"Are you serious?": examining the constitutionality of an individual mandate for health insurance.

AuthorPatterson, Ryan C.

Are you serious? Are you serious?

Nancy Pelosi, Speaker of the House, responding to a question about the constitutionality of an individual mandate for health insurance (1)

INTRODUCTION

The Patient Protection and Affordable Care Act (PPACA) (2) has significantly reformed the U.S. health care system. As a result, nearly all Americans will be required to purchase health insurance. (3) An individual mandate for health insurance is not a new idea. In 1993, the Senate Republican Task Force drafted a health care reform bill that included an individual mandate. (4)

As the debate over health care reform has unfolded, questions have been raised about whether the Constitution grants Congress the power to impose an individual mandate to purchase health insurance. (5) In 1994, the Congressional Budget Office addressed the issue, concluding that "[a] mandate requiring all individuals to purchase health insurance would be an unprecedented form of federal action." (6) More recently, the Congressional Research Service concluded that Congress might have the power to enact an individual mandate "as part of its taxing and spending power, or its power to regulate interstate commerce." (7) However, it acknowledged that "[w]hether such a requirement would be constitutional under the Commerce Clause is perhaps the most challenging question posed by such a proposal, as it is a novel issue whether Congress may use this clause to require an individual to purchase a good or a service." (8)

This Note analyzes whether Congress has the power to enact an individual mandate for health insurance under the Taxing and Spending Clause and Commerce Clause. (9) Part I examines the problems with our current health care system and the policy argument for an individual mandate. Part II addresses the complaint that an individual mandate would be an unprecedented assault on individual liberty. It compares the effects that prohibitions and mandates have on personal freedom and notes that there is precedent for the federal government mandating action as a condition of citizenship. Part III examines whether Congress can enact an individual mandate under its taxing power. Finally, Part IV analyzes whether an individual mandate can be enacted under Congress's power to regulate interstate commerce.

  1. A BRIEF EXAMINATION OF HEALTH CARE IN THE UNITED STATES AND THE ARGUMENT FOR AN INDIVIDUAL MANDATE

    The rising cost of health care and the number of Americans without health insurance are two of the main concerns that drove the push for health care reform. (10) In 2007, health care spending in the United States was equivalent to 16.2% of gross domestic product (GDP). (11) This total is expected to rise to 25% of GDP by 2025 if our current health care system is not reformed. (12) Since 1980, the annual rate of growth in medical care prices was 4.7%--almost double the annual rate of inflation. (13) The cost of obtaining health insurance has increased significantly in the last decade, making it difficult for some Americans to afford health insurance. (14)

    In 2007, 45.7 million Americans were uninsured at some point during the year. (15) Over ninety-eight percent of the uninsured are under age sixty-five. (16) The two main groups of the uninsured are low-wage workers who do not receive health insurance through their employers and healthy young people unwilling to buy insurance at its current price. (17) Thirty-nine percent of the uninsured are nineteen to thirty-five years old, (18) and sixteen percent of the uninsured earn at least $50,000 per year in household income. (19) One recent study estimates that forty-three percent of uninsured Americans have enough disposable income to afford health insurance but voluntarily choose not to purchase it. (20)

    Being uninsured can adversely affect an individual's health. The uninsured have a higher premature mortality rate than people with health insurance. (21) They are less likely to receive preventative care and more likely to postpone seeking treatment for an illness than the insured. (22) As a result, their medical problems are more serious by the time they seek treatment, (23) which they often receive in a hospital emergency room. (24) The Institute of Medicine estimates that "20,000 uninsured Americans die each year because the lack of health insurance prevents timely and routine medical care." (25)

    In addition to the individual health consequences, being uninsured imposes significant costs on society. The uninsured often receive medical care from the most expensive places. (26) As a result, they are not able to adequately compensate their health care provider for the care they receive. (27) The cost of this uncompensated care is shifted to others in the form of higher insurance premiums and higher taxes. (28) An estimated two to ten percent of the cost of private health insurance premiums covers uncompensated care for the uninsured. (29) Annually, uncompensated care accounts for about three percent of health care spending in the United States. (30)

    Failures in the health insurance market contribute to the rising cost of insurance premiums and the number of uninsured Americans. One of the market failures is adverse selection. (31) The "basic concept of insurance is to spread individual risk across a broad range of enrollees." (32) For health insurance, this requires a large number of healthy people to balance the risk posed to insurance companies by people with serious illnesses. (33) Adverse selection refers to the ability of a well-balanced risk pool to devolve into a pool composed mainly of high-risk individuals. (34) Our current system allows individuals to freely enter or exit insurance risk pools. (35) Healthy people rationally may choose not to purchase health insurance until they need it. (36) Without these low-risk individuals, the medical loss ratios of health insurance companies will increase due to an increased percentage of high-risk individuals in the risk pool. (37) Insurance companies are then forced to increase premiums to offset these losses. (38) However, the increase in premiums may cause healthy people with insurance to cancel their policies, starting the cycle over again. (39)

    Another health insurance market failure is the free-rider problem. (40) Free riders are people with the financial ability "to purchase health insurance [that] choose not to, knowing they can get emergency care when they need it." (41) When they need expensive care and are unable to pay for it, the cost of their uncompensated care is shifted to others through increased health insurance premiums and higher taxes. (42)

    Proponents of an individual mandate for health insurance believe that it will effectively address the cost and coverage concerns that drove the push for health care reform. (43) Requiring individuals to purchase health insurance will address the problem of adverse selection by forcing healthy people into insurance risk pools. (44) Health insurance premiums should decrease as insurance companies are able to spread the risk posed by seriously ill enrollees across a larger number of healthy individuals. (45) An individual mandate also addresses the free-rider problem by decreasing the amount of uncompensated care that health care providers deliver to patients. (46) This should produce a decrease in the average health insurance premium. (47) Due to these projected benefits, an individual mandate is a central feature of the PPACA.

  2. THE NATURE OF AND PRECEDENT FOR MANDATES

    In its 1994 evaluation of proposed health care reform bills containing individual mandates, the Congressional Budget Office noted "[a] mandate requiring all individuals to purchase health insurance would be an unprecedented form of federal action. The government has never required people to buy any good or service as a condition of lawful residence in the United States." (48) One senator has described it as "'a stunning assault on liberty.'" (49) Before examining the constitutionality of the individual mandate it is useful to review the difference between prohibitions and mandates as well as the precedent for mandates.

    To prohibit is to prevent someone from doing something. (50) In effect, it means that an individual can do everything but X. To mandate is to order or require that something be done. (51) In effect, it means that an individual must do Y. It is widely accepted that Congress has the power to prohibit. A mandate is more controversial. Generally, a prohibition will be less intrusive on a person's freedom than a mandate. (52) Although the freedom to do X has been restricted, the individual still has the freedom to do Y, Z, and any other thing that is not X.

    As the ways to comply with a prohibition decrease, however, the prohibition begins to have an effect on individual freedom similar to that of a mandate. For example, the Civil Rights Act of 1964 (53) prohibited the restriction of access to places of public accommodation based upon racial discrimination. (54) The only way for innkeepers or restaurant owners to comply with this prohibition was to serve African Americans that entered their establishments. Although styled as a prohibition, it had the functional effect of a mandate. (55) Prohibitions and mandates are two sides of the same regulatory coin, and Congress has the authority to do either if it is within the scope of one of its enumerated powers.

    The Congressional Budget Office is correct that "[t]he government has never required people to buy any good or service as a condition [of citizenship]." (56) However, there is precedent for the federal government mandating individual action as a condition of citizenship. All Americans are required to pay income taxes (57) and have an obligation to serve as jurors when called. (58) Also, all American males ages eighteen to twenty-five must register with the Selective Service System. (59) Notably, none of the mandates have been enacted using the commerce power.

    Some...

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