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RICHMOND, Va.--Affirming a lower court ruling, a federal appeals court ruled Wednesday that federal law pre-empts a Maryland statute requiring large employers to spend a specific amount of money on health insurance or face financial penalties.
Maryland's so-called Fair Share law, which state legislators passed last year over Gov. Bob Ehrlich's veto, required employers with more than 10,000 employees in the state to spend an amount equal to at least 8% of payroll on health care coverage or pay the difference into a state fund. The way the law was written, it only would have applied to giant retailer Wal-Mart Stores Inc.
Upholding a ruling in July 2006 by U.S. District Court Judge J. Frederick Motz, the 4th U.S. Circuit Court of Appeals said the law ran afoul of the Employee Retirement Income Security Act, which pre-empts state rules and laws that relate to employee benefit plans.
Because the Maryland 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 administration of these plans," wrote Judge Paul Niemeyer in the 2-1 appeals court decision.
Additionally, by including pre-emption as part of ERISA, lawmakers sought to prevent a "regulatory Balkanization" in which multistate employers would have been subject to different state benefit rules, the court said.
The ruling was welcomed by the Retail Industry Leaders Assn., an Arlington, Va.-based trade group, which challenged the Maryland law.
"Today's appeals court decision makes clear that employer health plans are governed by federal law, not a patchwork of state and local laws," said RILA President Sandy Kennedy in a statement.