Individual Mandate Unconstitutioinal? I don't think so.

Yesterday, a Federal District Court ruled that the individual mandate provision of the Affordable Health Care Act was unconstitutional because it exceeded Congress’ authority to regulate interstate commerce. The Court held that a decision not to purchase health insurance was not an “activity” and, therefore, not an “economic activity” subject to Congressional authority under the Commerce Clause.

Forget the fact that everyone eventually requires health care, and those who access our health care system without insurance shift the cost of their care onto the rest of us. Although this seems like "economic activity affecting interstate commerce" to me, what do I know. I say "forget that fact" because yesterday’s decision is flawed in a far more fundamental way. A way that might earn you a “D” on a law school exam were you to have written Judge Hudson's opinion.

A good explanation of the flaw can be found here
– but the bottom line is pretty simple. Congress not only possesses the power to enact laws regulating interstate commerce, it also possesses the authority to “enact laws necessary and proper for the regulation of interstate commerce.” The Supreme Court has repeatedly interpreted this to mean that Congress has the authority to enact laws that are "an essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated."

Regarding health care, the argument is straight forward. Congress determined that it needed to impose regulations on insurance companies requiring them to insure all comers, regardless of pre-existing conditions, at community pricing – meaning that insurance companies cannot price individuals with pre-existing conditions out of the market by charging a premium commensurate with their true risk.

However, this regulatory scheme cannot work without an individual mandate. People could (and many would) simply wait until they needed insurance and purchase it at that time – leaving inadequate resources to pay for the care of those who paid the premiums. This would force insurers to raise premiums, which would strengthen the incentive for people to forego purchasing insurance until they needed it, and so on. This dynamic would quickly destroy the private insurance system.

Recognizing this, Congress also passed the individual mandate as "an essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated."

A more appropriate exercise of Congress’ “Necessary and Proper” authority I cannot imagine. How Judge Hudson failed to address this line of cases is beyond me, but I predict he’s going to be taken to task pretty hard.

Below is the text from Gonzales v. Raich, where the Supreme Court explained all of this. (I removed the Court’s citation to other cases for readibility).

“As we implicitly acknowledged in Lopez, however, Congress's authority to enact laws necessary and proper for the regulation of interstate commerce is not limited to laws directed against economic activities that have a substantial effect on interstate commerce. Though the conduct in Lopez was not economic, the Court nevertheless recognized that it could be regulated as "an essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated." This statement referred to those cases permitting the regulation of intrastate activities "which in a substantial way interfere with or obstruct the exercise of the granted power." As the Court put it in Wrightwood Dairy, where Congress has the authority to enact a regulation of interstate commerce, "it possesses every power needed to make that regulation effective."

Although this power "to make . . . regulation effective" commonly overlaps with the authority to regulate economic activities that substantially affect interstate commerce, and may in some cases have been confused with that authority, the two are distinct. The regulation of an intrastate activity may be essential to a comprehensive regulation of interstate commerce even though the intrastate activity does not itself "substantially affect" interstate commerce. Moreover, as the passage from Lopez quoted above suggests, Congress may regulate even noneconomic local activity if that regulation is a necessary part of a more general regulation of interstate commerce. The relevant question is simply whether the means chosen are "reasonably adapted" to the attainment of a legitimate end under the commerce power.

Gonzales v. Raich, 545 U.S. 1, 36-37 (2005)