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Health insurance mandate upheld

A federal judge in Detroit, in a broad ruling upholding Congress’s power to require all Americans to buy health insurance or pay a penalty, decided Thursday that the mandate is necessary to prevent the “extinction” of the nation’s entire health care insurance market.  U.S. District Judge George Caram Steeh said the requirement was well within Congress’s power to regulate commerce among the states.  The decision is the first by a federal court to rule directly on the constitutionality of the buy-or-be-penalized provision of the sweeping new health care reform law.

The Obama Administration lost on two arguments it had made to Judge Steeh — that the challengers in the Michigan case had no legal right to sue to stop the insurance mandate, and that their lawsuit in any event was premature.  But, after finding that the challengers were properly in court and that a decision was appropriate now, the judge went on to rule that the requirement satisfies the Constitution and dismissed the claims targeting that specific provision of the new law. Thus, the result was a major victory for the Administration.

The ruling came in the case of Thomas More Law Center, et al., v. Obama, et al. (District Court docket 10-11156) in the Eastern District of Michigan.  That lawsuit is one of a lengthy list of court challenges across the Nation to several parts of the new health care law.  But the provision requiring everyone to have a health insurance policy by the year 2014 was clearly the most visible part of the package for most Americans, and it has been subjected to the most energetic challenge.  The key to most of the challenges is the argument that refusing to buy health insurance is not activity, but inactivity, and Congress has never had the power to order people to engage in economic activity when they choose not to do so.

But Judge Steeh refused to accept that view of what the insurance mandate is.   “Far from ‘inactivity,'” the judge wrote, “by choosing to forgo insurance [the challengers] are making an economic decision to try to pay for health care services later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars, $43 billion in 2008, onto other market participants.”

This “cost-shifting,” the opinion added, “is exactly what the Health Care Reform Act was enacted to address.”  Thus, he rejected the argument of the challengers that he would have to go through “metaphysical gymnastics” in order to find a link between a failure to buy insurance and Congress’s power to regulate the interstate market for health insurance.

“There is a rational basis to conclude,” the judge said, “that, in the aggregate, decisions to forego insurance coverage in preference to attempting to pay for health care out of pocket drive up the cost of insurance….The decision whether to purchase insurance or to attempt to pay for health care out of pocket, is plainly economic.  These decisions, viewed in the aggregate, have clear and direct impacts on health care providers, taxpayers, and the insured population who ultimately pay for the care provided to those who go without insurance.”  Those are the economic effects Congress had in mind, the judge found.

He also concluded that the health care market “is unlike other markets,” since “no one can guarantee his or her health, or ensure that he or she will never participate in the health care market.  Indeed, the opposite is nearly always true. …Without the minimum coverage provision, there would be an incentive for some individuals to wait to purchase health insurance until they needed care, knowing that insurance would be available at all times.  As a result, the most costly individuals would be in the insurance system and the least costly would be outside it.”

That would result, Judge Steeh found, in added cost-shifting and even higher insurance premiums for medical coverage.  “The prospect of driving the insurance market into extinction led Congress to find that the minimum coverage provision was essential to the larger regulatory scheme of the Act,” the opinion said.

At this stage of the Michigan challenge, Judge Steeh ruled only on the plea by the challengers to stop the insurance-purchase requirement and the penalty that would be assessed for failure to have insurance by 2014.  The same lawsuit also raises other issues, contending that the new Act intrudes on states’ rights under the Tenth Amendment, violates religious rights, and violates guarantees of legal equality and due process.  Those other challenges remain pending before Judge Steeh.

The Obama Administration, in reacting to the string of court challenges to the new law, has been making essentially the same arguments in court after court: that those who were suing lacked “standing” to challenge the mandate and the penalty, that any legal challenges were not “ripe” at this point because the mandate does not go into effect until 2014, and that, in any event, the mandate was within Congress’s powers to regulate the health insurance market among the states.  It thus has asked federal judges to dismiss the challenges.

A federal judge in Richmond, VA., District Judge Henry Hudson, was the first to rule on a challenge to the new insurance mandate, in a decision on August 2. However, he denied the Administration request to dismiss that case, and is now moving on toward a ruling on the merits.  Another significant challenge, by a group of states, is moving forward in federal District Court in Florida.

Judge Steeh went further than Judge Hudson, finding that the Michigan challengers would face possible legal injury from the mandate, even though it does not take effect for four more years.  While the challengers might suffer harm in the future, the judge concluded, they actually are experiencing harm from the provision right now: in order to plan ahead to spend the large sums that they contend will be necessary to pay for health insurance later, they will have to start saving money now, and that will affect their current spending choices. That present financial pressure, the judge said, is enough to give the challengers “standing” to sue.

Thus, the judge rejected that part of the Administration opposition.  The judge also turned aside the Administration claim that such challenges are premature.  While the Internal Revenue Service has yet to take any steps to impose the penalty, Judge Steeh said, that is not the issue at this stage.  In fact, he said, the challengers in this particular case have indicated that they will not risk the penalty but will buy health insurance if the mandate is upheld in court.

Moreover, the judge declared, the collection of the penalty at some future point has nothing to do with the central issue he was now confronting: whether the insurance-purchase mandate itself was beyond Congress’s constitutional powers.  The challengers, the judge concluded, “have a right to a court determination of the constitutional authority of Congress to enact the statute in the first place.”

Thus, the judge wound up dismissing the two challenges at issue at this stage: the first claim in the lawsuit, that Congress lacks authority under the Commerce Clause to require everyone to buy health insurance, and the second claim in the lawsuit, that Congress lacks authority to impose a direct tax on individuals when that is not distributed among the states on the basis of population.

Since the dismissal of those claims, and the denial of the injunction request based on them, are final actions by Judge Steeh, the challengers presumably would be free now to appeal those holdings to the Sixth Circuit Court.  It seems unlikely, at present, that the case could make it to the Supreme Court in time for action this Term — unless the challengers were to seek to bypass the Sixth Circuit and make an attempt to go directly to the Supreme Court now.