Why the Personal Mandate to Buy Health Insurance Is Unprecedented and Unconstitutional

December 9, 2009
by Randy Barnett , Nathaniel Stewart and Todd Gaziano
Legal Memorandum #49
The Heritage Foundation



A mandate requiring all individuals to purchase health insurance would be an unprecedented form of federal action. The government has never required people to buy any good or service as a condition of lawful residence in the United States. An individual mandate would have two features that, in combination, would make it unique. First, it would impose a duty on individuals as members of society. Second, it would require people to purchase a specific service that would be heavily regulated by the federal government.[1]

This statement from a 1994 Congressional Budget Office Memorandum remains true today. Yet, all of the leading House and Senate health-care reform bills being debated in Congress require Americans to either secure or purchase health insurance with a particular threshold of coverage, estimated by CBO to cost up to $15,000 per year for a typical family.[2] This personal mandate to enter into a contract with a private health insurance company is enforced through civil and criminal tax penalties in section 501 of the House bill[3] and with a freestanding mandate and equally questionable civil tax penalties in sections 501 and 513 of the pending Senate bill.[4]

The purpose of this compulsory contract, coupled with the arbitrary price ratios and controls, is to require many people to buy artificially high-priced policies to subsidize coverage for others as well as an industry saddled with other government costs and regulations. Congress lawfully could enact a general tax to pay for these subsidies or it could create a tax credit for those who buy health insurance, but that would require Congress to "pay for" or budget for the subsidies in a conventional manner. The sponsors of the current bills are attempting, through the personal mandate, to keep the transfers entirely off budget or--through the gimmick of unconstitutional taxes or penalties they dub "shared responsibility payments"--make these transfers appear to be revenue-enhancing.

This "personal responsibility" provision of the legislation, more accurately known as the "individual mandate" because it commands all individuals to enter into a contractual relationship with a private insurance company, takes congressional power and control to a striking new level. Its defenders have struggled to justify the mandate by analogizing it to existing federal laws and court decisions, but their efforts do not withstand serious scrutiny. An individual mandate to enter into a contract with or buy a particular product from a private party, with tax penalties to enforce it, is unprecedented-- not just in scope but in kind--and unconstitutional as a matter of first principles and under any reasonable reading of judicial precedents.

Congress has a responsibility, pursuant to the oath of all Senators and Representatives, to determine the constitutionality of its own actions independently of how the Supreme Court has previously ruled or may rule in the future. But it is very unlikely that the Court would extend current constitutional doctrines, or devise new ones, to uphold this new and unprecedented claim of federal power.

Constitutional Overview

In reaction to states that were enacting trade barriers and violating the rights of their citizens, those who drafted and ratified the U.S. Constitution were determined both to constrain the powers of states and, at the same time, limit the power of Congress. They designed an ingenious system of checks and balances that divides state and federal authority in the hope of preventing any one government from exerting too much control over a free people.[5] To that end, the Constitution creates a national government with a legislature of limited and enumerated powers. Article I allocates to Congress "[a]ll legislative powers herein granted,"[6] which means that some legislative powers remain beyond Congress's reach. The Constitution's Necessary and Proper Clause similarly grants Congress the power "[t]o make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof."[7]

The Supreme Court recognized and affirmed this fundamental principle from the earliest days of the republic, as Chief Justice Marshall famously observed: "The powers of the legislature are defined and limited; and that those limits may not be mistaken, or forgotten, the constitution is written."[8] And in his canonical opinion interpreting the Necessary and Proper Clause, Chief Justice Marshall insisted that "should Congress, under the pretext of executing its powers, pass laws for the accomplishment of objects not entrusted to the [national] government; it would become the painful duty of this tribunal, should a case requiring such a decision come before it, to say that such an act was not the law of the land."[9]

Nowhere in the Constitution is Congress given the power to mandate that an individual enter into a contract with a private party or purchase a good or service and, as this paper will explain, no decision or present doctrine of the Supreme Court justifies such a claim of power. Therefore, because this claim of power by Congress would literally be without precedent, it could only be upheld if the Supreme Court is willing to create a new constitutional doctrine. This memorandum explains why the two powers cited by supporters of this bill--the power of Congress to regulate interstate commerce and the power of Congress to tax--do not justify an individual mandate, even under the most expansive readings given these powers by the Supreme Court. In particular, this paper addresses four topics that have not yet been given adequate consideration by Congress and most, if not all, of the commentators:

First, most arguments, either favoring or opposing the individual mandate, do not discuss the Supreme Court's "class of activities" test, which it has applied in every relevant Commerce Clause case. This paper addresses this oversight and argues that, despite the broad congressional power to regulate interstate commerce, the individual mandate provision fails this test and is unlikely to survive the Court's review.
Second, this paper addresses the common, but mistaken, suggestion that a universal federal mandate to obtain health insurance is no different than a state requiring its licensed automobile drivers to have liability insurance for their injuries to others.
Third, this paper analyzes claims arising under the Taxing Clause. A preliminary review raises serious questions about the constitutionality of using the taxing power in this manner.
And finally, this paper explains why it is highly unlikely that the Supreme Court would break new constitutional ground to save this unpopular personal mandate.
The Interstate Commerce Clause

Advocates of the individual mandate, like Speaker Nancy Pelosi (D-CA) and law professor Erwin Chemerinsky, have claimed that the Supreme Court's "Commerce Clause" jurisprudence leaves "no doubt" that the insurance requirement is a constitutional exercise of that power.[10] They are wrong.

The Commerce Clause, set forth in Article I, section 8, grants Congress the authority "[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes."[11] From the Founding, both Congress and the Supreme Court have struggled to define the limits of that authority, but it has always been understood that some limit exists beyond which Congress may not go. To be sure, the Supreme Court has been deferential to congressional claims of authority to regulate commerce since 1937. Yet, even as it allowed Congress to exercise expansive powers over the national economy, the New Deal Supreme Court declared that:

The authority of the federal government may not be pushed to such an extreme as to destroy the distinction, which the commerce clause itself establishes, between commerce "among the several States" and the internal concerns of a State. That distinction between what is national and what is local in the activities of commerce is vital to the maintenance of our federal system.[12]

As the Congressional Research Service has recognized, the individual mandate could face a variety of constitutional obstacles, especially under the Commerce Clause:

Despite the breadth of powers that have been exercised under the Commerce Clause, it is unclear whether the clause would provide a solid constitutional foundation for legislation containing a requirement to have health insurance. Whether such a requirement would be constitutional under the Commerce Clause is perhaps the most challenging question posed by such a proposal, as it is a novel issue whether Congress may use this clause to require an individual to purchase a good or a service.[13]

Another word for "novel" is unprecedented, which is literally true: There is simply no legislative or judicial precedent for this claim of congressional power. In the absence of binding judicial precedent, however, the current Supreme Court is unlikely to stretch the commerce power even further than it already has.

The Supreme Court's "Class of Activities" Test

In the last seventy years, the Supreme Court has applied a relatively straightforward judicial test to determine whether a federal statute is within the commerce power of Congress. When evaluating a claim of power under the Commerce Clause, the Court proceeds with a two-pronged inquiry. First, the Court determines whether the entire class of regulated activity is within Congress's constitutional reach; and second, whether the petitioner is a member of that class.

A long line of Supreme Court cases establishes that Congress may regulate three categories of activity pursuant to the commerce power. These categories were first summarized in Perez v. United States, [14] and most recently reaffirmed in Gonzales v. Raich.[15] First, Congress may regulate the "channels of interstate or foreign commerce" such as the regulation of steamship, railroad, highway, or aircraft transportation or prevent them from being misused, as, for example, the shipment of stolen goods or of persons who have been kidnapped. Second, the commerce power extends to protecting "the instrumentalities of interstate commerce," as, for example, the destruction of an aircraft, or persons or things in commerce, as, for example, thefts from interstate shipments."[16] Third, Congress may regulate economic activities that "substantially affect interstate commerce."[17]

Under the first prong of its Commerce Clause analysis, the Court asks whether the class of activities regulated by the statute falls within one or more of these categories. Since an individual health insurance mandate is not even arguably a regulation of a channel or instrumentality of interstate commerce, it must either fit in the third category or none at all. Predictably, Congress has cited only this third basis. The Senate bill asserts (erroneously) that: "[t]he individual responsibility requirement...is commercial and economic in nature, and substantially affects interstate commerce.... The requirement regulates activity that is commercial and economic in nature: economic and financial decisions about how and when health care is paid for, and when health insurance is purchased."[18]

The second prong of the Court's Commerce Clause analysis requires a determination that the petitioner has in fact engaged in the regulated activity, making him or her a member of the regulated class. In its modern Commerce Clause cases, the Supreme Court rejects the argument that a petitioner's own conduct or participation in the activity is, by itself, either too local or too trivial to have a substantial effect on interstate commerce. Rather, the Court has made clear that, "where the class of activities is regulated and that class is within the reach of federal power, the courts have no powers 'to excise, as trivial, individual instances' of the class."[19] Thus, for example, a potential challenger of the proposed mandate could not argue that because her own decision not to purchase the required insurance would have little or no effect on the broader market, the regulation could not be constitutionally applied to her. The Court will consider the effect of the relevant "class of activity," not that of any individual member of the class.

To assess the constitutionality of a claim of power under the Commerce Clause, the primary question becomes, "what class of activity is Congress seeking to regulate?" Only when this question is answered can the Court assess whether that class of activity substantially affects interstate commerce. Significantly, the mandate imposed by the pending bills does not regulate or prohibit the economic activity of providing or administering health insurance. Nor does it regulate or prohibit the economic activity of providing health care, whether by doctors, hospitals, pharmaceutical companies, or other entities engaged in the business of providing a medical good or service. Indeed, the health care mandate does not purport to regulate or prohibit activity of any kind, whether economic or noneconomic. To the contrary, it purports to "regulate" inactivity.

Proponents of the individual mandate are contending that, under its power to "regulate commerce...among the several states," Congress may regulate the doing of nothing at all! In other words, the statute purports to convert inactivity into a class of activity. By its own plain terms, the individual mandate provision regulates the absence of action. To uphold this power under its existing doctrine, the Court must conclude that an individual's failure to enter into a contract for health insurance is an activity that is "economic" in nature-- that is, it is part of a "class of activity" that "substantially affects interstate commerce."

Never in this nation's history has the commerce power been used to require a person who does nothing to engage in economic activity. Therefore, no decision of the Supreme Court has ever upheld such a claim of power. Such a regulation of a "class of inactivity" is of a wholly different kind than any at issue in the Court's most expansive interpretations of the Commerce Clause. A mandate to enter into a contract with an insurance company would be the first use of the Commerce Clause to universally mandate an activity by all citizens of the United States.

Today, even voting is not constitutionally mandated. But, if this precedent is established, Congress would have the unlimited power to regulate, prohibit, or mandate any or all activities in the United States. Such a doctrine would abolish any limit on federal power and alter the fundamental relationship of the national government to the states and the people. For this reason it is highly doubtful that the Supreme Court will uphold this assertion of power.

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