On December 13, 2010, U.S. District Judge Henry Hudson ruled in Virginia v. Sebelius that the individual mandate included in the Patient Protection and Affordable Care Act (PPACA), popularly known as Obamacare, is unconstitutional. (Hudson’s ruling is available as a PDF here.) Does the government have the power to compel people to buy private health insurance? The answer to that question will soon be in the hands of the Supreme Court.
That Judge Hudson did not refer to United States v. South-Eastern Underwriters Association (S.E.U.A.) in his decision struck me as odd, probably because I have not studied law. It is likely that Judge Hudson did not refer to the 1944 ruling because it had no bearing on his decision. Still, as it was the only Supreme Court case that the drafters of the PPACA cited in the part of the law intended to make the individual mandate seem constitutional, my curiosity was piqued.
What follows will review: (1) the part of the PPACA that addresses the constitutionality of the individual mandate, (2) how the mandate might function if the courts waive it through, and (3) the S.E.U.A. case. Only then will 1944 ruling and the 2010 law be examined together. The focus will not be on legal precedents, but on an aspect of the matter with which I am more familiar: bittersweet irony.
Imagine a group of congressional staffers pulling an all-nighter, drafting the healthcare reform legislation. “We can’t use that! Look at the facts!” “Get real! Of course we can! Nobody’s going to read the damn thing!”
The PPACA says the mandate is constitutional because “most health insurance is sold by national or regional health insurance companies, health insurance is sold in interstate commerce and claims payments flow through interstate commerce.” (PPACA, Subtitle F, Part I, Section 1501, (a) (2) (B)).It goes on to say, “In United Statesv. South-Eastern Underwriters Association … (1944)the Supreme Court of the United States ruled that insurance is interstate commerce subject to Federal regulation,” (PPACA, Subtitle F, Part I, Section 1501, (a) (3)). (The consolidated version of the law, after reconciliation, is at ncsl.org.)
Briefly, then, unless the Supreme Court agrees with Hudson, the PPACA will, beginning on January 1, 2014, compel otherwise uninsured people to buy health insurance policies. Such policies will not be crafted to meet the needs of those being compelled to buy them. Instead, they will be “one size fits all” policies crafted to meet the government’s funding needs. For example, there will be no high deductible, catastrophic care policies, nor will there be policies that exclude such things as mental health care.
Additionally, the premiums for these policies will not be based on the real risk factors of the person being insured, but rather on a modified community rating that will compel low-risk purchasers to pay many times more than what would be justified using an actuarial table. The prices that companies charge for the policies will be regulated by the government as well, ensuring that they are steep enough to pay for the services that the high-risk policy holders require. Planned government subsidies notwithstanding, should someone choose not to purchase the mandated policy at the regulated price, he will be saddled with a hefty fine, attached to his tax bill. Should he refuse to pay the fine, he could, under existing tax law, be jailed. (For a good overview, read Hazards of the Individual Health Care Mandate at cato.org.)
Now, what was the South-Eastern Underwriters Association case about? Justice Hugo Black, writing for the majority, describes a group of insurance companies (the S.E.U.A.) violating the Sherman Antitrust Act by conspiring to “restrain interstate trade and commerce by fixing and maintaining arbitrary and non-competitive premium rates” on fire insurance policies. These companies “not only fixed premium rates and agents’ commissions, but employed boycotts together with other types of coercion and intimidation to force non-member insurance companies into the conspiracies, and to compel persons who needed insurance to buy only from S.E.U.A. members.” In addition, Black tells how the companies saw to it that those who were “not members of S.E.U.A. were cut off from the opportunity to reinsure their risks, and their services and facilities were disparaged; independent sales agencies who defiantly represented non-S.E.U.A. companies were punished by a withdrawal of the right to represent the members of S.E.U.A.; and persons needing insurance who purchased from non-S.E.U.A. companies were threatened with boycotts and withdrawal of all patronage.” (Openjurist.com has the entire ruling.)
So. The only Supreme Court ruling cited in the healthcare law to support the notion that the individual mandate is constitutional upheld the lower court decisions to: (1) break up a conspiracy to monopolize and otherwise control what had been a free insurance market, (2) punish conspirators for fixing premiums instead of allowing free-market competition to determine price and product, and (3) bring an end to the use of coercion and intimidation to force customers to buy the cartel’s insurance policies and to force companies to join in a scheme to control the insurance market.
Of course, those who drafted the PPACA cited the 1944 case because Justice Black was, for the first time, placing insurance companies under the sway of the interstate commerce clause, which gives Congress the power “to regulate Commerce … among the several States” (Article I, Section 8, Clause 3). But ask yourself, Did these drafters read the facts of the S.E.U.A. case? If they did, citing it in the law was an act of legislative chutzpah. After all, Justice Black was on the side of the intimidated, the coerced, not the conspirators doing the intimidating.
Imagine a group of congressional staffers pulling an all-nighter, drafting the healthcare reform legislation. “We can’t use that! Look at the facts!” “Get real! Of course we can! Nobody’s going to read the damn thing!” Only a handful of people did. How many read the 2,700-page bill prior to the vote? Surely it was many more than followed up on passing references to ancient fire insurance disputes.
Forgive my obtuseness, but as it was the drafters themselves who placed the 1944 antitrust ruling in Section 1501(a)(3) of the text of the PPACA, would not the Supreme Court be free to raise the facts of that case despite the fact that Judge Hudson made no reference to it? And if the court is free to raise these facts, might there not be an opportunity to ask the defenders of the individual mandate how it is that they see the ruling as supporting their cause, when, practically speaking, Justice Black was condemning exactly the kind of power-grab that they are championing.
After all, now it is the United States government itself that is playing the part of the South-Eastern Underwriters Association, forcing the health insurance industry into a government-controlled cartel, essentially monopolizing what was once a free market, fixing both the product and the price, and using coercion and intimidation to gain the compliance of people and companies alike.
I never thought I’d say this, but this is one trust that is ripe for busting.