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ERISA preempts Maryland Health Act
January 17, 2007 by Ross Runkel at LawMemo
Maryland's Fair Share Health Care Fund Act requires certain employers to spend at least 8 percent of payroll on employee health insurance or pay the shortfall to the state. These health care expenditures can be ERISA-qualified plans, on-site medical clinics, or contributions to Health Savings Accounts.
The 4th Circuit held (2-1) that the Employee Retirement Income Security Act (ERISA) preempts the Maryland Act. Retail Industry Leaders Assoc v. Fielder (4th Cir 01/17/2007)
The court said, "Because [the Act] effectively requires employers in Maryland covered by the Act to restructure their employee health insurance plans, it conflicts with ERISA's goal of permitting uniform nationwide administration of these plans." The state argued that the Act imposes a payroll tax and then offers a credit for qualified spending to help pay for the state's medical assistance program, but the court said this was "a stretch." The court found preemption because the Act has an impermissible "connection with" an ERISA plan.
The court reasoned that "the only rational choice" for employers would be to restructure their ERISA plans, and that this was exactly the intent of the state legislature.
The court rejected the state's argument that the Act provides two options that would not affect ERISA plans: on-premises medical clinics and Health Savings Accounts. The court said the clinics "would not be a serious means," and said Health Savings Accounts are available in only limited circumstances. In addition, both would still have an impermissible "connection with" ERISA plans because employers would need to coordinate their spending with existing ERISA plans.
The DISSENT argued that the Act provides a means of compliance that does not impact ERISA plans - paying an assessment into a state fund.
[Plaintiff Retail Industry Leaders Association is an association of which Wal-Mart is a member. Wal-Mart is the only employer that is both covered by the Act and not already in compliance.]
My view: The case is wrong. The dissent is right. Whether or not the statute is a good idea, Wal-Mart does not have to fuss with any of its ERISA plans in order to comply. This case is an example of a court looking for a reason to strike down a statute it does not like by speculating as to what sort of employer choices are "rational" and by declaring that on-premises clinics would not be a "serious" choice. The Act gives Wal-Mart three non-ERISA ways to comply. The 4th Circuit makes it sound like Wal-Mart had only one way out.
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Editor: Ross Runkel, Professor of Law Emeritus. email Ross@LawMemo.Com, Phone 503-399-8028. Copyright LawMemo, Inc.
