FRANKFORT — Central Kentucky Tea Party activist David Adams filed a lawsuit Monday challenging the legality of the Kentucky Health Benefit Exchange, which Gov. Steve Beshear created last year by executive order.
Beshear on July 17 authorized the online marketplace, which will offer health insurance plans for Kentuckians as called for by the federal Patient Protection and Affordable Care Act.
Adams, of Nicholasville, claims in his lawsuit that Beshear did not receive "proper approval" from the Kentucky General Assembly to create the exchange. Adams is seeking an injunction against Beshear's executive order until the governor receives legislative approval.
Beshear spokeswoman Kerri Richardson said the governor acted appropriately.
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"The governor exercised the constitutional authority afforded the office to meet the requirements of federal law," she said.
In signing the executive order last year, Adams said, Beshear cited one statute giving him the authority to do so — Kentucky Revised Statute 12.028. But the governor failed to receive approval of the General Assembly during this year's legislative session as required by the statute, Adams said.
Kentucky is one of 17 states that the U.S. Department of Health and Human Services approved to build their own exchanges to provide one-stop shopping for health insurance. Open enrollment begins Oct. 1, and the exchanges start operating Jan. 1.
Allowing the Beshear administration to operate the health exchange without legislative approval "sets a terrible precedent for ignoring legal limits on executive branch authority to protect Kentuckians' rights in seeking and pursuing their safety and happiness as explicitly guaranteed by the Kentucky Constitution," Adams said.
He also said costs of creating a state-run exchange cannot be easily avoided unless the state quickly informs federal authorities of its inability to agree to properly establish an exchange.
In addition to helping more than 600,000 uninsured Kentuckians arrange health coverage, the exchange will assist employers with enrolling workers in health plans, help individuals receive tax credits and subsidies for their insurance premiums, and qualify small businesses for tax credits.
It will be operated by the Cabinet for Health and Family Services and housed in a building in Frankfort.
Twenty-one states have declined to set up exchanges, which means federal authorities will set up and operate the insurance marketplaces for them. Three other states have gotten the go-ahead for federal-state partnerships.
The federal government is proposing a 3.5 percent fee on insurance premiums to operate exchanges for states that opted not to create their own. Kentucky plans to use an existing 1 percent fee on insurance premiums to operate its exchange, a potential savings to insurance customers in the state of more than $50 million a year.
Startup costs for the Kentucky exchange are being covered by federal grants, but the state will be responsible for all funding beginning in 2015.
Kentucky has received $252 million from the federal government to set up the exchange.