PLANK JUNE 21, 2012
Ever since the United States Supreme Court heard arguments about Obamacare’s constitutionality in late March, speculation has been rife that the Justices will strike down the individual mandate. The predictions rest on a single assertion: That individuals have never before been required, under the authority of the Commerce Clause, to purchase a product or service from a private party. In other words, that there is no precedent for a “purchase mandate.”
The assertion is inaccurate. There is not only clear precedent for such a mandate, but Justices of all political persuasions have embraced the precedent in principle. This includes nearly every member of the current Court. Only Justices Sotomayor and Kagan have never had the opportunity to weigh in on the issue.
So, what is the precedent?
In certain sectors, federal statutes have approved requiring employees to pay so-called “agency fees” to cover the cost of services received from a union acting as their collective bargaining agent, whether or not they wish to belong to the union. The 1956 Hanson case held that such a provision in the Railway Labor Act “is within the power of Congress under the Commerce Clause and does not violate either the First or the Fifth Amendments.” Since then, the Supreme Court has repeatedly reaffirmed Hanson’s validity and the constitutionality of requiring that employees pay such agency fees. Indeed, as recently as 2009, the Court unanimously reaffirmed this principle in the Locke decision.
Strictly from the standpoint of their legal character, the health care and agency fee mandates are indistinguishable. In addition to both being “purchase mandates,” they have the same justification. In the bargaining context, Justice Scalia clearly and succinctly stated the rationale that is generally used to justify the imposition of agency fees in his opinion in the 1991 Lehnert case:
Where the state imposes upon the union a duty to deliver services, it may permit the union to demand reimbursement for them; or, looked at from the other end, where the state creates in the nonmembers a legal entitlement from the union, it may compel them to pay the cost. The "compelling state interest" that justifies this constitutional rule is not simply elimination of the inequity arising from the fact that some union activity redounds to the benefit of "free-riding" nonmembers … What is distinctive … about the "free riders" [here] … is that, in some respects, they are free riders whom the law requires the union to carry … Thus, the free ridership (if it were left to be that) would be not incidental, but calculated, not imposed by circumstances, but mandated by government decree.
In both the union and healthcare context, the disputed mandate to purchase services was justified to cover the costs of a prior mandate imposed on others to provide those services. In the case of agency fees, the prior mandate to provide services was imposed on unions: The government requires them to represent everyone in a bargaining unit, whether or not they have joined the union. The Court held that this service mandate justified imposing the purchase mandate on those who are entitled to receive the services.
In the health care context, there are two relevant service mandates. The first was imposed about 25 years ago under a Reagan-era statute that requires virtually all hospitals to provide emergency services to anyone needing them, regardless of citizenship or ability to pay. The second service mandate is imposed by Obamacare itself, which requires insurance companies to “guarantee issue.” This means insurers must sell a policy to any individual seeking to purchase one, without regard to “health status” or pre-existing conditions. It thus requires insurers to carry individuals and assume risks and costs that those insurers would not otherwise assume. Significantly, those challenging Obamacare’s purchase mandate have conceded the constitutionality of each of these two service mandates—both the one imposed on the hospitals and the one on the insurers.
Given the union agency fees case law, these healthcare service mandates justify imposing an offsetting mandate to purchase insurance on all of us because we are all guaranteed those mandated healthcare services. Without such a purchase mandate, individuals could free ride on the service mandates by declining to buy insurance, knowing that they would still get emergency care they cannot afford and would still be able to buy insurance at low rates later when they get sick. Congress is thus entitled to impose a purchase mandate to make sure individuals cover: (1) the costs hospitals incur in providing emergency treatment, and (2) the costs that result from “guaranteed issue.” Thus, the same free rider rationale that Justice Scalia cited in Lehnert to justify the agency fee purchase mandate applies equally to Obamacare’s purchase mandate.
Altogether, this means that, if it is to be consistent, the Supreme Court has no choice but to uphold the constitutionality of Obamacare’s purchase mandate. Not only are such purchase mandates not unprecedented, but a purchase mandate with a strikingly similar rationale has affirmatively been approved by all but two members of the current Court.
Update: At the same time that this opinion piece posted, the Supreme Court released its opinion in the Knox case, which indicated the justices might be aware of this potential inconsistency. The Knox case concerned the adequacy of a notice to opt out of a special dues assessment for political union activities, which the Court struck down, rather than a mandate to pay a union for its collective bargaining services. However, the opinion of the five conservative justices went out of its way to say that, while they “do not revisit today” the constitutionality of a mandate to pay for collective bargaining services, they now thought the free-rider rationale (which they had previously approved) was an “anomaly.” This suggests that these justices may have anticipated the potential inconsistency between upholding the union fees mandate and striking down the health care mandate, and may be contemplating resolving this inconsistency by changing direction in the future on the underlying issue of agency fees.
Einer Elhauge is a professor at Harvard Law School, founding director of the Petrie-Flom Center in Health Policy, and editor of The Fragmentation of U.S. Health Care—Causes and Solutions (Oxford University Press 2010). Emily M. Bass is a New York constitutional law and intellectual-property attorney. She blogs at http://basslaw.wordpress.com.