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Guest Article

Deloitte

(From the February 27, 2006 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

Health "Play or Pay" Proposals in Play in Twenty States, According to NCSL


Proposed "play or pay" laws that would require certain employers to provide a minimum level of health benefits to their employees are pending in twenty states, according to information compiled by the National Conference of State Legislatures (NCSL). One state, Maryland, already has enacted such a law -- the Fair Share Health Care Fund Act -- which is currently being challenged in federal court. California enacted a broad-based play or pay law in 2003, but it was repealed by voter referendum in 2004.

Overview of Play or Pay Laws

Basically, play or pay laws require covered employers to provide a certain level of health benefits to employees or contribute to a state-operated fund used to provide health benefits to the uninsured. The repealed California law initially would have applied to employers with 50 or more California employees, and eventually would have applied to employers with as few as 20 California employees. The Maryland law applies only to employers with 10,000 or more Maryland employees.

The play or pay bills pending in other states generally are patterned after the Maryland law. However, the proposals vary from state to state. For example, at least one state (Arizona) would apply the play or pay mandate to employers with as few as 100 employees in their state, and another (Ohio) would set the threshold at 30,000 in-state employees. Also, the Maryland law requires covered employers to spend 8 percent of payroll on health benefits. Other proposals would set the mandate as high as 11 percent (Colorado).

The Retail Industry Leaders Association (RILA) recently filed suit to invalidate the Maryland law and a similar law in Suffolk County, New York. Their primary argument is that these laws are preempted by ERISA because they act to compel employers to provide a minimum level of health benefits to their employees. Other states currently considering play or pay laws, as well as those that might be considering such laws in the future, will be carefully watching the progress of that litigation.

States Considering Play or Pay

Following is the NCSL's list of 20 states in which play or pay proposals are pending. This list may not be comprehensive. For example, the RILA asserts play or pay proposals are pending in 33 states. However, the NCSL list, which is available online [click here], is a good starting point for tracking the progress of these proposals.

States with Pending Play or Pay Laws - February 20061

  • Alaska
  • Arizona
  • Colorado
  • Florida
  • Kansas
  • Kentucky
  • Massachusetts
  • Michigan
  • Minnesota
  • Missouri*
  • New Hampshire
  • New Jersey
  • New York
  • Ohio
  • Oklahoma
  • Rhode Island
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin

*The bill pending in Missouri (SB 944) would only require certain employers to report information about how much they spend on health care costs to the state department of labor and industrial relations. A second bill (HB 1463) similar to the Maryland law has been withdrawn.

1Data compiled by the National Conference of State Legislatures. The complete list, including summaries of the pending bills, is available on the NCSL's Web site, [click here].


DeloitteThe information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations.

If you have questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Taina Edlund 202.879.4956, Laura Edwards 202.879.4981, Mike Haberman 202.879.4963, Stephen LaGarde 202.879-5608, Bart Massey 202.220.2104, Diane McGowan 202.220.2077, Martha Priddy Patterson 202.879.5634, Tom Pevarnik 202.879.5314, Carlisle Toppin 202.220.2067, Tom Veal 312.946.2595, Deborah Walker 202.879.4955.

Copyright 2006, Deloitte.


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