A Victory For Health Reform And Good Law – Health Affairs Blog

by Timothy Jost

To understand this controversy, it is necessary to understand what the minimum coverage requirement actually says and why Congress adopted it. The law provides that, beginning in 2014, if you are not covered by health insurance from your job and are not eligible for Medicare or Medicaid; if you do not have a religious objection to having health insurance or belong to a health care sharing ministry; if you have been uninsured for 3 months or more; if you are not a Native American; if you earn more than the tax filing limit (currently $18,700 for a couple); if you can find a health insurance policy for less than 8 percent of your income; and if it does not otherwise cause you a hardship, you must purchase a basic, high cost-sharing health insurance policy or pay a tax penalty. If you don’t pay the penalty, you cannot be criminally prosecuted and the IRS cannot place a lien or levy on your property. Tax credits will also be available to help many of those subject to the mandate (a small minority of Americans) to purchase the required insurance.

The Purposes Of The Minimum Coverage Requirements

Congress adopted this provision for two reasons. First, the requirement was the only way to get to universal coverage using private insurance. If you require private insurers to insure people with pre-existing conditions, the health insurance market will collapse if you do not also require healthy people to participate in the market. Only sick people will purchase insurance, while healthy people will wait until they get sick or have an accident and then purchase insurance. Insurance will soon be unaffordable to all. Congress did not consider an alternative which would clearly have been constitutional—a tax-financed public insurance system like Medicare for all—because it wanted to make our private insurance system work.

Second, the use of health care is in the end unavoidable. We will all need health care sooner or later, and when we do, someone will have to pay for it. If an individual is insured, the insurer will pay for it. Each year, however, $43 billion worth of care is received by people who do not have health insurance and who do not pay for it. This cost is passed on to the rest of us—to our employers, insurers, health care providers, and the government. This level of cost-shifting may be understandable today, when many cannot afford health insurance, but once tax credits are available so that no one needs to be uninsured, it is no longer tolerable, The purpose of the law, that is, is to discourage this freeloading and to encourage individual responsibility (something conservatives used to be in favor of).

Judge Steeh’s Decision

The Michigan case, however, was the first case to reach the merits of the claim. The court squarely upheld the minimum coverage requirements. Judge Steeh ruled first on the jurisdictional claims raised by the federal government. Surprisingly, he held that the plaintiffs did have standing to challenge the law and that it was “ripe” for adjudication, even though it will not go into effect until 2014. He accepted the plaintiffs’ argument that they must already “reorganize their affairs” so that they will be able to afford health insurance in 2014. Although this argument seems spurious (who knows whether the individuals will or will not be insured or required to purchase insurance three years from now), and a claim that the plaintiffs were already suffering an injury was rejected by the judge in the California case, Judge Steeh refused to dismiss the case on this basis, obviously eager to get to the merits.

Once he got to the merits, the judge made short work of the nonsense argued by the opponents to the law. First, he recognized that for nearly six decades the Supreme Court has interpreted the Commerce clause broadly to permit Congress to regulate the use of the channels of interstate commerce; the instrumentalities of interstate commerce and persons and things in interstate commerce; and activities that substantially affect interstate commerce. The court cited Supreme Court cases recognizing that Congress could regulate purely local, non-commercial activity as an integral part of a statutory scheme that permissibly regulated interstate commerce. The court distinguished two cases from a decade ago that had struck down legislation regulating non-economic activity. And the court recognized, quoting earlier Supreme Court cases,

In assessing the scope of Congress’ authority under the Commerce Clause’ the court’s task ‘is a modest one. ‘The court need not itself determine whether the regulated activities ‘taken in aggregate, substantially affect interstate commerce in fact, but only whether a “rational basis” exists for so concluding.

Judge Steeh then turned to the “rational bases” of the minimum coverage requirement. First, he observed that Congress rationally concluded that the decisions of individuals to forego purchasing insurance coverage drives up the cost of insurance for everyone else: “The costs of caring for the uninsured who prove unable to pay are shifted to health care providers, to the insured population in the form of higher premiums, to governments, and to taxpayers.” The decision whether to purchase insurance or to attempt to pay for health care out of pocket is plainly economic.

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