By Constitution Staff

The Oklahoma Supreme Court struck down a bill which would have placed a "fee" on medical claims, declaring it to be an unconstitutional tax. House Bill 2437 would have levied a 1-percent fee on insurance claims to subsidize the healthcare of those who do not have insurance. The Legislature expected to use the $78 million per year generated by the fee to match $190 million in federal funds in fiscal year 2011 to pay for the state's Medicaid program to pay for the healthcare of those who do not have medical insurance.

The Oklahoma Insurance Commission, which was to be responsible for collecting the fee, filed a lawsuit asking the Court to take Original Jurisdiction. In its August 24 order assuming original jurisdiction, a majority of justices declared, "H.B. 2437 was enacted in violation" of Article 5, Section 33B and 33D of the Oklahoma Constitution and "is not to be enforced." The court found that the measure violated a ban on the passage of revenue bills during the last five days of the legislative session. The court also held that the bill failed to receive a three-fourths legislative approval or be submitted to a vote of the people. That requirement was placed in the Constitution with the passage of State Question 640. If the bill had not been struck down by the court, then virtually anything short of an increase in state income taxes would have been free from the constraints of State Question 640. The decision was approved by six of the justices, with two disagreeing and the remaining judge partially concurring with the decision.

Under the state Constitution, a bill which raises revenue as opposed to a fee, cannot be voted on during the last five days of a legislative session and must also be passed by a three-fourths majority in both the House and Senate, or be approved by a vote of the people. House Bill 2437 was voted on in the last few days of the session and did not receive the support of a supermajority in either chamber of the Legislature.

A "fee" is a charge, such as for registering your car or getting a driver's licence, which is used to support the activities of the user for which the fee is charged. In an amicus brief filed by Oklahoma City attorney Jerry Fent, whose previous lawsuit helped overturn several state fees, it was noted that 76 percent of the revenue raised by the bill would go to the state's general fund. "Raising revenue is the principle objective of this bill," Fent said.

State Rep. Dan Sullivan (R-Tulsa) praised the court for declaring the tax to be unconstitutional. "I argued against this measure when it reached the House floor because I believed it was an unnecessary tax on business and I agree with the court's decision," said Sullivan. He noted the constitutional flaws when he debated against passage of the bill on May 24, saying it would be struck down by the court. Those who voted for the bill did so knowing they were supporting an unconstitutional tax.

The former House Budget Chairman, and current candidate for State Treasurer, Rep. Ken Miller (R-Edmond) said, "I applaud the Supreme Court's decision affirming that the provider fee is in fact a tax. As details of this proposal became clear during the final days of session, I advised against and voted against its passage, strongly believing the bill to be a tax increase." He said that in addition to HB 2437 not meeting the constitutional requirements of SQ 640, it was also poor policy to increase the tax burden on Oklahoma families and businesses, especially during a global recession.

Paul Sund, spokesman for Gov. Brad Henry, who signed the unconstitutional bill into law, said the governor would review the short-term and long-term budget ramifications with legislative leaders. "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," Sund said.

The ruling left a hole in the state budget which could have resulted in a special session of the Legislature to deal with the loss. But, after the Oklahoma Legislature adjourned in May, the federal government made additional funds available to states by extending the enhanced Federal Medical Assistance Percentages (FMAP). The enhanced FMAP was set to expire December 31, but has been extended until June 30, 2011. The extension will make an estimated $140 million to $150 million available to the state. But, the legislature and governor will have less revenue available to fund Medicaid for the 2012 fiscal year which begins on July 1, 2011.

The tax would have been a burden on businesses and/or employees with health insurance plans. They would have paid a tax or high insurance premiums to benefit those without insurance. For example, following the ruling the state Employees Benefits Council (EBC), approved revised rates for HMO health insurance plans available to state employees and their families for the coming year. EBC had already announced rates with the fee included, with the absence of the tax, they lowered the rates for those insured employees.

House Bill 2437 was one of the ten bills included on this year's Oklahoma Conservative Index rating state legislators, with a vote against the bill being the conservative vote. To see how your legislator voted on this unconstitutional tax, see the 2010 Oklahoma Conservative Index published in our summer edition, or visit our website: www.OklahomaConstitution.com