Gostin L. The Legal Reasoning That Preserved ACA's Individual Mandate. JAMA Health Forum. Published online July 2, 2012. doi:10.1001/jamahealthforum.2012.0030
When the Supreme Court handed down its historical ruling in National Federation of Independent Business v Sebelius on June 28, it limited Congress’ power to penalize states that decline to expand Medicaid but upheld all of the other provisions of the Affordable Care Act (ACA)—even the controversial individual mandate, which requires all Americans to purchase health insurance or pay a penalty. Perhaps the most surprising part of the ruling was the reasoning supporting the individual mandate offered by Chief Justice Roberts.
Lawrence Gostin, JD
The Chief Justice, who cast the deciding vote in the narrow 5-4 ruling, siding with the Court’s liberal wing, confounded predictions by supporting the individual purchase mandate based on Congress’ taxing power, rather than its commerce power. Congressional power to “lay and collect taxes” provides an independent source of federal authority. Although the ACA explicitly called the levy a “penalty,” the Chief Justice said that if the levy takes the form of a tax (money collected by Internal Revenue Service [IRS] that provides revenue for government-funded activities), then it could be regarded as a tax:
Our precedent demonstrates that Congress had the power to impose the exaction in §5000A under the taxing power, and that §5000A need not be read to do more than impose a tax. That is sufficient to sustain it.
Furthermore, the Court said that the tax is not so punitive that it exceeds Congress’ power, given that it is small relative to the income of those required to buy insurance. The tax is structured so that individuals have a realistic choice whether to purchase insurance or to remain uninsured.
The Court’s reliance on the taxing power reflects a vital public health goal of the tax system. While providing Congress the financial resources to provide for the common defense and welfare, it also enables Congress to affect risk behavior and influence health-promoting activities. Tobacco taxes, for example, are levied not only to raise revenue but also to discourage smoking.
Beyond its historical significance for health care reform, the Supreme Court’s ruling fuels the goal of Conservatives to limit Congress’ power to protect the public’s welfare while retaining state authority. The Constitution grants the federal government limited or “enumerated” powers, while the 10th Amendment reaffirms that “powers not delegated to the United States… are reserved to the States… or to the people.” Supplying the crucial fifth vote, the Chief Justice joined the Court’s conservative bloc, ruling that the Commerce Clause did not empower Congress to compel individuals to buy insurance. Justice Roberts thus endorsed the activity/inactivity (purchasing insurance/not purchasing insurance) distinction that has permeated the health care debate, stating,
The individual mandate does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product…. Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority.
The Chief Justice warned that compelling the purchase of health insurance was tantamount to permitting government to “address the diet problem by ordering everyone to buy vegetables”—the so-called broccoli analogy. This analogy is deeply flawed. Not only is extremely unlikely that Congress would ever pass such a law, but more importantly, when well-off individuals refuse to buy insurance, they raise the costs for everyone and require society to subsidize their care when they become injured or ill. The better analogy is to car insurance: imagine if drivers could buy insurance after they crashed while in a ditch, and at the same affordable cost.
The act/omission distinction is equally flawed. The mandate doesn’t force individuals to enter the stream of commerce; one day everyone will require medical care (and someone must pay), and so the mandate only regulates the manner and timing of commerce. Individuals, therefore, are doing something affirmative, which is to shift the cost of their care to physicians, hospitals, insurers, and ultimately to society itself.
This ruling is only the third time since the Roosevelt Administration the Court found that Congress lacks the commerce power. The first 2 cases, involving guns in school zones and violence against women, involved purely local and noneconomic subjects. This case, however, deals with health care, which represents 17% of the gross national income and involves such activities and products as medical records, pharmaceuticals, and insurance claims that crisscross the nation and the world. If health insurance legislation is not a regulation of commerce, what is?
Despite this, the Court devoted the entire first part of its decision to a civics lesson showing how limiting federal power safeguards personal freedom. In doing so, the Court never mentioned the “greater” freedom afforded by humane care and treatment in the event of illness or injury. It’s impossible to tell whether this historic case foreshadows a future in which the Court aggressively limits federal public health. Yet the case may one day be used to build a conservative agenda on American federalism distinctly unfriendly to health and safety regulation.
The mandate, Congress’ model for ensuring the act’s economic sustainability, is integral to 2 pivotal and highly popular aspects of the ACA: requiring insurers to offer coverage to all applicants and prohibiting insurers from charging differential premiums based on health status. If the ACA lacked the mandate, individuals would have a strong incentive to delay buying health insurance until they became ill, at which time they would be assured of receiving coverage at the same affordable cost.
Now that the Court has upheld the ACA, the critical question now is whether the small tax will make a significant difference to young healthy individuals, who can still choose to pay a penalty that is small relative both to their income and the cost of insurance premiums. Individuals will have a further incentive to decline health insurance because Congress sharply limited the IRS’ power to collect the tax, prohibiting normal enforcement mechanisms such as liens and criminal prosecutions. Does the ACA merely “invite” healthy individuals to purchase insurance with minor consequences for failure to do so? And if enough healthy individuals opt out of insurance, will premiums rise, making health care less affordable for everyone?
Preserving the dual goals of universal access and economic sustainability will continue to be America’s most vital social and political project.
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