Universal Health Care, Wal-Mart, Maryland and Massachusetts

Since the passage of the Massachusetts Universal Health Care Law, many folks have been wondering "what about ERISA pre-emption?"  (OK, maybe not that many.)  In a nutshell (and with apologies to ERISA lawyers), Federal ERISA law pre-empts state law that relates to insurance in the context of employee benefits.  Richard Bales, among others, has opined on his WorkplaceProfBlog that the Massachusetts law is pre-empted.  Others have taken the opposite view, in part due to the options afforded employers (“pay or play”).

This week, a federal judge struck down a Maryland law that required any employer with more than 10,000 employees in Maryland to contribute at least 8% of payroll to health insurance benefits (known as the Wal-Mart law because, you guessed it, the law applied to only one employer), holding that it was pre-empted by ERISA.  Feel free to peruse the decision and order, as well as commentary from bloggers in Maryland (Below the Beltway) and Massachusetts (A Healthy Blog).

This decision holds special interest for Massachusetts, since the universal health care law here has a similar "pay-or-play" provision.  The Massachusetts law, however, requires payment of $295 per employee, not 8% of payroll per employee.  The judge in the Maryland decision distinguished the Massachusetts law in a footnote, saying:

Of course, I am expressing no opinion on whether legislative approaches taken by other States to the problems of health care delivery and its attendant costs would be preempted by ERISA. For example, the Commonwealth of Massachusetts has recently enacted legislation that addresses health care issues comprehensively and in a manner that arguably has only incidental effects upon ERISA plans. In light of what is generally perceived as a national health care crisis, it would seem that to the extent ERISA allows, 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 health care for all citizens.

The key distinction for this judge between the Massachusetts and Maryland plans seems to be that the Massachusetts plan is more comprehensive. A more cynical view would be that the the “penalty” for noncompliance is significantly greater in Maryland, and that is what contributed to the decision going the way it did. It remains to be seen whether the state will appeal — and whether this decision emboldens any potential plaintiffs in Massachusetts.