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The Legality of Health Insurance Mandates

By Sam Singer

The health care debate is already brimming with needless commentary, so it is with some reluctance that I bring up the latest digression, courtesy of two of the legal community's most notable agitators.

Writing in the Wall Street Journal, conservative lawyers David Rivkin and Lee Casey argue that Congress is without constitutional authority to enact a law requiring Americans to buy health insurance. Under its Commerce Clause powers, Congress can regulate economic activity that has a substantial effect on interstate commerce. But Rivkin and Casey can't discern what activity, short of having a pulse, Congress seeks to regulate through a mandatory insurance program.

I call this argument a digression because a court can accept it as true and still conclude that Congress has authority to enact an individual mandate. Under current precedent, Congress does not overstep its authority if, in regulating commerce, it enacts a law that happens to sweeps up something non-economic. So even if an individual mandate could not stand alone, a federal court won't quibble if Congress finds, as it has, that a broader compromise with national providers won't work without requiring every American to buy insurance. In constitutional terms, an individual mandate is "necessary and proper" for Congress to reach its ultimate goal, which is to make quality coverage affordable for every American, regardless of pre-existing conditions.

But if without legal merit, Rivkin and Casey's argument about the economic consequences of being uninsured is worth engaging. In a literal sense, Rivkin and Casey are right that no money changes hands when someone decides to remain uninsured. Indeed, there is nothing active about the decision, and so it would seem to stretch the meaning of the term to describe it as an "activity," let alone an "economic activity."

In a marketplace, however, the consumer who doesn't pay for a commodity is every bit as active as the one who does. Both become data points on a demand curve, which is a fancy way of saying that both communicate relevant information to suppliers. I'm not active in the squid market. I'm told that I'm still young and that my palate will adjust, but for now I'm more comfortable eating animals without ink sacs. Still, you will have a hard time persuading me that my dining preferences are less relevant than those of a squid eater, or that I'm not influencing market prices when I choose jalapeno poppers over calamari.

Although the same principle holds true for health insurance, the demographics of the industry magnify the effects of non-participation. Insurance companies operate most profitably when their pool of subscribers reflects a cross section of the population. This allows young and healthy subscribers, who typically make fewer claims, to front the costs of treating the sick and elderly. But it is for this very reason that next to the poor, the young and healthy are least likely to purchase health insurance. As young Americans forego coverage, the average subscriber's age increases, and with that so does the risk of insuring their health. Opting out, then, has a considerable effect on the price of insurance premiums.

That effect is not confined to the locality in which a particular policy is written. Although health insurance is regulated at the state level, most of it is sold by national insurance companies. A BlueCross/BlueShield plan registered as a single-state corporation will contract with similar plans to allow subscribers' access to doctors in other states. Likewise, if you're doing business with a local insurance company, there is a decent chance the title is nominal, and that it associates with a national carrier. As the market consolidates, industry analysts are dispensing with the fiction that the health insurance industry operates on a regional scale.

If we take anything from the mountains of polling data on health reform, let it be that a growing percentage of Americans can't understand why Congress insists on inserting itself between them and their doctors. The sooner Americans understand that their insurance decisions have consequences beyond their account statements, and that they make coverage choices not in a vacuum but in a national marketplace, the sooner they will appreciate the case for federal regulation.


Sam Singer is the Beachwood's legal correspondent. He welcomes your comments.


Previously by Sam Singer:
* Is TARP legal? Court to decide on laugh test.

* Taking Government Out Of The Marriage Business. Separating church and state.

* Chicago's Disorderly Conduct. Dissent allowed even in Daleyland

* Why Google Will Win. Newspapers are on the wrong side of the digital revolution.

* Is Blago A Flight Risk? We asked; a judge said yes.

* Obama's Torture Test. Politically calculating.

* Replacing Souter. Signs point to Kagan.

* Going to Pot. The states vs. the feds.

* The Sotomayor Show. A guide for viewers.

* Chicago's Still Valid Gun Ban. Chicago vs. D.C.

* The Gay Rights Gamble. What happened in California may no longer stay there.

* Legal Fiction. When judges go noir.

* Obama's Justice. The president's curious habit.

* Settling With The City. Backwards by even Chicago standards.


Posted on September 30, 2009

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