a citizen’s journal by Thomas Nephew

RILA v. Fielder strikes down Fair Share Health Care

Posted by Thomas Nephew on July 20th, 2006

The Washington Post’s Matthew Mosk and Yian Q. Mui report (‘Wal-Mart Law’ in Md. Rejected By Court) that federal district judge J. Frederick Motz has struck down the Fair Share Health Care bill passed earlier this year, ruling it conflicts with a federal law setting national guidelines for employee benefits. The Fair Share bill required Maryland companies with over 10,000 employees to pay a minimum of 8% of payroll to health care benefits, or make up the difference with payments to a state Medicaid fund.

In his RILA v. Fielder ruling, Judge Motz agreed with the Retail Industry Leaders Association that the Fair Share Health Care act was incompatible with ERISA (the Employment Retirement Income Security Act). Mosk and Mui report:

The Maryland law, Motz wrote, “violates ERISA’s fundamental purpose of permitting multi-state employers to maintain nationwide health and welfare plans, providing uniform nationwide benefits and permitting uniform national administration.”

Maryland lawmakers had been relying on an advisory opinion signed by Attorney General J. Joseph Curran Jr. (D) that listed a series of recent Supreme Court opinions, which, he argued, gave Maryland the latitude to impose the restrictions on Wal-Mart.

Motz, however, said his reading of the cases was different. “My finding that the Act is preempted is in accordance with long established Supreme Court law that state laws which impose employee health or welfare mandates on employers are invalid,” the judge wrote.

Prior to the bill’s veto override vote, at least one expert disagreed with this view of Supreme Court rulings on the matter. The Maryland Gazette reported that George Washington University law professor Phyllis Borzi believed that “since a 1995 decision, the Supreme Court has given states more control in regulating employee benefits.” The Baltimore Sun reported that Attorney General Joseph Curran agreed, “arguing that the Maryland law did not conflict with federal rules because it does not force employers to provide a specific level of health benefits. Rather, it gave companies the option of spending a certain amount on health care or paying a tax to the state.”

While that may seem like a distinction without a difference at first, I should think just paying a tax or fee to the state is operationally a very different (and simpler) choice than going to the trouble of arranging a competitive health care plan of one’s own. Be that as it may, it appears to me from inexpertly skimming the ruling that Motz’s key argument is

A short description of the statutes involved in Travelers, DeBuono, and Dillingham is sufficient to demonstrate that they lie at the periphery of ERISA analysis, not (as does the Fair Share Act) at its core.

… so that he believes these Travelers etc. rulings do not open the way for states to be health policy “laboratories of democracy” regarding health benefits policy. Some of Motz’s arguments appear odd to me; for example, he seems to argue at length that the bill is either a tax or a fee (I think he settles on regulatory fee) — but soon thereafter asserts that “the General Assembly neither intended nor contemplated that Act would raise any revenue for the State” (since it was assumed companies would prefer to raise their health care expenditures to the 8% threshold). I hope lawyers such as Nathan Newman or publius will illuminate these arguments better than I can.

The Washington Post article reports that the law is overwhelmingly popular in Maryland, with 77% of respondents to one survey favoring it. Maryland legislators and the current Attorney General Joseph Curran appear resolved to appeal the RILA v. Fielder ruling, and AG candidate Tom Perez has expressed his strong support for the bill as well:

It is quite clear to me that the intent of this legislation was to demand action by all large, private-sector employers in our State to develop or maintain health benefits’ programs for as many employees as possible. There are many chapters left in the legal battle; we will prevail because this legislation is both legally and morally sound.

Motz’s ruling did find against RILA in one respect: the Fair Share bill did not violate equal protection guarantees by “singling out” Wal-Mart. From the ruling:

The Supreme Court has made it clear that “equal protection is not a license for courts to judge the wisdom, fairness, or logic of legislative choices.” … A necessary corollary of this principle is that legislatures are permitted the “leeway to approach a perceived problem incrementally.” […]

…unless there is a reason to “infer antipathy” from the targeting of a particular group or person, “[t]he Constitution presumes that . . . even improvident decisions will eventually be rectified by the democratic process and that judicial intervention is generally unwarranted no matter how unwisely we may think a political branch has acted.” … It is only in cases involving politically vulnerable groups that the Supreme Court has appeared to rely, at least in part, on legislative antipathy when invalidating a law under the rational basis test.

But beyond that silver lining — such as it is — this is obviously a setback for the Fair Share idea, and one I hope is overturned as soon as possible.

UPDATE, 7/20: a Progressive States Network bulletin comments that the Fair Share defeat may well be reversed, and in any event has little to no bearing on other approaches to the Wal-Mart issue, e.g., prevailing wage or “big box” laws. The article makes the same point I do about “singling out” not being grounds for overturning the law. Thanks, eRobin!

UPDATE, 7/25: Labor law professor Paul Secunda (“Workplace Prof Blog”) identifies the same key passage re ERISA and comments, “…is the Maryland law really focused on ERISA plans? Some would argue that the law does not directly interfere with Wal-Mart’s health care plan, but only requires it to spend a given amount of money on health care regardless of whether it has such a plan or not. My sense is that this dispute lies at the heart of this controversy over Fair Share laws.”

EDIT, 7/29: New ERISA link directly to the statute’s language, rather than to a DOL overview.

2 Responses to “RILA v. Fielder strikes down Fair Share Health Care”

  1. eRobin Says:

    Well, it’s not like we didn’t see it coming. And you’re right about that silver lining. It’s up to the good guys to win on appeal or figure a way around this roadblock. I have confidence in this for some reason. I think it’s because it is one of the very few avenues of progress that doesn’t seem to scare the Democrats silly.

  2. » Blog Archive » "The military cannot seize and imprison civilians — let alone imprison them indefinitely." Says:

    […] that Judge Diana G. Motz may well be the spouse of Judge J. Frederick Motz. Mr. Judge Motz ruled in RILA v. Fielder that a Maryland “Fair Share Health Care” law evening the health care costs playing […]

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