Federal Court Upholds Individual Health Insurance Mandate

Judge George Caram Steeh (E.D. Mich.) today denied the plaintiffs' motion for a preliminary injunction and rejected their claim for declaratory relief in a case challenging the federal government's authority to enact the individual health insurance mandate as part of federal health care reform.  (Thanks to Politico for the link to the decision.)  Our last post on this case is here.

The case, Thomas More Law Center v. Obama, involved a challenge to congressional authority to require individuals to purchase health insurance starting in 2014.  The plaintiffs proffered a familiar argument against Congress's Commerce Clause authority: The requirement amounts to regulating the economic inactivity of not buying insurance.  The plaintiffs claimed that Congress has never validly regulated inactivity under the Commerce Clause, and that the courts have never sanctioned such a regulation.  According to the plaintiffs, the requirement thus went beyond the Commerce Clause's grant of authority to regulate only economic activity.  (The plaintiffs also claimed that the mandate exceeded Congress's taxing power under the General Welfare Clause.  Judge Steeh did not rule on this.)

Judge Steeh disagreed.  He wrote that the uninsured have a substantial effect on the health care market--a trigger for congressional regulation under the Commerce Clause--because they shift costs by foregoing insurance now only to pay later: 

The health care market is unlike other markets.  No one can guarantee his or her health, or ensure that he or she will never participate in the health care market.  Indeed, the opposite is nearly always true.  The question is how participants in the health care market pay for medical expenses--through insurance, or through an attempt to pay out of pocket with a backstop of uncompensated care funded by third parties.  This phenomenon of cost-shifting is what makes the health care market unique.  Far from "inactivity," by choosing to forgo insurance plaintiffs are making an economic decision to try to pay for health care services later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars, $43 billion in 2008, onto other market participants.  As this cost-shifting is exactly what the Health Care Reform Act was enacted to address, there is no need for metaphysical gymnastics of the sort proscribed by [United States v. Lopez].

The plaintiffs have not opted out of the health care services market because, as living, breathing beings, who do not oppose medical services on religious grounds, they cannot opt out of this market.  As inseparable and integral members of the health care services market, plaintiffs have made a choice regarding the method of payment for the services they expect to receive.

Op. at 16-17.  Judge Steeh also concluded that the individual mandate is an essential part of the larger health care reform scheme, thus regulable under Gonzales v. Raich (upholding federal regulation of intrastate medical marijuana in part because the regulation was essential to the broader federal regulatory scheme for drugs).  He wrote that plaintiffs will benefit from the "guaranteed issue" provision in the Act, enabling them to become insured even when they are already sick.  Therefore without the individual mandate, there is an incentive for them to purchase insurance only when they become sick, thus spreading costs (and economic effects) to everyone else:

In 2014, the Act will bar insurers from refusing to cover individuals with pre-existing conditions and from setting eligibility rules based on health status or claims experience.  At that time, all Americans will be insurable.  Without the minimum coverage provision, there would be an incentive for some individuals to wait to purchase health insurance until they needed care, knowing that insurance would be available at all times.  As a result, the most costly individuals would be in the insurance system and the least costly would be outside it.  In turn, this would aggravate current problems with cost-shifting and lead to even higher premiums.  The prospect of driving the insurance market into extinction led Congress to find that the minimum coverage provision was essential to the larger regulatory scheme of the Act.

Op. at 18.

Judge Steeh certainly defers to congressional fact-finding (as he must) on the uninsureds' substantial effects on interstate commerce.  But neither congressional fact-finding nor the opinion builds "inference upon inference" to get from the uninsured to the interstate economy.  See Lopez ("To uphold the Government's contentions [regarding the effect on interstate commerce of the Gun Free School Zone Act], we would have to pile inference upon inference in a manner that would bid fair to convert congressional authority under the Commerce Clause to a general police power of the sort retained by the States.").  Instead, the opinion carefully and correctly traces both the expansive authority under the Commerce Clause (as reflected in Wickard v. Filburn and Gonzales v. Raich) and the limitations on that authority (under United States v. Morrison and Lopez).  Judge Steeh concludes that while congressional requirement of this type may raise an issue of first impression, it also fits squarely within the Court's rulings allowing Congress to regulate a decision (even if not an action) that has a substantial effect on interstate commerce.

The case is in tension with an earlier federal court ruling from Virginia, rejecting the government's motion to dismiss in a case challenging the individual health insurance mandate.

(Judge Steeh also ruled that the plaintiffs had standing--their harm was their current income lost in order to save for future costs of health insurance--and that the case was ripe for judicial review.)

SDS