The new fight over Obamacare

The Obama administration’s health care reform survived hostile town halls, Tea Party protests, and a year of bitter political combat in the U.S. Congress before it was signed into law in March. But now it faces yet another hurdle: a constitutional challenge to what the administration calls its “linchpin” provision. Rather than providing a single government-administered insurance plan the way Canada does, the Obama reform attempts to achieve near-universal coverage by requiring all Americans to buy private health insurance for themselves and their families. Individuals who cannot afford to pay premiums will be subsidized by the government; those who fail to do so will be fined up to US$750. This so-called “individual mandate” begins to phase in in 2014.

The Obama administration says the individual mandate is necessary to control health care costs for everyone. As long as health insurance remains optional, the young and the healthy will avoid paying in, and insurance companies will charge more to cover the relatively older and sicker population. And, without the mandatory coverage provision, other parts of the law—such as a ban on denying coverage based on pre-existing medical conditions—wouldn’t work either, because they would encourage individuals to wait to purchase health insurance until they needed care, which in turn would shift even greater costs onto everyone else.

But opponents of the bill aren’t arguing over its mechanics. When the law was being debated in Congress, they charged simply that nothing in the U.S. Constitution gives the federal government the power to force individuals to buy something. Republican Sen. Jim DeMint of South Carolina called it an “arrogant power grab” and a “trillion-dollar assault on our freedoms.”

After the law was passed, attorneys general in 21 states sued the federal government, arguing that Congress exceeded its constitutional powers. Their critique was dismissed by supporters of the reform as extremist. Democratic Sen. Patrick Leahy of Vermont, chairman of the Senate judiciary committee, denounced what he called “misleading arguments and spurious attacks” that would “stand the Constitution on its head.” “I think there’s pretty longstanding precedent on the constitutionality of this,” said White House spokesman Robert Gibbs. But last week, in one such lawsuit, a federal judge in Richmond, Va., ruled that the issue is far from settled. In doing so, he re-energized a political movement at the state level that seeks to exempt swathes of the country from application of the health care law and to roll back Obama’s signature achievement.

Voters in Missouri voted overwhelming in a referendum last week in favour of the state’s Health Care Freedom Act, which would purportedly exempt the state from the individual mandate—reviving the arguments over whether states have the power to nullify federal laws that had seemed to be settled by the Civil War. Several states have passed similar legislation, and some others, including Arizona and Oklahoma, will put the issue to a vote on the ballot on Election Day in November.

Virginia’s attorney general, Kenneth Cuccinelli, launched his lawsuit as soon as the law was signed in March. He argued that the health care mandate is not authorized by any of the specific federal powers spelled out in the U.S. Constitution, which reserves general lawmaking powers to the states. A former Republican state senator, Cuccinelli has also challenged the right of the federal government to regulate greenhouse gases, denied legal protections to gays and lesbians, and authorized law enforcement to check the immigration status of anyone they stop. The Obama administration responded that the law falls clearly under the federal power to regulate interstate commerce and asked the judge to dismiss the suit on the grounds that the case was so weak there was no point in holding a trial. But on Aug. 2, U.S. district judge Henry Hudson declined to dismiss the case. In a written opinion, he said the power of Congress to force individuals to buy health insurance was far from obvious, and there would be plenty to litigate.

“This case is not about health care, so much as it is about liberty,” Cuccinelli told reporters when the decision came down. Under the Constitution’s commerce clause, which gives Congress the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes,” the federal government has been able to justify a variety of activities on the grounds that they would have a “substantial impact” on interstate commerce. Beginning in the 1990s, however, the Supreme Court began cutting away at Washington’s ability to regulate non-economic activity under the clause. In 1995, the court found that the clause did not empower the federal government to regulate handguns in school zones. In 2000, the court struck down the federal Violence Against Women Act, finding that gender-related violence did not impact interstate commerce. (The court, however, seemed to retreat somewhat in 2005, when it allowed the federal government to ban the private cultivation of marijuana despite a California law that permitted it for medical use.)

At the heart of Virginia’s case is the argument that when an individual chooses not to buy insurance coverage, he or she is choosing precisely not to participate in economic activity, and thereby is not covered by the commerce clause. “Thus far in our history it has never been held that the commerce clause?.?.?.?can be used to require citizens to buy goods or services,” Virginia’s brief states. While state governments require that drivers purchase car insurance for the privilege of driving, for example, the federal health insurance requirement applies to everyone simply because they exist. The Obama administration contends that all people are part of the health care market, whether they buy insurance or not. “Congress understood that virtually everyone at some point will need medical services, which cost money. The [law] merely regulates economic decisions on how to pay for those services—whether to pay in advance through insurance or attempt to do so later out of pocket—decisions that substantially affect the vast, interstate health care market,” states the administration’s brief.

The administration also argues that the penalty for failing to buy insurance is authorized under a section that allows the federal government to impose taxes. Virginia counters that lawmakers had intentionally avoided characterizing the penalty as a “tax” in order to build support for the measure in Congress, and could not retroactively declare it to be a tax in order to make it legal.

Judge Hudson did not express any opinion on the merits of the case, which will await a full trial, but concluded there were enough substantive legal issues raised that the case could go forward.

Nonetheless, the judge, who was appointed to the federal bench by George W. Bush in 2002, appeared to embrace Virginia’s characterization of the issue. “Never before,” he wrote, had the federal government’s power to regulate interstate commerce “been extended this far?.?.?.?No reported case from any federal appellate court has extended the commerce clause or the tax clause to include the regulation of a person’s decision not to purchase a product, notwithstanding its effect on interstate commerce.”

The White House says it had full confidence the law would be upheld, and portrayed the litigants as sore losers. “Having failed in the legislative arena, opponents of reform are now turning to the courts in an attempt to overturn the work of the democratically elected branches of government,” said a statement by White House aide Stephanie Cutter. But opponents of the law are encouraged by the judge’s language. “I think it is very significant,” said Randy Barnett, a law professor at the Georgetown University Law Center in Washington, who filed a friend-of-the-court brief supporting Virginia. “Everything we do and don’t do in life could be said to affect interstate commerce by [the administration’s] logic, which would then give Congress the power over everything—and it’s a basic premise of the American constitutional system that Congress does not have a plenary police power over everything.”

If Judge Hudson or an appeals court strikes down the law, it’s almost certain the issue will reach the U.S. Supreme Court. Many legal analysts say the law will ultimately be upheld. Edwin Chemerinsky, dean of the Irvine School of Law at the University of California, says, “It’s inconceivable to me that the Supreme Court would say that regulating health care doesn’t fit within the commerce clause because it’s a trillion-dollar industry.”

And while courts will eventually have to settle the clash between state and federal law, Barnett said the Virginia judge’s decision will energize support for anti-reform ballot initiatives. “We’ve been told that this argument is fringe-y. But this decision will further feed public perception that the mandate is unconstitutional, which will in turn feed political action against the mandate, which will in turn contribute to an atmosphere that will affect future judicial decisions,” said Barnett. But that may be a bet against history. “Through American history, conservatives have objected to progressive change on states’ rights grounds. The civil rights movement, desegregation, the New Deal, the abolition of slavery—all were opposed on states’ rights grounds,” notes Chemerinsky. “In the end,” he points out, “They didn’t succeed.”