The AFL/CIO has developed a bad solution to the crisis of the uninsured in America: the Fair Share for Health Care Act, which requires large businesses to provide health insurance for their employees. The Fair Share Act simply raises the cost of employing people, and hurts individuals who need health care the most. Unfortunately, similar legislation is now pending in other states.

New York Senator Nick Spano has jumped on the bandwagon, criticizing Wal-Mart for increasing emergency room visits and Medicaid coverage. His proposed Fair Share act will require employers with 100 or more employees to spend at least $3 per hour for health benefits per employee.

This custom-made measure is pushed by and partial to Wal-Mart’s unionized competitors. In many cases, Wal-Mart is comparatively more attentive to its employees than they are. According to a study, “Wal-Mart: A Progressive Success Story,” by former economic advisor to John Kerry, Jason Furman, Wal-Mart is one of few retail stores that offer health insurance to full and part-time employees. Only 60% of U.S. companies offer health benefits; only 17% offer benefits to part-time workers. Target, for example, does not offer benefits to people working fewer than 20 hours per week.

Nevertheless, legislators and unions claim that Wal-Mart exploits government health programs like Medicaid. The AFLCIO Web site states, “… that Wal-Mart should play such a prominent role in the Medicaid crisis is unjustifiable by any measure.” Obviously more Wal-Mart employees are on Medicaid than employees in other businesses: this is purely an indication of Wal-Mart’s size, and the fact that it employs mostly low-skilled workers.

If Wal-Mart employs people who live in public housing, the law doesn’t force Wal-Mart to buy houses for them. Furthermore, most Wal-Mart employees are already eligible for the company’s insurance. About one-third of employees however, opt out of it because they are covered by other family members’ plans or Medicaid.

Medicaid is a consummate sponge: It grew from 7% of U.S. health spending in 1970 to 16% in 2003 – but there was no comparable increase in the number of poor Americans at this time.

State governments have little incentive to stop federal handouts because they pay less than half the cost of Medicaid. Taxpayers pay most of the tab – as much as 83% in poorer states. Wal-Mart did not create this problem: in fact, it pays for it with its corporate taxes – $5.6 billion in 2005.

If the Fair Share legislation were consistent on mandatory health insurance for employees, it would include small businesses too. Most small businesses simply cannot afford to provide health benefits, and thus, have more uninsured employees. Such legislation would be a certain job killer.

The Fair Share Act is just another government-imposed cost on doing business, similar to a minimum wage law. The Fair Share Act already faces lawsuits in Maryland and New York. The Retail Industry Leaders Association filed the suits, claiming the legislation illegally mandates health care spending and inhibits businesses from dealing with their employees. RILA President Sandy Kennedy said the law will “discourage business development and stunt growth,” and hopes other states will recognize that it is unlawful.

The employer-provided system that dominates U.S. health care is already drowning in government mandates that limit employees’ choices and increase health care costs. It would be better for states to direct a portion of Wal-Mart’s colossal tax bill towards funding tax-free Health Savings Accounts for the uninsured. HSAs are associated with health plans that cost about a thousand dollars less than traditional employer-provided insurance.

Perhaps the fairest thing government can do is step aside. The greatest problem with our health care system today is not that companies don’t provide enough health care for their employees, but precisely the opposite: People are too dependent on their workplaces, not themselves, for health insurance.

Ms. Ernst is a public policy fellow in health care studies at the Pacific Research Institute (www.pacificresearch.org).