Healthcare: Appeals Court Agrees That “Fair Share” Plans are Not Legal Under Existing Law

It’s been a few months since I've written about it…
Yet it’s back in the news…
And it’s important, with impact on a major policy debate…
So humor me, and pretend that it’s an exciting topic…

With this introduction…
Loyal Anchor Rising readers will know…
That it can only be…

[Dramatic pause]…
[Unorthodoxly long dramatic pause now bordering on campy]….

ERISA -- The Employee Retirement Income Security Act of 1974!!!!

The Fourth Circuit Court of Appeals has upheld a July lower court ruling striking down Maryland’s “fair share” health coverage law as illegal under the aforementioned Federal ERISA law. Fair share laws are state mandates requiring large companies either to provide health insurance to their employees or pay an additional payroll tax used to fund a state-managed healthcare plan. The courts agreed (as they always have) that the ERISA statute prevents states from regulating employer-provided benefits – any benefits, healthcare included -- any more stringently than the Federal government does.

The strikedown of the Maryland law may have immediate consequences beyond Maryland, potentially ripping the heart out of Governor Arnold Schwarzenegger’s universal healthcare proposal for California. Without the tax on employers, the additional tax-increases on doctors and hospitals proposed in the California plan probably won’t be enough to pay for it. (By the way, I haven’t yet seen a satisfactory explanation of why ERISA doesn’t also doom Mitt Romney’s universal coverage plan for Massachusetts.)

In its coverage of the ruling, the New York Times mentions an interesting alternative to “fair share” laws that may have some cross-ideological appeal, because (at least in theory) it helps separate health care choices from employment…

Maryland lawmakers may also choose to rewrite the law, using an approach upheld in several other states that requires companies with uninsured workers to pay them higher wages that can be used for health care premiums, said Paul Sonn, deputy director of the Brennan Center for Justice at New York University School of Law and an expert on fair share health care legislation.

I’d be interested to know if the law in these other states requires employers to pay their employees only what would have been spent on health insurance, of if it requires the pay increase to be enough to pay for an individual health insurance policy, which would be substantially larger. If the second case is true, then this is less a reform proposal than it is a backdoor attempt to force everyone into (and thus continue) America’s strange system of employment based health coverage. That would be a bad thing, as it would retard the building momentum for decoupling health insurance from the workplace.