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From Health Law Daily, September 5, 2013

Kentucky court rejects constitutional challenges to Medicaid expansion, insurance exchanges

By Sheila Lynch-Afryl, JD, MA

Complaints filed by a private citizen against the Commonwealth of Kentucky challenging the constitutionality of the governor’s actions in establishing health insurance exchanges and expanding Medicaid eligibility were rejected (Adams v Commonwealth of Kentucky, September 13, 2013, Shepherd, P; Adams v Commonwealth of Kentucky, September 13, 2013, Shepherd, P). The court concluded that neither of these actions violated the separation of powers provisions of the state constitution. Accordingly, the citizen’s request for relief was denied.

Background. David Adams filed an action against the Commonwealth of Kentucky challenging the actions of Kentucky’s governor, Steve Beshear, in expanding Medicaid eligibility to allow Kentucky to receive additional funding under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148). KRS 205.520(3) provides that “it is the policy of the Commonwealth to take advantage of all federal funds that may be available for federal assistance.” Adams alleged that this statute is an unlawful delegation of power from the legislative to the executive branch, in violation of sections 27 and 28 of the state constitution, and that it violates the constitutional prohibition against “absolute and arbitrary power.”

Adams brought a separate suit challenging Beshear’s establishment by executive order of a health insurance exchange, as provided for in PPACA. The governor initially established an exchange under executive order 2012-587. The temporary reorganization established by the order expired 90 days after the 2013 regular session of the General Assembly, which adjourned without adopting a reorganization bill that confirmed the executive order. The governor then issued executive order 2013-048, which made numerous substantive changes to the initial program. Adams argued that the governor’s unilateral executive action without specific legislative authorization violated the separation of powers provisions of the state constitution.

The Commonwealth filed motions for summary judgment in both cases.

Insurance exchanges. Adams argued that the governor could not unilaterally establish a new program and the administrative structure to support it without specific legislative authorization. The court found, however, that the reorganization statute, KRS 12.028(1), specifically provides legislative authorization for the governor to create new offices. The court also rejected Adams’s argument that the legislature’s delegation of authority in KRS 12.028 is too broad, as subsections (1) and (3) have “very specific guidelines and standards.” Furthermore, the executive order was of limited scope since it did nothing more than implement a federal law that the U.S. Supreme Court has upheld against constitutional challenge. The court also found that state statutes authorized the expenditure of federal funds for the establishment of the insurance exchanges and that the governor had adequate authority to promulgate regulations implementing his executive order.

Medicaid expansion. In finding KRS 205.520(3) constitutional, the circuit court found that broad delegations of power to the executive branch are constitutionally permissible. Adams argued that the delegation was too broad; however, KRS 205.520 contains specific standards, and the governor’s discretion to expand Medicaid eligibility was limited to situations where such expansion brings additional federal funding.

The case numbers are 13-CI-605 and 13-CI-423.

Attorneys: Mark D. Guilfoyle (Dressman Benzinger & LaVelle PSC) for the Commonwealth of Kentucky.

Companies: Commonwealth of Kentucky

MainStory: TopStory CaseDecisions HealthReformNews MedicaidNews EligibilityNews KentuckyNews

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