Obamacare Insurance Mandate - Another Circuit Heard From

Originally Published on forbes.com on November 12th,2011

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I love the Obamacare insurance mandate cases as they brings out the real Constitutional purists.  This week we hear from the Court of Appeals for the District of Columbia Circuit in a decision titledSeven-Sky v Holder.  To review the bidding here is something from my poston the eleventh circuit decision:

Now the big argument is about the “individual mandate”.  The act requires that health insurance companies not useunderwriting to avoid insuring people likely to have health problems or with pre-existing conditions.  This subjects the insurance companies to the problem of “adverse selection”.  Some people will wait until they are sick to buy health insurance.  Part of the solution was a part of the act that penalizes people who don’t buy health insurance.  The Court noted that the enforcement mechanism for the penalty made it relatively toothless:

An individual who fails to pay the penalty is not subject to criminal or additional civil penalties. The IRS’s authority to use liens or levies does not apply to the penalty.  No interest accrues on the penalty. The Act contains no enforcement mechanism. See id. All the IRS, practically speaking, can do is offset any tax refund owed to the uninsured taxpayer.

Even though both the plaintiffs and the United States agreed that the DC Circuit had jurisdiction to hear the case, the Court still thought it necessary to discuss that issue.  It turns on whether the payment required if you do notbuy health insurance is a penalty or a tax.  If it were a tax, the anti-injunction act would have prevented the plaintiffs from having standing.  Even though the penalty is in the Internal Revenue Code it is not tax, because Congress did not call it a tax and also the IRS does not have most of the means it uses to collect taxes available to coerce people who choose not to pay the penalty.  So someone like Susan Seven-Sky (aka Susan Sevensky) has standing to sue just becasue she is worried about it.

The heart of the case is the Commerce clause.  Our system of government is based on divided sovereignty.  Some things are the responsibility of the federal government – national defense for example.  Other things are the responsibility of the states – professional licences for example.  One thing that masks this reality from us on a day to day basis is a wonderful organization called the National Unform Law Commission.  The Commission has no formal power, but it recommends laws that are passed by many, if not all, states with some variations.  Another thing is the federal government’s ability to use its funds to “encourage” states to pass laws on matters like speed limits.  Finally, there is the congressional power to regulate interstate commerce.  Where I live you cannot drive 50 miles in any direction except due West without crossing a state line so much commerce is interestate.  Nonetheless, Congress has stretched the power causing people to wonder if there is any limit to it.  If Congress can use the commerce power to make us buy health insurance can it go on to pass a law requiring us to eat broccoli ? That is what the plaintiffs are worried about:

Appellants’ primary argument why the individual mandate exceeded Congress’s enumerated powers is that Congress cannot require individuals with no connection to interstate commerce, and no desire to purchase a product, nonetheless to do so. Congress’s authority to regulate commerce, they say, extends only to existing commerce, i.e. only to individuals who take affirmative acts that bring them into, or substantially affect, an interstate market, and only for the duration of those activities. For this reason, the mandate also cannot be justified under the Necessary and Proper Clause, because that clause can effectuate only those powers that Congress actually possesses under the Commerce Clause, not create new ones. To hold otherwise would remove any limitations on federal power, at the expense of state sovereignty. Congress, appellants warn, could force individuals to buy any product, in any market, with any penalty—from fines to criminal prosecution—for non-compliance.

Of course the Government has an answer:

The Government counters that the individual mandate is well within the bounds of congressional power. Congress can regulate even purely local, intrastate economic behavior so long as, in the aggregate, it substantially affects interstate commerce. The manner in which consumers pay for services in the interstate health care market is such an example. Because virtually everyone will, at some point, need health services, no one is truly inactive, and the health services market is inextricably intertwined with health insurance. Congress found that those who do not purchase health insurance, and instead self-insure, almost inevitably take health care services they cannot afford. Hospitals, by virtue of federal law and professional obligation, provide these services, and as a result, $43 billion in annual costs are shifted to the insured, through higher premiums. That, in turn, makes health insurance less affordable and increases the total number of uninsured. Therefore, it is argued that Congress rationally concluded that decisions about how to pay for health care, in the aggregate, substantially affect interstate commerce.

 The Eleventh Circuit discussed four cases that either limited or did not limit Congressional power under the commerce clause.  The DC Circuit only focused on one of them Wickard v Filburn, which Forbes contributor Daniel Fisher explained so well in September.  Filburn was growing wheat soley for use on his own farm.  Since his wheat was not even entering directly into intrastate commerce much less interstate commerce, he though he should not be subject to quotas:

 Filburn argued that the Act was unconstitutional as applied to him because he was not using the excess wheat for any activity in the interstate market. The Supreme Court unanimously rejected this claim. It held that even growing wheat for personal consumption, not for sale in any market, could affect the national price, and therefore was within Congress’s commerce power.

  Home-grown wheat in this sense competes with wheat in commerce. The stimulation of commerce is a use of the regulatory function quite as definitely as prohibitions or restrictions thereon.

Of course the health insurance mandate takes things to another level.  People who are not doing anything are deemed to be affecting interstate commerce by their very inaction.  The Court recognizes the novelty of the situation, but does not find that it makes any difference:

The novelty—assuming Wickard doesn’t encroach into that claim—is not irrelevant. The Supreme Court occasionally has treated a particular legislative device’s lack of historical pedigree as evidence that the device may exceed Congress’s constitutional bounds.  But appellants’ proposed constitutional limitation is equally novel—one that only the Eleventh Circuit has recently—and only partially—endorsed. Moreover, the novelty cuts another way. We are obliged—and this might well be our most important consideration—to presume that acts of Congress are constitutional.  Appellants have not made a clear showing to the contrary, we do not believe these cases endorse the view that an existing activity is some kind of touchstone or a necessary precursor to Commerce Clause regulation.

So is there any limit on what type of commerce Congress might force on us ? 

We acknowledge some discomfort with the Government’s failure to advance any clear doctrinal principles limiting congressional mandates that any American purchase any product or service in interstate commerce. But to tell the truth, those limits are not apparent to us, either because the power to require the entry into commerce is symmetrical with the power to prohibit or condition commercial behavior, or because we have not yet perceived a qualitative limitation. That difficulty is troubling, but not fatal, not least because we are interpreting the scope of a long-established constitutional power, not recognizing a new constitutional right.  It suffices for this case to recognize, as noted earlier, that the health insurance market is a rather unique one, both because virtually everyone will enter or affect it, and because the uninsured inflict a disproportionate harm on the rest of the market as a result of their later consumption of health care services.

Apparently there is not by the lights of the DC Circuit.  As part of the health care initiative they probaby could make us buy  broccoli, if the logic is followed.  Whether we would have to eat it or not might be a different story.