When large corporations like Walmart dodge their responsibilities to provide health care to their employees, taxpayers are forced to pick up the tab. That’s unfair, and it must change.
AB 880 (Gomez) demands that the state’s largest corporations pay their fair share like the rest of us. It closes the ‘Walmart Loophole” in the Affordable Care Act (ACA) that encourages big, profitable companies to cut hours and wages so low that workers end up on taxpayer-funded programs like Medi-Cal. The law would assess a penalty on unscrupulous corporations that are pushing their costs onto taxpayers. And it improves access to affordable medical care for millions of low-income Californians.
Just the Facts
- The Affordable Care Act is designed to ensure everyone – employers, taxpayers and the government – pay their fair share. The ACA requires big employers to pay a penalty to offset the costs of public subsidies for their workers' healthcare.
- However, big corporations are exploiting a loophole in the ACA, which does not impose a penalty on employers whose workers enroll in Medi-Cal. That means that employers who pay low wages, reduce hours and fail to provide benefits are able to evade the ACA penalties and shift the cost of health coverage for their employees onto taxpayers.
- A 2004 study by the UC Berkeley Labor Center found that Walmart workers’ reliance on public health care programs cost the state $32 million annually, and that figure has continued to grow.
- Now, according to a new report from UC Berkeley found that as many as 380,000 workers employed by Walmart and other big companies will end up on the state’s Medi-Cal program by 2019.
- The state expansion of the Medi-Cal program allows large employers to shift even more of the costs of their employees’ health care onto the public. A childless adult could work 30 hours a week at $10 an hour and still qualify for Medi-Cal. Given that the typical retail worker earns $9.61 an hour, and Walmart workers earn an average wage around $8.81 an hour, many of new Medi-Cal employees will be working for Walmart and other huge, multinational companies with billions in revenue.
- Other large low-wage corporations are also cutting hours and eliminating benefits, since the penalty only applies to full-time employees. Darden Restaurants, which owns Olive Garden and Red Lobster and operates 121 restaurants in California, announced that it will reduce workers’ hours to part-time to avoid ACA penalties.
Q: There are already penalties for employers under ACA, why should California get in the way of this federal issue?
A loophole in the ACA encourages large employers like Walmart to circumvent the federal penalties they’d pay if their workers get health coverage through the insurance exchange. They plan to pay workers so little they wind up on the state Medi-Cal program instead. If California doesn’t act, our taxpayers and small businesses will pick up the tab for nearly 400,000 workers dumped by big employers by 2019. California must act to protect our taxpayers and small businesses.
Q: Who pays the penalty?
Only very large employers who aren’t paying their fair share and dump their health care costs onto taxpayers will pay any penalty. Small and mid-size businesses are exempt.
Q: Will this penalty drive businesses out of state and kill jobs, as big corporate groups claim?
This penalty only applies to those few very large employers who do not provide coverage and pay so little that their employees qualify for Medi-Cal. A large number of these employers are in the retail and restaurant industry—industries that will NEVER leave California because this is where their customers are. California is a huge market for retailers and restaurants and they can’t leave the state.
Q: Won’t this bill trigger more lawsuits against employers by creating a new class of protected workers? Don’t employers in California have enough lawsuits already?
No, this bill does not create a new class of protected workers. What is does is prevent retaliation by employers, so they can’t avoid the penalty by intimidating workers into not enrolling in Medi-Cal.
Q: How much will this penalty bring in?
That will be determined by how many companies decide to avoid their responsibilities and instead dump their health care costs onto taxpayers and small businesses. Most companies offer their employees a decent wage and benefits for a hard day’s work. This law only impacts those companies that are trying to cheat the system by paying workers so little that they end up on taxpayer-funded programs.
Q: How many employers will this affect?
This bill will only affect the largest, most profitable companies who evade federal law by slashing workers wages and benefits so low they quality for taxpayer-funded Medi-Cal. There are approximately 1200 employers in California with over 500 employees, though not all of them will have workers enrolled in Medi-Cal so won’t be subject to the penalty. Responsible employers that pay good wages and provide benefits will not be subject to the penalty.
Q: How will the funds be allocated and who makes that decision?
The funds will be put in a trust fund to pay for the state share of the Medi-Cal program, to increase reimbursement rates for Medi-Cal providers and to county health systems, community clinics and other safety net providers that provide care to the residually uninsured. The Department of Health Care Services will administer the funds.
The revenues from the penalty will take pressure off of the state budget to pay for the Medi-Cal program. Freeing up that revenue means more money for other state programs like schools, public safety and infrastructure.
AB 880 (Gomez)
- AB 880 would close the “Walmart loophole” in the ACA that allows low-wage employers to evade their responsibility to provide affordable coverage or pay a penalty for workers on subsidized coverage. It will ensure that large employers pay their fair share into our public health care system, saving money for the General Fund and improving access to care for recipients.
- Large employers will be subject to a fee if they have employees enrolled in the Medi-Cal program. The fee is equal to the cost of a commercial health plan that large employers provide to employees. The fee will be pro-rated for the number of hours worked by employees enrolled in Medi-Cal.
- Revenues from the fee will be used to pay for the non-federal state share of the Medi-Cal program, to increase reimbursement rates for providers to care for Medi-Cal recipients and to shore up the state’s safety net.
- AB 880 does not apply to small or medium-sized businesses. The fee only applies to large private employers with more than 500 employees. Federal, state and local public employers are exempt from the fee.
In the News
- Bakersfield Californian op-ed: AB 880 forces corporate giants to pay fair share for health care
- San Bernardino Sun op-ed: Don't let big employers cut hours to avoid providing health coverage
- LA Times: Report- Wal-Mart's low pay drives employees onto public benefits
- Sacramento Bee op-ed: Viewpoints: Should state close 'loophole' in health care law? Assemblymember Gomez says Yes
- Palm Desert Sun op-ed: Bill would stop transfer of health costs to workers
- LA Times: California bill would fine big firms whose workers get Medi-Cal
- Modesto Bee op-ed: Big companies will rip off taxpayers through Obamacare loophole
- Forbes op-ed: California To Wal-Mart- Enough! No More Taxpayer Subsidized Profits For You
- Fresno Bee op-ed: Doctors back bill to close reform loophole
- Orange County Register oped: Don't let big chains push costs onto taxpayers (subscription required)
- Press-Enterprise: Labor fed sends mail into lawmaker’s district
- LA Times: Part-timers to lose pay amid health act's new math
- Sacramento Bee: Labor-backed plan would fine large employers who send workers to Medi-Cal
- Ventura County Star: Companies that dump workers into Medi-Cal could face fines
- American Prospect: How Low Can Part-Timers' Hours Go?
- Forbes: Walmart Bails On Obamacare; Sticks Taxpayers With Employee Healthcare Costs
TV and radio coverage
- KABC/KGO/KFSN-TV: State bill proposes cracking down on 'Walmart loophole (video)
- KERO-TV: Protestors say Walmart is shifting the cost of employee healthcare onto the taxpayer (video)
- KOVR-TV: Protesters At Wal-Mart Pushing To Close Loophole In Affordable Care Act (video)
- KCRA-TV: Protesters attack 'Walmart Loophole' in West Sacramento (video)
- KGO-TV: Bill proposes cracking down on 'Walmart loophole' (video)
- Capitol Public Radio: Corporations Using Medi-Cal?
- KPBS Radio: California Bill Would Penalize Large Companies That Don’t Provide Health Coverage
- Southern California Public Radio: Part-time employees losing hours as ACA implementation approaches