Following the passage of the Patient Protection and Affordable Care Act, Attorney General Cuccinelli filed suit against the Department of Health and Human Services, seeking primarily to overturn the provision in the new law that requires individuals to purchase health insurance or pay a penalty. The penalty increases from $95 in 2014, $350 in 2015 up to $750, with a maximum of $2,250 per family or 2 percent of household income, whichever is greater, by 2016. After 2016, the penalty increases automatically through a cost of living adjustment annually. See Patient Protection and Affordable Care Act, H.R. 3590, Sec. 5000A (2010).
In addition to Virginia, another 13 states have filed suit in Florida. You can read their complaint here. Their complaint includes a number of issues not addressed by the Virginia complaint. Since this is a Virginia blog, I’ll be focusing my attention on the grounds included in AG Cuccinelli’s complaint. Given the complexity of this topic, I’m going to do this post in two parts. The first will provide the legal background, the second will provide the analysis. If you don’t want to read the background, just read Part 2 (which I’ll put up tomorrow) which provides the analysis. Part 1 will focus on the Commerce Clause and the Tax and Spend Clause arguments.
You’re going to see plenty of articles by conservatives saying “the law is definitely unconstitutional” and plenty by liberals saying “the law is clearly constitutional.” Lawyers with decades of experience will line up on both sides, which is why I am convinced the case will end up before the Supreme Court at some point. Regardless of the rhetoric, the only thing that seems clear to me is that the law in this area is not settled. Since you guys want my opinion and analysis (even though, as some people love to remind everyone, I’m just a law student), I will do my best to present both arguments here. However, I want to be clear: I believe that the AG is correct, and that the individual mandate section of the PPACA is an unconstitutional expansion of federal power, in violation of the Commerce Clause.
For Americans, the Constitution holds a mythic place in our political lives. It is the font of power and justice, and people rightfully cherish it. Everyone reads it in schools, most people know what the bill of rights generally does, copies of it are sold in every bookstore, and it’s available online in a variety of places. I like Cornell’s site because the provisions are annotated, meaning they include case law from the Supreme Court construing the document. Because the Constitution is so beloved, it can be very difficult to learn that parts of the Constitution one has viewed in a certain way don’t mean what you thought they mean. That’s why for most law students, Constitutional Law is one of the hardest courses to take – unlike Property, Contracts, Torts, Civil Procedure, most folks don’t come to law school with preconceived notions of what the law is (for the most part). But they do in Con Law. It kind of reminds me of how my pastor talks about going to seminary – he says a lot of folks wash out of seminary in the first few months when they get there and start deeply delving into the Bible. When they do that, they learn quickly that many of their preconceived notions about it weren’t true. My point in starting here in my analysis is that I hope you’ll bear with me as I explain some things that may seem counterintuitive.
There have already been a lot of arguments made about whether the PPACA is constitutional, some of them good, and some of them bad. For a good analysis of why proponents think the mandate is legal, see Mark A. Hall, Legal Solutions in Health Reform: The Constitutionality of Mandates to Purchase Health Insurance 1 (2009) available at http://www.law.georgetown.edu/oneillinstitute/projects/reform/Papers/Individual_Mandates.pdf. For a better discussion as to why they are unconstitutional see David B. Rivkin, Jr., Lee A. Casey, & Jack M. Balkin, Debate, A Healthy Debate: The Constitutionality of an Individual Mandate, 158 U. PA. L. REV. PENNUMBRA 93 (2009), http://www.pennumbra.com/debates/pdfs/HealthyDebate.pdf.
Before I begin an analysis of the constitutionality, I want to provide a bit of background, and answer the inevitable car insurance analogy. There is a fundamental difference between our federal and our state governments. Our federal government is a government of enumerated powers – those powers specifically given to it by the Constitution. As Chief Justice Marshall wrote, “[t]his government is acknowledged by all, to be one of enumerated powers. The principle, that it can exercise only the powers granted to it, would seem too apparent, to have required to be enforced by all those arguments, which its enlightened friends, while it was depending before the people, found it necessary to urge; that principle is now universally admitted.” McCulloch v. Maryland, 17 U.S. 316, 405 (1819). But does this mean that the government can only do what is outlined specifically in the Constitution? No. In addition to the enumerated powers, the federal government also has implied and inherent powers – the kind of powers needed to actually use the power expressly granted. For example, while the Constitution permits the government to regulate coinage, it does not specifically say the government can create the Bureau of Engraving and Printing or the Federal Reserve Bank (or, as was the question in McCulloch, a Bank of the United States). But through the Necessary and Proper Clause, found in Article I, Section 8, powers not specifically granted but implied or inherent are valid. McCulloch, 17 U.S. at 421-422 (noting that without the ability to legislate through a “mass of incidental powers” the Constitution would be, in effect, a “splendid bauble.”)
States, on the other hand, are different. They can exercise plenary authority (which is commonly referred to as a “general police power”) within their jurisdictions, and are only bound by the limits they place upon themselves in their constitutions and laws (and which have since been placed on them by the Constitution). So what does that mean? Well, it means that states have the ability to regulate a wide variety of things the federal government can’t. Such as requiring all citizens to maintain insurance coverage on their vehicles as an incident to ownership. This is also why state health insurance reform plans, like the one in Massachusetts, that require all state citizens to purchase health insurance don’t run afoul of the Constitution as well. If this law had been enacted by Virginia, it wouldn’t face a federal Constitutional challenge.
And before anybody yells “what about the tenth amendment!” at me, I want to make it clear under McCulloch, the tenth amendment simply states that whatever powers are not granted to the federal government by the Constitution are reserved to the states. But since the powers in the Constitution include implied and inherent powers that aren’t specifically enumerated in the text – the ones made possible by the necessary and proper clause – you can’t strike something down on tenth amendment grounds until you first determine that the Constitution does not permit the action. In effect, the tenth amendment simply repeats the fact that we have a goverment of enumerated powers. So I’m not going to spend a lot of time on the tenth amendment. If the Constitutional itself doesn’t permit the power, the tenth amendment simply doubles down on that prohibition.
So if the federal government is a government of enumerated powers, what power does the Constitution grant Congress to let them require everyone, as part of the responsibilities of being a citizen of the United States, to purchase health insurance? Opponents of the mandate, like me and the AG, argue that if the power exists anywhere, it must be found in the Commerce Clause of Art. I Section 8. Proponents argue that in addition to the Commerce Clause, the Tax and Spending Clause of Art. I Section 8 also grants Congress the authority to tax and spend and the penalty included is simply a tax on people without health insurance.
The Commerce Clause is a much used, much abused, and much maligned portion of the Constitution. The text of the clause gives Congress the authority “[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes.” U.S. Const. Art. I, Sec. 8. Interstate commerce, fundamentally defined in Constitutional terms, is the movement of things across state lines, regardless of whether or not commercial activity is involved. See The Lottery Case (Champion v. Ames), 188 U.S. 231 (1903). While the Supreme Court had ruled that Congress has plenary authority to regulate interstate commerce, see Gibbons v. Ogden, 22 U.S. 1 (1824), they really didn’t use it until the late 19th century, beginning with the passage of the Interstate Commerce Act and the Sherman Anti-Trust Act. Shortly after, the Supreme Court put the brakes on the usage of the commerce power, specifically when it held that Congress could not prohibit interstate transportation of products made by child labor. See Hammer v. Dagenhart, 247 U.S. 251 (1918). The Court also ruled against Congressional regulation of working hours, Lochner v. New York, 198 U.S. 45 (1905) (holding on right to contract grounds, not Commerce Clause) and struck down a major portion of the New Deal in Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935). The fundamental reason the Court used in all of these cases was that while the Commerce Clause allowed Congress to regulate interstate commerce, there must be a limit what activity could be reached.
All of that went bye bye after President Roosevelt started threatening to pack the Supreme Court and the Court suddenly loosened its grip on the Commerce Clause. Beginning with NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937) (upholding the National Labor Relations Act) and United States v. Darby, 312 U.S. 100 (1941) (upholding the Fair Labor Standards Act), the Court backed off using the Commerce Clause to strike down federal regulation of economic activities and that opened the floodgate for the New Deal, the Great Society, and much of the modern federal regulatory state we live in today. In addition to regulating interstate commerce, the Court also held that Congress could prohibit certain activities that were stricly intrastate if, when aggregated with everyone else engaging in the them across the country, would have a “substantial economic effect on interstate commerce.” Wickard v. Filburn, 317 U.S. 111, 125 (1942). Not stopping there, the Court also ruled that Congress could not only prohibit, but also regulate intrastate activities that could have an impact on interstate commerce and promote interstate commerce as well. Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 231 (1964) (upholding the Civil Rights Act of 1964 on the grounds that racial discrimination had an impact on interstate commerce and Congress had the power to protect such commerce by banning discrimination.)
This let the Congress do pretty much whatever it wanted – until 1995. Given that our government is one of enumerated powers, giving the Congress a way to do anything it wants by simply calling it a regulation of commerce, or something that has an economic impact on commerce was clearly not what the Framers intended. Yet that’s pretty much what Congress did until the Court finally put its foot down. In United States v. Lopez, 514 U.S. 549 (1995), the Supreme Court struck down the Gun-Free School Zones Act of 1990, a federal law that criminalized possession of a gun within a certain distance of a school. In the opinion, the court noted that “[t]he possession of a gun in a local school zone is in no sense an economic activity that might, through repetition elsewhere, substantially affect any sort of interstate commerce.” Lopez, 514 U.S. at 567. Five years after Lopez, the Court struck down the Violence Against Women Act of 1984 on similar grounds. See United States v. Morrison, 529 U.S. 598 (2000). The fundamental thrust of both of these decisions was that regardless of the tangential effect on interstate commerce that guns nears schools and violence against women may have, if all Congress has to do is find a link to interstate commerce, our system of federalism would be destroyed. Congress could do anything it wanted to do, with no limits. As the Court noted in Lopez, “Congress could regulate any activity that it found was related to the economic productivity of inidividual citizens: family law (including marriage, divorce, and child custody) … [u]nder these theories, [it] is difficult to perceive any limitation on federal power…” Lopez, 514 U.S. at 564. The holdings in both Lopez and Morrison were reaffirmed in Gonzales v. Raich, 545 U.S. 1 (2005), where the Court upheld Congressional prohibitions against the intrastate cultivation and use of medicinal marijuana on the grounds that while Lopez and Morrison were cases involving non-economic activity that may have had a tangential impact on interstate commerce, the cultivation of marijuana was fundamentally economic activity (as all agriculture is), and the possibility that intrastate grown weed could end up in interstate commerce was sufficiently likely to warrant Congress prohibiting it, as they did with home-grown wheat in Wickard.
That’s where we are today, very briefly, in terms of Commerce Clause analysis.
The Tax and Spend Clause in Article I, Section 8 is not so difficult. The text of the clause grants Congress the power “to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States.” U.S. Const. Art. I, Sec. 8. This does NOT mean that Congress can do anything it wants to do as a way of “providing for the general welfare” as some people seem to think. What it means is that Congress can tax and spend pretty much in any way it chooses. The Court has allowed Congress to use the tax and spend power historically as a “necessary and proper” way to exercise its regulatory powers, as well as raise revenue, even if the raising of revenue may have an incidental regulatory effect. This is the primary argument the proponents of the individual mandate are using to justify the mandate – they claim that, in effect, the penalties are simply a way of raising revenue, and thus Congress can use them to enforce the mandate.
It’s not that easy, however. The Supreme Court isn’t stupid, and they have limited the power to regulate through taxing. In the Child Labor Tax Case, Bailey v. Drexel Furniture Co., 259 U.S. 20 (1922), the Court struck down the Child Labor Tax Law, which sought to regulate child labor by taxing the net profits of employers using child labor. “Grant the validity of this law, and all that Congress would need to do, hereafter, in seeking to control any one of the great number of subjects reserved to [the states], would be to enact a detailed measure of complete regulation of the subject and enforce it by a so-called tax upon departures from it. to give such magic to the word ‘tax’ would be to break down all constitutional limitation of the powers of Congress and completely wipe out the sovereignty of the states.” Bailey, 259 U.S. at 38. As the Court says here, any regulatory scheme that uses a tax as a predicate to regulate is going to be closely scrutinized, especially if the regulation would not be valid under some other power granted to the Congress.
To be fair, while the the Child Labor Tax Case is still good law, it has only been used once since 1922 to overturn a federal tax, and that was before Jones & Laughlin and the other cases that opened the floodgates for Commerce Clause regulation. It is the Court’s likely unwillingness to strike down taxes that the proponents of the individual mandate are banking on.
In addition to taxing, the spending power can also be used to regulate behavior. The Court has upheld laws where Congress has attempted to withhold funding for states that have not enacted a federal regulatory scheme. For example, during the 1980s, Congress enacted a law that withheld a portion of the federal highway funds from states that had a drinking age lower than 21. The court upheld the regulation, saying that as long as the state had a meaningful choice – meaning that the withholding of funds wasn’t so exorbitant as to be tantamount to extortion – in enacting the policy or losing the funding, the regulation was valid. See South Dakota v. Dole, 483 U.S. 203 (1987). This is where the argument for the “opt-out” language comes in.
I think this provides enough of a background on the two major areas of the law people are going to use to argue for and against the health care mandate. Tomorrow, I’m going to analyze specifically why I think the current mandate is unconstitutional and why AG Cuccinelli has standing to bring the case in the first place.
NOTE: This post was originally posted on Too Conservative on March 25, 2010.