The U.S. Supreme Court will hear arguments regarding the constitutionality of The Patient Care and Affordable Care Act in March 2012. The Affordable Care Act stands as President Obama’s signature domestic achievement, promising affordable health insurance to every American. Congress narrowly passed the statute in March 2010 after a heated national debate — opponents quickly filed suit to have key provisions declared unconstitutional. Of the four federal appellate courts to rule thus far, three have upheld the law in its entirety while one declared the Act’s key provision – the individual mandate – unconstitutional. This newsletter will discuss the background and important provisions of the Act, key arguments on both sides of its constitutionality, and what will likely prove to be the most important factor in the Supreme Court’s ultimate decision.
First, approximately 50 million Americans do not have health insurance – some cannot afford it, some have been turned away by insurers, and some chose not to purchase it.
Second, all of these Americans will inevitable need and get health care, especially in emergencies; this results in a large cost shifting to health care providers or those with insurance (in the form of higher premiums). Congress found that the cost shift amounted to $43 billion in 2008, and resulted in higher annual premiums of $1000 for families and $400 for individuals.
Third, a substantial amount of those without insurance have tried to purchase it, but were turned away by insurers due to pre-existing health conditions. Standard practice in medical underwriting within the insurance industry calls for offering insurance only to the healthy, significantly reducing risk exposure.
II. Key provisions of the Affordable Care Act
Congress stated that its intent was to address “how and when health care is paid for” and “when health care is purchased” with the goal of reducing the number of uninsured Americans.
Congress chose five means to achieve its goal:
First, Congress regulated health insurers by banning them from denying coverage based on pre-existing health conditions and limiting their ability to raise premiums when providing riskier coverage.
Second, it imposed an individual mandate on all Americans to obtain and maintain health insurance. Americans failing to do so must pay a penalty. This is the most controversial aspect of the Act. Congress, though, deemed it vital: without the mandate, it could not impose on insurers the obligation to expand their coverage, the ranks of the uninsured could not be reduced, and the cost of obtaining insurance would again soar.
Third, Congress expanded Medicaid to provide coverage to larger numbers of the poor and disabled.
Fourth, the Act sought to create state run health insurance “exchanges” to allow individuals, families, and small businesses to competitively shop for insurance by banding together to qualify for lower rates. This provision has not been successfully challenged on constitutional grounds and will not be addressed by the Supreme Court.
Finally, the Act’s penalties on large employers for failing to offer adequate insurance coverage to employees also will not be before the Court.
III. Constitutional question regarding the individual mandate
Opponents of the Act have challenged the constitutional authority of Congress to mandate that every American purchase health insurance. The Constitution allows the federal government only certain, enumerated powers – anything not explicitly authorized by the Constitution as a federal power is reserved for the states.
Congress passed the Act pursuant to its authority under the Constitution’s “Commerce Clause,” which states that Congress shall have the power to “regulate Commerce . . . among the several States.” The Supreme Court has struggled over nearly the past 100 years to interpret that phrase in the context of Congressional power. It will now be called upon to decide whether that enumerated power authorized Congress to enact the individual mandate.
IV. Key arguments in support of declaring the mandate unconstitutional
The Eleventh Circuit Court of Appeals declared the individual mandate unconstitutional in August. In ruling that Congress exceeded its Commerce Clause power, the court relied heavily on the fact that an economic mandate for all Americans is unprecedented in this country’s history: “Even in the face of a Great Depression, a World War, a Cold War, recessions, oil shocks, inflation and unemployment, Congress never sought to require the purchase of wheat or war bonds, force a higher savings rate or greater consumption of American goods, or require every American to purchase a more fuel efficient vehicle.” If Congress can require Americans to purchase health insurance, the Eleventh Circuit reasoned, it could further require Americans to purchase any product it pleased, opening the door to a centralized, “command economy.” The Court concluded that the “mere fact of an individual’s existence” was not enough to make one an economic actor subject to Congressional control.
V. Key arguments in support of upholding the mandate
The DC Circuit Court of Appeals upheld the mandate and pointed out that the Supreme Court has never held that existing economic activity was a precursor to Congressional power under the Commerce Clause, as the Court had previously upheld civil rights, federal drug and child pornography laws, no matter how passive the possession or strained a connection to economic activity. “The shift to the ‘substantial affects’ [on interstate commerce] doctrine in the early twentieth century recognized the reality that national economic problems are often the result of millions of individuals engaging in behavior that, in isolation, is seemingly unrelated to interstate commerce.” Because Congress would clearly have the power to impose insurance purchase conditions on people who went to the hospital seeking medical services, it is well within bounds to impose a mandate in reasonable anticipation of virtually inevitable future transactions.
While acknowledging discomfort with the government’s inability to point to any activity that it could not regulate under the Commerce Clause pursuant to its reading, the Court admitted that it could not find a qualitative limitation on that power under current precedent.
Similarly, the Sixth Circuit upheld the mandate by pointing out that neither the text of the Commerce Clause nor Supreme Court precedent acknowledge a constitutional distinction between economic activity and economic non-activity. Moreover, the Sixth Circuit pointed out that – even if it wasn’t economic activity to purchase or not purchase health insurance – the mandate was part of a broader regulatory scheme of insurance companies, clearly subject to Commerce Clause authority.
VI. Framing the issue before the Supreme Court
What will likely drive the Supreme Court’s analysis will be which side is successful in framing the issue. Opponents of the Act will have a stronger chance of success by presenting the issue as whether an individual’s decision to not purchase health insurance is an economic act sufficient to fall under Congress’ Commerce authority. Framed in this manner, even Act supporters are hard pressed to find any limit on federal power — it is difficult to imagine arguably the most conservative Supreme Court in a century accepting that notion.
In order to succeed, Act supporters must frame the issue as whether an individual’s cost shifting, and timing and method of payment for health care consumption are economic activities subject to the Commerce Clause. Congress found that substantial numbers of uninsured Americans consume health care and shift the associated costs to providers, those with insurance, and the government. The issue issue seems to be not whether Americans choose to purchase health insurance, but rather the circumstances of payment for the the health care they ultimately and inevitably will receive. Framed in this manner and given prior precedent regarding the Commerce Clause, even a conservative Court would be hard pressed to strike down the Act.