An attorney for Insurance Commissioner Kim Holland's office asked the Oklahoma Supreme Court Monday to strike down a new law designed to raise revenue for the state's Medicaid program.
Attorney Michael Ridgeway told the high court state lawmakers did not follow constitutional guidelines when they passed the bill. Their errors included failing to get a required three-fourths vote of the House and Senate, he said.
The law sets a 1 percent fee on claims paid by private health insurers and companies with self-insured health care plans to support Medicaid, which provides health care to low-income and elderly residents.
Attorneys for the Oklahoma Health Care Authority, the state's Medicaid provider, and other state agencies urged the court to uphold the new law and said it was meant to increase residents' access to health care services provided by Medicaid.
Assistant Attorney General Scott Boughton said state lawmakers were grappling with a massive $1.2 billion budget shortfall when they began crafting a budget for the fiscal year that began July 1 and adopted the Medicaid fee to help balance the budget.
"They had to act and they had to act quickly," Boughton told the court's nine justices during oral arguments. The new fee is scheduled to go into effect Friday.
Justices indicated their decision may depend on whether the Medicaid fee fits the legal definition of a tax under state law. The Legislature is bound by strict constitutional guidelines when it adopts a new tax, but those rules don't apply to fees.
Requirements include passage by a three-fourths vote of the House and Senate. Also, lawmakers can't pass a tax during the last five days of a legislative session. The Medicaid fee received final passage during the final week of the 2010 Legislature, which adjourned May 29.
Responding to a question from Justice Marion Opala, Ridgeway said both fees and taxes raise revenue, but that a fee is intended to reimburse government for the cost of workers and facilities needed to provide a service whereas a tax pays for government programs.
"On its face, this is a revenue bill," Ridgeway said. "There is no purpose for this bill other than to raise revenue."
Justice John Reif of Skiatook asked Ridgeway if the Medicaid program could be considered a health insurance plan since it provides health care services similar to an insurance policy. Medicaid doesn't meet the definition of an insurance plan, Ridgeway responded.
But OHCA attorney Howard Pallotta said the fee was intended to compensate the Medicaid provider for money it pays into Insure Oklahoma, a state program that provides premium assistance for employees of small businesses who purchase private health insurance.
Supporters have said the measure will raise $78 million in new revenue for state coffers. With federal matching dollars, the fee will raise about $240 million for the state's Medicaid program.
The law requires Holland's office to collect the fee, and Ridgeway said analysts predict that will cost about $75,000 a year.
The justices did not indicate when they would make a decision.
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