States argue the feds can't force purchase of health insurance

Thursday, March 25, 2010

JUST MINUTES after Tuesday's signing ceremony, the constitutionality of the health insurance reform law came under fire. A coalition of attorneys general from 13 states filed suit in a northern Florida federal court; Virginia lodged a separate complaint, and other states may follow.

These challenges are not frivolous. The states argue that the individual mandate -- forcing individuals to purchase health insurance -- stretches and distorts Congress's constitutional power "to regulate Commerce . . . among the several states." A person who declines to buy insurance is not engaged in interstate commerce and should therefore lie beyond the reach of Congress, they say.

This contrasts, in two ways, with a consumer who is forced to buy car insurance. First, states have power to regulate activities within their borders that the Constitution does not grant the federal government. Second, a consumer must choose to enter the car market; only then does a state place a condition on that choice by requiring insurance. If the courts acknowledge the legitimacy of the individual mandate, the states argue, the federal government's power to order purchases of other products or services -- or any number of other directives -- would be unlimited.

The Supreme Court has given Congress wide but not unfettered latitude in regulating interstate commerce. It barred federal efforts to promulgate laws that ban guns near schools and those addressing violence against women, ruling that these activities have nothing to do with commerce. But health insurance is a commodity, and a consumer who sits on the sidelines has a significant impact on the market. And the federal government's interest in that market functioning efficiently to provide health-care access to all is undoubtedly a legitimate public purpose. So the case is not as clear-cut as many legal scholars have argued, but the federal government has a strong defense.

It's worth noting, too, that while the goal of the mandate is crucial to reform, the mandate isn't the only way to achieve that goal. For universal coverage to work, healthy people have to be brought into the insurance pool; if mostly the sick and old sign up, insurance will become more and more expensive, further driving away the healthy. The mandate, with an accompanying fine, is one approach to avoid such a spiral. Another, as Paul Starr of the American Prospect has pointed out, would allow individuals to opt out of the system but would force them to wait five years before opting in again and becoming eligible for subsidies. If they get sick in the meantime, they must either pay for treatment on their own or find an insurer willing to take them on, presumably at inflated rates.

Which would work better? The truth is that we don't know. Whether the system as designed by Congress will encourage near-full participation depends on human psychology as well as the size of the penalty for non-participation, the cost of insurance and the generosity of subsidies. If the health-insurance mandate is ruled constitutional, Congress undoubtedly will find itself tweaking and revising it over the years. If it's not constitutional, that doesn't mean health reform as a whole is lost.

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