In our Employee Benefits Advisory of July 28, 2006, Maryland's Fair Share Health Act Invalidated by Federal Court (and the Possible Consequences for Massachusetts Health Care Reform), we reported on a successful challenge by an industry group, the Retail Industry Leaders Association (RILA), to a Maryland law that required businesses with 10,000 or more employees to spend 8% (6% in the case of nonprofit organizations) of their payroll on employee health care benefits or pay the shortfall to the state. In an important new development, a federal appeals court recently upheld the lower court's ruling. While this decision affects only one judicial circuit, and while it may yet be appealed to and overturned by the U.S. Supreme Court, the appellate court's decision has important ramifications for state health care reform efforts (including Massachusetts) based on the so-called "pay-or-play" model.

See this Mintz Levin advisory for an overview of Pay-or-Play arrangements, ERISA preemption, the RILA appeal and the impact on the Massachusetts Health Care Reform Act.