What the Supreme Court is Hearing Today: Tuesday – The Minimum Coverage Provision (a.k.a. the Individual Mandate)
March 27, 2012
Authored by: benefitsbclp
Yesterday, today, and tomorrow we are posting brief descriptions of the arguments the Supreme Court will hear in U.S. Department of Health and Human Services, et al. v State of Florida, et al., the case challenging the landmark health reform law, the Patient Protection and Affordable Care Act (“PPACA”). As the audio of the oral arguments is released, we will post links to the audio here. Go to our first post for some background and a discussion of Monday’s arguments. Note that, in arguing over the constitutionality of the Individual Mandate, the individual respondents are joined by the National Federation of Independent Businesses (“NFIB”).
Today, the Court will hear two hours of argument on the Minimum Coverage Provision (a.k.a. the Individual Mandate).
What are they arguing about? Does Congress have the power to force you to buy health insurance or pay a penalty? The issue is fundamentally about Congress’s authority to regulate interstate commerce under the Commerce Clause of the Constitution (for an additional discussion of this point, see our October post on this issue). The Court will consider whether the Individual Mandate falls within Congress’ ability to regulate commerce among the states or to tax and spend for the general welfare.
What does the U.S. Government say? Of course Congress can do this, says the U.S. Government. The health care market accounts for 17.6% of the nation’s economy. Insurance pays for health care. Everyone, at some point needs health care and is, whether or not he or she buys insurance, engaged in an economic activity which has a cumulative, substantial effect on interstate commerce. Therefore, it is an economic activity that is part of interstate commerce and completely within Congress’s power to regulate. (We cut out a lot of statistics, but that’s basically the argument.) Alternatively, it is a proper exercise of Congress’s Constitutional taxing authority, i.e., Congress’ power to tax and spend for the general welfare.
What do the Individual Parties/NFIB say? The Mandate imposes a never before seen duty on Americans by forcing them to contract for a private product (health insurance). If Congress can compel the purchase of private insurance, there is no Constitutional principle that would prevent Congress from compelling the purchase of any product whatsoever. Congress can make you buy broccoli, if it chooses. “Buy it, you’ll like it,” Congress can say and you have to buy it, whether you like it or not. Furthermore, the Mandate is not really a tax, but an unequivocal requirement to purchase insurance that just so happens to also have a penalty attached to it. One of the interesting subparts of the tax issue is whether PPACA’s requisite payment is a tax or a penalty, and, if it is a penalty, does that make a difference when considering Congress’ power to tax. The individual parties and NFIB maintain that it is a penalty beyond the scope of Congress’ power to tax.
What do the State Parties say? They argue (similar to the individual parties/NFIB) that this is an unprecedented exercise of federal power to compel individuals to engage in interstate commerce. The minimum coverage provision is tantamount to an exercise of police power, not a regulation of commerce. They say that, if such a power exists in the Constitution, it is strange that Congress waited 220 years to take advantage of it. For example, why did Congress adopt the “cash for clunkers” incentive program if it could have just compelled individuals to buy new cars? Furthermore, such a broad reading of Congress’ power is inconsistent with the framework of a government of limited and enumerated powers.
Why does this matter? Perhaps this is obvious, but if the Mandate is struck down, then key conceptual pieces of PPACA no longer work as they should. The Court must then determine if the entire PPACA should be stricken. Under PPACA, policies will no longer have any preexisting condition exclusions (i.e., they will be “guarantee issue”) and they will not be based on individual medical history, but instead on the projected experience of the community as a whole (i.e., “community rated”). This will allow unhealthy individuals to get insurance at lower rates, but will raise rates for healthy individuals. This could create a devastating form of adverse selection, if the healthy individuals are not required to buy coverage. If healthy individuals do not buy in to the insurance pool, then the insurance companies may well drop the health insurance product part of their business because they will pay more in claims than they collect in premiums. The Mandate is designed to compel the purchase of insurance by healthy individuals to balance that market. Many other inconsistent results could pertain if the Individual Mandate is determined to be unconstitutional while other parts of PPACA remain in place.