posted on Thursday, January 18, 2007 8:17 AM
by
Rod Satterwhite
Mandatory Health Care Law Defeated
The Fourth Circuit Court of Appeals ruled yesterday that a Maryland law requiring large employers to provide a certain level of health care coverage was preempted by ERISA. In Retail Industry Leaders Association v. Fielder (No. 06-1840), January 17, 2007, the Court considered the fate of the Fair Share Health Care Fund Act, passed by the Maryland General Assembly on January 12, 2006. The Act had been targeted at employers with more than 10,000 employees which, in Maryland, basically meant Wal-Mart. (There are three other employees in the state that meet the threshhold, but there's little question that Wal-Mart was the lightning rod in that storm.) It was, in fact, the result of a larger campaign against the retailer to raise the level of benefits for its employees. The law required covered employers to spend at least 8% of their payrolls on employee health insurance programs, and came in the midst of a great deal of press about the alleged poor quality of health insurance benefits provided to Wal-Mart employees. In fact, the bill was vetoed by the state's Republican governer, and was the target of a filibuster in the State Senate, but both measures were ultimately defeated and the law passed.
Not surprisingly, Wal-Mart, through the Retail Industry Leaders Association, sued, arguing that the law was pre-empted by the federal Employee Retirement Income Security Act of 1974. The District Court agreed with the retailer, and Maryland appealed. The Fourth Circuit, citing prior authority, recognized that ERISA "does not mandate that employers provide specific employee benefits but leaves them free, 'for any reason at any time, to adopt, modify, or terminate welfare plans.'" In analyzing the requirements of the Maryland law, the Court then concluded that it "directly regulates employers' provision of health care benefits" and is therefore preempted by ERISA.
Many other states have enacted or are considering enacting similar laws. This decision, therefore, may have a far-reaching effect on these efforts, and may slow this somewhat paternalistic movement. It's nice to see a glimmer of capitalism shine through every once in a while, isn't it?