California lawmakers left intact on Thursday a Medi-Cal program cost loophole for major employers large enough for Walmart to ooze through. 

Companies with more than 500 employees can avoid providing health insurance for part-time workers without paying a penalty under Obamacare by paying them so little they qualify for Med-Cal totally at the state’s expense.

The Assembly vote on AB 880 was 46-27 in favor of closing the loophole, but that was eight votes shy of the two-thirds it needed for passage. It may have been Democrats’ last chance for passage because they will lose their supermajority when Assemblyman Bob Blumenfield resigns this weekend to become a Los Angeles city councilman.

Under the Patient Protection and Affordable Care Act (ACA), big businesses will be penalized if employees working 30 hours are forced to sign up at the exchanges because their employer doesn’t offer an insurance plan. But the penalty doesn’t apply if the employee is so poorly paid that he qualifies for Medi-Cal.  

That provides an incentive for corporations like Walmart to pay even lower wages and reduce worker hours. Walmart, which has a healthcare program for full-time employees, actively manages employee schedules to limit how many can take advantage of it. The result is that taxpayers foot the healthcare bill for many of the employees, rather than the business which, in this case, had revenues of $447 billion in 2011 and is the world’s largest private employer.

Approximately 250,000 California workers at big companies currently receive medical coverage through Medi-Cal, the state’s implementation of the federal Medicaid program. That number could grow by up to 100,000 people in 2014 when the ACA takes effect.

The bill had the strong support of unions and was opposed by the Chamber of Commerce, which called it a “jobs killer.” Corporate lobbying against it was intense. Business groups claim it would discourage employers from hiring part-time workers and hurt the economy.  

An analysis of the bill by Assembly staff noted an observation by its author, Democratic Assemblyman Jimmy Gomez, that several employers, including Walmart, Darden Restaurants (owner of Red Lobster and Olive Garden), Papa John’s Pizza, Universal and Denny’s have already moved to cut hours and benefits in preparation for implementation of the healthcare law.

–Ken Broder

To Learn More:

“Wal-Mart” Bill Fails in Assembly as Democratic Caucus Splits (by Jim Sanders, Sacramento Bee)

AB 880: "Walmart Loophole" Bill Faces Vote This Week (by Steve Smith, California Progress Report)

State May Close “Walmart Loophole” that Lets Big Employers Shift Workers to Medi-Cal (by Ken Broder, AllGov California)

Assembly Bill 880 (California Legislative Information)