Federal judge rules against Obama health care plan

December 13, 2010

A federal judge in Virginia has ruled that it is unconstitutional for the federal government to require people to buy insurance — a crucial piece of the health reform bill passed earlier this year.

Judge Henry Hudson ruled that the so-called individual mandate in the health reform law oversteps the power of Congress to regulate interstate commerce under the Commerce Clause in the US Constitution.

Although the judge’s ruling applies only to the mandate, that provision, scheduled to take effect in 2014, is a key part of the law. Without it, another much more popular provision — the rule prohibiting insurance companies from denying coverage to people with pre-existing conditions — would be difficult to sustain.

If insurance companies must sell policies to anyone, even if they are already sick or injured, and people are not required to buy insurance when they are healthy, consumers would have a strong incentive to not buy coverage until they needed it. That would be like letting people buy fire insurance while their house is on fire.

The idea of the individual mandate is to spread the risk in health insurance as broadly as possible by requiring everyone to have coverage. People who couldn’t afford it would be subsidized by the government.

The case is expected to be appealed, and to eventually reach the US Supreme Court.

But Hudson found that it would be unconstitutional for the federal government to require people to buy a private product — health insurance. He found nothing in the constitution or in case law that allows the government to impose such a requirement. It’s one thing, he said, to regulate economic activity. It’s an entirely different thing to regulate inactivity.

Here is a key paragraph from Hudson’s opinion:

A thorough survey of pertinent constitutional case law has yielded no reported decisions from any federal appellate courts extending the Commerce Clause or General Welfare Clause to encompass regulation of a person’s decision not to purchase a product, notwithstanding its effect on interstate commerce or role in a global regulatory scheme. The unchecked expansion of congressional power to the limits suggested by the Minimum Essential Coverage Provision would invite unbridled exercise of federal police powers.

The Obama Administration had argued that the mandate’s enforcement mechanism, a fine on those who failed to buy coverage, was really a tax, and outside the court’s purview in this case. But the judge said the fine was not a tax — and noted that the Administration said the same thing during the debate over the bill.

One easy fix would be for Congress to impose a health care tax and then offer a credit of an equal amount to anyone who could show proof of coverage. That would have the same effect as the mandate but would clearly rest within the taxing powers of Congress.

That would have been an easy fix, if the Democrats still controlled Congress. But Republicans are not going to pass such a tax, and their opposition will be even greater if it is portrayed as a way to save the reform legislation.

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