WASHINGTON, Jan. 19 (UPI) -- A court decision this week means laws requiring employers to offer health coverage will be off the menu for state healthcare reform efforts.
Last year, Maryland passed a law requiring employers with more than 10,000 employees to spend the equivalent of 8 percent of payroll on employee health benefits or pay into a state healthcare fund.
Other states followed suit with their own such proposals, known as fair share laws.
Massachusetts included a similar provision for employers with ten or more workers in its groundbreaking legislation to cover all the state's residents, and Calif. Gov. Arnold Schwarzenegger's recently proposed universal health coverage plan would impose a 4 percent requirement on all but the smallest firms. The city of San Francisco also passed such an ordinance.
But the Fourth Circuit Court of Appeals ruled in a two-to-one vote this week that the Maryland statute is in violation of a set of federal laws known as ERISA. The laws limit states' ability to regulate employee benefits.
That ruling means that states looking to employers to help pay for covering the uninsured will have to find some other way.
"Because Maryland's Fair Share Health Care Fund Act 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 Niemeyer wrote in the circuit court's opinion.
If the law were not struck down, he goes on to say, "surely other states and local governments would follow."
The Retail Industry Leaders Association, which sued the State of Maryland on behalf of member Wal-Mart, wasted no time in sounding the death knell for fair share laws.
The decision "makes clear that employer health plans are governed by federal law, not a patchwork of state and local laws," said association President Sandy Kennedy. "The court's decision sends a strong message that similar bills under consideration in other states and municipalities also violate federal law."
The ruling affirms the importance of ERISA laws' original purpose -- to protect nationwide companies from having to comply with numerous conflicting state regulations, added outside general counsel Stephen Cannon.
"Differing state and local health benefit mandates would only increase health care costs and serve as a strong disincentive for employers to offer health coverage," he said.
Some of the laws' biggest supporters also appear to be reconsidering their positions. Earlier this week a spokesperson for the AFL-CIO, which launched a national fair share campaign last year, said the labor union group is deciding how to proceed.
Maryland Attorney General Douglas Gansler has also not yet committed to appealing the court's decision.
Opponents of the laws may have fired an opening salvo in San Francisco, where a group of restaurant owners has filed suit against the city's employer requirement, also citing ERISA.
Part of the difficulty in crafting ERISA-friendly laws is the imprecise way they were written by Congress, said Roy Harmon III, an attorney based in South Carolina who specializes in employee health benefit law.
"ERISA was not written with a view to decide these cases," Harmon told United Press International. "But precedent clearly points to a prohibition on (fair share) legislation by states."
"It isn't a uniform and carefully drawn regulation," he said. "There's quite a bit of confusion."
The appeals court even took into account the state's motivation -- encouraging employer health coverage -- into its decision, he said, and that means there is little wiggle room for any future such laws to work around the court's opinion.
There is also little chance fair share laws will not be challenged, he added. "Because employers are as large as they are, they will be able to get their issues in front of a federal judge."
The best hope for fair share, Harmon said, may be in the new Congress, which could revisit the language of ERISA.
