Last week, we looked at the “Individual Mandate” in the new health insurance laws. The goal of the mandate is to make insurance more accessible to more people, and one of the tactics is to force insurance companies to offer coverage to customers with pre-existing conditions. The side-effect of such a rule is that healthy people can forego insurance coverage, and not pay premiums, until they actually get sick. Then they can sign up for coverage and exercise huge benefits from the insurer, after paying very little in premiums. In an effort to avoid this eventuality, which clearly would put a financial drain on insurance providers, the new laws also require that everyone purchase health insurance. Sick, healthy, young, old – no matter what, you must buy health insurance, or pay a fine. The language is vague, but the fine is described as a new tax. A tax monitored and levied by the IRS, requiring 17000 new IRS agents.
We have looked at the logic of the Individual Mandate, and the unintended consequences that we see in the Massachusetts version of the plan. This week we look into a different question: Is it even legal? Several states’ attorneys general have filed lawsuits contesting the constitutionality of the Individual Mandate. They maintain that the Federal Government cannot force individuals to purchase a product from a private company, and that the law stretches the purview of Interstate Commerce.
The Constitution says that Congress shall have power, “To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes.” There are two key phrases in that one sentence: 1. “regulate Commerce” and 2. “among the several States.”
1. The Congress can regulate “Commerce,” which can be broadly defined as the participation in economic activity. If an individual does not purchase health insurance, then they have not engaged in commerce. The new laws attempt to impose regulation and penalty on the non-participation in economic activity.
2. The federal government is empowered to oversee interstate commerce. Under current law, all health insurance operates on a state-by-state basis. You cannot purchase health insurance across state lines. Therefore, there is legally no interstate commerce in health insurance.
The authority to create a new fine or tax is clearly spelled out in one short sentence, just 16 words. And in that short span, there are two statements that apparently contradict the authority of the new laws. Under the 10th Amendment, the Federal government cannot expand its powers beyond those that are specifically outlined in the Constitution. “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
This new legislation is designed to phase in over the course of several years. These legal challenges to the new laws will probably drag out for years. It is impossible to guess how the courts will decide, but we will have to wait a long time to find out.