Sunday, July 18, 2010

Health Insurance Mandate: "Commerce" or "Tax"?

The Obama administration switched its position on the individual health insurance mandate and now claims that it is a "tax," according to the New York Times in a provocatively titled article Changing Stance, Administration Now Defends Insurance Mandate as a Tax.

The Times reports that the administration is now defending the mandate--perhaps the most controversial piece of the Patient Protection and Affordable Care Act--primarily as a tax, and not primarily as a regulation of commerce, in federal court cases seeking to overturn the Act as unconstitutional.  According to the story, administration officials describe the tax argument as the "linchpin" of their case.  The story suggests that the switch came in response to increasing criticism of the mandate as exceeding Congress's authority under the Commerce Clause--authority that allows Congress to regulate anything that has a substantial effect on interstate commerce.  The article suggests that this "switch," then, is a new (and disingenuous) argument.  (We've covered the Commerce Clause and taxation arguments here, here, here, and here.  We've covered other aspects of the bill here and here.)

Just one problem: The article is wrong.

The administration has consistently defended the mandate in court first as an exercise of Congress's Commerce Clause power and only (far) second as an exercise of its taxing power under the General Welfare Clause.  Take, for example, the Justice Department's brief in Virginia v. Sebelius, the case in the Eastern District of Virginia.  In that brief, the government devotes 15 pages to its thorough and aggressive argument under the Commerce Clause--its primary substantive argument--and a mere 4 pages for its near-after-thought argument on taxation.  Yet the Times article quotes a portion from the tax argument in that very brief as evidence that the administration has changed its stance.

Take, for another example, the Justice Department's brief in Florida v. HHS, the Northern District of Florida case.  In that brief, the government devoted a similar 16 pages to the Commerce Clause--again its primary substantive argument on the mandate--and a mere 3 to its secondary taxation argument.

(Thanks to the ACA Litigation Blog for the briefs.  The ACA Litigation Blog is a new blog dedicated to following the litigation around health care reform.)

In its first brief in these cases, Thomas More Law Center, et al. v. Obama, in the Eastern District of Michigan, the government similarly privileged its Commerce Clause argument over its taxation argument.

The taxation argument was actively in play as early as last fall, even if the government has never (even now) used it as its primary authority in litigation for the mandate.

In short, the government's litigation position seems to have been consistent: The mandate is supported primarily by the Commerce Clause and only secondarily and alternatively by the taxation authority under the General Welfare Clause.

But in the end, does it matter?  As the Times story indicates, Congress went to great lengths in the Act to justify the mandate as an exercise of its Commerce Clause authority, and virtually ignored its taxation authority.  And administration officials have repeatedly claimed that the mandate is not a tax.

But there's no requirement that Congress name the particular authority it uses in its legislation (although that might help the courts uphold it), and there's certainly no requirement that the government's (or any litigant's) public pronouncements about their positions line up with their litigation positions.  And in the end, whether the mandate is "commerce" or a "tax" doesn't really matter to those affected--they still have to comply, or face the penalty.

The only way the administration's public "switch" (if such a switch really exists) might matter is in a government's normative obligation to state publicly what it also states in litigation.  This may be an attractive standard to promote government transparency, publicity, and educated public discourse, but we have never held the government to it. 


Commerce Clause, Congressional Authority, Federalism, News | Permalink

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Congress and the administration repeatedly insisted that the mandate wasn't a tax during the protracted legislative battle, and Congress structured the Act and its accompanying legislative reports to bolster that view. It's not too fanciful to imagine some type of estoppel applying to arguments made for saving the mandate under the taxation power. That's particularly true where, as here, the statutory provisions relating to the mandate explicitly state that non-payment of the mandate subjects the tax deliquent to no criminal penalties, nor any property liens or forfeitures. That's an odd tax, and it's no wonder Congress did not identify it as a revenue-raising component of the Act.

Posted by: Mike | Jul 19, 2010 1:15:52 PM

A rose by any other name?

Posted by: james carroll | Jul 20, 2010 6:36:36 AM

I am wondering what this will look like after the changes have been implemented.

Posted by: Brett Gage | Jul 20, 2010 11:33:40 PM

Hope this plan goes well, as long that it for a good sake to all people then go on.

Posted by: Florida Insurance Agency | Aug 19, 2010 8:53:20 AM

For one thing, as Mike also pointed out, when opponents tried to brand the mandate as a tax, the administration argued heavily that it wasn't.
Then again... for chrissakes, it's the same fee, no matter what it's called! The substance of the law doesn't change. The only relevant question here is whether it will improve the health care situation in this country or brick it even more.

Posted by: Birkel Life Insurance | Sep 20, 2010 1:21:54 PM

Increasing Term life insurance

Posted by: James | Oct 4, 2010 10:40:43 PM

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