March 2006

Maryland sets threshold for healthcare spending

The Maryland legislature has overridden the governor’s veto of a law that requires employers with 10,000 or more workers in the state to spend at least 8 percent (for a for-profit employer; 6 percent for a nonprofit) of their payroll on health insurance or else pay the difference into a state Medicaid fund.

Maryland Governor Robert Ehrlich vetoed the bill in May; however, the veto was overridden by the legislature recently and became law in accordance with the Maryland Constitution.

The law, known as the Fair Share Health Care Fund Act, is the first law of this type to be enacted in the nation and has sparked a nationwide debate over the level of benefits employers should provide to employees. The law essentially became a fight between organized labor and big business, raising questions about the extent to which government should intervene in the dispute.

The law requires covered employers to file a report with the state, beginning in January 2007 and annually thereafter, stating the number of employees the employer had in the state during the immediately preceding calendar year, the amount spent by the employer on health insurance costs in the state, and the percentage of payroll the employer spent on health insurance costs in the state.

Failure to submit the report will result in a $250 per day penalty for each day the report is not filed. Failure to make the payment required by the law will result in a $250,000 penalty.

More than 30 other states, including Michigan and Wisconsin, are considering similar measures.

Source: Ford & Harrison, www.fordharrison.com

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