Commissioner Kim Holland opposed insurance claims levy in early stages

By Patrick B. McGuigan

Published: 27-Jul-2010

During the 2010 legislative session, Oklahoma Commissioner of Insurance Kim Holland directed her agency’s staff not to be involved with legislation, House Bill 2437, that had evolved into an increased levy on health insurance claims in the state.

CapitolBeatOK has learned Holland moved to distance the department from the bill as soon as its provisions, which many analysts consider a tax hike and not merely a user fee increase, became clear.

An email from Jonathan Small of Holland’s staff, sent to legislative sponsors of House Bill 2437 on the evening of May 21, read in pertinent part, “The Insurance Department would respectfully ask that we not be involved with anything related to this bill as it is currently drafted.”

On May 25, John Doak of Tulsa – who is seeking to replace Holland — issued a press release calling on her to oppose H.B. 2437 for adding that 1 percent levy to state insurance claims.  Doak has claimed Holland was “silent throughout the entire process.”

The May 21 communication from Small on Holland’s behalf — sent to state Reps. Doug Cox of Grove and Kris Steele of Shawnee, to Sen. Brian Crain of Tulsa, and to legislative staff — documents Holland raised her concerns about the measure as it was being considered in the legislative process. She acted four days before Doak’s May 25 statement on the issue. 

Another source of information on the timing of Holland’s concerns about H.B. 1437 is found in recordings from the May 21 proceedings in the state House. Rep. Cox moved to waive the 24-hour rule, a procedure that requires that members and the public have 24 hours to examine proposals before they can be heard. 

The House waived the rule, but several legislators continued to raise concerns that the measure had transformed from a “shell” bill into a levy on health insurance claims. Objections were also raised that the original subject or purpose of the bill had changed.

That day’s presiding officer, Rep. Steele, ruled the subject of the measure was and had remained funding for the Oklahoma Health Care Authority. However, some interpreted the bill to have shifted from dealing with OHCA to a focus on Medicaid funding.

In an exchange with Rep. Mike Reynolds of Oklahoma City, Rep. Cox explained H.B. 2437 was an important part of the budget agreement, intended to raise at least $260 Million for Fiscal Year 2011.

Rep. John Wright of Broken Arrow asked if the proposed fee could be limited to one year, and reviewed annually, rather than enacted for a four-year period. Wright’s suggestion was not pursued. Soon thereafter, Rep. Randy McDaniel of Edmond asked if the Insurance Commissioner had “weighed in” on the proposal.

Cox replied that Holland had supported an earlier version, with different provisions, “but, as you know, this is changed.”  Not much later, Rep. Dan Sullivan of Tulsa told Cox,  “I just received an e-mail from their office saying they are requesting to be taken out of this bill,” and asked, “Would that surprise you?”  Cox replied, “No, because the bill has been changed from Insure Oklahoma to stabilizing the state Medicaid system.”

The bill was not amended to remove the Insurance agency from involvement with the new fee. Rep. Cox stressed that without the revenue in the proposal there would not be enough money to balance the state budget. He said the bill needed 75 votes for a three-fourths majority (later correcting that figure to 76 votes).

H.B. 2437 presented legislators a choice, and a difficult one. On one particular aspect of the debate that has now become a matter of controversy, the record itself demonstrates members were informed in open session that Commissioner Holland’s office had raised substantive concerns about the provisions before they were enacted.

Earlier this month, Holland filed to challenge H.B. 2347 on several grounds. On the claims levy or fee (or tax, some call it), she has parted company from both the governor and most legislative leaders. She agreed with a sizable minority in the Legislature, however, where 33 representatives and 12 senators opposed the new fee.

In legal papers filed at the state Supreme Court on July 21, Commissioner Holland said the fee is unconstitutional and that her agency has no authority to collect it. She also contended it is a tax and not a fee under article V of the state constitution, including the provisions of State Question 640, a ballot initiative requiring popular approval for new taxes.

Holland also contends the new law is unenforceable under the Employee Retirement Income Security Act (ERISA), federal legislation she contends limits state actions as a matter of policy.