Can Obama Make You Buy Health Insurance?

An inquiry into health reform’s constitutionality.

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Barack Obama spent much of the 2008 presidential-primary season arguing with Hillary Clinton about whether health reform should include a so-called “individual mandate” requiring all Americans to purchase health insurance. Clinton argued that it should. Obama argued that it shouldn’t (even though his own plan called for a more limited individual mandate requiring parents to purchase health insurance for their children). One of Obama’s central arguments was that enforcing such a mandate would be impractical. “You can mandate it,” Obama said, “but there still will be people who can’t afford it. And if they can’t afford it, what are you going to fine them?”

At the time I thought Obama had the better argument, not just on practicality but also with respect to the Constitution. “If you want to drive a car,” I wrote,

it’s accepted that you have to buy private auto insurance. But that’s conditional on enjoying the societal privilege of driving a car; you can avoid the requirement by choosing not to drive one. A mandate to buy private health insurance, however, would be conditional on … being alive. I can’t think of another instance in which the government says outright, “You must buy this or that,” independent of any special privilege or subsidy it may bestow on you.

Nearly two years later, Obama has made peace with the individual mandate, which is included in the bills that cleared three House committees and one Senate committee. The House bill imposes on anyone who neglects to purchase health insurance for himself or his family a 2.5 percent tax on modified adjusted gross income. The Senate health committee bill imposes a minimum penalty of $750. (We’re still waiting to hear from the Senate finance committee.) Yet I’ve continued to wonder whether the individual mandate is constitutional.

Should health reform pass, it seems a dead certainty that conservatives will go to court to challenge the individual mandate. A preview of their arguments can be found on the Web site of the conservative Federalist Society in the paper, “Constitutional Implications of an ‘Individual Mandate’ in Health Care Reform” by Peter Urbanowicz, a former deputy general counsel at the Health and Human Services department, and Dennis Smith, a former director of HHS’s Center for Medicaid and State Operations. One of these turns out to resemble my earlier argument:

Nearly every state now has a law mandating auto insurance for all drivers. But the primary purpose of the auto insurance mandate was to provide financial protection for people that a driver may harm, and not necessarily for the driver himself. And the auto insurance mandate is a quid pro quo for having the state issuing a privilege: in this case a driver’s license.

Since I first wrote about this, it’s been pointed out to me that the comparison with auto insurance is not a legal argument at all. (I am not a lawyer.) The legal question isn’t whether it would be unusual for the government to compel people to buy health insurance. It’s whether it would square with the Constitution. Mark Hall, a professor of law at Wake Forest University, argues that it would, in part based on the commerce clause, which since the New Deal has permitted the federal government to expand its power in various ways by defining various activities as “interstate commerce.” Although health delivery is often local, Hall writes, “most medical supplies, drugs and equipment are shipped in interstate commerce.” More to the point, “most health insurance is sold through interstate companies.”

Yes, counter Urbanowicz and Smith, but “it is a different matter to find a basis for imposing Commerce Clause related regulation on an individual who chooses not to undertake a commercial transaction.” Does the commerce clause cover your refusal to engage in interstate commerce?

Well, yes, Hall in effect answers, because when a person declines to purchase health insurance, that affects interstate commerce, too, by driving up health insurance premiums for everyone else:

Covering more people is expected to reduce the price of insurance by addressing free-rider and adverse selection problems. Free riding includes relying on emergency care and other services without paying for all the costs, and forcing providers to shift those costs onto people with insurance. Adverse selection is the tendency to wait to purchase until a person expects to need health care, thereby keeping out of the insurance pool a full cross section of both low and higher cost subscribers. Covering more people also could reduce premiums by enhancing economies of scale in pooling of risk and managing medical costs. 

In essence, the commerce clause enables the economic arguments for the individual mandate to become legal arguments as well.

Urbanowicz and Smith next reach for that perennial conservative favorite, the Fifth Amendment’s takings clause, which says the government may not take property from a citizen without just compensation. “Requiring a citizen to devote a percent of his or her income for a purpose for which he or she otherwise might not choose based on individual circumstances,” Urbanowicz and Smith write, “could be considered an arbitrary and capricious ‘taking.’ …”

But according to Akhil Reed Amar, who teaches constitutional law at Yale, the case law does not support Urbanowicz and Smith. “A taking is paradigmatically singling out an individual,” Amar explains. The individual mandate (despite its name) applies to everybody. Also, “takings are paradigmatically about real property. They’re about things.” The individual mandate requires citizens to fork over not their houses or their automobiles but their money. Finally, Amar points out, the individual mandate does not result in the state taking something without providing compensation. The health insurance that citizens must purchase is compensation. In exchange for paying a premium, the insurer pledges (at least in theory) to pay some or all doctor and hospital bills should the need arise for medical treatment. The individual mandate isn’t a taking, Amar argues. It’s a tax.

But how can it be a tax if the money is turned over not to the government but to a private insurance company? William Treanor, dean of Fordham Law School and an expert on takings, repeated much of Amar’s analysis to me (like Amar, he thinks a takings-based argument would never get anywhere), but instead of a tax he compared the individual mandate to the federal law mandating a minimum wage. Congress passes a law that says employers need to pay a certain minimum amount not to the government but to any person they hire. “The beneficiaries of that are private actors,” Treanor explained. But it’s allowed under the commerce clause. “Minimum wage law is constitutional.” So, too, then, is the individual mandate.