Second post on the courts and the indvidual mandate
I. Overview
This post will examine the individual mandate in light of some of the law applicable to the question of its constitutionality. As I previously stated, "Anyone who wants to claim that this issue is simple and straightforward is, in my opinion, wrong," and I think this post will prove that.
Then again, this post will not be as complicated as it could be. I will examine the individual mandate under a Commerce Clause analysis only. That was the only issue decided by Judge Hudson in the Virginia case. He did not rule on--and I will not discuss in this post--the 10th Amendment issue. Instead, this post will analyze whether the individual mandate is constitutional under the Commerce Clause and Necessary and Proper Clause.
As will be shown, the Commerce Clause and Necessary and Proper Clause are often used in tandem in Commerce Clause cases. Often when a case is overall a Commerce Clause case, the Necessary and Proper Clause becomes the determinative factor. I believe that is true in the case of the individual mandate. Although much has been said about whether the individual mandate is proper under the Commerce Clause of the Constitution, I believe that whether the individual mandate is constitutional depends on the Necessary and Proper Clause. In my opinion, the individual mandate, standing alone, does not comply with the Commerce Clause. However, I believe it is constitutional under the Necessary and Proper Clause.
Here 's a preview...I think that under current law, the individual mandate is constitutional. In addition to explaining my opinion, I will also present arguments based on current law that could be a basis for striking down the individual mandate. Sections II and III set out the legal basics. Sections IV-IX discuss the how current law favors the individual mandate. As will become apparent in that discussion, I think that how the argument in favor of the individual mandate is structured is very important. The focus needs to be on regulating health care, not health insurance. Sections V.C and D begin the explanation for that opinion and the discussion of how the individual mandate could be declared unconstitutional. That discussion continues in Section XI. Before that, in Section X, I will explain why I think Judge Hudson's ruling in the Virginia case is wrong. And finally, I will present a conclusion in Section XII.
Although I think that under current law the individual mandate is legal, I still am not sure how the Supreme Court will rule. The Supremes are free to make changes in some of the law, create some law, and rule the individual mandate unconstitutional.
Like I said, this is a complicated issue. Now for the proof...
II. There is a vast amount of precedent to evaluate.
The Commerce Clause and the Necessary and Proper Clause have been interpreted and evaluated by our courts practically since the birth of our Constitution. That means there is a vast amount of precedent that is relevant to any question involving both of them.
For a primer on the Commerce Clause and the judicial precedent related to it, this Wikipedia article is good. If you read that and get a case of tired head, just realize that that article qualifies as the proverbial tip of the iceberg. You might instead want to start with this column by Stuart Taylor. It concisely discusses some of the factors at play in this litigation about the individual mandate.
So, generally speaking, there is a vast amount of precedent regarding the Commerce Clause and the Necessary and Proper Clause. And there is a reason why much of it will necessarily have to be considered in this case. Judge George Steeh wrote the following in his order upholding the constitutionality of the individual mandate:
If you have read the Wikipedia article and the Stuart Taylor column, you should have an idea of just how complicated and challenging this task will be.
Just in case you might still doubt that a great deal of precedent will have to be reviewed, consider the basic argument against the individual mandate: the Commerce Clause permits regulation of economic activity, and since the individual mandate seeks to penalize people for inactivity, it is not within the scope of the Commerce Clause. Another way to state this argument is to say that the individual mandate is not within the scope of the Commerce Clause because it seeks to force people to engage in an activity. Those arguments are straightforward and make a lot of common sense. However, there is at least one potential problem. Here is the actual language of the Commerce Clause:
And then there's the Necessary and Proper Clause, which says that
III. The precedent is not exactly clear and narrow.
As mentioned, the Commerce Clause and the Necessary and Proper Clause--and the precedent related to them--have been used to greatly expand federal power over the years. And now the Virginia case and others are attempting to place a limit on those powers. The problem in that regard is there there are so many cases granting expansion that there is a lot of precedent which could be used to persuasively argue that the individual mandate is constitutional.
A. Commerce Clause
This post will examine the individual mandate in light of some of the law applicable to the question of its constitutionality. As I previously stated, "Anyone who wants to claim that this issue is simple and straightforward is, in my opinion, wrong," and I think this post will prove that.
Then again, this post will not be as complicated as it could be. I will examine the individual mandate under a Commerce Clause analysis only. That was the only issue decided by Judge Hudson in the Virginia case. He did not rule on--and I will not discuss in this post--the 10th Amendment issue. Instead, this post will analyze whether the individual mandate is constitutional under the Commerce Clause and Necessary and Proper Clause.
As will be shown, the Commerce Clause and Necessary and Proper Clause are often used in tandem in Commerce Clause cases. Often when a case is overall a Commerce Clause case, the Necessary and Proper Clause becomes the determinative factor. I believe that is true in the case of the individual mandate. Although much has been said about whether the individual mandate is proper under the Commerce Clause of the Constitution, I believe that whether the individual mandate is constitutional depends on the Necessary and Proper Clause. In my opinion, the individual mandate, standing alone, does not comply with the Commerce Clause. However, I believe it is constitutional under the Necessary and Proper Clause.
Here 's a preview...I think that under current law, the individual mandate is constitutional. In addition to explaining my opinion, I will also present arguments based on current law that could be a basis for striking down the individual mandate. Sections II and III set out the legal basics. Sections IV-IX discuss the how current law favors the individual mandate. As will become apparent in that discussion, I think that how the argument in favor of the individual mandate is structured is very important. The focus needs to be on regulating health care, not health insurance. Sections V.C and D begin the explanation for that opinion and the discussion of how the individual mandate could be declared unconstitutional. That discussion continues in Section XI. Before that, in Section X, I will explain why I think Judge Hudson's ruling in the Virginia case is wrong. And finally, I will present a conclusion in Section XII.
Although I think that under current law the individual mandate is legal, I still am not sure how the Supreme Court will rule. The Supremes are free to make changes in some of the law, create some law, and rule the individual mandate unconstitutional.
Like I said, this is a complicated issue. Now for the proof...
II. There is a vast amount of precedent to evaluate.
The Commerce Clause and the Necessary and Proper Clause have been interpreted and evaluated by our courts practically since the birth of our Constitution. That means there is a vast amount of precedent that is relevant to any question involving both of them.
For a primer on the Commerce Clause and the judicial precedent related to it, this Wikipedia article is good. If you read that and get a case of tired head, just realize that that article qualifies as the proverbial tip of the iceberg. You might instead want to start with this column by Stuart Taylor. It concisely discusses some of the factors at play in this litigation about the individual mandate.
So, generally speaking, there is a vast amount of precedent regarding the Commerce Clause and the Necessary and Proper Clause. And there is a reason why much of it will necessarily have to be considered in this case. Judge George Steeh wrote the following in his order upholding the constitutionality of the individual mandate:
The Court has never needed to address the activity/inactivity distinction advanced by plaintiffs because in every Commerce Clause case presented thus far, there has been some sort of activity. In this regard, the Health Care Reform Act arguably presents an issue of first impression."Issue of first impression" is an issue that has never been presented to and decided by the Courts, especially the Supreme Court. There will be cases that have facts the same or similar to earlier rulings, or precedent. In those cases, precedent will be applied. However, sometimes issues arise in a case for which there is no precedent. In those cases of "first impression," Courts have to find reasoning from other precedent on which to base a ruling. This necessarily requires a wider review of precedent and more work. And that is pretty much what we have regarding the constitutionality of the individual mandate.
If you have read the Wikipedia article and the Stuart Taylor column, you should have an idea of just how complicated and challenging this task will be.
Just in case you might still doubt that a great deal of precedent will have to be reviewed, consider the basic argument against the individual mandate: the Commerce Clause permits regulation of economic activity, and since the individual mandate seeks to penalize people for inactivity, it is not within the scope of the Commerce Clause. Another way to state this argument is to say that the individual mandate is not within the scope of the Commerce Clause because it seeks to force people to engage in an activity. Those arguments are straightforward and make a lot of common sense. However, there is at least one potential problem. Here is the actual language of the Commerce Clause:
The Congress shall have power...To regulate commerce with foreign nations, and among the several states, and with the Indian tribes.The Commerce Clause does not include the words "economic" or "activity." For those who like to take a literalist or strict constructionist view of the Constitution, this is a problem. One could argue that it only makes plain sense that "commerce" includes "economic activity"--and I would agree--but that does not change the fact that that is NOT what the Constitution expressly says. I submit that it necessarily follows that it was judicial decisions that defined "commerce" to include "economic activity." That means there is a need for those relying on this "economic activity" argument to examine and interpret lots of precedent.
And then there's the Necessary and Proper Clause, which says that
The Congress shall have power...To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof.I will discuss this Clause in more detail in III.B and IV-IX below, but for now I will note that this provision basically addresses the means by which Congress manifests the powers of the federal government as granted by the Constitution. In other words, the Necessary and Proper Clause deals primarily with the means, not the ends. This is an important distinction. As for the amount of precedent dealing with the Necessary and Proper Clause, that precedent goes back to the landmark case of McCulloch v. Maryland, which was decided in 1817. Also, as stated in this Wikipedia article, "Indeed, the influence of the Necessary and Proper Clause and its broader interpretation under McCulloch vs. Maryland in American jurisprudence can be seen in cases generally thought to simply involve the Commerce Clause." So, a great deal of the precedent involving the Commerce Clause also involves the Necessary and Proper Clause. I will discuss one such case in detail in IV-IX below.
III. The precedent is not exactly clear and narrow.
As mentioned, the Commerce Clause and the Necessary and Proper Clause--and the precedent related to them--have been used to greatly expand federal power over the years. And now the Virginia case and others are attempting to place a limit on those powers. The problem in that regard is there there are so many cases granting expansion that there is a lot of precedent which could be used to persuasively argue that the individual mandate is constitutional.
A. Commerce Clause
Part of that precedent includes decisions that something comes within the scope of the Commerce Clause if it has an "effect" on interstate commerce. Here's how the Supremes stated it in the 2005 case of Gonzales v. Raich, 545 U.S. 1 (2005):
...Congress has the power to regulate activities that substantially affect interstate commerce. Ibid.; NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 37 (1937)...Our case law firmly establishes Congress’ power to regulate purely local activities that are part of an economic “class of activities” that have a substantial effect on interstate commerce. See, e.g., Perez, 402 U.S., at 151; Wickard v. Filburn, 317 U.S. 111, 128—129 (1942). As we stated in Wickard, “even if appellee’s activity be local and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce.” Id., at 125. We have never required Congress to legislate with scientific exactitude. When Congress decides that the “ ‘total incidence’ ” of a practice poses a threat to a national market, it may regulate the entire class. See Perez, 402 U.S., at 154—155 (quoting Westfall v. United States, 274 U.S. 256, 259 (1927)[.]545 U.S. at 16-17. I'm not saying that's good or bad, right or wrong. I'm just saying that is the law.
On the other hand, maybe there is a potential flaw in a claim that the individual mandate is authorized by the Commerce Clause, which is used to regulate interstate commerce. Under current law, a person cannot purchase a health insurance policy in a state other than the one in which he lives. That would seem to indicate that purchasing a health insurance policy is strictly an intrastate matter. That means there is another common sense argument, but there's that "effect" business to deal with, and there is other law that--for now--says that the "business of insurance" is interstate commerce. Much more on that in XI.C below...
And then there's the "rational basis" analysis. As the Court said in Gonzales v. Raich,
In assessing the scope of Congress' authority under the Commerce Clause, we stress that the task before us is a modest one. We need not determine whether respondents' activities, taken in the aggregate, substantially affect interstate commerce in fact, but only whether a “rational basis” exists for so concluding.545 U.S. at 22. Due to these concepts, the Supreme Court over the years has developed a level of deference to Congress when it comes to evaluating Commerce Clause cases. These excerpts from the Wikipedia article describes this deference:
The evolving level of scrutiny applied by Federal courts to Commerce Clause cases should be considered in the context of rational basis review. The idea behind rational basis review is that the judiciary must show deference to the elected representatives of the people. A respect for the democratic process requires that the Courts uphold legislation if there are rational facts and reasons that could support Congressional judgment, even if the Justices would come to different conclusions. Throughout the 20th century, in a variety of contexts, courts sought to avoid second guessing the legislative branch, and Commerce Clause jurisprudence can be seen as a part of this trend. Lawrence Tribe states:What all this means is that I think finding precedent to support a claim that the individual mandate is constitutional is going to be relatively easy. And even though the basic argument against the individual mandate makes common sense, the task for those on that side of the fence is explaining why that precedent should not apply.
Since 1937, in applying the factual test of Jones & Laughlin to hold a broad range of activities sufficiently related to interstate commerce, the Supreme Court has exercised little independent judgment, choosing instead to defer to the expressed or implied findings of Congress to the effect that regulated activities have the requisite "economic effect". Such findings have been upheld whenever they could be said to rest upon some rational basis.*******Since its decision in Gibbons, the Supreme Court has recognized that judicial limitations on Congressional exercise of its Commerce Clause powers represent an invasion of the democratic process. Of course, in some sense, by its very nature, the Constitution represents a constraint on the democratic process, because the Constitution represents a set of rules which may not be overturned through ordinary democratic means. Nevertheless, the Court regularly points out that the primary limitation on unwise exercise of Congressional Commerce Clause must be found at the ballot box.
Again, the most straightforward, common sense way to do that is to say that the individual mandate seeks to regulate inactivity as opposed to activity. However, since this is largely a question of first impression, there is no precedent regarding the type of inactivity present in this question and the Commerce Clause. There is precedent that, while not completely directly applicable, can be used to argue that the Commerce Clause can be used to regulate the "inactivity" of not buying health insurance, as discussed in V below.
B. Necessary and Proper Clause
As I said before, the Necessary and Proper Clause has been used many times to support expansions of federal power. That means there is a lot of precedent that could support the individual mandate.
Not only that, but I think whether the individual mandate is constitutional turns on the Necessary and Proper Clause, so the discussion here of that clause is going to be lengthier than that for the Commerce Clause.
On the one hand, the meaning of the Clause can be described by Madison's words in the Federalist Papers: "No axiom is more clearly established in law or in reason than wherever the end is required, the means are authorized; wherever a general power to do a thing is given, every particular power for doing it is included." (emphasis added). On the other hand, a case for limiting federal power under the Clause is found in the words of Chief Justice Marshall in McCulloch v. Maryland.
Just what is prohibited by the Constitution? The powers granted to the Congress in the Constitution are known as "enumerated powers." These are found in Article I, Section 8, and they include the Commerce Clause and the Necessary and Proper Clause. Article II, Section 9 contains a list of things that Congress cannot do, and thus constitutes a clear delineation of acts that are "prohibited by the Constitution" that could not be enacted via the Necessary and Proper Clause. Please note that Article I, Section 9 says nothing about laws that seek to regulate economic inactivity. But is there more to consider?
One could argue that any act of Congress that would not be allowed under one of the enumerated powers--such as the Commerce Clause--would also be prohibited by the Constitution. That makes sense, but, just as the Commerce Clause does not contain the words "economic activity," the Constitution does not expressly say that an act that does not match one of the enumerated powers is also prohibited. The Founding Fathers certainly knew how to include language which expressly prohibited acts--Article I, Section 9 has lots of such language. And yet there is no such direct statement in Article I, Section 9. This again points out the problem with taking a literalist/strict constructionist view of the Constitution.
The question really is "What is 'prohibited by the Constitution' in the context of the Necessary and Proper Clause?" As will be shown in the discussion of Gonzales v. Raich (and more specifically in VI below) the answer is not crystal clear, to say the least.
However, as Chief Justice Marshall stated, even if something is not "prohibited by the Constitution," there is another part to his test under the Necessary and Proper Clause, namely that something must be "consistent with the letter and spirit of the Constitution." There is room for interpretation on that, and I will do some "interpretation" in VII below.
The problem for those wanting to invalidate the individual mandate is that there is precedent strongly in favor of the individual mandate being valid under the Necessary and Proper Clause, and it is almost time to discuss one of those decisions.
So why am I listing law about the Commerce Clause in the section on the Necessary and Proper Clause? As explained by Justice Scalia in his concurring opinion in Gonzales,
Note also that everything described by Justice Scalia involves "activities."
At this point I must add that the above rules of law apply to matters that are also private in nature. See New York v. United States, 505 U.S. 144, 167 (1992); Hodel v. Virginia Surface Mining & Reclamation Association, Inc., 452 U.S. 264, 310 (1981) (Rehnquist, J., concurring); and National League of Cities v. Usery, 426 U.S. 833, 840 (1976). That means that these rules apply to matters that are private even if they might not be considered intrastate.
If an activity sought to be regulated meets the factors listed by Scalia, then the final test for proper application of the Necessary and Proper Clause must be satisfied. Here are two ways of describing that test:
And now it is time to apply all this law to the individual mandate, and I will do that by comparing it to the case of Gonzales v. Raich.
IV. An example of why the question of the constitutionality of the individual mandate is complicated: Gonzales v. Raich
As I said way back in the "first" post, I am not trying to present a detailed analysis of the Commerce Clause and Necessary and Proper Clause and their application to the individual mandate. I could write a very thick book on that subject and still not cover everything. Instead, I am going to compare the basic argument against the individual mandate to one previous decision by the Supreme Court, Gonzales v. Raich. That comparison will also include a case relied upon by the Court in Gonzales v. Raich--Wickard v. Filburn, 317 U.S. 11 (1942). What I will try to do is show why this issue of the individual mandate is not an easy one to resolve. With that in mind...
A. Basic description of the case and decision
Not only that, but I think whether the individual mandate is constitutional turns on the Necessary and Proper Clause, so the discussion here of that clause is going to be lengthier than that for the Commerce Clause.
- 1. The lasting conflict in interpretation
On the one hand, the meaning of the Clause can be described by Madison's words in the Federalist Papers: "No axiom is more clearly established in law or in reason than wherever the end is required, the means are authorized; wherever a general power to do a thing is given, every particular power for doing it is included." (emphasis added). On the other hand, a case for limiting federal power under the Clause is found in the words of Chief Justice Marshall in McCulloch v. Maryland.
We admit, as all must admit, that the powers of the Government are limited, and that its limits are not to be transcended. But we think the sound construction of the Constitution must allow to the national legislature that discretion with respect to the means by which the powers it confers are to be carried into execution which will enable that body to perform the high duties assigned to it in the manner most beneficial to the people. Let the end be legitimate, let it be within the scope of the Constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consistent with the letter and spirit of the Constitution, are constitutional.(emphasis added). The emphasized portion is basically the position taken by Judge Hudson in the Virginia case. (Hudson opinion, pp. 19, 24). However, as I will discuss in X.B and C below, the Supreme Court's 2005 decision in Gonzales v. Raich does not support Judge Hudson's ruling.
- 2. Chief Justice Marshall's admonitions
Just what is prohibited by the Constitution? The powers granted to the Congress in the Constitution are known as "enumerated powers." These are found in Article I, Section 8, and they include the Commerce Clause and the Necessary and Proper Clause. Article II, Section 9 contains a list of things that Congress cannot do, and thus constitutes a clear delineation of acts that are "prohibited by the Constitution" that could not be enacted via the Necessary and Proper Clause. Please note that Article I, Section 9 says nothing about laws that seek to regulate economic inactivity. But is there more to consider?
One could argue that any act of Congress that would not be allowed under one of the enumerated powers--such as the Commerce Clause--would also be prohibited by the Constitution. That makes sense, but, just as the Commerce Clause does not contain the words "economic activity," the Constitution does not expressly say that an act that does not match one of the enumerated powers is also prohibited. The Founding Fathers certainly knew how to include language which expressly prohibited acts--Article I, Section 9 has lots of such language. And yet there is no such direct statement in Article I, Section 9. This again points out the problem with taking a literalist/strict constructionist view of the Constitution.
The question really is "What is 'prohibited by the Constitution' in the context of the Necessary and Proper Clause?" As will be shown in the discussion of Gonzales v. Raich (and more specifically in VI below) the answer is not crystal clear, to say the least.
However, as Chief Justice Marshall stated, even if something is not "prohibited by the Constitution," there is another part to his test under the Necessary and Proper Clause, namely that something must be "consistent with the letter and spirit of the Constitution." There is room for interpretation on that, and I will do some "interpretation" in VII below.
The problem for those wanting to invalidate the individual mandate is that there is precedent strongly in favor of the individual mandate being valid under the Necessary and Proper Clause, and it is almost time to discuss one of those decisions.
- 3. Applications of the Necessary and Proper Clause/Commerce Clause combination and the limitations thereof
- Congress can regulate the channels of interstate commerce.
- Congress has authority to regulate and protect the instrumentalities of interstate commerce, and persons or things in interstate commerce.
- Congress has the power to regulate activities that substantially affect interstate commerce.
So why am I listing law about the Commerce Clause in the section on the Necessary and Proper Clause? As explained by Justice Scalia in his concurring opinion in Gonzales,
activities that substantially affect interstate commerce are not themselves part of interstate commerce, and thus the power to regulate them cannot come from the Commerce Clause alone. Rather, as this Court has acknowledged since at least United States v. Coombs, 12 Pet. 72 (1838), Congress’s regulatory authority over intrastate activities that are not themselves part of interstate commerce (including activities that have a substantial effect on interstate commerce) derives from the Necessary and Proper Clause.545 U.S. at 34 (citations omitted). Scalia went on to describe the types of things that could be regulated by the Commerce Clause via the Necessary and Proper Clause.
And the category of “activities that substantially affect interstate commerce,” Lopez, supra, at 559, is incomplete because the authority to enact laws necessary and proper for the regulation of interstate commerce is not limited to laws governing intrastate activities that substantially affect interstate commerce. Where necessary to make a regulation of interstate commerce effective, Congress may regulate even those intrastate activities that do not themselves substantially affect interstate commerce.545 U.S. at 34-37 (footnote omitted). "Lopez" is United States v. Lopez, 514 U.S. 549 (1995), a case that will be discussed in detail in X.C below. Note that the Necessary and Proper Clause can be used to ultimately apply the Commerce Clause to 1) activities that are intrastate, 2) activities that are non-economic, 3) intrastate activities that do not themselves substantially affect interstate commerce, and 4) activities that are necessary to implementation of an overall regulatory scheme that does regulate interstate commerce.*******As we implicitly acknowledged in Lopez, however, Congress’s authority to enact laws necessary and proper for the regulation of interstate commerce is not limited to laws directed against economic activities that have a substantial effect on interstate commerce. Though the conduct in Lopez was not economic, the Court nevertheless recognized that it could be regulated as “an essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated.” 514 U.S., at 561.*******The regulation of an intrastate activity may be essential to a comprehensive regulation of interstate commerce even though the intrastate activity does not itself "substantially affect" interstate commerce. Moreover, as the passage from Lopez quoted above suggests, Congress may regulate even noneconomic local activity if that regulation is a necessary part of a more general regulation of interstate commerce. See Lopez, supra, at 561.
Note also that everything described by Justice Scalia involves "activities."
At this point I must add that the above rules of law apply to matters that are also private in nature. See New York v. United States, 505 U.S. 144, 167 (1992); Hodel v. Virginia Surface Mining & Reclamation Association, Inc., 452 U.S. 264, 310 (1981) (Rehnquist, J., concurring); and National League of Cities v. Usery, 426 U.S. 833, 840 (1976). That means that these rules apply to matters that are private even if they might not be considered intrastate.
If an activity sought to be regulated meets the factors listed by Scalia, then the final test for proper application of the Necessary and Proper Clause must be satisfied. Here are two ways of describing that test:
- The relevant question is simply whether the means chosen are “reasonably adapted” to the attainment of a legitimate end under the commerce power. Gonzales, 545 U.S. at 37 (Scalia, J., concurring).
- [W]e look to see whether the statute constitutes a means that is rationally related to the implementation of a constitutionally enumerated power. Sabri v. United States, 541 U.S. 600, 605, 124 S.Ct. 1941, 158 L.Ed.2d 891 (2004) (using term "[130 S.Ct. 1957] means-ends rationality" to describe the necessary relationship)[.] U.S. v. Comstock, 130 S.Ct. 1949, 1956-1957 (2010).
In Lopez and Morrison, the Court–conscious of the potential of the “substantially affects” test to “545 U.S. at 35-38 (emphasis added). "Morrison" is United States v. Morrison, 529 U.S. 598 (2000), and that decision will be discussed in detail in X.C below. Justice Kennedy, in his concurring opinion in Comstock, described the test as‘obliterate the distinction between what is national and what is local,’ ” Lopez, supra, at 566—567 (quoting A. L. A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 554 (1935)); see also Morrison, supra, at 615—616–rejected the argument that Congress may regulate noneconomic activity based solely on the effect that it may have on interstate commerce through a remote chain of inferences. Lopez, supra, at 564—566; Morrison, supra, at 617—618...Thus, although Congress’s authority to regulate intrastate activity that substantially affects interstate commerce is broad, it does not permit the Court to “pile inference upon inference,” Lopez, supra, at 567, in order to establish that noneconomic activity has a substantial effect on interstate commerce. Lopez and Morrison affirm that Congress may not regulate certain “purely local” activity within the States based solely on the attenuated effect that such activity may have in the interstate market.*******
requir[ing] a tangible link to commerce, not a mere conceivable rational relation...The rational basis referred to in the Commerce Clause context is a demonstrated link in fact, based on empirical demonstration.Comstock, 130 S.Ct. at 1967 (Kennedy, J., concurring).
And now it is time to apply all this law to the individual mandate, and I will do that by comparing it to the case of Gonzales v. Raich.
IV. An example of why the question of the constitutionality of the individual mandate is complicated: Gonzales v. Raich
As I said way back in the "first" post, I am not trying to present a detailed analysis of the Commerce Clause and Necessary and Proper Clause and their application to the individual mandate. I could write a very thick book on that subject and still not cover everything. Instead, I am going to compare the basic argument against the individual mandate to one previous decision by the Supreme Court, Gonzales v. Raich. That comparison will also include a case relied upon by the Court in Gonzales v. Raich--Wickard v. Filburn, 317 U.S. 11 (1942). What I will try to do is show why this issue of the individual mandate is not an easy one to resolve. With that in mind...
A. Basic description of the case and decision
In Gonzales v. Raich "Gonzales" was the U.S. Attorney General, and the non-government party I want to focus on was named Monson. Monson was growing her own marijuana for her medicinal purposes, as was legal under California law. It was grown and used only for her personal and medicinal purposes. There was no attempt or intent to sell the marijuana. There was no attempt to put the marijuana into interstate commerce. In other words, there was no "economic activity" and any activity was strictly private and intrastate in character. The DEA seized the plants pursuant to the Controlled Substances Act (CSA). Ultimately, the Supreme Court ruled that such action was constitutional under the Commerce Clause and the Necessary and Proper Clause. Indeed, the Court's decision turned primarily on the Necessary and Proper Clause, as shown in the opening paragraph of the majority opinion.
The question presented in this case is whether the power vested in Congress by Article I, §8, of the Constitution “[t]o make all Laws which shall be necessary and proper for carrying into Execution” its authority to “regulate Commerce with foreign Nations, and among the several States” includes the power to prohibit the local cultivation and use of marijuana in compliance with California law.Gonzales, 545 U.S. at 5. Immediately after the quote in III.A above describing the "rational basis" test, the majority opinion said
Given the enforcement difficulties that attend distinguishing between marijuana cultivated locally and marijuana grown elsewhere, 21 U.S.C. § 801(5), and concerns about diversion into illicit channels, we have no difficulty concluding that Congress had a rational basis for believing that failure to regulate the intrastate manufacture and possession of marijuana would leave a gaping hole in the CSA...Congress was acting well within its authority to “make all Laws which shall be necessary and proper” to “regulate Commerce … among the several States.” U.S. Const., Art. I, §8. That the regulation ensnares some purely intrastate activity is of no moment.545 U.S. at 23 (emphasis added). Again, to me this shows that the Court relied mainly on the Necessary and Proper Clause in making its ruling. More proof that the case was decided on the basis of the Necessary and Proper Clause is found in Justice Scalia's concurring opinion.
Other parts of the majority opinion show that the Court ruled that the Commerce Clause justified the DEA's action under the CSA because of the possibility that people other than Monson might grow their own marijuana and put it into the interstate market. Gonzales, 545 U.S. at 28-33. In other words, the Court ruled that the Commerce Clause was applicable to Monson even though the evidence established that she was not involved in any kind of commerce or interstate activity. Another way to put this is that the Court ruled that the Commerce Clause was applicable to Monson even though the evidence established that she chose not to engage in commerce and her activities were strictly intrastate and private in nature.
The majority relied heavily on the Court's decision in the 1942 case of Wickard v. Filburn, and the reasoning of that decision is relevant to the instant discussion. Specifically, the reason for and effect of the law at issue there is analogous to that of the individual mandate.
In Wickard v. Filburn the law in question was the Agricultural Adjustment Act of 1938, which had a formula which determined the maximum amount of wheat a given farm would be allowed to produce. Filburn, the farmer, was producing more than twice the amount called for under the law, and the federal government sought to fine him and destroy the "excess" amount of his wheat crop pursuant to the Agricultural Adjustment Act. Filburn argued that the "excess" was grown for his own use only and thus was not part of interstate commerce. The Supreme Court rejected that argument.
The Court's opinion, by Justice Jackson, had this to say about the Agricultural Adjustment Act:
The effect of the statute before us is to restrict the amount which may be produced for market and the extent as well to which one may forestall resort to the market by producing to meet his own needs. That appellee’s own contribution to the demand for wheat may be trivial by itself is not enough to remove him from the scope of federal regulation where, as here, his contribution, taken together with that of many others similarly situated, is far from trivial.317 U.S. 127-128. In other words, the objectives were to 1) regulate the total amount of wheat in the interstate market so as to control prices, and 2) make sure that everyone--including farmers--would have to buy wheat for their own use from that market. Only in that way could the purpose of the legislation achieve its goals. And the only way to achieve those goals was to force farmers to comply with the law, or stated another way, force farmers to do something, namely limit their wheat production. If they did not, they would be penalized by a fine.
The Court in Gonzales v. Raich ruled that
Wickard thus establishes that Congress can regulate purely intrastate activity that is not itself “commercial,” in that it is not produced for sale, if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity.545 U.S. at 18. (emphasis added). In Gonzales the Court went on to rule that if Congress had any rational basis for concluding that certain conduct could undercut the overall goals and objectives of legislation, that conduct could be regulated or compelled.
Here's how I see the Court's reasoning: 1) there is an interstate market for marijuana; 2) the federal government has a legitimate interest in regulating that interstate market; 3) marijuana grown for private purposes could conceivably find its way into the interstate market; 4) the seizure of Monson's plants was a "necessary and proper" means to regulate the interstate commerce of marijuana by prohibiting any intrastate growing of marijuana because 5) without such prohibition, the entire regulatory objectives of the CSA could fail.
With the foregoing in mind, let's look at some of the similarities between Gonzales and the individual mandate.
B. The primary similarities
I stated the basic argument against the individual mandate as follows:
[T]he Commerce Clause permits regulation of economic activity, and since the individual mandate seeks to penalize people for inactivity, it is not within the scope of the Commerce Clause. Another way to state this argument is to say that the individual mandate is not within the scope of the Commerce Clause because it seeks to force people to engage in an activity.And here's how Judge Hudson put it:
Neither the Supreme Court nor any federal circuit court of appeals has extended Commerce Clause powers to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market.I think the big problem with Judge Hudson's ruling is the ultimate determination of the constitutionality of the individual mandate depends not on the Commerce Clause, but on the Necessary and Proper Clause. Judge Hudson did make a ruling on the Necessary and Proper Clause, but as will be explained in X below, his ruling is incorrect.
My opinion is that in light of the ruling in Gonzales I don't see how the individual mandate is not constitutional under the Necessary and Proper Clause. A comparison of the facts in Gonzales and how the individual mandate would operate supports my opinion. For the individual mandate, people who would otherwise choose not to become part of commerce would be "forced" to become part of commerce by buying insurance or pay a penalty. To put it another way, a person who chose not to engage in an economic activity--buying health insurance--would be required to engage in an economic activity or pay a penalty. In Gonzales, Monson chose not to engage in any kind of commerce, but was nonetheless ruled to have an effect on commerce. Under the individual mandate, one must engage in commerce or get penalized. Monson was effectively forced into commerce even though she chose not to be and in fact was not engaged in any kind of economic activity and penalized by having her property seized. One could argue that Monson's fate was even worse than what would happen under the individual mandate. Under the individual mandate, one would get penalized for his own deliberate inaction. Monson got penalized in large part because of what other people might do. Not only that, but Monson was not given a choice in the matter, whereas under the individual mandate a person can choose between buying insurance or paying a penalty. And to top it off, Monson was engaged in wholly private and intrastate activity.
I'm not saying that Gonzales is exactly the same as any of the cases regarding the PPACA. I am, however, pointing out that Gonzales shows just how far the Supreme Court has been willing to expand justifications for federal law pursuant to the Commerce Clause and Necessary and Proper Clause. That same kind of rationale might be applied to the individual mandate.
V. Gonzales, the individual mandate, and activity
A. Overview
As shown above, there are strong similarities between the circumstances in Gonzales and the individual mandate. Moreover, the legal rationale used in Gonzales could be applied to the individual mandate in all regards--if not for one not-so-small detail. Recall that the main argument against the individual mandate is that it seeks to regulate inactivity rather than activity. Recall also that the law regarding the Necessary and Proper Clause as described by Justice Scalia involves activity.
Consequently, the legal meaning of "activity" is at the core of this whole matter, and for me, the core of that meaning is the overall regulatory objective of the PPACA. As I will explain, I think the "inactivity" argument fails if the overall regulatory objective is health care as opposed to health insurance. Conversely, I think the best way to try to invalidate the individual mandate is to show that the overall regulatory objective of the PPACA is health insurance.
B. Application of the Necessary and Proper Clause in Gonzales and how that compares to the individual mandate
Recall that in Gonzales Monson was not engaged in any commerce, was not engaged in any economic activity, and was engaged in activity that was completely private and intrastate in nature. That meant that the Commerce Clause was in no way directly applicable to Monson. Recall also that the Court found that the statute in question was an essential part of an overall regulatory scheme designed to regulate an interstate market. Because of all those factors, the Supreme Court ruled that the statute in question was constitutional and applicable to Monson because of the Necessary and Proper Clause.
Now compare that with the individual mandate in the context of the primary argument against it. That argument is based on a person not being involved in an economic activity--just like in Gonzales. That argument is based on a person not being engaged in any commerce--just like in Gonzales. And the individual mandate is an essential part of an overall regulatory scheme.
As I stated in my (first) lengthy post on health care, "if insurance is to be the foundation of a health care system, having a mandate that everyone have insurance really is key to trying to manage the cost of the insurance and provide coverage to everyone." Now I will go even further. Although the "reforms" of the PPACA are (in my opinion) the insurance exchanges and the consumer protection provisions (such as no more "preexisting conditions"), the key to any success of the PPACA is the individual mandate. As I tried to explain before, without the individual mandate, there is little chance of the insurance exchanges succeeding. Without the individual mandate, the insurance companies will try to get rid of the consumer protections (and there are rational business reasons for that). The key for any possible success under the PPACA is that everyone has health insurance, and the only way to ensure that happens is the individual mandate. The federal government made basically the same claims in the Virginia case. (Hudson Opinion, pp. 12-16). However, the feds also claimed that the regulatory objective is the health insurance market (as shown in part in V.D below). I think this is a potentially fatal mistake, but I will discuss that later. For now, let's assume that there is an interstate health insurance market.
That means that almost all of the same factors that led the Supreme Court to uphold the statute in Gonzales are present in regard to the individual mandate. Almost. The one thing missing for the individual mandate--according to the argument against it--is "activity." Or is it?
C. What isn't an "activity" in one market might be in another.
I am not going to examine what "the meaning of 'is' is," but it might seem like I am.
This is going to be the first of several contentions by me that making the regulatory objective of the PPACA health insurance rather than health care is a way to get the individual mandate found unconstitutional.
As shown in III.B.3 above, in order for a law to be proper under the Necessary and Proper Clause, it has to have a rational basis of relation to a regulatory objective that is proper under the Commerce Clause. For instance, in Gonzales, the law which called for the seizure of Monson's marijuana plants was not itself allowable under the Commerce Clause (since Monson was not engaged in any commerce and her activities were strictly intrastate and private), but since that law was deemed to be essential to regulation of an interstate market that was subject to Commerce Clause regulation, the law was deemed proper because of the Necessary and Proper Clause. Furthermore, Monson did engage in an activity of some sort, namely growing the plants. Hence, her case fit all the elements of law set out in both the majority opinion and Scalia's concurring opinion.
However, if regulation of the interstate health insurance market (assuming it is an interstate market) is the overall objective of the PPACA, then how can there be "activity" by someone who does not participate in that market? How can someone who does not buy health insurance engage in "activity" in the health insurance market? That is the essence of the argument against the individual mandate. And if the overall objective of the PPACA is regulation of the health insurance market rather than the health care market, that argument makes a lot of sense, and it might provide a way to get around all the law interpreting the Necessary and Proper Clause.
In my opinion, the situation changes if the overall regulatory objective of the PPACA is the health care market. Unlike health insurance, health care does not have to be purchased in the same state where a person lives. People can cross state lines to get health care. In other words, health care is an interstate market and is thus subject to regulation under the Commerce Clause. Under the Necessary and Proper Clause, then, Congress can pass laws which regulate some portion of the health care market which themselves are not proper under the Commerce Clause. Those laws can regulate non-commercial, non-economic, and private activities.
In the Virginia case, the feds argued that everyone is going to have to have health care at some point. I agree. That means that everyone at some point is going to get health care, which is going to need to be paid for. Today, the primary method of payment for health care is insurance, but that is not the only way, nor will it be the only possible way under the individual mandate. A person could choose not to get insurance, pay the penalty, and still pay for health care out of his own pocket. When all those factors are considered, then choosing not to buy insurance is a choice freely made. When combined with the fact that consumption of health care is inevitable, a case could be made that the decision to either acquire or forgo health insurance becomes an "activity" because it determines how one will pay for something--health care--that is part of interstate commerce. Stated differently, 1) obtaining health care is an activity in an interstate market; 2) that health care has to be paid for; 3) thus, paying for that health care is an activity in an interstate market; 4) deciding how to make that payment is necessarily an activity in an interstate market, and 5) deciding whether or not to buy health insurance is part of deciding how to pay for health and is thus an activity in an interstate market.
Here's the difference...As of now, everyone will necessarily participate in the health care market, while right now everyone does not have to participate in the health insurance market. If the health care market is the regulatory objective, then the individual mandate is not regulating whether someone enters that market. Instead, the individual mandate seeks to regulate a person's conduct after he enters that market. If the regulatory objective in the health insurance market, then the individual mandate does seek to regulate whether someone enters a given market.
There is a potential flaw in my analysis on this point. It depends in what Judge Hudson termed a "future contingency," namely people needing health care in the future. Admittedly, basing a regulation on what people might do in the future does not seem right (although it was not a problem in Gonzales). However, I think health care presents almost no future contingency. There are lots of people who need health care right now. There are plenty of people (such as people with chronic diseases or conditions) that we know will need health care in the future. And we all know that pretty much everyone alive now and in the future is going to need health care at some point. All of this is beyond dispute. To put it another way, needing health care is not a matter of "if" but "when."
And there is yet another potential problem with my analysis, naley that making decision is not the same as doing something. For instance, I might decide to go workout, but if I never get up to actually exercise, does my decision count as an "activity?" That sort of question is addressed in V.D.
D. But wait...there's more regarding "activity," or "fun with words."
- 1. Dictionary definitions of "economic" and "activity"
Unlike those at issue in Lopez and Morrison, the activities regulated by the CSA are quintessentially economic. "Economics" refers to "the production, distribution, and consumption of commodities." Webster's Third New International Dictionary 720 (1966). The CSA is a statute that regulates the production, distribution, and consumption of commodities for which there is an established, and lucrative, interstate market. Prohibiting the intrastate possession or manufacture of an article of commerce is a rational (and commonly utilized) means of regulating commerce in that product.Gonzales, 545 U.S. at 25-26. It is possible that health care and health insurance are "commodities?" If so, then is the decision on how to pay for either health care or health insurance "economic" in nature? If the answer to that question is "yes," then does that decision become an "activity?" It seems to me that it does. The federal government raised this basic argument, although judging from Judge Hudson's opinion, the feds did not use the definition of "economics" cited by Justice Stevens. See Hudson Opinion, pp. 11-12. Here is the basic argument from the feds:
Critical to the Secretary's argument is the notion that an individual's decision not to purchase health insurance is in effect "economic activity." (Def.'s Mem. Supp. 35.) The Secretary rejects the Commonwealth's implied premise that a person can simply elect to avoid participation in the health care market. It is inevitable, in her view, that every individual”today or in the future”healthy or otherwise”will require medical care. She adds that a large segment of the population is uninsured and "consume[s] tens of billions of dollars in uncompensated care each year." (Def.'s Mem. Opp. 14.) The Secretary maintains that the irrefutable facts demonstrate that "[t]he conduct of the uninsured”their economic decision as to how to finance their health care needs, their actual use of the health care system, their migration in and out of coverage, and their shifting of costs on to the rest of the system when they cannot pay”plainly is economic activity." (Def.'s Mem. Opp. 16-17.)(Hudson Opinion, pp. 12-13)(footnotes omitted). I hope the reader now sees why I said in V.B above that the feds claimed that the overall regulatory objective of the PPACA is the health insurance market. There were points where the feds referred to the health care market, but, if Judge Hudson's Opinion accurately stated the arguments, the feds kept coming back to talking about the health insurance market.*******The core of the Secretary's primary argument under the Commerce Clause is that the Minimum Essential Coverage Provision is a necessary measure to ensure the success of its larger reforms of the interstate health insurance market. The Secretary emphasizes that the ACA is a vital step in transforming a currently dysfunctional interstate health insurance market. In the Secretary's view, the key elements of health care reform are coverage of those with preexisting conditions and prevention of discriminatory premiums on the basis of medical history. These features, the Secretary maintains, will have a material effect on the health insurance underwriting process, and inevitably, the cost of insurance coverage...Therefore, under the Secretary's reasoning, since Congress has the power under the Commerce Clause to reform the interstate health insurance market, it also possesses, under the Necessary and Proper Clause, the power to make the regulation effective by enacting the Minimum Essential Coverage Provision.
In any event, the feds argued that deciding not to buy health insurance was an "economic activity," and under the definition of "economics" in Gonzales, an argument could be made that any decision made by a person regarding insurance is an "economic activity." I still think that is a stretch if the overall objective of the PPACA is regulating insurance, but the argument could be made.
That argument would be strengthened by another definition for "economic" found at Dictionary.com. That site had the same definition as used by Justice Stevens, but it also had this definition: "involving or pertaining to one's personal resources of money." Under that definition, a decision regarding whether or not to buy health insurance is an economic activity. However, that does not end the inquiry. Under that definition, potentially almost every decision a person makes would be an "economic activity." So where is the line to be drawn if there is to be any limit on the government's powers? Then again, it seems to me that sometimes a decision necessarily is an activity.
So let's look at a definition for "activity." I found this definition on Dictionary.com as well: "normal mental or bodily power, function, or process." And then there's this definition from the Merriam-Websiter site: "natural or normal function: as... a similar process actually or potentially involving mental function[.]" Under either of these definitions when one has a choice to make and makes a decision about that choice, one has engaged in an activity. Still the "line drawing" issue exists.
In the context of Commerce Clause/Necessary and Proper Clause questions, it seems to me that if a given decision is part of a direct line of circumstances that ends in having an effect on a market that is subject to Commerce Clause regulation, that decision is at least an activity and at most an economic activity. The decision cannot have an attenuated or highly inferential effect on an interstate market. And if that is the case, then the individual mandate does not seek to regulate inactivity.
Isn't this fun?
I have to admit that I have found no precedent that supports my little word game here. However, in Gonzales the Supremes did use a dictionary definition of "economics" as a key part of the reasoning for the decision. They did not do the same for "activity," and as I have framed the issue, the meaning of "activity" is central to determining whether the individual mandate comes within the scope of the Necessary and Proper Clause.
- 2. More on health care as opposed to health insurance
If the regulatory objective is only the health insurance market, there is still the problem of the individual mandate basically compelling someone to enter a market. Assuming that the health insurance market is interstate, my "word game theory" could be used to rule that the individual mandate is constitutional. However, if a line is to be drawn, it is going to be a lot easier than if the objective is regulation of the health care market. Why? Because no one has to be forced or compelled into entering the health care market. That's the case now, and that will always be the case. By contrast, right now people do not have to enter the health insurance market. The individual mandate seeks to essentially change that. Regardless of the the legal technicalities, there is something about that change that doesn't seem right to a lot of people.
There is another problem concerning the health insurance market. I will discuss that in detail in XI.C, but for now I will say that there is a chance that the market for health insurance is not an interstate market, and if that is the case, AND the regulatory objective of the PPACA is the health insurance market, then the individual mandate is doomed.
VI. What about "prohibited by the Constitution?"
Recall that in order for a law to be upheld under the Necessary and Proper Clause, it must not be "prohibited by the Constitution." In discussing this element in III.B.2 above I said Gonzales would show that the precise meaning of this phrase is not crystal clear. I also noted that there is no express language in the Constitution which prohibits laws regulating economic activity, nor is there express language saying that laws which do not come within the enumerated powers of Article I, Section 8 are prohibited.
And indeed, Gonzales shows that laws that do not by themselves come within the enumerated power of the Commerce Clause are not necessarily "prohibited by the Constitution." Recall that the law in question in Gonzales sought to regulate conduct that was non-economic, non-commercial, and completely intrastate. As such, there was no way that the Commerce Clause applied to that law or conduct. Moreover, I submit that that law--which made the growing of marijuana illegal--does not come within the express language of any of the other enumerated powers of Article I, Section 8. Yet the Supreme Court upheld that law via the Necessary and Proper Clause.
I see the same rationale applying to the individual mandate--as long as the overall regulatory objective of the PPACA is health care.
VII. What about "consistent with the letter and spirit of the Constitution?"
I think my analysis concerning "prohibited by the Constitution" applies equally to this question. Granted, the the basic argument against the individual mandate--regulating inactivity and forcing someone to do so something--at the least seems like a violation of the spirit of the Constitution. The principles involved in the argument against the individual mandate are personal liberty and the desire to be free from government intrusion on that liberty.
And to that I have three responses. First, in terms of violating personal liberty, I think the circumstances of Gonzales are worse than the individual mandate. In Gonzales, Monson was doing something that was strictly for her own personal purposes. Moreover, what she was doing was legal under California law, and she had no intention to do anything illegal. She was not involved in any kind of commerce and had no intention of changing that. She was basically minding her own business, not harming anyone, was not a threat to harm anyone, and she was acting within California law. Not only was her personal liberty basically violated, but the basis for that was what other people might do. And yet, the Supreme Court found that the federal law which effected such an encroachment on her personal liberty did not violate the spirit of the Constitution.
Second, although I think most of us view the Constitution primarily as establishing rights related to personal liberty (for example, the Bill of Rights). While the Constitution certainly does that, that is not all it does. The Constitution also establishes the responsibilities and powers of the federal government. Those also have to be enforced, and over the years, the Supreme Court has certainly done that. Again, I am not saying that is right or wrong. I am simply saying that's the way it is. I am also saying that the spirit of the Constitution also involves protecting the power and authority of the federal government. What I am trying to say is that even if the individual mandate is not within the Constitution's spirit of personal liberty, it could still be within the Constitution's spirit of preserving the power and authority of the federal government. Recall that I said this case is ultimately about drawing a line regarding Congress's power under the Commerce Clause and Necessary and Proper Clause. Stated differently, it is about finding a balance between personal liberty and federal government power. Based on existing precedent--like Gonzales--I do not think that the individual mandate is sufficiently violative of the spirit of the Constitution to be illegal. However, the Supreme Court could feel otherwise, and the Justices are absolutely free to say so.
Third, under the applicable law on the Necessary and Proper Clause, Congress can pass laws that regulate private activities. One could strongly argue that the decisions on how to pay for health care and whether to buy insurance is strictly a private matter. If that argument is accepted, such private conduct is still within the reach of the Commerce Clause by virtue of the Necessary and Proper Clause.
In spite of the foregoing, I think that this aspect of the law could be a basis for overturning the individual mandate. The Justices of the Supreme Court do not bend with the political winds, as in they are not the poll-watching, pandering whores that some politicians are, but they are also not out of touch with common sense and a sense of fairness. The core argument against the the individual mandate contains a strong "it is against the spirit of the Constitution" element, and that could well provide the impetus for a majority of the Justices to modify existing precedent in order to declare the individual mandate unconstitutional. And, to continue my broken record, the "against the spirit of the Constitution" argument is much stronger if the purpose of the PPACA is regulation of health insurance.
VIII. What about the requirement that the individual mandate be “reasonably adapted” to the regulatory objective of the PPACA?
It seems to me that the individual mandate meets this requirement--as long as the focus is on regulating health care.
The individual mandate is "reasonably adapted” and "rationally related" to the attainment of a legitimate end under the commerce power. The health care market is interstate in nature, and thus subject to Commerce Clause regulation. The PPACA seeks to regulate the health care market by making sure that more people have access to it. The PPACA seeks to regulate that market by instituting consumer protections regarding health insurance. The PPACA seeks to regulate that market by instituting measures intended to reduce costs (scant as they may be). And as I have said before, the individual mandate is the key to all of that. At least that's the argument. I am far from convinced that the PPACA is going to achieve those goals, but the way it is set up, the individual mandate is, as the feds argued in the Virginia case, the linchpin to the whole deal.
Getting back to my not being convinced that the PPACA will work...I still think the PPACA is not real reform of the health care system and that there is little in the PPACA that actually addresses reducing the actual cost of actual health care. However, the question as to the constitutionality of the individual mandate via the Necessary and Proper Cause is NOT whether the PPACA will actually work. I do not think the Supreme Court has the authority to try to determine whether the PPACA will work. The question is twofold: 1) does the PPACA seek to regulate the health care market (which is a proper objective under the Commerce Clause), and 2) is the individual mandate rationally related to that objective? I don't see how the answer can be anything but "yes."
IX. What about a "remote chain of inferences?"
In short, there is not one.
Again, my answer is based on the PPACA regulating health care rather than just health insurance. I explained some of the reasons why I think the argument for the individual mandate must be based on the PPACA regulating health care in III.A (purchasing health insurance is an intrastate activity and thus one could argue there is no interstate health insurance market), V.C (not buying health insurance is not engaging in "activity" in the health insurance market), and V.D.2 (easier to draw a line of limitation for health insurance), and a further explanation will come in Section XI.
My answer regarding a remote chain of references is based on the argument I made in V.C regarding "activity." Once again, here it is: 1) obtaining health care is an activity in an interstate market; 2) that health care has to be paid for; 3) thus, paying for that health care is an activity in an interstate market; 4) deciding how to make that payment is necessarily an activity in an interstate market, and 5) deciding whether or not to buy health insurance is part of deciding how to pay for health and is thus an activity in an interstate market.
To put it in the language of the test as set out in III.B.3 above, there is a tangible link between the individual mandate and interstate commerce. The individual mandate is about regulating the decision on how to pay for health care, and there's nothing more tangible than the payment for services and commodities. Also, there is no "remote chain of inferences" or "piling of inference upon inference." It is a fact that everyone either currently needs or will need health care. It is a fact that such health care is going to need to be paid for. It is a fact that, even under the individual mandate, people are going to have to pay for health care through insurance or some other means. There are no inferences there. Any decision as to how health is to be paid for is a demonstrable, empirical link to the interstate market of health care. And the individual mandate seeks to regulate that decision process.
X. Direct criticism of Judge Hudson's opinion regarding the Necessary and Proper Clause
A. Overview
In the "first post" I quoted the following statement from Judge Hudson's Opinion:
If a person’s decision not to purchase health insurance at a particular point in time does not constitute the type of economic activity subject to regulation under the Commerce Clause, then logically an attempt to enforce such provision under the Necessary and Proper Clause is equally offensive to the Constitution.(Hudson Opinion, p. 19). Based on this reasoning, Judge Hudson's actual ruling on the Necessary and Proper Clause was as follows:
Because an individual's personal decision to purchase”or decline to purchase” health insurance from a private provider is beyond the historical reach of the Commerce Clause, the Necessary and Proper Clause does not provide a safe sanctuary. This clause grants Congress broad authority to pass laws in furtherance of its constitutionally enumerated powers. This authority may only be constitutionally deployed when tethered to a lawful exercise of an enumerated power. See Comstock, 130 S.Ct. at 1956-57. As Chief Justice Marshall noted in McCulloch, it must be within "the letter and spirit of the constitution." 17 U.S. (4 Wheat.) at 421. The Minimum Essential Coverage Provision is neither within the letter nor the spirit of the Constitution. Therefore, the Necessary and Proper Clause may not be employed to implement this affirmative duty to engage in private commerce.(Hudson Opinion, p. 24). There are many problems with Judge Hudson's reasoning and ruling. First and foremost, Judge Hudson completely ignored Gonzales--as in his statements are contradicted by the law and facts in Gonzales and he did not even address Gonzales in a substantive way. In other words, his statements are wrong in light of Gonzales and he did not even bother to try to explain why Gonzales did not control. Instead, he accepted faulty arguments by Virginia and then incorrectly relied on two other Supreme Court decisions, United States v. Morrison, 529 U.S. 598 (2000), and United States v. Lopez, 514 U.S. 549 (1995). Morrison and Lopez are distinguishable from the circumstances of the individual mandate, meaning they are not controlling on the question of whether the individual mandate is constitutional under the Necessary and Proper Clause.
B. Judge Hudson ignored the law.
As shown by the two above excerpts from Judge Hudson's Opinion, he basically ruled that since the individual mandate on its own violated the Commerce Clause, it also violated the Necessary and Proper Clause. Orin Kerr, a law professor, made the following comments about this part of the ruling:
The reason Judge Hudson did not cite any authority (that is, precedent or other law) is because the existing authority shows Judge Hudson was and is wrong. Judge Hudson's ruling completely ignores the law as clearly set out in Gonzales, in particular Justice Scalia's statements that "activities that substantially affect interstate commerce are not themselves part of interstate commerce, and...Congress’s regulatory authority over intrastate activities that are not themselves part of interstate commerce...derives from the Necessary and Proper Clause." Judge Hudson also apparently forgot about this part of the majority opinion in Gonzales: "Wickard thus establishes that Congress can regulate purely intrastate activity that is not itself 'commercial,' in that it is not produced for sale, if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity." In other words, the applicable law holds that conduct that, standing alone, cannot be regulated through direct application of the Commerce Clause can still be regulated through the Necessary and Proper Clause. In light of that law, Judge Hudson is simply wrong.
That Judge Hudson failed to apply the correct law is seen in this statement from his Opinion: "Whether the [individual mandate], which requires an individual to purchase health insurance or pay a penalty, is borne of a constitutionally-enumerated power, is the core issue in this case." (Hudson Opinion, p. 17). He missed the point completely. The core issues were and are 1) whether the PPACA as a whole regulates an interstate market, and 2) whether the individual mandate is allowable under the Necessary and Proper Clause as part of the overall regulatory objective.
It seems to me that Judge Hudson considers the individual mandate the "end" rather than the "means." That might be fine if the true, overall objective of the PPACA is the regulation of the health insurance market. However, I think the overall objective of the PPACA is regulation of the health care market, which clearly is an interstate market, and that means the overall objective of the PPACA is allowable under the Commerce Clause. The individual mandate is a means by which to accomplish that objective, and thus is allowable under the Necessary and Proper Clause. This is the approach the Supreme Court used in Gonzales. The Court ruled there was an interstate market for marijuana, the CSA was an attempt to regulate that market pursuant to the Commerce Clause, and the seizure of Monson's plants was a "necessary and proper" means by which to carry out that regulation of an interstate market. Keep in mind also that the Court acknowledged that Monson was engaging in an intrastate activity, meaning that on the surface, the Commerce Clause (intended only for interstate commerce) could not apply to Monson. It was only through the "necessary and proper" step of the CSA which called for seizure of the plants that such seizure was constitutional.
Basically, it appears to me that Judge Hudson applied a Commerce Clause analysis to the individual mandate as if it was a stand-alone provision. To be fair to Judge Hudson, some of the language contained in § 1501 of the PPACA (the individual mandate) could be construed as Congress claiming that the individual mandate by itself is a proper exercise of power under the Commerce Clause (see XI.B below), but I don't think that conclusion is warranted when the PPACA is viewed as a whole. If the individual mandate had been a stand-alone piece of legislation, I don't think it could be constitutional under the Commerce Clause (see XI.C below)--and that would mean that the Necessary and Proper Clause would not even enter into the analysis. However, the individual mandate is not a stand-alone provision. It is one part of an overall regulatory scheme that has as its objective regulation of the health care market. As such the individual mandate does not have to be constitutional under the Commerce Clause because of the effect of the Necessary and Proper Clause. That is the reasoning in Gonzales.
There is another problem with Judge Hudson's ruling. If he was not merely viewing the individual mandate alone as needing to pass muster under the Commerce Clause, then Professor's Kerr's criticism is correct. It seems clear that under the Necessary and Proper Clause, a provision of a law that is a means rather than an end does not have to be constitutional under the Commerce Clause. If Judge Hudson was viewing the individual mandate as a "means," it seems to me that his reasoning would render the Necessary and Proper Clause--as applied in Commerce Clause precedent (such as Gonzales)--a nullity because it would require that "means" must by themselves comply with the Commerce Clause before they could be considered "necessary and proper." That simply is not the law, and Judge Hudson's rulings are wrong.
C. Hudson accepted faulty arguments and relied on inapplicable precedent.
For me the biggest weakness in Judge Hudson's opinion is that he did not address any of the arguments I set out above concerning Gonzales and Wickard. He stated the arguments each side made as to those cases. As noted earlier, the feds' arguments were close to the arguments I have made--with the exception of the feds basing the arguments on an interstate health insurance market, but Judge Hudson's opinion never explained why those arguments are incorrect. Instead, he stated Virginia's abbreviated arguments regarding Gonzales and Wickard, accepted them, and then made an incorrect statement about Commerce Clause precedent. Here's what Virginia argued regarding Gonzales and Wickard:
Hudson, however, apparently accepted that position and used it as a basis for this portion of his Opinion:
Instead, Judge Hudson, like Virginia, relied on two other Supreme Court decisions, Lopez and Morrison. The arguments I have presented in favor of the constitutionality of the individual mandate are based on it being an essential part of an overall regulatory scheme. That is the same basis upon which the laws at issue in Gonzales were found constitutional. In his concurring opinion in Gonzales, Justice Scalia shows why Morrison and Lopez are not applicable when the individual mandate is evaluated on this basis:
The law in question in Lopez was the Gun-Free School Zones Act of 1990, which was a brief, single-subject statute making it a crime for an individual to possess a gun in a school zone. In other words, the statute was a stand-alone law. It was not part of an overall regulatory scheme. The Supreme Court ruled as follows:
In Morrison, the law at issue was part of the Violence Against Women Act, specifically 42 U.S.C. §13981, which created a federal civil remedy for the victims of gender-motivated crimes of violence. The Supremes held that law not to be allowed under the Commerce Clause. Here's how Justice Stevens (in the majority opinion in Gonzales) described the ruling in Morrison:
XI. Insurance and interstate commerce as defined by the Supreme Court
A. Overview
Judge Hudson does not cite any authority for this conclusion: He seems to believe it is required by logic. But it is incorrect. The point of the Necessary and Proper clause is that it grants Congress the power to use means outside the enumerated list of of Article I powers to achieve the ends listed in Article I. If you say, as a matter of “logic” or otherwise, that the Necessary and Proper Clause only permits Congress to regulate using means that are themselves covered by the Commerce Clause, then the Necessary and Proper Clause is rendered a nullity. But that’s not how the Supreme Court has interpreted the Clause, from Chief Justice Marshall onwards. Indeed, as far as I know, not even the most vociferous critics of the mandate have suggested that the Necessary and Proper Clause can be read this way.Some have said that Professor Kerr has misread what Judge Hudson wrote. They maintain that Judge Hudson was saying that while the means chosen by Congress to carry out a law do not have to be listed in the Constitution, that law itself must be constitutional when considered by itself. I agree with that assessment, but that does not make Judge Hudson's statement correct. Judge Hudson’s ruling ignores the law that says that even if a given law on its own does not come within the Commerce Clause, it could still be constitutional via the Necessary and Proper Clause.
The reason Judge Hudson did not cite any authority (that is, precedent or other law) is because the existing authority shows Judge Hudson was and is wrong. Judge Hudson's ruling completely ignores the law as clearly set out in Gonzales, in particular Justice Scalia's statements that "activities that substantially affect interstate commerce are not themselves part of interstate commerce, and...Congress’s regulatory authority over intrastate activities that are not themselves part of interstate commerce...derives from the Necessary and Proper Clause." Judge Hudson also apparently forgot about this part of the majority opinion in Gonzales: "Wickard thus establishes that Congress can regulate purely intrastate activity that is not itself 'commercial,' in that it is not produced for sale, if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity." In other words, the applicable law holds that conduct that, standing alone, cannot be regulated through direct application of the Commerce Clause can still be regulated through the Necessary and Proper Clause. In light of that law, Judge Hudson is simply wrong.
That Judge Hudson failed to apply the correct law is seen in this statement from his Opinion: "Whether the [individual mandate], which requires an individual to purchase health insurance or pay a penalty, is borne of a constitutionally-enumerated power, is the core issue in this case." (Hudson Opinion, p. 17). He missed the point completely. The core issues were and are 1) whether the PPACA as a whole regulates an interstate market, and 2) whether the individual mandate is allowable under the Necessary and Proper Clause as part of the overall regulatory objective.
It seems to me that Judge Hudson considers the individual mandate the "end" rather than the "means." That might be fine if the true, overall objective of the PPACA is the regulation of the health insurance market. However, I think the overall objective of the PPACA is regulation of the health care market, which clearly is an interstate market, and that means the overall objective of the PPACA is allowable under the Commerce Clause. The individual mandate is a means by which to accomplish that objective, and thus is allowable under the Necessary and Proper Clause. This is the approach the Supreme Court used in Gonzales. The Court ruled there was an interstate market for marijuana, the CSA was an attempt to regulate that market pursuant to the Commerce Clause, and the seizure of Monson's plants was a "necessary and proper" means by which to carry out that regulation of an interstate market. Keep in mind also that the Court acknowledged that Monson was engaging in an intrastate activity, meaning that on the surface, the Commerce Clause (intended only for interstate commerce) could not apply to Monson. It was only through the "necessary and proper" step of the CSA which called for seizure of the plants that such seizure was constitutional.
Basically, it appears to me that Judge Hudson applied a Commerce Clause analysis to the individual mandate as if it was a stand-alone provision. To be fair to Judge Hudson, some of the language contained in § 1501 of the PPACA (the individual mandate) could be construed as Congress claiming that the individual mandate by itself is a proper exercise of power under the Commerce Clause (see XI.B below), but I don't think that conclusion is warranted when the PPACA is viewed as a whole. If the individual mandate had been a stand-alone piece of legislation, I don't think it could be constitutional under the Commerce Clause (see XI.C below)--and that would mean that the Necessary and Proper Clause would not even enter into the analysis. However, the individual mandate is not a stand-alone provision. It is one part of an overall regulatory scheme that has as its objective regulation of the health care market. As such the individual mandate does not have to be constitutional under the Commerce Clause because of the effect of the Necessary and Proper Clause. That is the reasoning in Gonzales.
There is another problem with Judge Hudson's ruling. If he was not merely viewing the individual mandate alone as needing to pass muster under the Commerce Clause, then Professor's Kerr's criticism is correct. It seems clear that under the Necessary and Proper Clause, a provision of a law that is a means rather than an end does not have to be constitutional under the Commerce Clause. If Judge Hudson was viewing the individual mandate as a "means," it seems to me that his reasoning would render the Necessary and Proper Clause--as applied in Commerce Clause precedent (such as Gonzales)--a nullity because it would require that "means" must by themselves comply with the Commerce Clause before they could be considered "necessary and proper." That simply is not the law, and Judge Hudson's rulings are wrong.
C. Hudson accepted faulty arguments and relied on inapplicable precedent.
For me the biggest weakness in Judge Hudson's opinion is that he did not address any of the arguments I set out above concerning Gonzales and Wickard. He stated the arguments each side made as to those cases. As noted earlier, the feds' arguments were close to the arguments I have made--with the exception of the feds basing the arguments on an interstate health insurance market, but Judge Hudson's opinion never explained why those arguments are incorrect. Instead, he stated Virginia's abbreviated arguments regarding Gonzales and Wickard, accepted them, and then made an incorrect statement about Commerce Clause precedent. Here's what Virginia argued regarding Gonzales and Wickard:
In their opposition, the Commonwealth focuses on what it perceives to be the central element of Commerce Clause jurisdiction, "economic activity." The Commonwealth distinguishes what was deemed to be "economic activity" in Wickard and Gonzales, namely a voluntary decision to grow wheat or cultivate marijuana, from the involuntary act of purchasing health insurance as required by the Provision. In Wickard and Gonzales, individuals made a conscious decision to grow wheat or cultivate marijuana, and consequently, voluntarily placed themselves within the stream of interstate commerce. Conversely, the Commonwealth maintains that the Minimum Essential Coverage Provision compels an unwilling person to perform an involuntary act and, as a result, submit to Commerce Clause regulation.(Hudson opinion, pp. 17-18). In my view, Virginia's position is wrong as it relates to Gonzales. As explained in IV above, in Gonzales, Monson deliberately chose NOT to engage in any economic activity. Monson chose to engage in strictly non-economic and intrastate activities, and yet the Supreme Court ruled that activity ultimately to be subject to regulation under the Commerce Clause. Moreover, Monson was forced into "interstate commerce," and that was based not on what she did, but on what others might do. In fact, the Supreme Court in Gonzales acknowledged that Monson's activity was intrastate in character but ruled that that did not matter and still applied the Commerce Clause to her! In other words, there was nothing about Monson's conduct that was economic or interstate, and she certainly did not voluntarily place herself into interstate commerce. She deliberately kept from doing that. Thus, Virginia's characterization of Gonzales is simply wrong.
Hudson, however, apparently accepted that position and used it as a basis for this portion of his Opinion:
In surveying the legal landscape, several operative elements are commonly encountered in Commerce Clause decisions. First, to survive a constitutional challenge the subject matter must be economic in nature and affect interstate commerce, and second, it must involve activity. Every application of Commerce Clause power found to be constitutionally sound by the Supreme Court involved some form of action, transaction, or deed placed in motion by an individual or legal entity.(Hudson Opinion, p. 23) (emphasis added). The emphasized language disregarded the law set out by Scalia in Gonzales that even noncommercial activity is subject to regulation under the Commerce Clause via the Necessary and Proper Clause. Judge Hudson also disregarded what happened in Gonzales. He never mentioned the fact that Monson's conduct in Gonzales was non-economic. In short, he disregarded the facts and law in Gonzales relevant to the Necessary and Proper Clause and did not try to explain how those were not relevant or applicable to the individual mandate. Let me put this another way. If Judge Hudson's above statements are correct, then the result in Gonzales would have been the opposite of what it was. If Judge Hudson is correct, then Gonzales would have been reversed by now, but that has not happened. Gonzales is still current law, and Judge Hudson's "rulings" disregard that law without any attempt at an explanation.
Instead, Judge Hudson, like Virginia, relied on two other Supreme Court decisions, Lopez and Morrison. The arguments I have presented in favor of the constitutionality of the individual mandate are based on it being an essential part of an overall regulatory scheme. That is the same basis upon which the laws at issue in Gonzales were found constitutional. In his concurring opinion in Gonzales, Justice Scalia shows why Morrison and Lopez are not applicable when the individual mandate is evaluated on this basis:
Neither case involved the power of Congress to exert control over intrastate activities in connection with a more comprehensive scheme of regulation; Lopez expressly disclaimed that it was such a case, 514 U. S., at 561, and Morrison did not even discuss the possibility that it was. (The Court of Appeals in Morrison made clear that it was not. See Brzonkala v. Virginia Polytechnic Inst., 169 F.3d 820, 834-835 (CA4 1999) (en banc).)545 U.S. at 35 (emphasis added). At this point, I remind the reader that the applicable law on the Necessary and Proper Clause applies not just to intrastate activities, but private activities as well (see II.B.3 above).
The law in question in Lopez was the Gun-Free School Zones Act of 1990, which was a brief, single-subject statute making it a crime for an individual to possess a gun in a school zone. In other words, the statute was a stand-alone law. It was not part of an overall regulatory scheme. The Supreme Court ruled as follows:
Section 922(q) is a criminal statute that by its terms has nothing to do with 'commerce' or any sort of economic enterprise, however broadly one might define those terms. Section 922(q) is not an essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intra-state activity were regulated. It cannot, therefore, be sustained under our cases upholding regulations of activities that arise out of or are connected with a commercial transaction, which viewed in the aggregate, substantially affects interstate commerce.Lopez, 514 U. S. at 561. Thus, while Lopez does set out limitations on the Commerce Clause power, those limitations are not applicable to the individual mandate.
In Morrison, the law at issue was part of the Violence Against Women Act, specifically 42 U.S.C. §13981, which created a federal civil remedy for the victims of gender-motivated crimes of violence. The Supremes held that law not to be allowed under the Commerce Clause. Here's how Justice Stevens (in the majority opinion in Gonzales) described the ruling in Morrison:
Despite congressional findings that such crimes had an adverse impact on interstate commerce, we held the statute unconstitutional because, like the statute in Lopez, it did not regulate economic activity. We concluded that "the noneconomic, criminal nature of the conduct at issue was central to our decision" in Lopez, and that our prior cases had identified a clear pattern of analysis: "'Where economic activity substantially affects interstate commerce, legislation regulating that activity will be sustained.'" Morrison, 529 U. S., at 610.Gonzales, 545 U.S. at 25 (footnote omitted). At first that might seem to support an argument against the individual mandate, but a closer look shows that it does not. Remember that the argument I have presented in favor of the invidual mandate is based on the Necessary and Proper Clause. In Gonzales, the Supreme Court upheld the law in question even though the conduct involved was noneconomic. That was done because the law was part of an overall regulatory scheme that as a whole regulated economic activity that affected an interstate market. And that is the situation involving the individual mandate. Also, the statute in Morrison was part of a statutory scheme, but that statutory scheme did not regulate an interstate market. Hence, Morrison is irrelevant to the question of whether the individual mandate is constitutional via the Necessary and Proper Clause in connection with the Commerce Clause.
XI. Insurance and interstate commerce as defined by the Supreme Court
A. Overview
As mentioned in VI.C.3 above, there is law which declares that insurance is--to some extent--interstate commerce. I think that if the Supreme Court is to declare the individual mandate unconstitutional, that ruling will be based on changes or modifications in that law. Furthermore, that is why I think basing the argument for the individual mandate on the health insurance market is a mistake.
The Supreme Court consistently ruled that insurance was not part of interstate commerce and thus beyond federal regulation until 1944. That’s when the Supremes ruled in U.S. v. South-Eastern Underwriters Ass’n, 322 U.S. 553 (1944), that the “business of insurance” was interstate commerce. That ruling has not been reversed, so it is still the law. That might at first indicate that there is thus no question that the individual mandate is constitutional, but that might not be the case now or in the semi-near future.
This subsection will examine the reasons for my previous sentence. I will be going into some semi-detailed legal analysis. If you should think that such analysis is getting too picky and technical and/or semantic, it is again the proverbial tip of the iceberg. Supreme Court rulings typically go into far more in-depth analysis than what you will see here.
B. Health insurance: intrastate or interstate commerce?
In South-Eastern Underwriters, Justice Black, writing for the majority, set out a number of reasons why "the business of insurance" was interstate commerce. All of those reasons make sense in light of the "effect" and "rational basis" tests for determining if something is subject to the Commerce Clause, but I eventually will focus on one specific sentence from Justice Black which could be the basis for ruling that in this case regarding health insurance the Commerce Clause does not apply. I also note that South-Eastern Underwriters did not address health insurance.
But first, let's look at the rest of Justice Black's reasoning. Here is a large portion:
Ordinarily courts do not construe words used in the Constitution so as to give them a meaning more narrow than one which they had in the common parlance of the times in which the Constitution was written. To hold that the word "commerce," as used in the Commerce Clause, does not include a business such as insurance would do just that. Whatever other meanings "commerce" may have included in 1787, the dictionaries, encyclopedias, and other books of the period show that it included trade: business in which persons bought and sold, bargained and contracted. And this meaning has persisted to modern times. Surely, therefore, a heavy burden is on him who asserts that the plenary power which the Commerce Clause grants to Congress to regulate "Commerce among the several States" does not include the power to regulate trading in insurance to the same extent that it includes power to regulate other trades or businesses conducted across state lines.322 U.S. 539-542 (footnotes omitted). Or put more succinctly, insurance companies engage in "activities which, as part of the conduct of a legitimate and useful commercial enterprise, may embrace integrated operations in many states and involve the transmission of great quantities of money, documents, and communications across dozens of state lines." 322 U.S. at 550. Like I said, all of that makes sense in light of the "effect" and "rational basis" tests. Also, as shown in Judge Hudson's ruling, the arguments raised by the feds in the Virginia case were similar.
The modern insurance business holds a commanding position in the trade and commerce of our Nation. Built upon the sale of contracts of indemnity, it has become one of the largest and most important branches of commerce. Its total assets exceed $37,000,000,000, or the approximate equivalent of the value of all farm lands and buildings in the United States. It annual premium receipts exceed $6,000,000,000, more than the average annual revenue receipts of the United States Government during the last decade. Included in the labor force of insurance are 524,000 experienced workers, almost as many as seek their livings in coal mining or automobile manufacturing. Perhaps no modern commercial enterprise directly affects so many persons in all walks of life as does the insurance business. Insurance touches the home, the family, and the occupation or the business of almost every person in the United States.
This business is not separated into 48 distinct territorial compartments which function in isolation from each other. Interrelationship, interdependence, and integration of activities in all the states in which they operate are practical aspects of the insurance companies' methods of doing business. A large share of the insurance business is concentrated in a comparatively few companies located, for the most part, in the financial centers of the East. Premiums collected from policyholders in every part of the United States flow into these companies for investment. As policies become payable, checks and drafts flow back to the many states where the policyholders reside. The result is a continuous and indivisible stream of intercourse among the states composed of collections of premiums, payments of policy obligations, and the countless documents and communications which are essential to the negotiation and execution of policy contracts. Individual policyholders living in many different states who own policies in a single company have their separate interests blended in one assembled fund of assets upon which all are equally dependent for payment of their policies. The decisions which that company makes at its home office -- the risks it insures, the premiums it charges, the investments it makes, the losses it pays -- concern not just the people of the state where the home office happens to be located. They concern people living far beyond the boundaries of that state.
Moreover, the PPACA itself contains statements echoing Justice Black's rationale. Section 1501 of the PPACA is the individual mandate (called "individual responsibility" in the PPACA). Section 1501 (a)(1) says "The individual responsibility requirement provided for in this section (in this subsection referred to as the ‘‘requirement’’) is commercial and economic in nature, and substantially affects interstate commerce, as a result of the effects described in paragraph (2). " Paragraph 2 contains all kinds of facts and figures showing how health insurance and all the integrated activities and decisions related thereto affect the national economy. Recall the discussion in III.A above about the Courts showing great deference to Congressional findings and declarations. By the way, these portions of § 1501 are those which could be construed as Congress claiming that the individual mandate by itself is a proper exercise of power under the Commerce Clause.
Again, on the surface, all of that reasoning makes sense under applicable precedent concerning the Commerce Clause, but now it's time to look at one other statement by Justice Black. In describing the nature of Congressional power under the Commerce Clause, he said
its purpose is not confined to empowering Congress with the negative authority to legislate against state regulations of commerce deemed inimical to the national interest. The power granted Congress is a positive power . It is the power to legislate concerning transactions which, reaching across State boundaries, affect the people of more states than one[.]322 U.S. at 511-552 (footnotes omitted) (emphasis added). And this is where 1) the nature of health insurance and 2) the basis for the government's arguments in the Virginia case could become important. As I have said several times, one cannot live in one state and buy health insurance in another state. A person can buy health insurance only in his state of residence. That makes purchasing health insurance strictly an intrastate matter, and Congress has no power under the Commerce Clause to regulate intrastate commerce. In other words, in a sense, purchasing health insurance, to use Justice Black's wording, is NOT a transaction reaching across State boundaries. Or as I put it earlier, it seems there is no such thing as an interstate health insurance market. And yet, according to Judge Hudson's Memorandum Opinion, the federal government's arguments are based on the claim that the PPACA is all about reform of the interstate health insurance market. My point is there is a basis for claiming that the health insurance market is an intrastate market not subject to federal regulation AND that it seems that the feds are putting all their eggs in an interstate health insurance market basket. Those two facts could present an opening for the Supreme Court to rule that the individual mandate is unconstitutional.
One might argue that I am splitting hairs, talking semantics, being hyper-technical, etc., especially in light of all the precedent applying the "effect" and "rational basis" tests, and that argument might be correct. However, what I am trying to point out here is that IF the Supreme Court wants to declare the individual mandate unconstitutional, what I have presented in the previous paragraph could be the way the Court gets it done.
There are plenty of counterarguments--and some of them I have already raised in arguing that the health care market is interstate in nature. Insurance pays for health care, and if health care is interstate, then health insurance clearly has an affect on interstate commerce. And like Justice Black stated in South-Eastern Underwriters, money paid for policies crosses state lines, home offices of insurers are located in various cities across the nation, those companies employ people in differing states, etc.
However, as alluded to in the last paragraph of the opening section of the "first post," this question of the individual mandate is ultimately about drawing a line regarding Congressional power under the Commerce Clause. Given that this is a question of first impression, simply relying upon and applying previous precedent without any further explanation would not draw a line at all. And like I said, even if the individual mandate is upheld, there needs to be some further definition regarding application of the Commerce Clause. Consequently, the simple form of the counterarguments mentioned in the previous paragraph might not be enough to uphold the individual mandate. And if a majority of the Justices want to use this question as an opportunity to narrow the scope of the Commerce Clause, they could very well look for a way to claim that health insurance is not interstate commerce, and I think what I have suggested is a start. They would have to modify previous precedent and its application to health insurance--and they are under no constraint in that regard. They can do whatever they want. I still think any ruling that the individual mandate is unconstitutional will be narrow in scope, but more on that later...
C. "The business of insurance"
Section 1501(a)(3) of the PPACA says "In United States v. South-Eastern Underwriters Association (322 U.S. 533 (1944)), the Supreme Court of the United States ruled that insurance is interstate commerce subject to Federal regulation." That is not entirely accurate. What the Supreme Court ruled was that "the business of insurance" was interstate commerce. Thus, the effect of South-Eastern Underwriters on the individual mandate depends on the meaning of the phrase "the business of insurance."
Now here's where things get a little tricky. I have found some Supreme Court cases defining the term, but they define the term in the context of statutory law known as the McCarran-Ferguson Act. As explained by the Supremes in Humana , Inc. v. Forsythe, 525 U.S. 299, 306 (1999), "Concerned that our decision (in South-Eastern Underwriters) might undermine state efforts to regulate insurance, Congress in 1945 enacted the McCarran-Ferguson Act." The first part of McCarran-Ferguson, 15 U.S.C. § 1011, says that
Congress hereby declares that the continued regulation and taxation by the several States of the business of insurance is in the public interest, and that silence on the part of the Congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several States.In other words, regulation of insurance is primarily left to the States, not the federal government. The next part of McCarran-Ferguson, 15 U.S.C. § 1012(a), makes sure of this:
(a) State regulation(emphasis added). 15 U.S.C. § 1012(b), however, carves out an exception:
The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business.
(b) Federal regulation(emphasis added). I will discuss McCarran-Ferguson in more detail later, but for now I point out that 1) McCarran-Ferguson was passed as a direct response to limit the effects of South-Eastern Underwriters, 2) that decision ruled that the Commerce Clause applied to "the business of insurance," and 3) McCarran-Ferguson repeatedly uses the phrase "the business of insurance. Consequently, I maintain that Supreme Court decisions defining "the business of insurance" as used in McCarran-Ferguson are equally applicable to any definition of the term outside of McCarran-Ferguson. With that in mind...
No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance[.]
Here's how the Supreme Court defined the term in SEC v. National Securities, Inc., 393 U.S. 453, 460 (1969):
The relationship between insurer and insured, the type of policy which could be issued, its reliability, interpretation, and enforcement -- these were the core of the "business of insurance." Undoubtedly, other activities of insurance companies relate so closely to their status as reliable insurers that they too must be placed in the same class. But whatever the exact scope of the statutory term, it is clear where the focus was -- it was on the relationship between the insurance company and the policyholder. Statutes aimed at protecting or regulating this relationship, directly or indirectly, are laws regulating the "business of insurance."(emphasis added). I don't really see how the individual mandate fits into this definition of "the business of insurance." By the way, Virginia also made this claim (see footnote 6 of Judge Hudson's ruling), but Judge Hudson did not address this issue. It seems that this definition of "the business of insurance" has not changed. As the Supremes stated in the 1993 case of Dept. of Treasury v. Fabe, 508 U.S. 491 (1993),
This Court has had occasion to construe this phrase only once. On that occasion, it observed: Statutes aimed at protecting or regulating this relationship [between insurer and insured], directly or indirectly, are laws regulating the "business of insurance," within the meaning of the phrase.508 U.S. at 501. Again, I do not see that the individual mandate falls within that category. The individual mandate seeks to create such a relationship. It does not affect that relationship once it has been created. A strong claim can be made that the consumer protection provisions of the PPACA certainly concern the relationship between the insurer and the insured, but in my opinion the individual mandate does not.
Back to the individual mandate...If the individual mandate is viewed alone, in my opinion it is not related to "the business of insurance" and thus does not come with the Commerce Clause. As a result, the individual mandate, standing alone, is not constitutional. So, the federal government is making a big mistake if it is arguing that standing alone the individual mandate is constitutional.
However, the individual mandate is part of an overall statutory scheme, and that means that even though it is not itself constitutional under the Commerce Clause, it could still be upheld via the Necessary and Proper Clause. Once again I say I feel the argument has to be properly structured to be based on regulating the interstate health care market. As I said, the consumer protection provisions of the PPACA are related to the "business of insurance," meaning the Commerce Clause is applicable to them. That means the Necessary and Proper Clause might be applicable to the individual mandate if the regulatory objective of the PPACA is regulation of the health insurance market. However, there is still the possibility, as discussed above, that the Supreme Court could rule that there is no interstate health insurance market, and then the Necessary and Proper Clause would not save the individual mandate. One could argue that it is unlikely the Supreme Court would make such a ruling, and that might be true, but why take the chance? Why give the Supreme Court a possible basis for making that ruling? By arguing that the purpose of the PPACA is regulation of the interstate health care market, the Necessary and Proper Clause would, in my view, unquestionably be applicable to the individual mandate. Otherwise, there is the possibility that "the business of insurance" could be used to declare the individual mandate unconstitutional.
D. McCarran-Ferguson
Now this is where things really get confusing.
Here's how McCarran-Ferguson works. If Congress passes a law that specifically relates to "the business of insurance," that law controls over any and all state laws, period. If, however, the federal law is not specifically related to "the business of insurance," AND that law invalidates, impairs, or supersedes any law enacted by any State for the purpose of regulating "the business of insurance," the federal law cannot be enforced. South-Eastern Underwriters placed a limit on Congress's Commerce Clause power by saying that it applies to "the business of insurance," and McCarran-Ferguson places a further limit on that Commerce Clause power.
Now let's look at the individual mandate again. As discussed above, I do not think the individual mandate has anything to do with "the business of insurance." As such, it cannot automatically control under McCarran-Ferguson. However, it could still be enforceable under McCarran-Ferguson if it does not invalidate, impair, or supercede any State law which regulates "the business of insurance." What this means is that if a State has a law that deals with the business of insurance AND is in conflict with individual mandate, the individual mandate cannot be enforced.
Virginia may have just such a law. It is called the Health Care Freedom Act, and here is what it says:
No law shall restrict a person's natural right and power of contract to secure the blessings of liberty to choose private health care systems or private plans. No law shall interfere with the right of a person or entity to pay for lawful medical services to preserve life or health, nor shall any law impose a penalty, tax, fee, or fine, of any type, to decline or to contract for health care coverage or to participate in any particular health care system or plan, except as required by a court where an individual or entity is a named party in a judicial dispute. Nothing herein shall be construed to expand, limit or otherwise modify any determination of law regarding what constitutes lawful medical services within the Commonwealth.(emphasis added). This law clearly conflicts with the individual mandate, and clearly the individual mandate would invalidate, impair, or supercede this State law. But the analysis does not stop there. The question now becomes whether the Health Care Freedom Act regulates "the business of insurance." If I am correct that the individual mandate does not regulate "the business of insurance" because it concerns matters that exist before there is a relationship between an insured and insurer, then it seems to me that the same could be said about the Health Care Freedom Act. If that is the case, McCarran-Ferguson would have no impact on whether the individual mandate is enforceable.
Ain't law just a barrel of laughs?
But wait...there's even more potential chaos.
The Health Care Freedom Act became law in Virginia before the PPACA became law. What if other States begin passing laws now that would be invalidated, impaired, or superceded by the individual mandate? Does a State law have to be in existence before the federal law is enacted in order for McCarran-Ferguson to apply? I don't know the answer, but if the answer is "no," then all some other States have to do to stop the individual mandate is to now pass a law that does regulate "the business of insurance" that directly conflicts with the individual mandate. That could certainly muck up everything.
But wait...I'm not done yet.
Let's assume that, for whatever reason, the individual mandate is not enforceable because of McCarran-Ferguson. To me what that means is that the individual mandate cannot be constitutional under the Commerce Clause because 1) McCarran-Ferguson is a valid limitation of the Commerce Clause power, and 2) the individual mandate is subject to that limitation. However, the Necessary and Proper Clause is still out there. Recall that under that clause, a law does not itself have to be constitutional under the Commerce Clause. And that raises a very interesting question. McCarran-Ferguson is a limit on the Commerce Clause, but is it also a limit on the Necessary and Proper Clause? If the individual mandate does not comply with McCarran-Ferguson, does that mean it cannot be enforced pursuant to the Necessary and Proper Clause? My opinion is "no" because
- South-Eastern Underwriters dealt only with the Commerce Clause.
- McCarran-Ferguson was a direct response to South-Eastern Underwriters.
- McCarran-Ferguson is on its face an express limit on the Commerce Clause.
- McCarran-Ferguson does not on its face apply to the Necessary and Proper Clause, and
- Generally speaking, Constitutional provisions control over statutory ones.
Stated differently, since Congress did not in McCarran-Ferguson expressly limit its power under the Necessary and Proper Clause, I think the individual mandate is still enforceable under the Necessary and Proper clause even if the individual mandate is unenforceable under McCarran-Ferguson.
To be honest, I have not done any research on this theory, and I am not going to before publishing this post. For now I will simply say that this theory could seriously complicate this entire matter. It raises all kinds of questions about how any ruling should be structured and the possible long term effects of any ruling.
E. A little more on the Health Care Freedom Act
To be honest, I have not done any research on this theory, and I am not going to before publishing this post. For now I will simply say that this theory could seriously complicate this entire matter. It raises all kinds of questions about how any ruling should be structured and the possible long term effects of any ruling.
E. A little more on the Health Care Freedom Act
Virginia made the Health Care Freedom Act a main part of its case, claiming that because of that Act, the PPACA violated the 10th Amendment. As noted way back in section III of the "first post," Judge Hudson made no ruling on that issue. That means that a 10th Amendment issue could still be argued and determined by the Supreme Court. I have not mustered the desire or energy to look into that, and I likely won't any time soon. I just want to point out that such an issue presents another lengthy and detailed set of matters that could make this whole case even more complicated.
F. Conclusion as to the role of insurance
I think the best shot to have the individual mandate declared unconstitutional is to focus on the intrastate aspects of health insurance and the fact that the federal government is basing its arguments on what its claims to be an interstate health insurance market. Even so, this approach will require some modifications/alterations to existing precedent concerning insurance and the Commerce Clause and how McCarran-Ferguson has been interpreted and applied.
This approach could help in making a decision invalidating the individual mandate narrow. By focusing on what might be aspects unique to health insurance, the Supreme Court might be able to modify existing Commerce Clause precedent in a way that does not unravel much of that precedent AND helps to further define the scope of the Commerce Clause. By dealing with the meaning of "the business of insurance," the Supreme Court could further narrow its decision so that it does not have much effect beyond insurance. At least that's my story and I'm sticking to it.
XII. Conclusion
Still working on this...
Will update as soon as I have it finished.
posted by WCharles @ 1/24/2011 11:01:00 PM
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