This essay for our symposium is by Jonathan H. Adler, Professor of Law and Director of the Center for Business Law and Regulation at the Case Western Reserve University School of Law. He is a regular contributor to the popular legal blog, The Volokh Conspiracy.
The public debate over the constitutionality of the individual mandate tends to focus on whether it is a permissible exercise of the power to "regulate commerce . . . among the several states." This is no surprise. The commerce power is the most used and most expansive federal power. Fights over the scope of the Commerce Clause take place on familiar terrain. In the end, however, the constitutionality of the mandate is likely to turn on the scope of a less explored provision, the Necessary and Proper Clause.
Supporters and opponents characterize the individual mandate in different ways. Supporters, by and large, characterize the mandate as part and parcel of a regulation of financial decision-making or other economic activity. Opponents, on the other hand, claim it is not a regulation of activity at all, but rather a regulation of "inactivity" or a requirement that all Americans engage in activity that could then subject them to regulation.
The reason so much effort is expended on characterizing the mandate one way or the other is that how one characterizes the mandate "“ or, more properly, how one characterizes that which the mandate regulates "“ goes a long way toward determining whether the mandate is, in fact, a regulation of commerce. Thus (now former) Acting Solicitor General Neal Katyal would argue that the class of activities subject to regulation under the mandates are "financial decisions about how and when health care is paid for" and Judge Boyce Martin of the U.S. Court of Appeals for the Sixth Circuit characterized the relevant class as "the practice of self-insuring for the cost of health care delivery." The ultimate fate of the individual mandate could turn on whether a majority of the Supreme Court accepts such characterizations of the class of activities subject to the mandate.
The reason it is important to define the class of activities subject to regulation is because the federal government's commerce power only extends to certain subject matter. Setting aside (for a moment) the supplemental authority of the Necessary and Proper Clause, the Commerce Clause only grants Congress the power to regulate commerce. Even the Supreme Court's most expansive interpretations of this clause have disclaimed that the Commerce Clause creates a latent police power. Though broad, the commerce power is ultimately limited.
Whether a given exercise of the commerce power is constitutional is determined by how the power is exercised, not whether a given statute reaches otherwise regulable conduct. United States v. Lopez is a case in point. Alfonso Lopez was arrested while he was participating in a commercial transaction. He possessed a gun within a school zone because he was to deliver a gun to a local gang member. This activity "“ participating in a commercial transaction "“ is unquestionably subject to the federal commerce power. Why, then, did the federal government lose its case? Because in the Gun-Free School Zones Act (GFSZA) Congress did not regulate gun sales, but gun possession in-or-near schools. Although the GFSZA could be applied to economic conduct within the scope of federal power, that was not what it regulated. The class of activities subject to regulation under the GFSZA, gun possession in-or-near schools, was not economic.
What Lopez illustrates is that the key question in determining whether a statute is a proper exercise of the commerce power is whether Congress regulated a class of activities that is subject to the commerce power. The way this question is answered is by looking at what it is that subjects an individual to regulation, and not at whether a specific litigant is engaged in otherwise reachable conduct. In Lopez, what subjected someone to the GFSZA was non-economic "“ the possession of a gun in or near a school "“ and so the statute exceeded the commerce power. This was true even though one could conceive of an alternative statute "“ such as a law prohibiting or limiting gun sales near schools "“ that would have covered Alfonso Lopez's conduct and passed constitutional muster.
The problem for defenders of the mandate is that, by its own terms, the law does not seem to regulate a class of activities that is defined in economic terms. It may well be that the vast majority of Americans are engaged in health care transactions of one sort or another that are readily subject to federal control, but engaging in such transactions is not what makes an individual subject to the mandate. To the contrary, an individual who has never purchased health care (let alone health insurance), and never plans to, is still subject to the mandate. Although the legislative purpose may have been to regulate health-related financial decisions, that is not the class of activities Congress made subject to the law, as the class is not limited to those who have taken (or will take) such actions. Under Lopez, then, it would seem the individual mandate has some problems.
The expansive nature of the mandate is one reason the eventual resolution of the mandate litigation is likely to turn on the Necessary and Proper Clause. Insofar as the mandate is imposed on those who have not engaged in any health-related economic activities, the question becomes whether it is "necessary and proper" to reach such individuals in order to "carry into execution" the health care reform law's other regulatory provisions. As Gonzales v. Raich shows, Congress may extend its regulatory reach beyond purely economic conduct where it is "necessary and proper" to ensure the viability of a broader regulatory scheme. Thus, the Court explained in Raich, Congress could well have concluded that it was necessary and proper to prohibit marijuana possession in order to make the federal prohibition on the sale of marijuana more effective. Though often framed as solely a Commerce Clause case, both the majority opinion and Justice Scalia's concurrence made explicit that the law rested on the Necessary & Proper Clause as well.
Does the reasoning of Raich save the individual mandate? Perhaps. On the one hand, requiring all Americans to purchase qualifying health insurance plans is one way to reduce adverse selection and the resulting upward pressure on health insurance premiums. On the other hand, unlike the law in Raich, the mandate is not conditional upon anyone having taken an affirmative step. Angel Raich was only subject to prosecution because she chose to obtain marijuana, just as Roscoe Filburn was only subject to the Agricultural Adjustment Act because he chose to produce wheat for his dairy cows. The mandate, on the other hands, does not require a similar predicate. Someone else can be subject to the mandate even if they have done nothing at all. Does this distinction suffice to place the mandate beyond the scope of what constitutes "necessary and proper"? That is the question the Supreme Court will ultimately have to address.