Fair Share Health Care Fund Act

Maryland's Fair Share Health Care Fund Act Overturned in ERISA Challenge

Updated Jan. 29, 2007

The U.S. Court of Appeals for the Fourth Circuit (to view the ruling, click here) the today upheld the ruling of a Federal judge who last year nullified the Maryland Fair Share Health Care law, which singled out Wal-Mart for special health care spending mandates.

Background:
Maryland's Fair Share Health Care Fund Act was vetoed by the governor in 2005 (read the veto message). In January 2006, the legislature overturned the veto, making the much-debated bill state law. Senate bill 790 requires organizations with more than 10,000 employees to spend at least 8 percent of their payroll on health benefits -- or put the money directly into the state's health program for the poor.

Maryland's legislation was dubbed the 'Wal-Mart Bill' because the 8 percent threshold would affect only the retailer, though three other companies in the state count over 10,000 employees. Johns Hopkins University only needed to meet a 6 percent threshold, as it is classified as a non-profit organization. The other two companies, Northrop Grumman and Giant Food, are large enough to be subjected to the law, but spend enough on health care to be exempt. Wal-Mart CEO H. Lee Scott spoke to the National Governors Association on February 26, 2006, arguing that the law was bad for all business in the state. Link to his comments.

The Retail Industry Leaders Association (RILA) filed suit in Maryland in February to block the law, saying that it is illegal under the Employee Retirement Income Security Act (ERISA) and that it violates the equal protection clause of the 14th Amendment because it affects only Wal-Mart. Oral arguments begin in the case on June 23, 2006. RILA says that the suit is also meant to advise caution to the many other states considering similar legislation.

RILA also filed a lawsuit challenging a recent Suffolk County, NY law that requires grocery retailers to provide health benefits equal to $3 an hour. The law affects only companies that do not have collective bargaining agreements, make at least $1 billion in annual revenue, and have at least 25,000 square feet for retail grocery sales. RILA argues that this law is also preempted by ERISA, and therefore null and void.

More information regarding ERISA court challenges:
ERISA Case Study
Maryland Health Care for All! Coalition

Articles about Maryland's Fair Share Health Care Fund Act:
Washington Post, February 10, 2006.

What the nation's newspapers said after Maryland's veto override:
Washington Post, January 13, 2006

What the nation's newspapers said about the bill before the veto:
Washington Post, April 6, 2005

The NCSL Health Program regularly collects articles of interest to legislators, policymakers and those interested in health-related issues. We provide the links for informational purposes only, and they do not necessarily reflect NCSL positions.

Please note that some links may not work since many media Web sites keep active links to articles for a limited time, some as little as 24 hours. If you are interested in a story with a link that does not work, please visit the Web site of its origin.

ERISA's Impact on State Health Policy
Maryland as a Case Study

Congress passed the Employee Retirement Income Security Act in 1974 to reform and streamline employee benefit packages. ERISA intended to create uniform federal standards by eliminating competing state laws and protecting employee benefits from fraud and mismanagement. The law addresses pension plans in detail but only touches on other employee benefits, like health care. In fact, ERISA's "preemption clause" has been a sticking point for state lawmakers looking to reform health care since the law's inception.
The preemption clause states that "[ERISA] shall supersede any and all State laws insofar as they relate to any employee benefit plan." These benefits include health care. Thus state reforms have often come into conflict with ERISA because they relate, directly or indirectly, to employee benefits and conflict with the federal law. States cannot mandate that employers pay for health insurance, directly tax benefit plans, or require reports on cost or use of the plans from employers. What states can do under ERISA is "regulate the business of insurance." Through this clause states have tried to side-step ERISA, usually without success. Hawaii, with its Prepaid Health Care Act of 1974, is the only state with an employer mandate. This law was grandfathered in after ERISA passed.
ERISA is administered by the Department of Labor, but the only body that can grant an ERISA waiver (to a state implementing broad health care reform, for example) is Congress. They have never granted such a waiver. You can read the judge's decision here.

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