Pay or Play Under Attack

Pay-or-play health insurance schemes -- like Gov. Arnold Schwarzenegger's in California -- come under attack in the lead editorial in the Wall Street Journal this morning. Under pay or play, a company must either provide health insurance or pay into a state (or national) fund that can be used to provide the uninsured with health insurance.

The Journal points to the recent appeals court decision striking down Maryland's "Wal-Mart" law, which required companies over a certain size to provide health insurance. The ruling said the state legislature had ignored Erisa, the federal law that establishes national standards for corporate health and benefit plans, which are, the editorial emphasizes, supposed to be voluntary.

Like the Fortune 500 executive who wrote to GoozNews Sunday after my quick analysis of the Bush tax incentive plan, which will be unveiled tonight, there will be a lot of push back by the employer community against pay-or-play plans such as the Massachusetts-California plans and the recent offering from the Economic Policy Institute. Pay-or-play does nothing to relieve companies that provide insurance from its high and increasing cost, while forcing those who don't to either buy that insurance or pay a tax. All stick, no carrot.

One way to get around this is to relieve employers of their obligation entirely -- by moving to a single-payer system financed by a broadbased tax. That will create winners and losers among corporations (those who provide plans more expensive than the national plan), and make at least some of those winners proponents of reform.