Originally Written on June 24th, 2012
Post-Script Written in July 2012
Edited on February 15th, 2016
Thanks to former Wisconsin Libertarian Party officials
Rolf Lindgren and Ben Olson III
for their assistance in finding reference materials for
this article,
and to Patrick Mende for additional assistance with the
terminology of constitutional interpretation traditions.
Table of Contents
1.
Introduction
2. The
Commerce Clause
3. Three
Prohibited Activities
4. Is
Health Insurance Commerce?
5. Sherman
and McCarran-Ferguson
6. McCarran-Ferguson
and Monopsonies
7. Why
Obamacare is Unconstitutional
8. Conclusions
Content
1.
Introduction
At 10 A.M. Eastern Standard Time on
the morning of Friday, June 22nd, 2012, the U.S. Supreme Court made
a decision on the constitutionality of the Patient Protection and Affordable
Care Act of 2010, colloquially known as “Obamacare”.
At the time of the original writing
of this article – Sunday, June 24th, 2012 – the Supreme Court’s
decision on the matter has not yet been revealed to the public.
I would like to explain why I believe the law is unconstitutional,
giving special attention to the law’s relationship to the interstate Commerce
Clause (Article I, Section 8, Clause 3 of the U.S. Constitution). It shall
first be necessary to provide some background on that clause, and on its
interpretation.
2.
The Commerce Clause
The Commerce Clause reads, in part,
“The Congress shall have Power” … “to regulate Commerce” … “among the several
States”.
In my view – and in the view of many
so-called “strict constructionists” and originalists (referring to proponents
of the “original intent” and “original meaning” interpretations of the
Constitution) – “regulate” should not be construed to mean “legislate on”, nor
“prescribe the rules for governing”, but rather “keep regular”; that is,
uninhibited, uninterrupted, and uncontrolled.
I, and many originalists, believe
that the purposes of the Commerce Clause include giving the federal government
the power to prevent and reverse attempts by the states to create barriers and
impediments to free trade across state borders (including tariffs and
importation fees), and to prevent protectionism by the states, and trade wars between the states.
Two effects that these purposes have
are as follows: 1) to turn the nation into a free-trade zone; and 2) to prevent
state governments from inappropriately pandering to the industries and
businesses within their jurisdictions, by protecting them with regulatory
favors, and with taxpayer subsidization and bailouts.
“Commerce” has been held by the
Supreme Court to mean “intercourse”, which includes traffic and navigation.
Being that the constitutional philosophies of strict-constructionism and
originalism have a great deal in common – and that originalists feel it
informative to inquire as to how certain important words were defined when the
laws containing them were written – it would be appropriate to mention that a
dictionary printed in the 1790s defined the word “commerce” (in its verb form)
to mean “to hold intercourse”.
Supreme Court precedent supports the
notion that “intercourse” includes exchange and interchange. As I stated above,
“commerce” is not strictly traffic and navigation, but includes traffic and navigation, so it would seem reasonable to assert
that commerce also includes the
component of economic exchange, interchange, and / or transaction. Therefore, I
feel that it would be reasonable to define “commerce” and “commercial
intercourse” as “travel, traffic, and navigation used for the purpose of conducting
and facilitating economic exchange, interchange, and / or transaction”.
3.
Three Prohibited Activities
Next, I will explain which types of
state-sponsored activities are prohibited by the Commerce Clause, at least in
the opinions of myself, strict constructionists, and originalists.
The first type of activity pertains to
distinctions between interstate and intrastate
(in-state) activity, and between manufacture and commerce. In the 1888 case Kidd v. Pearson, which pertained to the
manufacture of alcohol, the Supreme Court held there to be a distinction
between manufacturing and commerce. The effect is that state prohibitions on
the manufacture of goods within a
state – for sale out-of-state – do not conflict with the Commerce Clause,
and therefore are constitutional.
However, in discussing contraceptive goods in
a Republican debate in 2012, then presidential candidate Ron Paul made a
statement which implied that if the importation
of a good into a state cannot be banned, then the good itself can also
not be completely banned within a state.
While I have not encountered any information
which would indicate that there exists any precedent supporting Dr. Paul’s
position, my opinion supports a compromise between these two viewpoints.
Although my ethical position is that
no state should prohibit the manufacture of any good – a position which I take
for various reasons, related to contract rights, and the conditions for legitimate
consent to government – my constitutional
law opinion is that, while states should have the power to prohibit
manufacture of certain goods, they should not
have the power to prohibit the possession
of goods, nor to prohibit their importation across state lines.
The second
type of prohibited activity pertains to what constitutes inappropriate
inhibitions, interruptions, and controls of interstate commerce.
Views expressed by the founding fathers in The
Federalist Papers support the notion that the Commerce Clause should
prohibit the enactment of tariffs, tolls, and other taxes on the importation of
goods. In the 1942 case Wickard v.
Filburn, the Supreme Court ruled that quotas can be imposed on the
possession of goods whose existence is deemed to substantially affect
interstate commerce.
Although I am not aware of any case that
could be cited as precedent to support the notion that the Commerce Clause
should prevent the imposition of quotas, it is widely acknowledged among strict
constructionists and originalists that the Wickard
decision was one of the most inappropriate, overreaching decisions in the
history of the court. Additionally, that, with that decision, began the
entrenchment of precedent supporting a loose definition of what “substantially
affects” interstate commerce as a justification for federal intervention, getting
even worse in the Heart of Atlanta Motel
v. U.S. decision.
It is this loose definition that has been
construed to justify the need for laws like Obamacare, among many others. As
far back as 1824, when Gibbons v. Ogden
was decided, the phrase in the Commerce Clause “among the several States” has
been effectively redefined as loosely “intermingled
with the several States”.,
The third
type of prohibited activity pertains to exclusive intrastate monopolies.
In my opinion, the wielding of exclusive in-state
monopolies, is the only type of activity among the three I have mentioned,
which pertains to the Affordable Care Act. The necessity of Obamacare seems to
be predicated chiefly upon the notion that health insurance companies should be
permitted to compete across state lines. In my view, this is a perfectly
legitimate objective, and one that merits and requires federal intervention in
order to address.
I believe that commercial exchange should be
construed to include the purchase, as well as the sale, of goods and services.
I also feel that it would be just as unfair – and inhibitive of economic
activity, thus meriting and requiring federal intervention – for a state to
give itself or businesses within its jurisdiction the sole, exclusive power to sell a good or service (monopoly), as it
would be unfair to give or wield the sole power to buy a good or service (monopsony). Health insurance, of course, is,
and should be, no exception, given that the purchase and sale of health
insurance does, indeed, constitute economic activity (and, it would seem,
commercial transaction).
I am not aware of any business that has been
awarded a state-upheld exclusive monopoly on the sale of health insurance.
Being that people need health care – being capable of dying, and possessing
physical, tangible bodies, unlike businesses – it would be ludicrous to
consider the possibility that any business has been awarded a monopsony on the purchase of health insurance, just as it would be ludicrous to
consider why a business would need to
purchase health insurance (except on behalf of its employees). Furthermore,
since health insurance companies sell health insurance, but governments don’t, it
is obvious that no state has given itself a monopoly
on the sale of health insurance.
However, the question remains of whether any
state government has given itself a monopsony
on the purchase of health insurance.
As I stated above, such a system would be an unfair inhibition of commerce,
which would merit and require federal intervention in order to resolve.
Moreover, it would be ludicrous to conjecture as to why an abstract,
potentially perpetual institution like a state government would need to
purchase health insurance (except on the behalf of its employees), especially
why it would need to wield a monopsony on such purchase.
Being that businesses and governments
purchase health care on the behalf of their workers and citizens, there is no
need to proceed along such an absurd line of logic. Rather than immediately
answering whether any state government has given itself the sole, exclusive
power to purchase health insurance, it will first be necessary to delve into
the history of constitutional law surrounding health insurance.
4.
Is Health Insurance Commerce?
An issue that should be addressed is whether
the sale or purchase of health insurance constitutes commerce.
In the 1869 case Paul v. Virginia, the Supreme Court held that “issuing a policy of
insurance is not a transaction of commerce”. To cite this case as precedent
would support the notion that the federal government has no constitutional
authority to regulate the health insurance industry; neither to require the purchase of insurance (as a
corollary to permitting insurance companies to compete within states), nor to prohibit the interstate purchase and
sale of health insurance. However, this is not the case.
In the 1944 case United States v. South-Eastern Underwriters Association, the
Supreme Court held that the Sherman Antitrust Act of 1890 applied to insurance.
Specifically, that the provisions of the act which prohibited artificial,
unnatural, and coercive monopoly – and business activities which reduce
competition in the marketplace – applied to insurance.
The effect of the decision in United States v. South-Eastern Underwriters
Association is that the federal government can regulate insurance. This is not because the Paul v. Virginia decision was wrong in
holding that issuing an insurance policy is not a commercial transaction; but,
rather, because the market for insurance is vulnerable to being compromised by
the forms of artificial monopoly, and inhibition of competition, which are
prohibited by the Sherman Act.
Keeping in mind that the decision in
Paul v. Virginia was that “issuing a
policy of insurance is not a transaction of commerce”, something else to
examine is whether the failure to
purchase health insurance really constitutes a “transaction of commerce”.
In an article from late 2011, David Lat
expressed the opinion that refraining from purchasing health insurance does not
constitute transaction, but that it instead constitutes failure to engage in commerce.
In the same article, Lat summarizes
the views of former U.S. Solicitor General Paul Clement, explaining that the
individual mandate “orders people to
buy health care insurance”, and then regulates “that which it has forced you to
do”. That is, the individual mandate forces a person to engage in what is
ostensibly commerce, rather than regulating ostensible commerce which already exists.
Additionally – despite all the rhetoric that
there is need for legal reform to address the problem of the health care costs
of the uninsured being passed along to everyone else – it is health insurance (not health care) which Obamacare regulates.
However, according to Professor Laurence H. Tribe, it is “economic activity” “to make other people pay for your health
care”. According to the aforementioned article by David Lat, that is “what ends
up happening under the status quo, without the Act” (emphasis mine).
I would agree with Lat, and argue that
Obamacare ensures that this happens,
rather than ensuring that it doesn’t
happen, its intended purpose. Furthermore, Obamacare causes particular people (i.e., the taxpayers, and those who may be required to purchase
insurance under the provisions of the act) to pay for other people’s health
care, rather than simply causing some unspecified collective of persons or
agencies to pay – or causing the costs of health care not to be paid at all – which is the actual status quo.
5.
Sherman and McCarran-Ferguson
In 1945 – the year after the Supreme Court
rules, in the case of U.S. v.
South-Eastern Underwriters Association that the Commerce Clause held that
the court had the power to regulate the insurance business – the
McCarran-Ferguson Act was passed by Congress.
McCarran-Ferguson does not regulate
insurance, nor does it require the
states to regulate it. Instead, it allows
the states to regulate insurance, and preserves certain state regulations
on insurance.
The McCarran-Ferguson Act also provides that federal
anti-trust laws – and acts of Congress that do not expressly purport to
regulate “the business of insurance” – will not pre-empt state laws that
regulate insurance. Additionally, the act exempts the business of insurance
from most federal regulations, whether the states regulate insurance or not.
The federal regulations from which insurance companies are exempted, include
federal anti-trust laws, except those
which pertain to cases of boycott, coercion, and intimidation.
In a partial dissent in U.S. v. South-Eastern Underwriters Association, Supreme Court
Justice Robert H. Jackson called the idea that insurance is not commerce a
“fiction”. If Jackson had been in the majority, then it appears that the
decision in the case would have had the same effect, but for a different
reason. The reason is that the sale and purchase of insurance would indeed be
considered commercial transactions, and thus, federal intervention would be
constitutional in certain cases.
Given the outcome of the aforementioned case,
I would note that the Sherman Antitrust Act and the McCarran-Ferguson Act are
more effective in preventing inappropriate inhibitions of interstate economic
activity than is the Commerce Clause itself. This is because those two acts
have been held to apply to “the business of insurance”, which has somehow been
deemed to exist outside the realm of commerce.
6.
McCarran-Ferguson and Monopsonies
Next, I will address the relationship between
the McCarran-Ferguson Act, intrastate insurance monopsonies, and Obamacare.
The McCarran-Ferguson Act provides that
states may regulate insurance freely, unless federal anti-trust laws – or acts
of Congress which expressly purport
to regulate the insurance business – pre-empt state laws. This would seem to
give Congress the authority to regulate the health insurance industry. In the
case of Obamacare in particular, then that means that as long as Obamacare
expressly purports to regulate health insurance, then it can pre-empt state
laws regulating health insurance.
However, I have not become aware of any such
express claim that the purpose of Obamacare is to regulate the business of
insurance; it has always been billed as pertaining to care (Obama-care,
Affordable Care Act, etc.). But I have heard proponents of Obamacare cite the Commerce Clause to
defend the act’s constitutionality.
However, being that the decisions in Paul v. Virginia and U.S. v. South-Eastern Underwriters
Association hold that insurance is not
commerce, the Commerce Clause does
not even pertain to health insurance, and so, the Commerce Clause does not support the constitutionality
of Obamacare (nor does it have anything
to do with Obamacare, if the law is considered upon its own definitions,
purposes, and justifications).
On the other
hand, McCarran-Ferguson permits the states to regulate insurance (in some
cases). Some opine that this fact effectively prohibits the sale of insurance
across state lines, because the states have the exclusive power to regulate the
insurance policies bought and sold within their jurisdictions, free from
federal intervention (that is, when antitrust laws, and acts of Congress
expressly purporting to regulate insurance, do not pre-empt state laws).
It seems reasonable to suggest that federal
intervention is necessary to permit the sale of insurance across state lines. It
appears that the only thing that an act of Congress would have to do, in order
to pre-empt and override state laws (preventing regulations that obstruct free
exchange across state borders), is to properly and expressly purport to
regulate the business of insurance.
7.
Why Obamacare is Unconstitutional
I conclude that there are two main reasons
why the Patient Protection and Affordable Care Act of 2010 is unconstitutional.
The first reason is that the law does not expressly
purport to regulate the business of insurance. With such a claim, the federal
government could easily justify intervention in order to permit or require that
insurance transactions may be conducted across state lines, pre-empting and
invalidating state laws on such matters, and (most likely) reducing premiums in
the process.
The second reason is that the individual
mandate portion of the law is not a tax, as its proponents claim, but a penalty, imposed upon people for
declining to purchase health insurance policies. If it were a tax, then it would be an infinite
tax, being a substantial “tax” upon the zero-dollar
“transaction” of not buying health insurance, which is a non-transaction. Furthermore, taxes are supposed to be small,
relative to the price of the item; there is no item here whatsoever.
Additionally, had the Kucinich Amendment to
Obamacare been adopted, there would have been a second reason (although this
reason is not undermined by its lack of inclusion, as I will show). As a bit of
background, I will note that Kucinich was told that his amendment would be
included in the law, but that promise was later rescinded. The Kucinich
Amendment would have permitted each state to implement a single-payer (or
“universal”) health insurance system.
The inclusion of the Kucinich Amendment would
have, effectively, allowed for the possibility that any state could erect, for
itself, the sole and exclusive power to purchase, as well as regulate, health
insurance, within its territory. This, as I explained, would constitute
monopsony power; i.e., an exclusive
monopoly on the purchase of health insurance on behalf of its citizens.
I regard such systems as violations of the
Sherman Antitrust Act, and as unconstitutional inhibitions on the sale of
insurance across state lines, which run contrary to the purpose of the Commerce
Clause. Additionally, since Obamacare does not expressly and explicitly invoke
the authority to regulate insurance as its purpose, it lacks the proper
authority to pre-empt state laws regulating health insurance.
Therefore, even without the Kucinich Amendment, Obamacare sets up a federal monopsony on the purchase of
health insurance; at least, virtually,
because it does nothing to either allow, nor require, the sale and purchase of
health insurance across state lines.
Not only does Obamacare fail to cite the
proper authority to achieve its purported ends; part of the law actually defeats the very goals which its
proponents claim are the law’s chief objectives. Namely, to increase
competition, and reduce inhibitive economic activity, in the health insurance
business, in order to drive down costs of health care insurance premiums. Not
only has competition not been increased – nor inhibitions decreased – but the prices of premiums have risen. Thus is the
legacy of the so-called “Affordable
Care Act”.
8.
Conclusions
The Patient Protection and
Affordable Care Act of 2010 has been a colossal waste of time, money, and
public attention. It will cost somewhere in the neighborhood of a combined $2
trillion, to implement new regulations, as well as changes to existing
programs. It has resulted in two or three years of public and legislative
discussion, as well as a subsequent three or four years of repeal attempts,
filibusters, and government shutdowns.
There truly is a need to reform the status quo of the insurance business in
this country. But given what one source estimated as an approximately 80%
chance that at least the individual mandate would have been overturned, and the
fact that inappropriate power was cited in order to defeat the very purpose of
the legislation, it is clear that this legislation – which, if upheld, will be
the best-known, best-renowned, and longest-lasting legacy of the Obama
Administration – is nothing more than a costly, thoughtless, ineffectual
distraction from much more pressing issues.
Moreover, this comes in the
aftermath of a rapid decline of home values, out-of-control bailouts and Major
Fiscal Exposure, records deficits and national debt, economic stagnation,
rapidly increasing disparity of wealth and income, an upswing in domestic
surveillance, and heightened geopolitical tension. This is not to mention the
very rising health care and insurance costs, which were supposed to be
addressed by the act.
I have neglected to mention several
important factors relating to broader questions pertaining to the law’s
constitutionality (or, rather, unconstitutionality),
because they are outside of the scope of this article, which focuses on the
relationship between Obamacare and the interstate Commerce Clause.
These factors include: 1) taxation
authority; 2) issues pertaining to the interpretation of the General Welfare
Clause; 3) constitutional legitimacy of the presidential reorganizational
authority, which was cited in order to establish the executive branch
departments, which were the progenitors of the modern Department of Health and
Human Services in the first place; and 4) whether the law’s provision that the
federal government will withhold Medicaid funding from the states if they do
not expand coverage for the poor, constitutes unlawful coercion.
I will end by noting that, prior to the
Supreme Court’s ruling, it was reported that the justices of the Supreme Court
are not positive that that date was not an appropriate time to rule on
Obamacare. This is because the Anti-Injunction Act provides that a taxpayer may
not challenge a law until it goes into
effect, and until the taxes enabling it have been assessed. This was scheduled
to occur in April 2015, although the bulk of its provisions, taxes, and
programs were rolled-out in 2013 and 2014, and will not be fully implemented
until 2022.
Lastly,
prior to the Supreme Court’s decision, the following facts had been reported:
1) that Associate Justice Anthony M. Kennedy’s opinion would have, most likely,
been the deciding factor; 2) that one of Kennedy’s former clerks thought that
Kennedy would have voted to uphold the law (as it turns out, he did not); 3) that
it may have appealed to Kennedy to avoid making a decision, on the grounds of
proper jurisdiction, and of the Anti-Injunction Act; 4) that several of the
justices of the Supreme Court seemed skeptical that the Anti-Injunction Act
would prevent the individual mandate from being challenged as early as June
2012; and 5) that the vast majority of the interested parties involved in the
suit believed that the Anti-Injunction Act should not apply.
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