In my first and second posts, I gave a broad overview of congressional power and the Commerce Clause, and summarized three major precedents in Commerce Clause law. In this post, I’ll take a first look at how these precedents might apply when determining the constitutionality of the individual mandate by discussing how the federal government could argue in its favor.
The Supreme Court has held that the sale of insurance is “commerce” within the meaning of the Commerce Clause. United States v. South-Eastern Underwriters Assn., 322 U.S. 533, 552-53 (1944). And the applicability of the substantial economic effects test (discussed in my previous posts) to the individual mandate, which requires that non-exempt individuals purchase health insurance, seems to be self-evident: if more people pay insurance premiums, insurance claim costs are more dispersed and the price of insurance goes down. Hence the regulated activity (the purchase of health insurance) will have a substantial economic effect on the interstate insurance market (by affecting premium prices). That’s particularly true because people who would not otherwise buy insurance, were it not for the law, are more likely to be healthy (all things equal). So the government can argue that courts should apply the substantial economic effects doctrine in a straightforward way: Congress has regulated the purchase of health insurance, and this activity has a substantial economic effect on the interstate market for that insurance.
Moreover, although it struck down a law by invoking a limit to Congress’s Commerce Clause power, the Lopez decision nevertheless noted that intrastate activity could be regulated as “an essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated.” United States v. Lopez, 514 U.S. 549, 561 (1995). It thereby distinguished its holding, which struck down a criminal statute that stood apart from any regulatory scheme, from such an instance. See id. This reasoning subsequently provided some of the justification for the Supreme Court’s decision in Raich. Gonzales v. Raich, 545 U.S. 1, 23-25 (2005); id. at 36-38 (Scalia, J., concurring in the judgment).
Of course, federal regulation of the health insurance market, even under the new health care bill, isn’t nearly as comprehensive as that of the marijuana market regulated by the Controlled Substances Act, the statute at issue in Raich. In the latter instance, the sale of the commodity (as well as its manufacture, distribution, or possession) is banned entirely. The federal health care bill, by contrast, does not purport to completely control the market for health insurance, nor does it otherwise supplant state insurance regulation. So the government might have a harder case to make in this instance that the individual mandate is an “essential part” of Congress’s regulatory scheme whose absence would “undercut” that scheme. But this line of attack would probably be a dead end for the mandate’s challengers; Congress clearly intended to make health insurance premiums more affordable, and eliminating the individual mandate would undermine that intention. That should be enough to withstand rational basis scrutiny, the most deferential form of constitutional review. See id. at 22.
In any event, it would also be a dead end for challengers to argue that the failure of any given individual to purchase health insurance cannot be regulated because that failure is a purely intrastate activity, or because that one individual’s failure, alone, will not substantially affect the interstate insurance market. First, as noted above, even intrastate activity can be regulated if the failure to regulate it would undercut a constitutional regulatory scheme. Lopez, 514 U.S. at 561; see also Raich, 545 U.S. at 18. Second, under either the “substantial economic effects” justification or the “essential part of a larger regulat[ory scheme]” justification, Wickard and Raich tell us that the key inquiry is whether a regulated activity will, in the aggregate, have a substantial economic effect or undercut the regulatory scheme. So the mandate can be applied to individuals even if any one individual, on his or her own, would not substantially affect the interstate market by purchasing or declining to purchase health insurance. See Wickard v. Filburn, 317 U.S. 111, 127-28 (1942); Raich, 545 U.S. at 19.
The government may have one more hurdle that I haven’t previously noted: it may have to show that the regulated activity (i.e., the decision not to purchase health insurance) that substantially affects interstate commerce is itself an economic activity. Five years before Raich was handed down, the Supreme Court noted that “thus far in our Nation’s history our cases have upheld Commerce Clause regulation of intrastate activity only where that activity is economic in nature,” United States v. Morrison, 529 U.S. 598, 613 (2000), and Raich essentially did not disturb that principle. See Raich, 545 U.S. at 25-26 (noting that the federal Act at issue therein “is a statute that directly regulates economic, commercial activity,” and including within this category the Act’s “[p]rohibiti[on of] the intrastate possession . . . of an article of commerce [i.e., marijuana]”). The challengers to the individual mandate could ask: How can a failure to engage in economic activity constitute economic activity and so satisfy Supreme Court precedent?
The government will have a ready response to this question, probably akin to that articulated by Dean Erwin Chemerinsky of the UC Irvine School of Law in this online debate. Dean Chemerinsky argues that Wickard and Raich itself show that a person can engage in economic activity even in the absence of an economic transaction—indeed, recall from my last post that Wickard’s holding was based in part on the premise that farmer Filburn grew wheat for his own consumption and thus abstained from purchasing wheat in the market, and that this failure to participate in the market had a substantial economic effect on wheat prices in the aggregate and could be regulated by Congress. “If this is economic activity,” Dean Chemerinsky argues, “then certainly the purchase of health insurance (or a refusal to do so) is economic activity.”
As a result, the government should be able to make a fairly strong case under current law that the Commerce Clause authorizes Congress to enact the individual mandate.
In my next post, I’ll discuss some possible counterarguments to the government’s position.
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