Can Congress Require Everyone to Have Health Insurance?

Today, the Supreme Court will hear two hours of oral argument on the central issue in the case against the Obama administration’s health law — whether the federal government has the constitutional authority to make people either purchase health insurance or pay a fine.

It is this question — corresponding to a provision of the law known as the “individual mandate — that has been the primary focus of intense political opposition and public outcry ever since the law was proposed. It has been the focus of numerous lower court lawsuits as well.

Of the four appeals court decisions on the constitutionality of the health law, two upheld the mandate, one found it unconstitutional, and one ruled the question could not be decided until the mandate takes effect.

The challenge to the individual mandate, one of four separate issues in the case, stems from two lawsuits filed in Florida and later consolidated by the U.S. Court of Appeals for the 11th Circuit in Atlanta. One was filed by the National Federation of Independent Businesses and two individuals who lacked health insurance. The other was filed by Florida and joined by 25 other states.

The business group and individual plaintiffs challenged only the individual mandate. The states challenged the mandate and the Medicaid expansion provision, which will be argued tomorrow. The 11th circuit struck down the mandate, but found the Medicaid expansion constitutional. 

The Lawyers

Day 1— Anti-injunction law
Court-appointed amicus curiae: Robert A. Long, Washington, D.C.
Administration: Donald B. Verrilli Jr., Solicitor General, U.S. Department of Justice
Plaintiffs: Gregory G. Katsas, Washington, D.C.
(90 minutes)

Day 2 —Individual mandate
Administration: Verrilli
Plaintiffs (states): Paul D. Clement, Washington, D.C.
Plaintiffs (National Federation of Independent Business, et al): Michael A. Carvin, Washington, D.C.
(two hours)

Day 3 (morning)—Severability
Plaintiffs (states): Clement
Administration: Edwin S. Kneedler, Deputy Solicitor General, U.S. Department of Justice
Court appointed amicus curiae: H. Bartow Farr III, Washington, D.C.
(90 minutes)

Day 3 (afternoon)—Medicaid Expansion
Plaintiffs (states): Clement
Administration: Verrilli
(one hour)

Source: U.S. Supreme Court

What is the individual mandate? 

Under the Affordable Care Act, nearly everyone must purchase health insurance or pay a fine starting in 2014. Exceptions are granted for financial hardship, religious objections and incarceration. Undocumented immigrants and members of American Indian tribes are also exempt. 

According to the law, insurance companies must provide reasonably priced insurance for everyone, regardless of health status. As a result of this new requirement, the administration has said the mandate is necessary to ensure that healthy people don’t wait until they get sick or become injured to sign up for insurance. If that were to happen, the insurance pool would likely be too small to keep costs affordable to consumers. The result would be sharp increases in insurance rates for everyone. 

The annual penalty for not having insurance is the greater of a flat dollar amount or a percentage of income. The flat rate starts at $95 in 2014 and gradually increases to $695 in 2016. The percentage of income in excess of the federal tax filing threshold starts at 1 percent in 2014 and rises to 2.5 percent in 2016. For both families and individuals, the penalty could be as high as the price of insurance coverage. 

The Congressional Budget Office (CBO) estimates that 21 million non-elderly people will be uninsured in 2016, but the majority of those will not be subject to the penalty due to financial hardship. About 4 million people will pay the penalty, netting about $4 billion to the U.S. Treasury, the CBO predicts. Currently, more than 50 million Americans are uninsured. 

The arguments 

Arguments on both sides primarily center around the commerce clause in Article 1 of the U.S. Constitution, which gives Congress the authority to regulate commerce within the states if it has a substantial effect on interstate commerce. 

The plaintiffs charge that the commerce clause does not apply to the health law’s individual mandate, because a decision not to buy insurance isn’t a commercial transaction. Instead of regulating commerce, plaintiffs maintain that Congress is requiring people to enter commerce by purchasing health insurance. If the mandate is upheld, they argue the federal government would have unprecedented power over individuals’ actions — and inactions. The federal government, they argue, could require people to purchase all kinds of other things, such as American cars. 

The administration has argued that the decision to buy health insurance is unlike other purchasing decisions, because everyone will use health care services at some point in their lives. It’s just a question of when. Instead of inaction, the administration maintains, not buying health insurance is a decision to self-insure and take a risk on remaining healthy. According to the administration, people who do not purchase health insurance often end up paying less than the full cost of the care they ultimately receive. That results in the costs of their care shifting to people who have insurance, in the form of higher premiums. 

Two other constitutional provisions in Article 1 — the “necessary and proper” clause and the “taxing power”—have also been invoked by both parties. 

The necessary and proper clause allows Congress to enact laws needed to execute the federal government’s duties. The administration argues that extending health care to the uninsured, which addresses a pressing national problem, is among those duties. But plaintiffs argue that without the commerce clause, the necessary and proper provision alone cannot validate the individual mandate. 

The administration also says the individual mandate falls within the government’s broad taxing powers, in part because it is administered through the tax code. Plaintiffs argue that the mandate is not a tax but a civil penalty. In ruling against the mandate, the 11th Circuit observed that Congress was careful to refer to the sanction for not buying health insurance as a “penalty,” while using the word “taxes” in several other provisions of the law.