A federal appeals court in Baltimore says state laws that give employers a choice between providing health coverage and paying a tax or fee violate the Employee Retirement Income Security Act.

ERISA preempts the Maryland Fair Share Health Care Fund Act of 2006, which requires employers with 10,000 or more Maryland employees to spend at least 8% of their total payrolls on employees’ health insurance costs or pay the amount their spending falls short to Maryland, according to 2-1 decision by 3 judges who sit on the 4th U.S. Circuit Court of Appeals.

The panel upheld a ruling by the U.S. District Court in Baltimore, which also found that ERISA preempts the Maryland Fair Share law.

In Maryland, the law directly affects only Wal-Mart Stores Inc., Bentonville, Ark., writes Judge Paul Niemeyer for the 4th Circuit panel in an opinion concerning Retail Industry Leaders Association vs. Fielder.

ERISA was enacted in 1974 to help make benefits administration more uniform for multistate employers, but the Maryland Fair Share law and similar rules considered or adopted in jurisdictions such as Minnesota would “force Wal-Mart to tailor its health care benefit plans to each specific state, and even to specific cities and counties,” Niemeyer writes.

RILA had asked the court to rule on whether the Maryland law violated the equal protection clause of the 14th Amendment to the Constitution, but Niemeyer writes that he need not consider the equal-protection claim because the law is preempted by ERISA.

One judge on the RILA panel, Judge Blane Michael, writes in a dissenting opinion that the Maryland Fair Share law does not violate ERISA because it gives employers the option of paying into a state fund rather than changing their benefit plans. Moreover, states need a way to cope with the effects of employers’ decisions to drop health coverage on taxpayer-funded health finance programs, Michael writes.

The 4th Circuit covers Maryland, North Carolina, South Carolina, Virginia and West Virginia.

At press time, Maryland Attorney General J. Joseph Curran Jr. had 2 weeks to decide whether to appeal to a full panel of the 4th Circuit or to the U.S. Supreme Court.

RILA says the 4th Circuit ruling sends a strong message that similar bills under consideration in other states and municipalities also violate the law.

The decision “makes clear that employer health plans are governed by federal law, not a patchwork of state and local laws,” RILA President Sandy Kennedy says in a statement.