Judge to rule on Kentucky health exchange lawsuit

By Kevin Wheatley Published:

A judge will decide whether to dismiss a case against Gov. Steve Beshear’s administration for implementing a state-run health benefit exchange as part of the federal Patient Protection and Affordable Care Act, commonly known as Obamacare.

Dozens of tea party supporters filled the courtroom Monday as attorneys on both sides argued before Franklin Circuit Judge Phillip Shepherd.

The crux of the matter involved whether Nicholasville tea party activist David Adams and others had standing as taxpayers to challenge Beshear’s executive order establishing the Office of the Kentucky Health Benefit Exchange, a key provision of the Affordable Care Act.

Adams is seeking an injunction against the exchange until the Legislature approves its creation.

“The bottom line on the case is the health benefit exchange was enacted illegally and unconstitutionally, and therefore should be shut down,” Adams told reporters outside the temporary courthouse.

Kentucky’s benefit exchange is expected to help more than 330,000 uninsured Kentuckians gain health coverage and 276,000 may be eligible for subsidized health insurance, according to statistics from the Cabinet for Health and Family Services. Some 3,800 uninsured Franklin County residents are expected to obtain health insurance through the exchange, with an estimated 3,102 eligible for subsidies.

Patrick Hughes, a Crestview Hills attorney representing the state, said the lawsuit should be thrown out because Adams and others have shown no specific injury as a result of Beshear’s decision to move ahead with a state-run insurance marketplace.

What’s more, Hughes said they have no case as state taxpayers because the federal government will finance the program through 2014. Exchanges must be self-funded by 2015, and Kentucky has received nearly $71 million from Washington, D.C., to set up the program, according to the National Conference of State Legislatures.

“The only way they have standing is if there is an expenditure of state tax dollars,” Hughes said. “The exhibit to their complaint, which is controlling, identifies there are no net increases to state dollars being spent, so they don’t have standing.”

Michael Dean, an Irvine attorney representing Adams and two others, countered that state funds have been used to implement the benefit exchange’s bureaucracy. The federal healthcare law also mandates the creation of an educational “navigator” program that must be financed by the state, he said.

“From day one, there will be state funds expended,” Dean said.

Dean said the General Assembly had no say in the creation of the health benefit exchange, but Hughes argued legislators neither affirmed nor denied the action.

Beshear has statutory authority to spend non-budgeted federal money in interim sessions and reorganize his administration, Hughes said. The General Assembly “seldom” ratifies such organizational shifts, he said.

“The governor has the authority to manage his cabinet and to organize his cabinet in the interim,” Hughes said. “That is routinely done.”

Shepherd said he would issue an order promptly on Hughes’ motion to dismiss the case and said the matter posed a “very interesting legal issue.”

Adams also filed a similar lawsuit Monday against Beshear’s decision to expand Medicaid eligibility under the federal healthcare law to those earning up to 138 percent of the federal poverty line, which will be $32,499 for a family of four, up from $23,550. Adams is seeking an injunction on the expansion until approved by state lawmakers.

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