Oklahoma Supreme Court Rejects Health Plan Fee

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August 25, 2010 Wednesday 04:21 PM EST

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Oklahoma Supreme Court Rejects Health Plan Fee

Jesse A Hamilton

OKLAHOMA CITY

The Oklahoma Supreme Court has rejected the constitutionality of a law that would have charged a 1% fee on health claims paid by carriers. The surcharge was to pay for the establishment of a Health Carrier Access Payment Revolving Fund that would have covered state Medicaid expenses.

Expected to raise $78 million a year, the fee was to be collected by the insurance commissioner until the end of 2014. It had been signed into law by Gov. Brad Henry in late May but was challenged in court by Commissioner Kim Holland, citing violations of procedure in the method by which it was passed. In its decision, agreeing with Holland, the state's high court has now determined the law should not be enforced.

The initial proposal was an effort to shore up the state's budget, and the money was going to be used to maximize federal matching funds for Medicaid -- intending to secure an additional $190 million next year. But the questions about its legality arose because of the nature of the fee -- really a tax, said Holland, meaning the bill had to follow Oklahoma's strict rules for the passage of a revenue measure. For instance, it didn't win the three-fourths vote the state requires in each chamber for a revenue bill.

"The legislature tried to couch it in terms that it was a fee," Holland said. "It was not a fee -- it was a revenue measure."

The court heard an hour of oral arguments on the legal dispute before deciding to overturn the state law, determining that the law's passage in the legislature hadn't followed appropriate procedural rules.

Holland said her objection to the method of passage doesn't signal opposition to the underlying idea. "Not at all," she said. "That was not the issue." And she realizes the need in the Medicaid arena, she said, but argued that this wouldn't have been a good strategy if its foundation was illegal. "I'm not insensitive to the issues with Medicaid," Holland said, but she added that the state's Medicaid agency "is fine right now." Allowing the law to move forward would have opened it up to industry lawsuits, she pointed out.

In a partially dissenting opinion, Justice John Reif said, "In my opinion, HB 2437 is a constitutionally permissible fee related to the provision and regulation of health insurance in the State of Oklahoma."

The Oklahoma Health Care Authority, which oversees Medicaid, has seen increased enrollment due to the recession, spokeswoman Jo Kilgore had said earlier. When the bill was under consideration, the authority had said it had the resources to get through the fiscal year that ended two months ago, but it has had no public position on the law (BestWire, May 27, 2010).

America's Health Insurance Plans didn't take a position on the ruling, according to spokesman Robert Zirkelbach.

(Jesse A. Hamilton, Washington bureau manager: [email protected])

August 26, 2010

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