Oklahoma insurance commissioner challenges new fees on health care plans

Communications Director Paul Sund said it's too early to say whether Holland's challenge might prompt a budget crisis, "but it would affect Medicaid recipients and providers across the board — nursing homes, doctors, hospitals and their patients."

Holland on Tuesday asked the state Supreme Court to block the collection of the 1 percent fee on health care plans, claiming the measure approved in May by the Legislature and signed by Henry unconstitutionally creates a new tax.

Holland is asking the court to determine if House Bill 2437 was a tax increase that required a three-fourths legislative majority, which it did not receive.

Her petition also questions whether lawmakers violated a prohibition against passing a revenue bill within the last five days of legislative session.

"As an officer of the state, I have a sworn duty to support and uphold our state's constitution. After thoroughly reviewing the new law with the department's general counsel, I believe it violates that trust," Holland said.

The bill was designed to provide money for the state's Medicaid program, which would be matched with federal dollars. The fee, to be paid by insurance companies, as well as by companies that self-insure employees, would be collected by the insurance commissioner.

Holland said the state cannot impose a requirement on companies that provide self-insured health insurance for employees without violating federal law.

"This is putting me in a position of having to violate one law or another and requires clarification from the courts," she said.

The insurance fee would generate an estimated $78 million a year to be matched with about $190 million in federal funds in the 2011 fiscal year, which began July 1. The bill, scheduled to take effect Aug. 27, was part of a $6.7 billion budget agreement struck between Republican lawmakers and the governor near the end of the legislative session.

Sund said the governor's office was "very surprised" by Holland's legal challenge.

"She proposed and pushed for a fee almost identical to the current law before and during this year's legislative session," Sund said. "In fact, she initiated meetings with a number of top state officials in an effort to sell them on her plan."

However, Holland said the fee she backed was not related to funding Medicaid.

If the court upholds the measure, Holland said her agency would be ready to collect the funds. If the court strikes down the measure, Holland said lawmakers could address the funding early in the 2011 legislative session.

"If courts ruled this method is unconstitutional, they would have to make a decision and develop a mechanism that is constitutional. That's their job," she said.

Roy Williams, president of the Greater Okahoma City Chamber, which opposed the original bill, said Holland's legal challenge may produce a dilemma for policymakers.

"If she's successful, now the budget isn't balanced, and Oklahoma is required to have a balanced budget," Williams said.

"Does this create a mandate of a special session? We don't know what the implications are if she's successful."