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April 3 2018

States Seek to Revisit Supreme Court Ruling on Mandate to Buy Health Insurance

by Erin Hawley

In late February, twenty states launched the latest legal assault on Obamacare.  According to the States, the very case that first upheld Obamacare—NFIB v. Sebelius—now compels the federal courts to strike it down after the Tax Cut and Jobs Act of 2017. 

NFIB upheld Obamacare because of the majority’s conclusion that the “penalty” attached to the individual mandate was actually a “tax.”  The Tax Cut and Jobs Act, however, zeroed out that penalty, thus leaving the mandate without this constitutional foothold.  At a minimum, the States most recent challenge again highlights the myriad of problems with the Supreme Court’s decision in NFIB.

Obamacare’s individual mandate requires us all (with certain exceptions) to purchase health insurance.  Over nearly a decade, we’ve grown accustomed to the idea that the government can force us to enter the marketplace and buy a product.  But there was and is nothing ordinary about the nature of power wrested from us by Obamacare.  That law marks the first time that any Congress in the history of our nation has required Americans to buy something.

Under the Constitution, the federal government is one of limited, enumerated powers.  As a result, Obamacare (or any law) is constitutional only if it is a valid exercise of one of Congress’s powers.  The Obama Administration’s reading of the Commerce Clause turned the federal government into one of broad, unlimited powers.  In its view, the Commerce Clause was not restricted to existing Commerce, rather Congress could force Americans to enter a market and purchase a product.  As the late Justice Scalia famously remarked, “Everybody has to buy food sooner or later, so you define the market as food, therefore, everybody is in the market; therefore, you can make people buy broccoli.”

Five justices were clear that the Commerce Clause does not stretch so far as to require Americans to buy vegetables or purchase health insurance.  Unfortunately, that was not the end of the case. 

A different majority looked to the penalty provision of Obamacare to find a constitutional power capable of upholding the statute.  Those justices acknowledged that the most natural reading of the penalty provision was that the penalty was, surprise, surprise, a penalty.  Using a doctrine intended to save unconstitutional statutes, however, this second majority concluded that it was “fairly possible” for the penalty to be construed as a tax.  And presto.  The individual mandate became a constitutional exercise of Congress’s taxing power. 

All of this changed on December 22, 2017, the States argue.  On that day, the Tax Cuts and Jobs Act of 2017 zeroed out the penalty provision attached to the individual mandate.  This creates new constitutional problems for Obamacare because it is far from clear that the penalty provision functions as a tax any longer.  Under NFIB, the penalty provision operates as a tax because it raises “at least some revenue for the Government”—“the essential feature of any tax.”  The penalty provision no longer raises any revenue, however, and thus lacks this “essential feature” of a tax.  And of course, if the penalty is not a tax, then the taxing power cannot support the individual mandate.

The States also argue that the mandate is not severable from the rest of the statute.  Congress made clear that the individual mandate was “essential to creating effective health insurance markets,” and that its absence would “undercut Federal regulation of the health insurance market.”  As the Supreme Court has recognized, for example, the guaranteed issue and community rating requirements do not work without the mandate.  Because the rest of Obamacare no longer functions as intended by Congress, the States argue that “the whole Act must fall with the mandate.”  Finally.

Time will tell whether  the Supreme Court will revisit ObamaCare in this case, which is currently pending before a federal district court in Texas.

Disclaimer: Erin M. Hawley is IWF's legal fellow. Her husband, Josh Hawley, is the Attorney General of Missouri, one of the 20 states involved in this lawsuit.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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