Court overturns "Wal-Mart" law

The Maryland measure breaks a federal law letting big businesses offer uniform health coverage nationwide, judges say. The ruling sparks questions about employer mandates' legality.

By Amy Lynn Sorrel, AMNews staff. Feb. 12, 2007.

A federal appeals court decision against Maryland's "Wal-Mart law" may not halt other state efforts to require that employers offer health coverage, but it likely will force them to chart a different course, some policy experts said.

A three-judge panel of the 4th U.S. Circuit Court of Appeals in January ruled 2-1 that the federal Employee Retirement Income Security Act preempts Maryland's Fair Share Health Care Act.

Because the law "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," Judge Paul V. Niemeyer wrote.

The act, which passed a year ago and was set to take effect last month, requires firms with more than 10,000 employees to spend at least 8% of payroll costs on health benefits or pay the difference into a fund to support the state's Medicaid program. Although the law applied to four large employers in the state, it singled out Wal-Mart because it was the only business that did not meet the threshold.

Twenty-seven other states last year considered bills that would require businesses to offer insurance or pay in some way to cover the uninsured.

The court said that "a proliferation of similar laws in other jurisdictions would force Wal-Mart or any employer like it to monitor these varying laws and manipulate its health care spending to comply with them."

W. Stephen Cannon, legal counsel for the Retail Industry Leaders Assn., the trade group that sued, said ERISA was meant to make it easy for businesses to roll out nationwide benefit plans under uniform rules.