Health Care Reform — What Went Wrong on the Way to the Courthouse
Posted By Sofia Schonell on December 19, 2010
Before health care reform was enacted, Democratic lawmakers and most legal scholars were confident of its constitutionality. Under long-established Supreme Court precedent, Congress would have authority, if it wanted, to enact a single-payer socialized insurance system, using its powers to tax and spend “for the general welfare.” Far short of such a system, the complex blend of regulation, subsidies, and an individual mandate included in the Affordable Care Act (ACA) is vastly more protective of insurance markets and individual freedoms. Congress has nearly unbridled authority to regulate products sold in or affecting interstate commerce, and health insurance is one such product. And given the economics of health insurance, a mandate to purchase insurance is integral to regulating how insurers design, price, and sell their products.
But something went wrong on the way to the courthouse. Federal Judge Henry Hudson in Richmond, Virginia, ruled on December 13, 2010, that Congress lacks the necessary constitutional authority and that Virginia may therefore exempt its residents from the individual mandate. A preliminary ruling in Pensacola, Florida, suggests that a similar outcome is likely in the suit brought by 19 other states. Two other federal judges, in Detroit and Lynchburg, Virginia, have upheld the ACA’s individual mandate in lower-profile cases brought by special interest groups and individual litigants.
Judge Hudson ruled that Congress lacks authority under the Commerce Clause to regulate “inactivity.” Reasonable people may disagree about whether being uninsured is more passive than active. The Detroit and Lynchburg courts accepted the government’s argument that going without insurance is an active choice to pay for care out of pocket, but Judge Hudson disagreed.
He was also unpersuaded that the mandate is merely a tax on being uninsured, noting that Congress went out of its way to call the assessment a penalty rather than a tax. Although Congress could subject individuals to a “play or pay” tax similar to that imposed on large employers,1 that differs from a mandate enforced by a penalty, which the judge ruled must fall within Congress’s regulatory commerce power. So far, no court has disagreed with this point.
Whether the ACA is under any serious legal risk will not be known until circuit courts rule on appeals of these decisions. If any federal circuit court finds a constitutional flaw, the case will almost certainly reach the high court, and speculation abounds over what might happen there.
One intriguing clue points to judicial politics. According to scholars, judges are mostly politically neutral when the governing law is clear, but when legal principles are inchoate, judges’ political leanings inevitably shape their rulings.2 In this instance, both judges upholding the law were appointed by President Bill Clinton, and both judges declaring or suggesting that the mandate is unconstitutional were appointed by Republicans. With the current Supreme Court favoring conservative viewpoints five to four, the possibility of a victory for the mandate’s opponents seems real.
But legal prognostications are not so simple. Courts, out of respect for the democratic process, generally lean in favor of finding laws constitutional, especially when Congress has made specific findings about the basis for its regulatory power. To rule against this law would require the Court to declare a limit on congressional power that previously has not been articulated.
Some justices might be willing or eager to do just that, not so much out of hostility to health insurance reform, but out of concern over expansive federal powers. Conservative legal scholars criticize the modern jurisprudence that extends Commerce Clause authority far more broadly than envisioned by the Constitutional framers.3 It’s conceivable, for example, that the modern commerce power could be used to regulate medical licensure or numerous other matters traditionally relegated to states. And where there is federal authority, it can trump state regulation.
Yet reverting strictly to the original Constitutional meaning of interstate commerce would entail reversing generations of established precedent and undoing massive and firmly ensconced regulatory regimes, such as the Food and Drug Administration. It is much more palatable, though, simply to stop the Commerce Clause from extending any further, by noting, as Judge Hudson did, that Congress has never before used this power to mandate purchase of a private good or service. In effect, conservative courts might reverse the normal presumption in favor of constitutionality, instead asking Congress to point to the constitutional provision or precedent that clearly allows it to mandate insurance coverage.
Drawing the line at mandated purchases might seem especially appealing, given the apparent unpopularity of the individual mandate. But resolving this challenge is not as simple as striking just the mandate: the Court must also decide whether to strike the accompanying insurance regulations and subsidies, which are much more popular and clearly within congressional power. Judge Hudson struck only the individual mandate, “severing” it from the rest of the ACA. But because the ACA’s ban on medical underwriting would wreak havoc on the marketplace without the mandate, other judges might feel torn between striking both and letting both stand.
Striking most or all of the ACA is a bolder move indeed. Unless all five conservative justices are willing to make that move, the law may well survive. But on what grounds? It’s quite conceivable that five justices could agree that the Commerce Clause does not cover economic inactivity. But the Constitution also gives Congress authority “to make all laws which shall be necessary and proper for carrying into execution” its other powers. In the Court’s 2010 Comstock decision, for instance, involuntarily confining federal prisoners for psychiatric treatment even after they complete their criminal sentence was found to be necessary and proper to Congress’s general authority to punish crimes, though there is no general federal civil commitment law.
Is an individual mandate necessary and proper for regulating insurance? Judge Hudson evaded this issue, which turns on how one defines these constitutional adjectives. “Proper” generally means not violating any other constitutional provision, and there is no solid argument that the mandate violates individual rights or states’ interests. With rhetorical flourish, Judge Hudson said that this dispute “at its core . . . [is] about an individual’s right to choose” to be uninsured, but in most of these cases no one even asserts that economic liberties are constitutionally guaranteed.
Almost two centuries of precedents have construed “necessary” quite broadly, as meaning merely “convenient” or “rationally related” to a constitutionally authorized power. This loose construction resembles the term’s meaning in the insurance construct “medically necessary,” which generally means medically appropriate rather than absolutely essential.4 Conservative theorists push for a stiffer definition of necessity. Their argument might well have traction in this case, which implicates individual liberties and expanded federal powers. Otherwise, what would stop Congress from mandating all manner of other purchases, simply to stimulate the economy?
Fortunately, however, the insurance mandate should pass even heightened scrutiny of its necessity. It is no mere economic stimulus. Economic logic and past experience suggest that the market for individual insurance would be severely crippled by regulations that, without a mandate, invite widespread adverse selection. This likelihood has already been borne out under the ACA: when early regulations required insurers, 3 years before the mandate’s implementation, to accept all children under 19 years of age regardless of preexisting conditions, most major insurers simply stopped selling child-only coverage.
In sum, there is consensus that the mandate is inextricably intertwined with the other insurance regulations that are indisputably constitutional.5 Even the challengers appear to concede this point, by asking courts to strike the entire law rather than just the mandate. Thus, in appealing Judge Hudson’s ruling, the acknowledged undesirability, if not impossibility, of banning medical underwriting without a requirement to purchase insurance is the government’s strongest defense. Even if the mandate is not within Congress’s commerce power, it is necessary to accomplish the overall reform scheme — clearly within congressional power — of creating a market structure in which no one can ever again be turned down for health insurance.
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