all Americans have access to quality, affordable coverage.”

The retail giant’s support of key components of health care reform could help sway some moderate Democrats and Republicans, who have been major recipients of campaign donations by Wal-Mart over the years.

“The naysayers — other employer associations — saying Wal-Mart’s support doesn’t change anything, strikes me as a bit foolhardy,” said Robert Bruno, associate professor of labor and employment relations at the University of Illinois. “It has an impact, particularly on centrist Democrats, including the two senators from Arkansas. If you take them and add them to the mix with liberals and a handful of moderate Republicans, you get the makings of a deal around a key component piece of getting everyone covered and widely distributing the costs.”

Bruno said Wal-Mart gives cover to Republicans who are in the weeds and would like to come out in support of employer mandates, but “do not want to suffer a beating from their party.”

There was widespread speculation about why Wal-Mart came out in support of employer mandates, ranging from trying to burnish its tarnished health care image to trying to force its competitors into higher health care costs.

“Here’s an employer that’s been beat up that’s actually trying to do more,” said Brooks Holtom, assistant professor of management at Georgetown University’s McDonough School of Business. “It doesn’t hurt them competitively, and it enhances them from a public relations perspective.”

Because of Wal-Mart’s scale, the impact of the employer mandate is not as burdensome as it would be for a smaller business, he said, adding, “You have to at least ask the question, ‘What’s in this for Wal-Mart?’”

Bruno of Illinois University said: “If mandates aren’t included but Obama says employers will have to pay into a separate fund to cover all of those low-wage workers receiving a [government] subsidy, chances are Wal-Mart will pay a whole lot more under the plan and lose some control over the debate. Why not, if you are the big dog on the block, lead the parade and take the chance to shape the policy?”

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