The Individual Mandate and Insurance Markets

I believe there is at least an even chance that the Supreme Court will strike down the individual mandate in the new health care bill. Here is a paragraph from the Court's decision in US v. Lopez, the first case in decades that did limit the powers of Congress under the commerce clause of the Constitution:

We pause to consider the implications of the Government's arguments. The Government admits, under its "costs of crime" reasoning, that Congress could regulate not only all violent crime, but all activities that might lead to violent crime, regardless of how tenuously they relate to interstate commerce. See Tr. of Oral Arg. 8-9. Similarly, under the Government's "national productivity" reasoning, Congress could regulate any activity that it found was related to the economic productivity of individual citizens: family law (including marriage, divorce, and child custody), for example. Under the theories that the Government presents in support of § 922(q), it is difficult to perceive any limitation on federal power, even in areas such as criminal law enforcement or education where States historically have been sovereign. Thus, if we were to accept the Government's arguments, we are hard-pressed to posit any activity by an individual that Congress is without power to regulate.

This was the case on the Gun Free School Zones Act, and the Government argued that it had the power to regulate guns in school zones under the commerce clause because: a) guns increase the cost of crime, which affects commerce among the states; and b) guns and crime affect national productivity, which also affects commerce. The Court states quite clearly that these arguments would justify any police power at the Federal level and therefore cannot be right.

In terms of the individual mandate, the parallel argument would be that if inaction -- failure to buy a product -- is considered to be reachable under the commerce clause, then the regulatory power of the Congress would be expanded into a region that would further make the commerce clause infinitely powerful. In Lopez, the Court was willing to draw a line in front of an activity that was not sufficiently related to interstate commerce. I can certainly see another line being drawn, a very bright one it would seem, at the distinction between inactivity and activity.

If the mandate is struck down, then some creativity will be required in insurance markets in order to maintain some of the accomplishments of the health care bill, in particular the avoidance of universally-hated insurance policies such as restrictions on pre-existing conditions and indiscriminate premium increases. My next post will get into some of these issues.