State Update

Circuit Court Upholds Authority of Kentucky Governor to Create a Health Insurance Marketplace and Expand Medicaid Under the Affordable Care Act

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The Commonwealth of Kentucky, Franklin Circuit Court issued two opinions on September 3 in David Adams, et al. v. Commonwealth of Kentucky, et al. The first upheld the authority of Gov. Steve Beshear (D-KY) to create a health insurance exchange/marketplace under the Affordable Care Act (ACA), and the second upheld the governor’s authority to expand Medicaid under the ACA.

Health Insurance Marketplace Ruling

In this action, the plaintiffs challenged the governor’s authority to establish a health insurance exchange by Executive Order. The governor initially established a health insurance exchange, including the formation of the Office of the Kentucky Health Benefit Exchange to oversee the development of the exchange, under Executive Order 2012-0587 in 2012. However, under Kentucky statute KRS 12.028(5), the temporary reorganization  established under the Executive Order expired 90 days after sine die adjournment of the next regular session of the General Assembly. The General Assembly adjourned sine die without adopting a reorganization bill confirming the Executive Order. As a result, the governor issued another Executive Order, Executive Order 2013-0418, in 2013, which made substantive changes to the initial Executive Order issued in 2012. The plaintiffs argued that the General Assembly’s failure to act essentially abolished the health insurance exchange. The plaintiffs further argued that the governor’s Executive Orders, establishing a state health insurance exchange, exceeded his constitutional authority under §§27 and 28 of the Kentucky Constitution, which provides for separation of powers of the co-equal branches of government. The Circuit Court ruled that the General Assembly had delegated to the governor the power to make changes in administrative structure after the legislature has adjourned sine die. Further, the Circuit Court found that there are adequate safeguards on the exercise of the governor’s discretion both in the Kentucky statute itself, and the limited scope Executive Order, which “does nothing more than implement a very specific section of a federal law that has been upheld against constitutional challenge by the U.S. Supreme Court. (2)" 

Interestingly, according to the National Conference of State Legislatures, the governors of New York and Rhode Island also established health insurance exchanges by Executive Order.

Medicaid Expansion Ruling

In this action, the plaintiff challenged the governor’s unilateral authority to expand Medicaid eligibility under the ACA. The plaintiff argued that Kentucky statute, KRS 205.520(3), which provides that “it is the policy of the Commonwealth to take advantage of all federal funds that may be available for medical assistance,” is an unlawful delegation of power from the legislature to the executive branch in violation of the state constitution’s provisions on separation of powers. As a result, the Circuit Court was charged with determining whether the statute, KRS 205.520, is unconstitutional. The court ruled the Kentucky statute is constitutional, and the executive action by the governor falls squarely within the statutory authorization. 

 


(2) On June 28, 2012, the U.S. Supreme Court upheld The Patient Protection and Affordable Care Act (ACA) by a vote of 5 to 4 (ruling).