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RICHMOND, Va. — Attorneys for Maryland asked a federal appeals court Thursday to allow the state to enact a law that would require Wal-Mart Stores Inc. to spend more on employee health care or pay a tax to defray Medicaid costs. Passed by the state legislature last year, the Maryland Fair Share Health Care Fund Act is part of the state’s “ongoing, long-standing efforts to address health care and skyrocketing costs of Medicaid,” Steven M. Sullivan, the state’s solicitor general, told the 4th U.S. Circuit Court of Appeals. The law would require nongovernment employers with 10,000 or more workers to spend at least 8 percent of their payroll on health care or cover the difference in taxes. The measure was aimed at Wal-Mart, the target of critics who say its inadequate health care coverage forces some workers to rely on government programs. Other states have considered similar legislation, though Maryland is the only one that adopted such a measure. The Retail Industry Leaders Association, a trade group of which Bentonville, Ark.-based Wal-Mart is a member, urged the three-judge panel to uphold a lower court’s ruling that struck down the law. U.S. District Judge J. Frederick Motz ruled in July that the Employee Retirement Income Security Act (ERISA) pre-empts and invalidates any state laws that mandate employee benefits such as health care or pensions. But Sullivan argued that the law passes muster under federal labor law because it doesn’t force Wal-Mart to offer health care; it gives companies the choice of spending at least 8 percent on employee health benefits or covering the costs with increased taxes. He also said that not all health-care benefits � for example, in-store medical clinics � are covered under ERISA. “They have real options; Wal-Mart knows it,” he said. “They were trying to convince the legislature they weren’t as chintzy as their competitors were saying they were.” He also argued that the law has a legitimate public purpose: to defray health-care costs. RILA attorney William J. Kilberg reiterated that the Supreme Court and lower courts have made it clear that ERISA, not state laws, governs employee benefits, and therefore states can’t compel companies’ health-care spending. But Judge Paul V. Niemeyer asked Kilberg if Maryland was actually mandating benefits if companies can opt to pay the tax. “It’s a Hobson’s choice, because no sane employer would make that choice” between increasing its spending and paying more taxes, Kilberg said. Kilberg also expressed concerns that if the law is upheld, all other states would be able to pass laws mandating similar benefits, “an unprecedented, direct assault on ERISA” and the end of a uniform national plan. Niemeyer said that is no different from the patchwork of regulations that corporations already face when doing business in different states and localities. The Maryland legislature passed the Maryland Fair Share Health Care Fund Act this winter to help encourage companies to keep their workers off public assistance, including $4.6 billion in annual Medicaid spending. The law is to take effect in January but the state will delay enforcing it until a ruling is issued. The appeals court usually rules several weeks after hearing oral arguments.

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