Thursday, June 30, 2011


The first of three anticipated federal Courts of Appeals decisions on the constitutionality of the Affordable Care Act was handed down yesterday by a Sixth Circuit panel in Cincinnati—and it was a win for the Obama administration.

The three judge panel ruled two to one against an appeal by the conservative Thomas More Law Center of an earlier federal District Court finding that the ACA does not violate the Constitution. The ruling was especially notable as the first in which a Republican judicial appointee supported the constitutionality of the ACA’s individual mandate.

The majority opinion emphasized that the case should not hang on distinctions about whether the failure to buy insurance should be defined as activity or inactivity, a question the Supreme Court has never considered. “The constitutionality of the minimum coverage provision cannot be resolved with a myopic focus on a malleable label,” the opinion stated, but also noted: “The activity of forgoing health insurance and attempting to cover the cost of health care needs by self-insuring is no less economic than the activity of purchasing an insurance plan.”

Judge Jeffrey Sutton, appointed to the Court by President George W. Bush, added: “Inaction is action, sometimes for better, sometimes for worse, when it comes to financial risk. Whether an individual buys an insurance policy or not, each requires affirmative choices; one is no less active than the other, and both affect commerce.” In contrast, Judge James Graham, the second Republican appointee on the panel, countered that if the mandate was allowed, “it is difficult to see what the limits on Congress’s Commerce Clause authority would be.”

The majority emphasized its belief that health care is a unique market because most providers are required to treat people—a critical piece of the government’s argument. As Judge Sutton wrote in concurring: “A mandate to purchase health insurance does not parallel other settings or markets. Regulating how citizens pay for what they already receive (health care), never quite know when they will need, and in the case of severe illnesses or emergencies generally will not be able to afford, has few (if any) parallels in modern life.”

The ruling by the Cincinnati court is the first of three opinions to be delivered by separate Courts of Appeal. Opinions are expected soon from panels in the Fourth Circuit in Richmond, Va., and the Eleventh Circuit in Atlanta.

It is expected that the Supreme Court will take one or more of the cases, perhaps as soon as its coming term, which starts in October. The speed of the Sixth Circuit ruling could help ensure that timing.

Monday, June 13, 2011


The past week’s appellate court hearing in Atlanta on the constitutionality of the Affordable Care Act, one of a series along the inevitable road to the Supreme Court, showed that the opposing legal arguments are beginning to be firmly established—with each seeming to confuse the purchase of health insurance with the purchase of health care.

The Atlanta panel of three judges, with both Republican and Democratic appointees, heard arguments for and against the earlier ruling by Judge Roger Vinson in Pensacola that the individual mandate was unconstitutional and so central to the ACA that the entire act should be invalidated, and specifically that while the Commerce Clause of the Constitution gave the government authority to regulate interstate commerce, it did not allow Congress to penalize people for the “inactivity” of declining to buy a commercial product.

Former Bush administration Solicitor General Paul Clement, arguing in support of the Vinson decision, agreed that while it could be permissible for Congress to require insurance or other payment by those being treated in an emergency room, because they would already be in the “stream of commerce,” it was a very different matter to require them to pay prospectively for future care.

Acting Solicitor General Neal Katyal, presenting the government’s case, urged the judges to see the ACA requirement not as a mandate to buy an insurance policy, but as a regulation of the payment for care that individuals would inevitably consume. He argued that Americans would not be “conscripted” into the market because the uniquely unpredictable demand for health care would have already placed them there, thus “it’s all about financing, it’s about regulating whether people are paying cash or credit.”

Clement’s characterization of health insurance as a type of prospective payment for service fits neatly into ACA opponents’ argument that if the federal government can require Americans to buy such insurance, there are no effective constitutional limits to prevent it from mandating any other purchase or activity. On the other hand, Katyal’s use of the cash or credit analogy—similarly implying that health insurance is a form of payment for care—may have been a serious misstep.

While the government apparently hopes to build on two precedent Supreme Court decisions that (separately) defined wheat growing and marijuana cultivation for home consumption as falling under the purview of the Commerce Clause, the government case that medical care is an inevitability and so puts every American in the stream of commerce is undermined by the facts: some people never receive care, while others willingly pay for care out of their own pockets at the time they need it.

The problem is in characterizing insurance as a form of prospective payment. An alternative—and probably more accurate—view is that insurance is the sharing of risk, and that the purchase of insurance is payment for participation in the risk pool. In fact, without the sharing of risk, the concept of insurance is meaningless. While the underlying reality may be the same, the practical difference between the two perspectives is that risk is current, universal, and certain; payment for care is not necessarily any of these.

The risk model makes the government’s case for constitutionality of the individual mandate considerably stronger, since it is the failure of the non-insured to participate in the sharing of risk that immediately increases the costs for the insured—something that experience shows very clearly. Moreover, it emphasizes the uniqueness of insurance: although it is clearly a commercial activity, it offers neither a tangible product nor a service activity, only a transfer of risk—thereby helping to counter the “if Congress can require insurance purchase, is there no purchase they could not compel?” argument.

Would the Supreme Court find this interpretation helpful in judging the constitutionality of the individual mandate? Prospectively, it’s impossible to say, but regarding insurance purchase as payment for risk sharing—and therefore something that applies to all Americans, since even those who fail to purchase insurance affect the costs of others—seems more consistent with the intent of insurance than the advance purchase concept offered by both parties to the Atlanta court.