Summary:  Yesterday, a federal District Court judge in Michigan rejected a constitutional challenge to the Affordable Care Act (ACA)  .This is the first time that a court has gotten to the merits of the case against the ACA.  Below, excepts from analysis by Timothy Jost of the Washington and Lee University School of Law, explaining the decision. Jost’s piece, titled“A Victory for Health Reform and Good Law” appeared on the HealthAffairs blog today.

I’ve added some comments in italics.

“Opponents of health care reform lost another battle on October 7.  Having failed in their efforts to defeat the legislation last spring, anti-reform advocates have turned to unelected judges to overturn the will of Congress . . .

“On October 7, Judge George Steeh of the United States District Court for the Eastern District of Michigan rendered the first final judgment on the primary argument urged by reform opponents—that the minimum coverage requirement of the legislation is unconstitutional.  Reasoning from clear, long-standing precedents recognizing the power of Congress under Article I of the Constitution to regulate commerce, and sweeping away the nonsense that opponents of the legislation have been arguing for months, Judge Steeh upheld the minimum coverage requirement.

“To understand this controversy, it is necessary to understand what the minimum coverage requirement actually says and why Congress adopted it,”  Jost writes. He then offers a clear, concise definition of who is subject to the mandate to buy insurance:

• If you are not covered by health insurance from your job and are not eligible for Medicare or Medicaid;
• If you do not have a religious objection to having health insurance or belong to a health care sharing ministry;
• If you have been uninsured for 3 months or more;
• If you are not a Native American;
• If you earn more than the tax filing limit (currently $18,700 for a couple);
• If you can find a health insurance policy for less than 8 percent of your income; and if it does not otherwise cause you a hardship, you must purchase a basic, high cost-sharing health insurance policy or pay a tax penalty.

Note that no one will be forced to buy a policy that costs more than 8 percent of his or her income. Here, I would add that if too many Americans cannot find policies that cover the minimum benefits required under the law, and cost less than 8 percent of their income, Congress is likely to reconsider the public option.  This is why insurers have already begun to cut administrative costs, while looking for ways to provide incentives that will encourage health care providers to be more efficient.  They know that if they can’t make insurance affordable, they’ll soon find themselves competing with a public plan that doesn’t have to provide profits for shareholders,  lobby Congress, or pay executives seven-digit salaries.

Josts goes on to debunk conservative claims that health care reformers want to put you in jail—or take your home. “If you don’t pay the penalty, you cannot be criminally prosecuted and the IRS cannot place a lien or levy on your property.  Tax credits will also be available to help many of those subject to the mandate  . . . to purchase the required insurance.

The Purposes of the Minimum Coverage Requirements

“Congress adopted this provision for two reasons.”  First, Jost makes the argument that most people understand: “If you require private insurers to insure people with pre-existing conditions, the health insurance market will collapse if you do not also require healthy people to participate in the market.  Only sick people will purchase insurance, while healthy people will wait until they get sick or have an accident and then purchase insurance.  Insurance will soon be unaffordable to all . . ..”

He then makes an equally important point: “Second, the use of health care is in the end unavoidable.  We will all need health care sooner or later, and when we do, someone will have to pay for it.  If an individual is insured, the insurer will pay for it.  Each year, however, $43 million worth of care is received by people who do not have health insurance and who do not pay for it.  This cost is passed on to the rest of us—to our employers, insurers, health care providers, and the government.  This level of cost-shifting may be understandable today, when many cannot afford health insurance, but once tax credits are available so that no one needs to be uninsured, it is no longer tolerable,   The purpose of the law, that is, is to discourage this freeloading and to encourage individual responsibility (something conservatives used to be in favor of).”

Here, I would add that no one knows when they will need care. A young, healthy person might feel that he is willing to gamble that he won’t be in an accident, or suddenly fall ill. But that person needs to recognize that he is gambling with other people’s money.

Jost goes on to explains that “Opponents of the law .  . . claim that Congress does not have the power under the Commerce Clause to stop this freeloading.  They claim that Congress can only regulate “activity,” and that refusing to purchase insurance is “inactivity.”  They claim that if Congress can require the purchase of health insurance, it will soon be passing laws requiring people to buy cars or eat spinach.

“Health care, however, is different.  Insurance exists not only to provide financial security to the insured but also to prevent the insured from shifting costs to others.”   In other words, the mandate does not represent a paternalistic effort to protect you—the goal is to protect others from the consequences of your folly.

“You cannot drive a car in most states without liability insurance, or get a loan to purchase a home without homeowner’s insurance that covers the lender,” Jost adds. “ But if you don’t own a home or drive a car, there is no reason to require the purchase of these auto liability or homeowner’s insurance.  Everyone can get sick or injured, however, and thus everyone must have health insurance to avoid cost-shifting.”

The Legal Background

Jost sums up the three rulings, to date, that federal judges have entered in cases challenging the Affordable Care Act:  “In July, a federal judge in Maryland refused a preliminary injunction in a case challenging the reform law and dismissed the case as to President Obama.  That judgment was upheld by the Fourth Circuit Federal Court of Appeals.  In August, a federal court case was dismissed in California, with the judge finding that the plaintiffs lacked standing to raise a whole host of challenges to the law, including a challenge to the minimum coverage requirement and also a claim that the law violated the Equal Protection Clause by creating Offices of Women’s Health but not an Office for Men’s Health. 

“In August a federal judge in Virginia  denied the federal government’s notion to dismiss a case  challenging the minimum coverage requirements brought by the Commonwealth of Virginia, holding that plaintiff Commonwealth had standing to challenge the law and that the Commonwealth presented “a plausible claim with an arguable legal basis.”  The court repeatedly emphasized that the decision did not resolve the merits of the claim and that “it will certainly not be the final word.”  That case is now being briefed on a motion for summary judgment, which will likely resolve the case at the trial court level.  A Florida court is also considering the federal government’s motion to dismiss a case brought by twenty state attorneys general challenging the minimum coverage requirement, and has signaled that it might not dismiss all of the claims brought by the states.”

Judge Steeh’s Decision

“The Michigan case, however, was the first case to reach the merits of the claim.  The court squarely upheld the minimum coverage requirements. ..  . . . 

“Once he got to the merits, the judge made short work of the nonsense argued by the opponents to the law.  First, he recognized that for nearly six decades the Supreme Court has interpreted the Commerce clause broadly to permit Congress to regulate the use of the channels of interstate commerce; the instrumentalities of interstate commerce and persons and things in interstate commerce; and activities that substantially affect interstate commerce. The court cited Supreme Court cases recognizing that . . . In assessing the scope of Congress’ authority under the Commerce Clause’ the court’s task ‘ is a modest one.  ‘The court need not itself determine whether the regulated activities ‘taken in aggregate, substantially affect interstate commerce in fact, but only whether a “rational basis” exists for so concluding.’”

Judge Steeh then turned to the “rational bases” of the minimum coverage requirement.  “First, he observed that Congress rationally concluded that the decisions of individuals to forego purchasing insurance coverage drives up the cost of insurance for everyone else:  “The costs of caring for the uninsured who prove unable to pay are shifted to health care providers, to the insured population in the form of higher premiums, to governments, and to taxpayers.” The decision whether to purchase insurance or to attempt to pay for health care out of pocket is plainly economic.

“No one can choose not to get sick or injured, the court recognized.  In that respect the market for health care is very different from the market for spinach or cars, which are in fact avoidable. (I avoided spinach for years). At some point we all need health care.  This is what makes the market for health care unique.  At the point we need care, we will either be insured or not.  If people are not insured, in all likelihood some of the cost of their care will be shifted to others.  The plaintiffs have in fact made a choice—a choice regarding how they will pay for their health care. . . .

“The court further rebutted the “inactivity” canard by noting that the Supreme Court has consistently rejected claims that individuals who choose not to engage in commerce can put themselves beyond the reach of the Commerce Clause.  The court invoked Supreme Court cases rejecting claims that individuals who grew marijuana or wheat for personal use only were not engaged in commerce or that individuals could refuse to do business with people of another race.  The court noted that it was more accurate to say that the Commerce Clause allows Congress to regulate economic decisions rather than economic activity.  Deciding not to purchase health insurance is certainly an economic decision. . . .”

Looking Into The Future

“Judge Steeh’s decision is solidly based on the existing law and in the factual predicate established by Congress in adopting the legislation,” Jost concludes. “ The states’ cases in Florida and Virginia are presided over by judges who may not shrink from making new law to restrict the power of Congress.  Limiting the power of Congress has been a long-term right-wing agenda in the United States and has some sympathizers on the Supreme Court and many in the lower courts.  But a number of the justices who decided the medical marijuana case in 2005 that broadly construed the Commerce Clause are still on the Court, and some of the judges who have left the Court in the past decade were the strongest advocates of states’ rights.  Anti-reform advocates have struck a responsive chord with some segments of the public, and have clearly picked their judges well for the initial stages of litigation, but I still believe in the end the courts will defer to the reasonable judgment of Congress, as they must under current law, and not try to impose their own will on the American people.  This is as it should be.”

I agree, and I would add that some observers have suggested that the Supreme Court will refuse to take a case challenging the ACA because the Court does not want to put itself in the position of ruling on a major piece of legislation approved by Congress. If the court let the Affordable Care Act’s opponents pit the judicial branch of the government against the legislative branch, we would be teetering on the brink of a constitutional crisis. Finally, I don’t think the American public wants to see Washington spend another year focused on health care. As I have said in the past, voters want their government to fix its eyes on just three issues: jobs, jobs and jobs.

You can read Jost’s entire piece here.