Retailer Testifies to Congress about State Healthcare Mandates

May 5, 2006

Retailer Testifies to Congress about State Healthcare Mandates

The owner of a small chain of retail stores testified Thursday in front of a congressional panel on behalf of the National Retail Federation to raise concerns about the rising number of pending healthcare mandates in a number of states. Many small retailers fear that pending legislation, including bills in Maryland and New York, will force layoffs and drive up consumer prices without solving the larger problems of healthcare.

"State healthcare mandates do nothing to address the real healthcare challenges: rising healthcare costs and reduced accessibility," said Larry Drombetta, president and CEO of HR Stores Inc., a chain of shoe stores that is a National Retail Federation member, during a hearing on "Examining the Impact of State Mandates on Employer-Provided Health Insurance" by the House Education and Workforce Committee's Subcommittee on Employer-Employee Relations. "In fact, they make matters worse. Legislation mandating that employers spend arbitrary percentages of their payroll on healthcare does not solve cost pressures but instead will jeopardize current employment levels, stunt future job growth and raise consumer prices. We believe state healthcare mandates amount to an ill-advised tax on jobs."

Drombetta testified that his 35-employee company based in Maryland has seen a 155% increase in health insurance costs since 2000, and that his employees' out-of-pocket expenses have risen too, forcing many workers to drop out of the health plan. As that happens, he said, the average age of his covered workers rises, further driving up the cost of coverage.

Under debate are bills pending in a number of states that are modeled on legislation enacted in Maryland in January, which requires companies with 10,000 or more employees to spend at least 8% of payroll on healthcare benefits. However, a new Maryland bill also requires companies with fewer than 10,000 employees to pay at least 4.5%, and a New York state bill requires companies with 100 more more workers to spend at least $3 per each hour worked by an employee. Also, many states are looking at legislation that would mandate coverage for specific medication conditions or procedures, according to the National Retail Federation.

Drombetta said during his testimony that many pending state healthcare mandates are written to single out the retail industry, and that many of the bills set percentages of payroll to be spent on healthcare that far exceed retailers' 2%-3% percent average profit margin.

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