By Kevin J. Fandl, J.D., Ph.D.
Associate Professor of Public Policy, American Public University
What does your health have to do with interstate trade? That is the question at the heart of the current litigation over the Patient Protection and Affordable Care Act of 2010 (a.k.a., “ObamaCare”). Let’s start with a little background. The Act was passed in 2010 with a Democrat-controlled Congress. Although it is much weaker than the healthcare plan proposed, but never enacted by President Clinton during his administration, which would have had the federal government negotiating directly with healthcare providers and insurance companies to get the best deal for patients. ObamaCare focuses on reducing costs for medicines, expanding coverage options, and preventing insurance companies from denying coverage based upon pre-existing conditions, among other things.
But there is one particular provision of the new law that has drawn criticism from the now Republican-controlled House of Representatives and a number of state legislatures—the individual mandate. The individual mandate takes effect in 2016 and states that all individuals who can afford to purchase health insurance must purchase that insurance or face a penalty on their tax return. Sounds pretty harsh—if you choose to skip the health insurance policy, you will be charged a penalty by the federal government. But, it is not quite as ominous as it appears.
For example, although about 26 million citizens are uninsured currently in the United States, one-third of those qualify for Medicaid (i.e., they already receive free or low-cost insurance from the government) and another third would qualify for federal subsidies to pay for insurance. That leaves about 7 million uninsured citizens that would be required to buy insurance or face a penalty. And how much is the penalty? Currently it is set at $695 or 2.5 percent of your income, whichever is higher. However, the statute does not contain an enforcement provision, so there is no clarity on what happens if you don’t pay the penalty.
This provision of the Act has met the most scrutiny because of how it appears to be forcing citizens to take action that they may not want to take. Of course, the federal government has the right to require action of citizens under a number of federal laws. In this case, the federal government based their power to regulate health on the Commerce Clause (U.S. Const., Art. I, Sec. 8). That clause permits federal regulation of any commerce that moves between states. The government argued that healthcare is a national concern and that health policies and services cross state lines all the time, thus making it an issue of interstate commerce. However, they also argued that if the Commerce Clause did not support their power to regulate health, the mandate and its associated penalty is no more than a tax, permissible under Congress’s tax and spend power.
We should have a decision by the summer of 2012. Keep watching as this has been an exciting year at the Court!
Update:
On June 28, 2012, the Supreme Court issued a ruling that surprised most legal scholars and policymakers—they upheld the entire healthcare law. The mandate would have been struck down by the majority if it had only been based upon the Commerce Clause power. The Chief Justice made clear that, while the Commerce Clause power is broad, this Act creates rather than regulates commerce. However, the tax argument saved the provision as a majority of justices, led by Chief Justice Roberts, agreed that Congress had the power to levy this tax. Roberts argued that if someone chooses not to purchase health insurance, they can pay the tax and that is the end of the argument—the government cannot force them to buy insurance. This taxation argument saved the Act and, despite the urging of the Administration, has opened the door to a much more heated political debate over the viability of the Act.
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