Health Insurance Politics in Federal Court

Executive Summary

Boston University School of Public Health professors, Wendy Mariner and George Annas, review the legal arguments Republicans raised about the ACA in federal court in 2010 before the cases reached the Supreme Court.

Having been outmaneuvered in Congress with the passage of the Patient Protection and Affordable Care Act (?Affordable Care Act,? or ACA), Republicans have taken their case to federal court, arguing that the law's key provision, the individual mandate to purchase health insurance, is unconstitutional. This argument has been made most prominently by attorneys general from 20 states in a Florida federal court and by the Commonwealth of Virginia in a Virginia federal court. In early August, federal district court judge Henry Hudson decided that the Virginia challenge deserves a hearing,1 thereby giving the constitutional argument an aura of respectability and ensuring that we'll hear more about the meaning of states' rights in the context of the Constitution's Commerce Clause (which grants Congress the authority to regulate interstate commerce), both in court and on the campaign trail.
Although, as Judge Hudson noted, the case ?has a distinctive political undercurrent,?1 the controversy will be argued in the courts in constitutional terms, and Hudson finds the constitutional questions ?novel.? Virginia claims that Congress does not have authority under the Commerce Clause to require individuals to obtain health insurance coverage, does not have the power under the Taxing and Spending Clause (which gives the federal government the power of taxation) to impose a tax or penalty on individuals who fail to obtain coverage, and consequently violates Virginia's sovereign power, protected by the Tenth Amendment, to enact a state law prohibiting Virginia residents from being required to obtain health insurance (a law that Virginia adopted primarily to gain standing to challenge the ACA).
Hudson uses imagery that is strikingly uncomplimentary toward federal power to frame the core issue: ?The Commonwealth defies the Secretary [of health and human services] to point to any Commerce Clause jurisprudence extending its tentacles to an individual's decision not to engage in economic activity.? The federal government has broad power to regulate economic activities affecting interstate commerce,2 but no court has explicitly ruled that the federal government can regulate what Virginia suggests is an absence of activity, such as not purchasing health insurance.
The federal government argues that the individual mandate is necessary to support ?the financial foundation? of the health care system. The ACA aims to make affordable health insurance available to everyone, regardless of health status. It requires insurers to sell policies covering virtually all health conditions, including preexisting ones, to everyone who wants them. However, such coverage would be prohibitively expensive if people waited until they were sick to buy a policy and would ?drive that market into extinction.? Unless everyone buys into the market, with or without a government subsidy, unaffordable health insurance will render health care out of reach.
Although the decision of any single individual to forgo buying health insurance would not bring down the system, the aggregation of many such individuals would have that effect ? just as the aggregation of many wheat farmers growing wheat for their own consumption and state-authorized medical marijuana users growing their own marijuana would affect the wheat and marijuana markets.2 Therefore, since Congress can regulate the insurance industry under the Commerce Clause, it can regulate participation in the health insurance market under the Necessary and Proper Clause (which gives it power to make all laws that are necessary and proper for executing its enumerated powers) in order to carry out the overall regulatory scheme. As the Supreme Court said in the medical marijuana case Gonzales v. Raich, ?When Congress decides that the `total incidence' of a practice poses a threat to a national market, it may regulate the entire class.?3
Virginia argues that the wheat and marijuana cases both involve ?a voluntary decision to perform an act? (growing a crop), whereas the ACA's individual mandate ?requires a person to perform an involuntary act.?1 Hudson summarizes Virginia's ?economic inactivity? argument as follows: ?A decision not to purchase a product . . . is not an economic activity. It is a virtual state of repose ? or idleness ? the converse of activity. At best, [it] regulates future activity in anticipation of need.?1
If, as the late Chief Justice William Rehnquist put it, the key to the federal government's authority under the Commerce Clause is defining ?an economic activity that might, through repetition elsewhere, substantially affect any sort of interstate commerce,? then the activity of deciding whether to purchase health insurance could well qualify.4 Economists accept, for example, that some forms of ?inactivity? affect economic health as much as activity does: for example, our economy remains flat because Americans refuse to consume, and our economic bubble burst partially because Americans failed to save. Similarly, not buying health insurance seems to qualify as an economic activity; it entails making decisions about whether to buy coverage and about how to pay (or not pay) for health care when it is needed. Indeed, one could argue that individuals who do not buy health coverage but use their own resources to get medical care are like farmers and medical marijuana patients who do not buy wheat or marijuana in the regular markets but instead grow their own. Economists easily conclude that not buying health insurance is economic conduct.5 But this controversy will be decided not by how economists view economic activity but by how judges view the reach of the Commerce Clause.
The states have inherent (police) powers authorizing them to regulate residents' inactivity ? to require residents, for example, to get vaccinations and even to purchase health insurance, as Massachusetts does. The federal government's powers are limited to those listed in the Constitution, but the reach of the Commerce Clause has necessarily expanded with the national economy. Virginia argues that if Congress can regulate inactivity that affects interstate commerce like insurance and health care, then there is no practical limit to federal regulation and Congress will usurp the state's police powers.
The fundamental legal problem is whether, if the federal government can penalize individuals for refusing to purchase health insurance, there is any principle that would limit the power of the federal government to penalize the failure to purchase other products, such as a daily newspaper to save the newspaper business from extinction. The federal government's answer is that people simply cannot choose ?to avoid participation in the health care market.?1 Rather, ?it is inevitable . . . that every person ? today or in the future ? healthy or otherwise ? will require medical care,? and the ACA provides a dependable, affordable mechanism to pay for such care.1
This answer may offer a limiting principle that distinguishes the ACA from a hypothetical penalty for not buying newspapers. There are few nondiscretionary national markets in which virtually all Americans inevitably participate. Congress could not require all Americans to buy cars from Detroit in order to shore up the automobile industry; not everyone needs a car. On the other hand, perhaps the federal government could justify penalizing individuals for not buying an apple a day or for not buying a gym membership or multivitamins, at least if these purchases are seen as integral parts of containing costs in a national health insurance market, because people who don't make these purchases increase health care costs for all of us.
We think that the federal government has the more realistic view of how the national economy functions and how the Constitution should function today. Nonetheless, the outcome in the federal courts is far from certain and will ultimately be decided by a Supreme Court that is just as ideologically fractured as the Congress that passed this law. Other clearly constitutional approaches were available, including Medicare for All, or simply raising the income or payroll tax to pay for health benefits, but these would have been even more objectionable to those who are raising Commerce Clause problems with the ACA.
Judge Hudson's next decision, this fall, will be on the merits of the case, and as he recognizes, his decision will be appealed no matter how he rules. But health care politics will not be put on hold while we await judicial resolution, which could take years. Without mentioning the Commerce Clause or health care, many politicians will campaign on the argument that the federal government is too big, is too intrusive into our individual lives, and spends too much money. In this debate, the ACA will be exhibit number one.

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