The Supreme Court's Historic Ruling on the Affordable Care Act

Abstract

Chief Justice Roberts confounded predictions, upholding the individual mandate (that requires most individuals to pay an annual tax if they do not have health insurance by 2014) based on Congress’ taxing power. Congress’ power to “lay and collect taxes” for the common defense and welfare provides an independent source of federal authority. Although the ACA explicitly called the levy a “penalty,” the chief justice preferred a functional definition that did not rely on a label. Congress imposed a tax as the only sanction for failing to buy insurance, which is calculated and collected by the Internal Revenue Service (IRS). “That is sufficient to sustain it” under the taxing power. The tax, moreover, is not overly punitive, so individuals have a realistic choice about whether to purchase insurance or to remain uninsured. The court’s decision supports taxation as a public health tool. While affording Congress financial resources, taxes also influence health-promoting activities. Tobacco taxes, for example, discourage smoking, rather than simply raise revenue. The Commerce Power. Beyond its health policy significance, the court’s ruling limits federal power, while retaining state authority. The Constitution grants Congress limited or “enumerated” powers, while the Tenth Amendment reaffirms that “powers not delegated to the US . . . are reserved to the States.” The court said the commerce power— Congress’ constitutional authority to regulate interstate and foreign commerce—could not support the mandate. Justice Roberts reasoned that the mandate does not regulate commerce, but compels individuals to purchase a product. “Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority.” Reflecting the well-known broccoli analogy, Justice Roberts warned that the mandate was tantamount to permitting government to “address the diet problem by ordering everyone to buy vegetables.” Health insurance, however, is different because if healthy individuals refuse to buy it, they impose costs on society. The same cannot be said about buying vegetables or joining a gym. The mandate, moreover, does not compel commerce, but simply regulates the manner and timing of commerce. One day virtually everyone will require medical care, and someone must pay. “Free riders” reduce the insurance pool and impose costs ($62 billion in 2009) through higher taxes and insurance premiums. Thus, for only the third time since 1937, the court said Congress exceeded its commerce authority. In the previous 2 cases, the court ruled that Congress lacked the power to make gun possession within a school zone a federal offense, and to create a private civil remedy for women who had been subjected to violence. Both cases entailed purely local, noneconomic activities. Health care, however, represents 17% of the gross domestic product, with products (eg, medical records, pharmaceuticals, and insurance claims) traveling nationally and globally—clearly a regulation of commerce. The ACA’s Economic Viability. The mandate is integral to 2 pivotal, highly popular reforms: “guaranteed-issue” (insurers must cover all applicants) and “community-rating” (insurers cannot charge higher premiums based on health status). The mandate was designed to ensure the act’s economic sustainability. Without it, individuals would have an incentive to delay buying health insurance until they became ill. The critical question is whether a small tax will encourage healthy individuals to purchase health insurance. Not