An Individual Mandate for Health Insurance?
We Could Do That, But It Would Be Wrong

The following remarks are adapted from Tom Miller's comments during a panel discussion of "The Constitutionality of Mandates to Purchase Health Insurance," at the April 27, 2009 Georgetown Law Center's "Legal Solutions in Health Reform Spring Symposium." Other panelists included Mark Hall of Wake Forest University School of Law, and Len Nichols of New America Foundation.

A couple of preliminary points. Len Nichols, you've allowed me to appear on panels with you before, pretending to be an economist. I would have allowed you to pretend to be a lawyer today. Mark Hall roped me into this. I'm going off inactive status in the Georgia Bar, as long as I get continuing education credit for this.

The actual first case that I handled in private practice, a couple of months out of law school, involved representing the Medical Association of Georgia. We sued the Department of Health, Education, and Welfare, and the state of Georgia. We advanced the preposterous idea, by today's standards, but less so at that time, that doctors did not have to sign a unilateral provider agreement. I got it into court and beat a motion to dismiss. We didn't have any facts on our side, but we negotiated after maintaining a group boycott of the state Medicaid program by most physicians. So there are ways to challenge excesses of health policy regulation, under basic statutory law--without even going to the Constitution.

I say that even though there appears to be a little bit of an upward positive bias in this particular conference format, along the lines of "Yes we can--one way or the other, under the law"--for all these problems of implementing proposed health reforms. But the role of lawyers is not always simply to tell you how to do it. It may also involve just as much on the other side telling you how to stop it or divert it or gain some bargaining leverage over final terms of the deal.

Now, I'm not suggesting that we are in the midst of writing a legal memo justifying torture of private choice in health care and how you spend your money. But legal barriers are not just accidental bumps in the way. They often represent part of the diverse package of our values that are embedded within that legal structure.

So, I guess to quickly use a previous phrase from another former Duke Law graduate, Richard Nixon, though not originally with regard to an individual mandate:

"There is no problem in raising a million dollars." [I'd upgrade that to over a trillion dollars today, under CBO scoring].We could do that, but it would be wrong."

Individual Insurance Mandates under Current Constitutional Law

Mark Hall did a fine job summarizing the mainstream view of constitutional law and what the legal limits appear to be. And I don't find any fault with that in terms of where we are at the moment. The federal government has a lot of power under the commerce clause. In addition, the tax and spend power for the general welfare goes a long way, as a means of facilitating indirect regulation. It's easier to provide tax subsidies as a positive magnet to purchase health insurance than to impose tax penalties on those who don't or won't. You can do a lot with the tax power alone--but it's not airtight. I'd remind that you that Chief Justice Marshall once wrote, in a different context, "The power to tax is the power to destroy." You can carry that power too far and bump up against limits.

As to an individual mandate to purchase health insurance, there are no "fundamental rights" violated here, but it would be good to be careful to spell out some substantive rationales and findings--whether they are accurate or not. I'd disagree to some extent with some of the findings of an earlier speaker, Len Nichols, with regard to free riders, cost shifting, scale economies, reducing premiums, and reducing adverse selection. But it's close enough for congressional work. And it would be wise, even if not necessary, to allow for some religious exemptions as a matter of prudence. You can ensure participation and compliance by states and individuals with an individual insurance mandate through strong financial incentives, like conditional spending of federal funds, use of fall-back federal preemption if the states don't comply while opting out, and use of pay-or-play taxes on the private sector.

Possible Legal Challenges to an Individual Insurance Mandate

However, there are a few hypothetical worries about a future expansion of this under the takings clause limits. But in general, substantive due process remains "...Dead, Jim." It's not just dormant. There's no constitutional right to be left alone by the federal health care police.

But let's talk about which constitution you want. I've got a great one, but it's in exile at the moment. Or perhaps it's just been subject to rendition and sent to another country? There are some clauses in the original Constitution that have been treated as enemy combatants against the modern welfare state.

Let's remember that before 1945, it wasn't a matter of whether insurance was interstate commerce. The Supreme Court, in three different decisions, said it wasn't even commerce, let alone interstate commerce. Those rulings started with Paul v. Virginia in 1869, and they were reaffirmed in two other Supreme Court decisions. (Of course, they involved state law rather than a matter of congressional legislation.)

So, give me five justices and I can invent a different constitution for you. These legal disputes are not necessarily fixed for all time in ironclad rulings. In pursuing politics through other means, such as constitutional law, it can come down to whatever five justices say. Even though you or I may have different personal views as to what the Constitution is and is not, if you have the votes, you can change it around.

A good point that Mark made earlier is that there is no existing analogy in current and past law for a mandate to purchase something that is semi-private, albeit highly regulated, just because you "exist" or as a condition of residence in the country, rather than legally tying a mandated purchase to one's exercise of a privilege. Remember that even Social Security and Medicare Part A operate explicitly only as taxes. You don't actually have to take the benefits, if you're willing to compound your losses even further. And in the case of a mandate to purchase private health insurance, the latter essentially delegates the sovereign power of taxation to private parties charging premiums for (forced) coverage.

Takings are harder to challenge under the law when they involve economic regulation, and particularly when all that they take is money rather than other types of property. I would read the Eastern Enterprises v. Apfel Supreme Court case in 1998 (524 U.S. 498) a little differently than Mark Hall did. It's a typical Justice O'Connor case, where she writes the lead opinion. You know there are five votes for the basic decision and not much else. This is the type of opinion she used to like to write. It's not dispositive in either direction, and it doesn't provide any future rule of broad application. But Apfel at least puts in play the concept that you might try takings as an argument with regard to money as property.

Interestingly enough, there are a series of taking cases in insurance regulation at the state level where substantive due process apparently provides greater protection for businesses than for individuals--in terms of requiring a reasonable rate of return on investment expectations as regulation becomes more severe. The question here becomes just how much is too far for health insurance regulation.

Let's take a bit of a stab at discovering the legal limits. What if you consider individuals as "self-insurers," who want to get a reasonable rate of return on their own "insurance business" under an individual mandate (under severe regulation)? At what point do regulatory burdens become too disproportionate?

What this suggests is that if you push what is currently a more benign individual mandate much further downstream toward a more extreme level of restrictive regulation that starts to close off many previous options for you to seek care, you may eventually create a different environment in which what didn't used to be a potential "constitutional right" could come to life.

So if the insurance mandate is structured so explicitly that it precludes other reasonable alternatives for seeking and receiving health care, such as we have almost seen with regard to private contracts under Medicare, it could begin to squeeze out remaining choices so much under a future iteration that it could trigger a revival of a fundamental legal right to seek personal medical care. One can envision mounting budgetary and economic pressures under certain health reform schemes that would take us far into this direction. A too narrowly configured common bundle of what could be purchased legally as health insurance might come to be seen as too confining, rather than what was assumed to become comparatively more expansive; compared to what most Americans previously were able to find available. Moreover, the right to decline the purchase of otherwise mandatory health insurance also includes the right to purchase health care on an out-of-pocket "cash" basis instead.

Hence, if an insurance purchasing mandate becomes structured so explicitly and narrowly that alternative arrangements for seeking health care--in content, form, type, and source--are precluded, a future court could conclude that it has just "discovered" a fundamental right under the Constitution that has been violated (even though it was not recognized the day before). The question is a matter of degree in how much an individual's ability to direct their available resources for such personal care has been impaired.

The Rationales for "Minimally Rational"

To be fair, holding Congress to a minimally rational standard in this regard is not that hard, although it might prove to be more of a challenge for that institution than Mark assumes.

Let's consider the real purposes of an insurance purchasing mandate, instead of the purported substantive findings held out earlier by Len Nichols. I'd posit that there are a half-dozen or more rationales for such a mandate, each of them flawed and unconvincing in its own way. The least important one politically, and garnering the least support, is actually to improve people's health care. The strongest political support for an individual insurance mandate comes from its promise to pay more of the bills of various health care providers, or to get someone else to pay more for them than they are currently willing to do--so that others can pay less. Another rationale appears to adopt a mutual hostage theory that assumes that if we put everybody into the same large but leaky boat, someone eventually will figure out a way to swim back to shore by providing health care at a lower cost and perhaps with better quality. Another even less likely rationale for an insurance mandate is that we actually want people to have "equal" health care. I think that's particularly hard to demonstrate in practice, but we sometimes pretend to say it officially. Other rationales occasionally advanced include reducing the need for more explicit public funding, leveling the playing field so that those using publicly funded health services pay their "fair share" of the costs of care, easing the concerns of private insurers about adverse selection aggravated by risk rating restrictions, and binding government bodies to provide adequate subsidies for those subjected to otherwise unaffordable mandates.

Yet consider, in the alternative, that the actual problem is that the tool of an individual insurance purchasing mandate is too weak and ineffective in any case. It simply can't accomplish the goal of guaranteeing improvements in people's health. What you really would need to mandate is not health insurance. You would need to mandate "treatment." After all, health insurance is an imperfect means to the end of ensuring that people get the right care.

So I'd suggest a much stronger mandate. If someone's walking down the street and they haven't had their mandatory colonoscopy in the last year, as recommended, one would need to mandate insertion for a full scan, on the spot! In the same way, a strong and serious mandate would insist that a medical provider immediately inject drugs into a nearby patient, if they have been falling behind on their prescriptions.

Let's have a mandate that actually accomplishes our "goals!" As opposed to weaker mandates just to purchase insurance. Real mandates would insist and guarantee that doctors provide the right care to patients, whether the latter liked it or not, as opposed to what appears to be providing recommended care only about half the time currently--even when patients are insured.

Of course, the real limits with regard to an individual insurance purchasing mandate are not as much legal as they are political, economic, and administrative. Those latter factors ultimately will determine the scope and scale of any insurance mandate, as well as whether we have one or not. For example, an individual mandate alone won't suffice to achieve universal insurance coverage without an employer mandate as well. The latter is needed politically both disguise a portion of the entire price tag for this political goal and to harness the existing infrastructure of insurance enrollment, premium payment, benefits determination, and insurer selection. However, if states are allowed significant discretion in determining what coverage every resident must have, as a specific minimum, under an individual mandate, this would effectively require employers to provide that level of coverage (and no less), as well--raising issues of legal compatibility with federal ERISA rules for self-insured employers. Ultimately, any individual insurance mandate also becomes an employer mandate.

Remaining Arguments for the Court of Last Resort

In the meantime, allow me to try to throw a few remaining long Hail Mary passes aimed at challenging an individual insurance coverage mandate, given that most of the good legal arguments are long since gone (and we don't have an alternative Constitution ready to come out of exile). What might you try to cobble together if you were going into court to challenge a mandate? One possible avenue, as somewhat suggested in Tim Jost's earlier paper today on legal hurdles confronting the establishment of national insurance exchanges, is the "uniformity of taxation across states" clause, in Article 1, Section 8 of the Constitution. Article 1, Section 2, clause 3 of the Constitution also requires that direct taxes be apportioned among states according to their respective numbers.

You would have to go through a couple of stages in advancing this line of argument. First, from where are the "taxes" coming? If you remember the history of the Clinton-era "health alliances," circa 1993-1994, as was pointed out in Henry Greely's paper in the Journal of Health Law Matrix at the time, the alliances arguably were instrumentalities, or arms, of the federal government. What initially seemed to be "insurance premiums" paid through the alliances were treated as earmarked federal "receipts" within the federal budget. Thus, they were the equivalent of "taxes" in the Congressional Budget Office analysis of the time.

Second, you would take this argument another step further and ask, "Can you impose taxes on different people in different parts of the United States in a different amount that is no longer uniform?" I would at least attempt that argument, even if it's a bit of a reach.

In practice, federal taxes apply on equal terms in every state. The question might be, "

What constitutes legitimate discrimination across states?" Is it differing health care costs that vary by region? The desired norm of achieving federal uniformity of "benefits" might conflict with the different regional costs of providing them.

Of course, an alternative way to fix any possible constitutional problems here would be either to require a more uniform lump sum payment--where everybody (at least in similar categories besides their state of residence) pays the same premium, or where everybody gets a percentage tax credit as a subsidy for mandatory insurance purchasing purposes. But to the extent that an individual mandate might be seen as forcing similar people to pay different amounts, due mainly to the state in which they live, the latter could be construed as equivalent to a tax that bumps up against the uniformity clause.

Another less exercised legal doctrine that might be tried is that of "unconstitutional conditions." It basically says that the federal government cannot grant a privilege by imposing conditions that require relinquishment of a constitutional right. So, if you are in effect required to pay confiscatory rates for something you don't want to buy--individual health insurance--you are in effect being forced to "go out of business" as an individual.

Admittedly, it's more than a little difficult to tie an "individual affordability" right to that unconstitutional condition. It's actually sort of like Steve Martin's old comedy routine about "How do you become a millionaire?"

"So Steve, how do you become a millionaire?"

He responds: "It's simple. First ... get a million dollars!"

In the same way, how do you find a Constitutional right? First, assume you have one and then you're on the way home from there.

Two other quick attempts at other legal arguments for challenging an insurance purchasing mandate:

The anti-commandeering of state and local governments doctrine under the 10th Amendment could be enlisted, although there should not be too large a constitutional concern here, because most of the state and local workers involved are going to be insured by their employer--a state or local government--anyway. But there might be a point at which, if a national law made the states total instrumentalities, if not mere puppets, of the federal government, you would begin to undermine the existence of state and local government and trigger this legal limit. Because federal government dominance in this realm could be pushed too far, as well as more practical concerns about the administrative capacity of Washington to run a massive health care system at the state and local levels, drafters of an individual insurance mandate implementation scheme should want to give the states some additional leeway, as opposed to requiring them to follow more uniform cookie-cutter steps to carry it out as distant, bureaucratic field offices of the national regulatory regime for health insurance. So HOW you implement an insurance mandate still can be a secondary factor in avoiding, or overcoming, constitutional challenges. Instead of imposing a full federal takeover on the administrative side; developing a delegated partnership with state governments (like HIPAA) would avoid the complete obliteration of state and local governments that once was a concern long ago in the Lopez, or Jones and Laughlin Steel, cases.

Of course, Washington's mandate issuers very well might need to delegate matters to some state-level enforcement agents on the ground, closer to the complexities of local health insurance problems, if whatever remains of the post-911 Posse Comitatis Act limits use of federal troops, or state national guard soldiers, to enforce the mandate!

Stepping Back from the Constitutional Brink

The more rigid and narrowly defined an individual insurance mandate, the more likely will be legal challenges to it under statutory and constitutional law. Our political system is quite accustomed to garden-variety indirect regulation by the federal government in which the latter takes more, or less, of one's money and tries to change the relative prices of goods and services. Such national-level regulation triggers fewer legal challenges when it still provides some remaining range of choices--for states as well as individuals--so it is not imposing an all or nothing proposition. Some factors to consider are the degree to which a mandate:

  • Provides for several ways to meet its requirements;
  • Sets a floor rather than a ceiling, while allowing for variations, upgrades and approximate equivalents;
  • Limits its degree of intrusiveness, comprehensiveness, and uniformity;
  • Ensures that financial penalties for non-compliance are reasonable (e.g. provides subsidies for affordability and strikes a balance between the strength of the penalty, the full cost of compliance, and the likelihood of penalty enforcement).

The other less oppressive approach is to recognize that there are other ways to get close to a mandate without actually imposing one, and you're almost there anyway. The first way is to make the cost of care less expensive than it is, as well as more worthwhile, so that people will buy it. But in another sense, we have achieved a non-mandate mandate in parts B and D of Medicare wherein you are charged higher premiums if you don't opt in initially when first eligible. That has accomplished most of the universal coverage goal for the elderly. It gets nearly everybody signed up in Medicare Part B and Part D. This suggests that the indirect way of achieving broader coverage--through the loss of a tax subsidy or the loss of the benefit--gets you almost as far as trying to punish directly people to do it.

Thomas P. Miller is a resident fellow at AEI.

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