Oklahoma Supreme Court Finds Health Insurance Tax Bill Unconstitutional

Staff and Wire Reports

OKLAHOMA CITY -- The Oklahoma Supreme Court has overturned a state law intended to raise revenue for the state's Medicaid program.

The ruling posted on the court's website Tuesday said the measure violates the state Constitution. It comes a day after justices heard oral arguments in the case.

State Insurance Commissioner Kim Holland asked the court to overturn the state law stating it violated the Constitution since a revenue bill cannot be passed in the final five days of the session. The law set a 1 percent fee on claims paid by private health insurers and companies with self-insured health care plans.

Insurance Department attorney Michael Ridgeway argued that the bill also failed to get a required three-fourths vote when it passed the House and Senate late in the legislative session.

The State Chamber applauded the decision as a victory for business owners and their workers.

"Obviously, we're very happy that this bill was thrown out by the Supreme Court because it would have cost the business community about $78 million in new costs," said Mike Seney, Sr. V.P. State Chamber.

But that's also $78 million that won't be coming into the Medicaid system, creating a hole in the state's budget.

"We don't need a special session because unexpectedly and luckily the federal government provided us more health care dollars two weeks ago. We can use those dollars to plug the budget hole that was caused by the Supreme Court decision, but again the big problem is next year. The bill will come due and it's going to be tough to fill it,"said Paul Sund, Governor's Communications Director.

Democratic State Representative Richard Morrissette voted for the fee. He said he's just glad there will be money available right now.

"Thank God for the federal government, which everybody seems to be against these days," Morrissette said.

However, Morrissette said lawmakers won't have $600 million in stimulus dollars next time around.

Several Republican state leaders praised the court's decision and are looking ahead. House Budget chairman Ken Miller said it's important not to pass on additional financial burdens to taxpayers.

"As state leaders continue to address our budget challenges, we must do so in a fiscally responsible manner without placing additional burdens on taxpayers," Miller said.

State Representative Dan Sullivan said legislators should look for an alternative option to funding the program.

"We need to find other ways to fund our Medicaid program than to rely on job-killing taxes," Sullivan said.

Sullivan said incoming House leadership, including House Speaker Kris Steele, has developed a plan that would create the revenue necessary for Medicaid funding without relying on a tax increase.

Gov. Brad Henry released the following statement regarding the ruling:

"In the days to come, we will be reviewing the court decision's short-term and long-term budgetary implications with legislative leaders," said Henry. "Obviously, from a long-term budgeting perspective, it will be disruptive to lose this revenue source at a time when the state is pulling itself out of a historic budget crisis...Oklahoma will face significant funding challenges in health care and other important programs when the Legislature returns in 2011."

Insurance Commissioner Kim Holland released the following statement on the ruling:

"Today's decision is a victory for all Oklahomans who believe that our Constitution is worth upholding. State Question 640 was passed overwhelmingly in 1992 granting the people the right to vote on tax increases in the absence of a super majority vote by the legislature.

"I appreciate the Court's expediency in looking into this matter. With this decision, my department accomplished all we set out to achieve— to ensure that we adhere to the Constitution and the laws of our state."

More: Oklahoma Insurance Chief Challenges Medicaid Tax