The National Individual Health Insurance Mandate

On March 23, 2010, President Obama signed into law the nation's first comprehensive health care reform bill, the Patient Protection and Affordable Care Act. Within weeks, twenty states filed lawsuits challenging the constitutionality of its most politically charged feature—an individual purchase mandate. By 2014, the bill requires most individuals to have health insurance. With certain exceptions (pertaining to income level and religious objections), individuals without qualifying coverage will pay an annual tax penalty reaching the greater of $695 ($2,085 per family maximum) or 2.5 percent of household income.¹

If anything, the tax penalty is too low compared with the cost of insurance, so it may not provide sufficient incentive for healthy individuals to purchase insurance. But it remains controversial because it compels people to purchase coverage they choose not to have, raising the question whether Congress can lawfully and ethically require individuals to contract with, and transfer money to, a private party.² To be sure, the individual mandate lacks a clear American precedent. (It has worked successfully in other countries, such as Australia.) Compulsory automobile insurance, for example, is a state requirement, operates as a condition of exercising the privilege of driving, and requires coverage for injuries to others (not the insured).

Personal Freedom and Collective Goods in Conflict

Opposing a mandate is understandable when viewed from an individual perspective: it interferes with economic freedom and constrains personal choice. In economic terms, it represents a compelled cross-subsidy. However, when viewed from a collective perspective, the mandate offers valuable social benefits. The absence of health insurance creates harmful consequences, including lower quality of life, increased morbidity and mortality, and higher financial burdens.³

Since these adverse consequences fall mostly on those who lack insurance, the decision to seek insurance arguably should be left to them. However, government is responsible for the well-being of the community, not particular individuals. Even if the decision were primarily self-regarding, its effects—illness and death—can be felt by all.

Many individuals cannot afford insurance, but others choose not to insure; over nine million people with annual incomes over seventy-five thousand dollars had no coverage in 2007.⁴ Yet many previously healthy people suffer illness or injury and end up requiring treatment in emergency departments, most of which is uncompensated. "Free riders" rely on society to pick up the costs (forty-three billion dollars in 2008) through higher insurance premiums (above one thousand dollars annually) and higher taxes (such as hospital subsidies, Medicaid, and Medicare). Individuals often delay purchasing insurance until they become ill, creating an "adverse selection" problem for insurers. At its worst, free-riding and adverse selection create a downward spiral of higher premiums and a shrinking insurance pool, making everyone's health care less affordable.⁵

The Mandate's Constitutionality

The pivotal constitutional concern is that government will penalize individuals for failing to buy health insurance—for "doing nothing"—simply because they are legal residents of the United States. The states could undoubtedly mandate health coverage, as with the Massachusetts Health Care Reform Plan of 2006. But the federal government has limited power; its principal enumerated powers are to regulate interstate commerce and to tax for the general welfare. The Supreme Court, however, has broadly construed federal powers—known as the "implied powers" doctrine—to uphold laws that are "necessary and proper." By this reasoning, the Court ought to uphold the constitutionality of the health insurance mandate.

The power to regulate interstate commerce.

The Supreme Court has interpreted the commerce power broadly, applying it to virtually every aspect of economic and social life. Indeed, from 1937 to 1995, the Court did not invalidate a single federal statute on the ground that Congress lacked the power to regulate commerce. Critics claim, however, that the individual mandates do not regulate activity of any kind, whether economic or not, but rather regulate "doing nothing at all."⁶ An individual decision not to purchase health insurance, they argue, also has negligible economic consequences, with purely personal and intrastate impacts.

Nothing could be farther from the truth. In terms of health, individuals never really "do nothing." Uninsured individuals...