The Daily Caller

The Daily Caller
A man looks over the Affordable Care Act (commonly known as Obamacare) signup page on the website in New York in this October 2, 2013 photo illustration. REUTERS/Mike Segar A man looks over the Affordable Care Act (commonly known as Obamacare) signup page on the website in New York in this October 2, 2013 photo illustration. REUTERS/Mike Segar  

Why the Supreme Court’s Obamacare ruling still matters

Photo of Ilya Somin
Ilya Somin
Associate Professor, George Mason University School of Law

Last year’s Supreme Court decision on the constitutionality of the Affordable Care Act was part of an ongoing struggle over constitutional federalism. On one side, most of those who claimed that the Obamacare individual health insurance mandate is constitutional believe that Congress has virtually unlimited authority to regulate anything that might affect the economy, and that the courts should defer to the legislature on federalism issues whenever possible. The opposing view holds that Congress’s powers are limited to those enumerated the Constitution, and that courts should not hesitate to enforce those limits. The Court’s divided ruling gave something to both sides. The issues raised by the decision remain relevant as the debate over Obamacare and the limits of federal power continues.

The Individual Mandate and the Limits of Federal Power 

The ACA individual health insurance mandate requires nearly all Americans to purchase government-approved health insurance by 2014 or pay a fine. The federal government advanced three arguments claiming that this is constitutional, asserting that Congress was authorized to enact it by the Commerce Clause, the Necessary and Proper Clause, and the Tax Clause. As became increasing clear over the course of two years of litigation, the common weakness of these arguments is that they tended to break down meaningful constraints on federal power. That is the reason why the Supreme Court ultimately rejected the first two, and partially accepted the third.

The Commerce Clause gives Congress the power to regulate “Commerce … among the several states.” Since the 1940s, the Supreme Court has expanded it broadly to cover virtually any “economic activity.” Failure to purchase health insurance, however, is not economic activity. If Congress could impose mandates simply because failure to take an action has an effect on the economy, there would be no limit to its authority. Failure to purchase broccoli affects the market for food. Failure to wake up early may affect an individual’s productivity. As Chief Justice John Roberts put it in his decisive swing vote opinion, if Congress can “regulate individuals precisely because they are doing nothing,” it would have the power to impose mandates “whenever enough [people] are not doing something the Government would have them do.” But if the Commerce Clause gives Congress the power to enact any law that affects the economy, the Constitution’s elaborate listing of other congressional powers would become completely superfluous. For example, Congress would not need a separate power to coin money or declare war, since both of these measure obviously affect the economy.

The same problem bedeviled the government’s argument that the mandate is authorized by the Necessary and Proper Clause, which gives Congress the power to “make all Laws which shall be necessary and proper for carrying into Execution” other federal powers. The Supreme Court has defined the term “necessary” very broadly. But even a “necessary” law may be unconstitutional if it is not also “proper.” A majority of justices ruled that the mandate was not “proper” because the logic of the government’s argument would have given Congress virtually unlimited power to impose any mandates that might affect the economy, thereby gutting limits on federal power. As James Madison explained in 1791, “[w]hatever meaning this clause may have, none can be admitted that would give an unlimited discretion to Congress.”

Having accepted nearly all of the case against the mandate, the chief justice joined the Court’s four liberal justices in reinterpreting it as a tax, authorized by the Constitution’s Tax Clause. He reasoned that the mandate is a tax because it imposes only a monetary penalty on those who fail to comply, the penalty is not so high as to be coercive, it does not apply to the very poor, and the fine is collected by the IRS. But the text of the statute refers to the fine as a “penalty,” not a tax. And the Supreme Court has repeatedly distinguished between taxes and penalties, defining the latter as “an exaction imposed by statute as punishment for an unlawful act” or omission; this description fit the individual mandate very well. Unfortunately, Roberts’ opinion gives Congress broad power to use “taxes” to force Americans to purchase virtually any product, whether it be health insurance or broccoli. But his reasoning also imposes important constraints on the degree of coercion it can use. Congress must limit mandates in inactivity to monetary penalties that are not coercive, and it cannot make it a crime to disobey.