Critical Health Areas Project (CHAP) Newsletter

Maryland’s “pay-or-play” Wal-Mart law overturned in court

Maryland’s first-of-its-kind “pay-or-play” law was overturned by a federal district court judge on Wednesday, in a ruling favoring the Retail Industry Leaders Association, of which Wal-Mart is a member. The so-called “Wal-Mart law” was approved by Maryland’s legislature in January 2006 despite a veto by Gov. Robert Ehrlich.  It required employers with more than 10,000 workers to pay into a state fund for the uninsured, unless they contributed the equivalent of 8 percent of their payroll costs toward health benefits for their employees.  Wal-Mart was the only employer in the state with a workforce large enough and health benefit spending low enough to be affected by the law. Judge J. Frederick Motz ruled that Maryland’s law was preempted by the federal Employee Retirement Income Security Act (ERISA), which overrides state laws “related to employee benefits”.  ERISA effectively blocks states from directing benefits-related laws at employers who self insure rather than purchase insurance. However it is not clear how ERISA plays out when a state acts through taxing authority rather than a mandate.  Maryland’s attorney general had previously advised the legislature that the state law was not preempted by ERISA, and plans to appeal the recent decision.

Judge Motz also ruled that the Maryland law injured Wal-Mart because the company would have had to report to the state information on payroll and health care spending, a requirement imposed on no other companies in the state. However, he rejected the argument that the Maryland law discriminated against Wal-Mart in violation of the equal protection clause in the 14th Amendment of the U.S. Constitution, originally passed to protect the civil rights of freed slaves.

Motz emphasized that his decision only applies to the Maryland law, making it unclear exactly how the decision might affect related laws recently enacted in Massachusetts and Vermont. “It is strongly in the public interest to permit states to perform their traditional role of serving as laboratories for experiment in controlling the costs and increasing the quality of care for all citizens,” Motz wrote in his ruling.

Summaries of judge’s and key players’ positions:

Baltimore Sun article about the recent decision: http://www.baltimoresun.com/business/bal-walmart0719,0,7470993.story?coll=bal-home-headlines

Judge Motz’s decision: http://www.retail-leaders.org/new/resources/RULING.pdf

Maryland Attorney General’s opinion that ERISA does not preempt Maryland’s law: http://www.healthcareforall.com/parameters/healthcareforall/uploads/dl/Main/curranERISA.pdf

Retail Industry Leaders Association’s summary of their opposition to Maryland’s law: http://www.retail-leaders.org/new/resources/HealthCareLegalUpdate.pdf

The conservative Consumers for Health Care Choices’ statement on the decision: http://www.chcchoices.org/

AFL-CIO’s response to the decision: http://blog.aflcio.org/2006/07/19/wal-mart-off-the-hook-judge-overturns-maryland-fair-share-health-care-law/

NCSL’s overview of strategies to expand access to health care, including Maryland’s law: http://www.ncsl.org/legis/pubs/SLmag/2006/06SLMay06_PrognosisUninsured.htm

NCSL’s up-to-date listing of the status of other states’ “pay-or-play” laws: http://www.ncsl.org/programs/health/payorplay2006.htm

NCSL’s overview of the impact of ERISA on State Health Policy: http://www.ncsl.org/programs/health/fairsharenews.htm#ERISA

August 14 @ 7:30 a.m. - 3:30 p.m.: NCSL pre-conference meeting on “America's Health Care Safety Net” at Gaylord Opryland Resort and Convention Center in Nashville, TN.

August 14 @ 9:00 a.m. – 3:30 p.m.: NCSL pre-conference meeting on  “Task Force on Medicaid” at Gaylord Opryland Resort and Convention Center in Nashville, TN.

August 14 @ 3:30 p.m. – 5:30 p.m.: Health Chairs / Critical Health Areas Project “Critical Health Topics: Lessons from Tennessee” Tea, featuring speakers discussing lessons learned from Tennessee’s Medicaid experiment, TennCare.

August 15-18: NCSL annual meeting in Nashville, jam-packed with useful health-related sessions on: Health IT; Massachusetts’ new individual health insurance mandate; disease management; Medicare Part D and state pharmaceutical assistance programs (SPAPs); school junk food bans; Medicaid and the Deficit Reduction Act; drug discount cards; immunizations; Medicaid fraud; preventive care for children; protecting communities from methamphetamine; emergency preparedness; and pensions and retiree health care.  Register today!