Law forcing Wal-Mart to boost health care spending tossed out

BALTIMORE — A first-of-its-kind state law that would have required Wal-Mart to spend more on employee health care in Maryland is invalid under federal law, a judge ruled Wednesday.

The state law would have required nongovernmental employers with 10,000 or more workers to spend at least 8 percent of payroll on health care or pay the difference in taxes. The measure was aimed at Bentonville, Ark.-based Wal-Mart Stores, which has been under attack by critics who say that its inadequate health insurance is forcing some employees to use state-funded plans.

U.S. District Judge J. Frederick Motz decided that the Maryland Fair Share Health Care Fund Act would have hurt Wal-Mart by requiring it to track and allocate benefits for its Maryland employees in a different way from how it keeps track of employee benefits in other states.

Motz cited the federal Employee Retirement Income Security Act, which he said pre-empts state laws regarding employee benefit plans.

"My finding that the act is pre-empted is in accordance with long established Supreme Court law that state laws which impose health or welfare mandates on employers are invalid under ERISA," Motz wrote.

Wal-Mart Chief Executive Lee Scott said the ruling meant businesses would not have to contend with different standards in different states for health coverage.

Kevin Enright, a spokesman for the Maryland attorney general's office, said the state would appeal the ruling to the 4th U.S. Circuit Court of Appeals in Richmond, Va. Enright said the state disagreed with Motz on several counts, particularly in finding that the law is pre-empted by ERISA.

"Supreme Court precedent makes it clear that this law does not impermissibly impact health-benefit plans," Enright said. "Employers may choose to pay the tax or avoid paying the tax in several ways."

In Maryland, where state budget writers were looking for ways to rein in a $4.6 billion annual Medicaid tab, the Wal-Mart law was seen as a way to encourage companies to keep employees off public rolls. It became law last winter when the Democratic legislature overrode a 2005 veto by Republican Gov. Robert Ehrlich.

Nu Wexler, a spokesman for Wal-Mart Watch, one of Wal-Mart's most vocal union-funded critics, said the ruling does not change the fact that Wal-Mart's health-insurance plan is "unaffordable and inaccessible for its employees."