The Constitutionality of the Individual Mandate

(See page 24 of link below)

By Bob Semro

From the beginning, there was little doubt that one of the Affordable Care Act's most important provisions would end up in the Supreme Court. That section of the law, known as the "minimum coverage provision," or "individual mandate," would require most American citizens and legal residents to purchase a minimum level of health insurance coverage from a private insurer or pay a tax penalty.

After previous and conflicting appellate court rulings, the court agreed to review the law, and on March 26-28, the justices heard oral arguments on the mandate and other key provisions of the ACA. While not a solid indication of the court's final ruling in June, the conservative justices did appear to be skeptical about the mandate's constitutionality.

If the mandate alone is ruled unconstitutional, it may not be possible for some of the most popular provisions of the ACA to be successfully implemented. Those provisions would most likely include guaranteed issue of coverage (which would prevent insurers from using health status as a condition for not offering coverage) and community rating (where insurers would have to offer coverage at the same price to everyone without medical underwriting and without regard to health status). Even though alternatives to the mandate exist, it is unlikely that the current Congress would agree to implement them in order to rescue the law. If the entire law is ruled to be unconstitutional because the court considers the mandate to be unseverable from the rest of the law, then health care reform would return to square one.

The argument over the constitutionality of the individual mandate centered on whether the decision not to purchase health insurance is a form of commercial activity that can be regulated by Congress under the Constitution's Commerce Clause and whether the minimum-coverage provision is constitutional in its own right.

Opponents of the mandate argued that the provision is an inappropriate use of Congress's commerce power, because for the first time, Congress would attempt to compel American citizens to purchase a private product that they may not wish to purchase, may never have purchased in the past and may never use. The decision not to purchase health insurance, they maintained, would constitute economic or commercial "inactivity," which is not related to interstate commerce and therefore, is not subject to regulation under the Commerce Clause.

Opponents also argued that, should the individual mandate be allowed to stand, there would be no limiting legal principle to prevent the unchecked expansion of Commerce Clause powers in the future. If the mandate were ruled constitutional and Americans were required to purchase health insurance from a private company there would be no legal barrier to preventing lawmakers from compelling the purchase of other products from private industry in other markets.

Finally, as a regulatory solution, the provision is constitutionally suspect because it would require people to purchase private insurance and maintain that coverage for the remainder of their lives. All of this would be done without considering whether these individuals are able to pay for the cost of their health care or have sought those services either now or in the future.

Supporters of the mandate argued that the minimum-coverage provision is a proper use of congressional authority granted under the Commerce Clause. They questioned the argument that individuals will never purchase or need health insurance or engage in economic activity regarding the health care market. They maintained that unlike every other commercial market it is virtually certain that at some point, an individual will become actively engaged in the health care market. Individuals cannot guarantee that they will not become sick. Without insurance, individuals cannot guarantee that they will be able to completely pay for their treatment. And unlike commerce in other markets, hospitals cannot refuse service based upon an individual's ability to pay. The real issue is how and when individuals will consume and pay for those services and not whether they will consume them.

Furthermore, people are not just "sitting alone in their homes and doing nothing" when they make the decision to self-insure. In aggregate, the decision to self-insure is a decision about how to manage future financial risk and is in itself is an active economic decision. The decision to self-insure or purchase insurance represents two alternatives for addressing the same financial risk. One decision is no less "active" than the other one, and each directly involves commerce. In 2008, the uninsured were unable to pay for about 63 percent of the cost of their treatment, leaving some $43 billion in uncompensated costs that were passed on to insurers, which in turn were passed on to their customers.

The mandate represents a constitutional solution because it focuses on stabilizing the entire health care market and not merely regulating individual conduct. It resolves an otherwise intractable problem in the current health care market in which the uninsured inflict disproportionate harm on the rest of the market because of their inevitable consumption of health care services. Congress merely applied an inventive and constitutional solution that redesigns the market and the individual's interaction with it in a way that is compatible with existing case law and precedent.

Finally, supporters argued that the mandate does not represent a slippery slope to unchecked federal authority because existing Commerce Clause case law directly limits how those powers can be used. In addition, the health care market is so uniquely one of a kind – in that everyone will use health care; hospital emergency rooms must treat patients regardless of their ability to pay; uncompensated care costs are shifted on to others; and health insurance is by far the most common way to pay for health services – that the mandate could be restricted to that market alone.

Regardless of which argument holds sway, the results of the Supreme Court's decision will forever affect health care in America and define the scope of federal authority in the future.