MD law may need an MD, but CA could have an Rx

A federal appeals court Wednesday upheld a lower court’s decision that struck down Maryland’s so-called Wal-Mart Act.

In 2005, Maryland passed legislation requiring businesses with more than 10,000 employees to spend at least 8 percent of their payroll on health coverage. Only four businesses met the law’s description, Johns Hopkins University (which was exempt because it is a non-profit), Giant Food (a union grocery chain which spends more than 8 percent), Northrop Grumman, a defense contracter (which also spends more than the law required because of its high-salaried workers), and Wal-Mart — ultimately the only target.

After the law passed, retailers sued, claiming — among other things — that Maryland could not legally force businesses to spend a certain amount on its “health insurance costs” because it violated the 1974 federal law that says states can’t interfere with businesses’ benefit plans. The courts so far have agreed with Wal-Mart.

What implications does this ruling have for an employer requirement in California, in the different variations proposed by Governor Schwarzenegger, Speaker Nunez, or Senate President Perata? Not much.

The courts — and ERISA — do not say that state and local governments can’t dictate spending on “health care services” — just benefits. So — there is a way for states to make policy in this area without running into the constraints of the federal law.

San Francisco’s Health Access Program (no relation), which has created an employer mandate, is believed to have a much stronger legal case to actually get around the federal restrictions.

San Francisco’s Health Access Plan requires employers to spend a minimum amount on ‘health care services.’ Businesses could satisfy this requirement several ways–by providing insurance, contributing to a city pot to cover the uninsured, or reimbursing employees for medical expenses, among other things. The latter two examples would not violate federal law because it has nothing to do with a specific benefit plan.

A second point — which is mainly just a beef but I’ll make it anyway — is that Maryland’s 8 percent threshold would have hardly caused Wal-Mart to make any changes to its workers’ health benefits. Wal-Mart testified in court that its coverage spending was between 7-8 percent, already (7.7 percent if their website is to be believed).

For Wal-Mart, that means having to increase its spending on 16,000 Maryland employees, who make an average of $14,400 a year. That means — at most — another $2.3 million a year. That doesn’t even amount to one-one thousandths of Wal-Marts net profits in 2006.

The passage of the Maryland law was a important signal, after SB2/Prop 72 in California, that other states were looking at the issue of employers scaling back or dropping coverage, and the impacts not just on the uninsured, but on the public programs and thus taxpayers as well.

The concept that everybody–including employers–should pay their “fair share” is an important one. But given how different Maryland’s law is from similarly-themed approaches, including those in New York City, Massachusetts, San Francisco, etc, the court ruling will have little actual impact on what has passed in other places, or what is being proposed.

Health Access California promotes quality, affordable health care for all Californians.

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