Parsing the mandate

Mike Riggs Contributor

Back in January, Jack Balkin wrote about the individual mandate for the New England Journal of Medicine. Now that the mandate is a reality, and at least eight states are preparing to challenge it on Constitutional grounds, it’s worth revisiting Balkin’s argument for the mandate to get a sense of what Florida, Virginia, Idaho, and the others are up against:

The term “individual mandate” is misleading for two reasons. First, the law would not actually require all individuals to purchase insurance. The mandate would not apply to dependents, persons receiving Medicare or Medicaid, military families, persons living overseas, persons with religious objections, or persons who already get health insurance from their employers under a qualified plan.

Second, it is not actually a mandate. It is a tax, which people would not have to pay if they purchased health insurance. The House bill imposes a tax of 2.5% on adjusted gross income if a taxpayer is not part of a qualified health insurance program. The Senate bill imposes what is called an “excise tax” — a tax on transactions or events — or a “penalty tax” — a tax for failing to do something (e.g., filing your tax return promptly). The tax is levied for each month that an individual fails to pay premiums into a qualified health plan.

Because the textual argument for Congress’s authority under the General Welfare Clause is obvious and powerful, opponents have tried to argue that the tax is unconstitutional because it is a “direct” tax. Under the Constitution, “direct” taxes must be apportioned to state population. That is, if State A has twice as many people as State B, the amount of revenue collected from State A must be twice that collected from State B. Like most federal taxes, the individual mandate is not apportioned to state population.

The individual mandate is not a direct tax. The House’s version is a tax on income. Under the Sixteenth Amendment, income taxes do not have to be apportioned, regardless of the source of the income. The Senate’s version is an excise or penalty tax. It is neither a tax on real estate nor a general tax on individuals. It is a tax on events: individuals who are not exempted are taxed for each month they do not pay premiums to a qualified plan.

Less convincing is this line of reasoning, which stems from the power of Congress to enforce the mandate under the Commerce Clause:

The individual mandate taxes people who do not buy health insurance.Critics charge that these people are not engaged in any activitythat Congress might regulate; they are simply doing nothing.This is not the case. Such people actually self-insure throughvarious means. When uninsured people get sick, they rely ontheir families for financial support, go to emergency rooms(often passing costs on to others), or purchase over-the-counterremedies. They substitute these activities for paying premiumsto health insurance companies. All these activities are economic,and they have a cumulative effect on interstate commerce.

So, in essence: Redefine a passivity as activity in order to tax it? Sounds slippery!