The Price of Health Insurance and the Tenth Amendment

The more policyholders file claims, the more pressure there is for insurance companies to raise the price of premiums. Insurance companies cope with such pressure with several tactics. They can raise the premiums of those who file claims, and they can raise the premiums of those who pose higher-than-average risk, like teenage drivers. They can also refuse to insure those who could file particularly expensive claims, such as refusing to offer flood insurance to those who live in oceanside communities, especially if they’re below sea level, like parts of New Orleans. Such tactics aim at keeping the average premium affordable.

However, the standard practices that the insurance business has used to keep the price of premiums affordable have been disallowed in one sector of the industry: health insurance. Both state and federal governments have instituted the twin policies of “guaranteed issue” and “community rating” in health insurance. The former stipulates that nobody can be denied health insurance due to “preexisting conditions,” and the latter ordains that everybody pays the same for premiums. Both policies put an upward pressure on premium prices, and have led to serious problems when tried in the states.

It may seem a strange link, but in his recent ruling in King v. Burwell, Chief Justice Roberts wrote a concise little history of what happened in states that instituted the twin policies. Roberts’s history is in Section I-A, which begins on PDF-page 7 and runs for all of two pages; it’s worth reading:

This cycle happened repeatedly during the 1990s. For example, in 1993, the State of Washington reformed its individual insurance market by adopting the guaranteed issue and community rating requirements. Over the next three years, premiums rose by 78 percent and the number of people enrolled fell by 25 percent. By 1999, 17 of the State’s 19 private insurers had left the market, and the remaining two had announced their intention to do so. […]

For another example, also in 1993, New York adopted the guaranteed issue and community rating requirements. Over the next few years, some major insurers in the indi­vidual market raised premiums by roughly 40 percent. By1996, these reforms had “effectively eliminated the com­mercial individual indemnity market in New York with the largest individual health insurer exiting the market.”

As Roberts chronicles, the twin policies of guaranteed issue and community rating tore up the health insurance business in states adopting them; premiums soared due to “adverse selection” and companies fled the states in fearsome “death spirals.” However, a solution developed in Massachusetts in 2006 which was later cemented into ObamaCare. The solution involved tax credit subsidies, the issue in King, and the “individual mandate,” one of the issues in NFIB v. Sebelius.

The Left often tells us that the individual mandate is a conservative idea. But at Forbes in “How the Heritage Foundation, a Conservative Think Tank, Promoted the Individual Mandate,” Avik Roy wrote in Oct. 2011 that the inclusion of the individual mandate “in Obamacare is today its most controversial feature on the Right.” Heritage filed an amicus brief stating: “Heritage has stopped supporting any insurance mandate.”

The individual mandate posed a problem for Justice Roberts. In NFIB, he wrote on PDF-page 50: “The Federal Government does not have the power to order people to buy health insurance. Section 5000A would therefore be unconstitutional if read as a command.”

Yes, but why is the individual command unconstitutional? Roberts contends that the Commerce Clause doesn’t extend that far. But could it have something to do with the Tenth Amendment?

Roberts mentions the Tenth only once in NFIB, i.e. when he referred to the Court of Appeals on PDF-page 17: “And the court rejected the States’ claim that the threatened loss of all federal Medicaid funding violates the Tenth Amendment by coercing them into complying with the Medicaid expansion.” The Supreme Court reversed that and held that the States would not lose all Medicaid funding if they did not expand Medicaid. Furthermore, on PDF-page 53, Roberts wrote: “That insight has led this Court to strike down federal legislation that commandeers a State’s legislative or administrative apparatus for federal purposes.” To back that up, Roberts cites Printz v. United States and New York v. United States, and both those cases touch on the Tenth and commandeering, especially New York.

There may be a link between the Medicaid expansion issue and the individual mandate issue: the Tenth Amendment. You see, the Tenth Amendment reserves undelegated powers not only to the States but to the people as well. So if Congress cannot commandeer the States for federal purposes, how can they commandeer the folks? But that’s what the individual mandate does; it commandeers the people in order to make a federal program, ObamaCare, workable. Without the individual mandate, the twin policies of community rating and guaranteed issue would make health insurance unaffordable.

Justice Roberts rescued the individual mandate by bringing it into the ambit of the power to tax. By Roberts’s reasoning, Congress can tax the people for not doing what Congress cannot command the people to do, yet Congress cannot punish States for not doing what Congress cannot commandeer the States to do.

The Ninth Amendment refers to rights “retained by the people.” And the Tenth Amendment refers to powers “reserved to the States respectively, or to the people.” So it doesn’t seem too crazy to wonder whether “commandeering” the States might be akin to commanding the people if both are for furthering a federal program, like ObamaCare. At the Tenth Amendment Center, Mike Maharrey explores the “anti-commandeering doctrine” and reminds us (link added):

James Madison asserted in Federalist 45, the powers of the federal government are “few and defined.” So federal power actually extends into only a few spheres. Most power and authority was left to the states and the people.

The ruling in King v. Burwell was disappointing to some on the Right. But regardless of which way the Court had gone in King, the issue of healthcare and health insurance will be big in the 2016 elections. For the Democrats the issue will be getting more folks on Medicaid or fixed up with subsidies. Democrats will urge us to help make the ACA work “even” better. Democrats will urge us to accept ObamaCare, and “move on” -- it’s the “law of the land,” don’t cha know.

However, in a disturbing article at Breitbart on July 6, Chriss W. Street reported: “When health insurance costs are going up by an average of 30 percent in 2016, Obamacare sticker shock will almost certainly dominate the 2016 elections.” (The old individual mandate doesn’t seem to be working well at keeping the price of premiums down; perhaps a bailout of the insurance companies is in our future.)

For Republicans, the issue in 2016 should be: the replacing of ObamaCare with something that is constitutionally beyond reproach. That would involve throwing out the individual mandate. Americans have always bristled at that command anyway, and some might even sense that it is fascistic. But at the very least, a federal command on the people to buy something with their own hard-earned money in order to make a federal program feasible is un-American.

Just as have the feds and the States, the People have sovereignty, too.

Jon N. Hall is a programmer/analyst from Kansas City. 

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