Mandating Health Insurance


A great national debate is about to be played out in the Supreme Court. The question presented is whether we may all be required to buy insurance under the Obama health-care law, the Patient Protection and Affordable Health Care Act of 2010. Can those citizens who refuse to buy such insurance be penalized? That issue has split lower federal courts and is on its way up.

The question turns on the powers delegated by the Constitution to the federal government, particularly the Commerce Clause as reinforced by the Necessary and Proper Clause. Alternatively, the government’s power to tax may supply an answer. Before consideration of the new law, a bit of history.

We begin at the beginning: the old Articles of Confederation of 1777–78 did not include a grant to the federal government of power over domestic commerce. The omission was soon lamented. In 1784, Congress appealed to the states to correct the position, saying that “few objects of greater importance can present themselves to [the states’] notice.... [Commerce] is the constant source of wealth and incentive to industry; and the value of our produce and our land must ever rise or fall in proportion to the prosperous or adverse state of trade.” That is, the impact of trade on the value of produce and land was grasped. In that light, the Constitution as ratified in 1788 empowered Congress to “make all laws which shall be necessary and proper” to “regulate commerce...among the several states.” The document was considered ingenious, “a machine that would go of itself,” James Russell Lowell thought.

Given the rudimentary state of the colonial economy, the major concern of the Commerce Clause—as Alexander Hamilton in Federalist 7 and James Madison in 42 promptly asserted—was to prevent any state from imposing burdens on goods arriving from another state. Chief Justice John Marshall famously took that line in 1824: the commerce power, he held, extended to “intercourse” that “concerns more states than one.” But it was an open question whether the word “commerce,” its original use having to do with an eighteenth-century economy, enabled Congress to regulate transactions wholly within a state that affected interstate trade only indirectly.

As the nation’s canals, railroads, and industry grew, a broad view became necessary. A dictum of the Supreme Court of 1851 opened the door: “Whatever subjects of this power are in their nature national,” the Court said, “or admit only of one uniform system, or plan of regulation, may justly be require exclusive legislation by Congress.” On that note, antitrust laws, among other statutes pregnant with federal power, were in place by the end of the century.

The dictum of 1851 soon became living law. Case after case presented facts justifying federal intervention into the heart of the states. The New Deal was a further catalyst. Federal regulation of labor practices within Pittsburgh steel plants was sustained; a farmer in Ohio who grew wheat for home consumption in excess of a federal quota was penalized; a Georgia manufacturer was prohibited from shipping lumber cut by employees paid less than the federal minimum wage; a conviction of a loan shark under federal criminal law was sustained, though the offense was committed entirely at a local butcher shop. Recently, when the nexus with commerce was slight—for example, the prohibition of firearms in a school zone or the protection of women from violence—federal regulation was not permitted. But in 2005 the High Court again vindicated federal power: a California grower of marijuana for home consumption, like the Ohio wheat farmer, fell under federal control because of the interstate market for the product.

In the wake of these decisions, the new federal health-care law was enacted. A statute of profound national significance, it already bedevils the federal courts. Its salient provisions will require each of us (with minor exceptions) to maintain a minimum level of health insurance, beginning in 2014. Failure to comply results in a penalty imposed by the tax code, payable with annual tax returns. These provisions, in their individual impact, have been attacked as beyond the authority of Congress under the Commerce Clause or the taxing power.

The mandatory-insurance obligation is central to the plan of the new law. The provision derives from an economic calculation adopted by Congress itself: unless we are all so obligated, revenues will be insufficient to cover the costs of high-risk or uninsurable individuals within the national population. Still, the mandatory insurance provision is challenged on the ground that a citizen’s passive refusal to participate in the program is not an economic “activity,” and that only economic “activity” may be regulated under the Commerce Clause. Remarkably, this hermeneutic argument about the clause—whether affirmative “activity” inheres in the concept of commerce—has split the federal courts.

It is true, as we have seen, that the historic growth of federal power under the clause has involved some form of activity related to interstate commerce. But it would be strange if a great constitutional question turned on a semantic quarrel about the word “activity.” By 1946, the Supreme Court had said that in using its commerce power “Congress is not bound by technical legal conceptions. Commerce itself is an intensely practical matter.” It was reasonably determined by Congress (supporters say) that the decision by each of us to purchase, or not to purchase, health insurance—given the effects of the individual decision when magnified by similar decisions of millions—is a commercial matter in the sense of the clause. Such determinations by Congress have generally been conclusive of the nexus with “commerce,” and the force of the Necessary and Proper Clause will doubtless steel the Commerce Clause. Indeed, as a strictly semantic matter, philosophers hold that in defining intentional “action” it is understood that “a person may be said to have done something when she keeps perfectly still” (The Oxford Companion to Philosophy). Those who would analogize the compulsion of the health-care law to a command to eat asparagus or work out at a gym ignore that the entire fiscal integrity of the new law depends on near-total compliance by the citizenry. That is not true of the hypothetical cases and favors the constitutionality of the law.

But quite apart from the Commerce Clause, it is also argued that Congress may not, under its taxing power, impose a penalty, payable with one’s usual income-tax returns, for a citizen’s failure to buy health insurance. The very first of the powers of Congress enumerated in the Constitution is the power to “lay and collect Taxes, Duties, Imports, and Excises.” In terms of power, this was intended to invigorate the old Articles of Confederation, as Hamilton, the master of the subject, pointed out (Federalist, 30–36). Although the penalty payable under the new health-care law is prescribed by the tax code and collected as a tax, opponents insist that the deliberate designation of the payment as a “penalty” manifests an intention by Congress not to treat the payment as a tax measure within its tax powers.

This lexical quarrel about the use of the forms of taxation for a regulatory purpose is an old one, and judicial precedents make the legal outcome unpredictable. While a 1953 decision of the Court may be helpful (it permitted an occupational tax on gambling to discourage the practice), Albert Einstein may have been right: the hardest thing in the world to understand, he said, was the income tax.

Published in the 2011-01-28 issue: 

Joseph D. Becker, a founding partner of Becker, Glynn, Melamed and Muffly, a Manhattan law firm, is author of The American Law of Nations (Judis).

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