Justices question constitutionality of health insurance mandate


The Obama administration faced tough questions from the Supreme Court this week over the health care law’s requirement that all Americans – with very few exceptions – must obtain health insurance by 2014 or face a tax penalty for non-compliance.

If the court strikes down the coverage mandate, then two other key reforms enacted by the Affordable Care Act will not be economically feasible. Without the AFC’s guaranteed issue and community rating reforms, insurers can continue to deny coverage to anyone with pre-existing conditions and discriminate against sicker people by charging exorbitant rates.

Tuesday’s oral arguments centered on whether Congress had exceeded its authority to regulate commerce by requiring everyone to pay for health insurance before they receive medical care.

Since the Constitution grants Congress the power to regulate existing commerce but not to create it, the court would have to determine if the minimum coverage mandate (a) simply regulates how people pay for health care services that they consume or will inevitably consume or (b) actually creates a new market by compelling uninsured people to buy insurance to cover medical services that they don’t plan on using.

Justice Anthony Kennedy, who will likely cast the deciding vote, suggested that the coverage mandate may be an overreach of the Commerce Clause when he asked, “Can you create commerce in order to regulate it?”

“That’s not what’s going on here, Justice Kennedy,” responded Solicitor General Donald Verrilli. “This is a regulation of people’s participation in the health care market.”

Verrilli argued that the coverage mandate regulates how people pay for health care, which accounts for 17% of the nation’s economy and is primarily financed through insurance.

In the government’s brief, Verrilli noted that “participation in the market for health care is virtually universal” – even for those who are healthy and/or uninsured – because “every individual is always at risk of requiring health care, and the need for particularly expensive services is unpredictable.”

And because hospitals in the United States are legally required to provide emergency care to everyone, including those who are uninsured and who cannot afford the full cost of medical services, billions of dollars in uncompensated care costs are passed on to taxpayers and to those who have insurance.

In fact, 57% of the 41 million uninsured Americans received medical care in 2008 and the uncompensated care costs totaled $43 billion that year. Furthermore, those who decide to self-insure, on average, pay only 37% of the total costs of their care; government and charities pick up 26% of their tabs, and the remaining 37% of the uncompensated costs are passed on to those who are insured. As a result, the average family is forced to pay $1,000 in higher insurance premiums every year.

To remedy the massive cost shifting that is driving up health care costs to an unsustainable level, Verrilli said Congress approved the minimum coverage requirement as a way to regulate how people pay for health care. After years of studies and debates, Congress determined that the best way to avoid cost-shifting is to require everyone to obtain health insurance before they need or receive medical care. The other – though morally objectionable – option is for Congress to allow hospitals to deny emergency care to anyone who cannot pay for the full costs of the treatments, even if the denial of care will result in the person’s death.

“The minimum coverage provision is a means that regulates that [existing] economic activity, namely your transaction in the health care market, with substantial effects on interstate commerce,” Verrilli told the court. “Congress has the authority under the commerce power and the necessary and proper power to ensure that people have insurance in advance of the point of sale because of the unique nature of this market.”

But Justice Antonin Scalia countered that if Congress is granted the unprecedented power to compel people buy health insurance in the name of regulating the health care market, then what is to stop the government from ordering people to buy broccolis or to join an exercise club to reduce long-term health care costs?

“They can regulate other things that affect this now-conceded interstate market in health care in which everybody participates,” said Justice Scalia, whose comments clearly signaled his opposition to the coverage mandate.

Another concern raised by the court is the timing: when is it appropriate for the government to regulate commerce?

It’s generally accepted that Congress can regulate commerce at the point of sales, or when an individual consumes a service, like receiving care at an emergency room. However, the coverage mandate effectively regulates commerce before an individual receives health care.

“This is concerning because it requires the individual to do an affirmative act,” said Justice Kennedy. “That changes the relationship of the Federal Government to the individual in a very fundamental way.”

The question brought up by Justice Kennedy is this: can the government regulate an inactivity – such as not having insurance – to guarantee that a person can pay for medical care that won’t be denied to them in an emergency? In other words, does Congress have the authority under the Commerce Clause to compel individuals to purchase something before they need it?

Verrilli argued that given the unique nature of the health care market, regulating at the point of sales by requiring people to buy insurance only when they’re at the hospital seeking treatment will do little to solve the cost-shifting problem.

“Think about how much it would cost to get the insurance when you are at the hospital or at the doctor. It would be unfathomably high,” Verrilli said.

And because hospitals cannot legally deny people emergency care, those who can’t pay the required health insurance costs when they’re at the emergency room will still be able to receive medical treatment, and the costs they incur will still be shifted to others.

“That will never work. Congress understood that. It chose the means that will work,” said Verrilli. “Our position is that Congress can regulate the method of payment by imposing an insurance requirement in advance of the time in which the — the service is consumed when the class to which that requirement applies either is or virtually most certain to be in that market when the timing of one’s entry into that market and what you will need when you enter that market is uncertain and when — when you will get the care in that market, whether you can afford to pay for it or not and shift costs to other market participants.”

“Everyone subject to this regulation is in or will be in the health care market. They are just being regulated in advance. That’s exactly the kind of thing that ought to be left to the judgment of Congress and the democratically accountable branches of government,” he concluded.

Verrilli pointed out that 80% of Americans already comply with the individual mandate because they have insurance coverage through their employers’ plans or through public programs like Medicare, Medicaid, and CHIP. The Affordable Care Act would help the remaining 20% who are uninsured obtain coverage by expanding Medicaid eligibility, offering tax incentives to encourage small businesses to provide health coverage, and setting up state or regional insurance exchanges where individuals can purchase private plans at the discounted rates currently reserved for large corporations.


Learn More: