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Health Care Financing Reform (132): Judge Martin's Opinion in Obama v. Thomas More Law Center

by Professor Will Huhn on June 30, 2011

in Commerce Clause,Constitutional Law,Health Care,Wilson Huhn

Yesterday's post announced the decision of the Sixth Circuit in Obama v. Thomas More Law Center.  Judge Boyce Martin's opinion upholding the law tracks the federal government's legal arguments in support of the constitutionality of the Patient Protection and Affordable Care Act.

Judge Martin's opinion contains three principal propositions:

1.  As economic legislation, the PPACA enjoys a strong presumption of constitutionality.   The courts do not exercise independent judgment regarding the policy judgments justifying such a law.  The judgment of Congress must be upheld so long as there is a "rational basis" supporting it.

2.  Congress had a rational basis for believing that the PPACA (including the individual mandate) regulates conduct that, in the aggregate, has a substantial effect on interstate commerce.  Accordingly, Congress has the authority to enact the individual mandate under the Commerce Clause.

3.  The individual mandate of the PPACA is essential to the accomplishment of the goals of the statute as a whole in regulating health insurance in the nation as a whole.  Accordingly, the individual mandate is also constitutional under the Necessary and Proper Clause.

Below I quote passages from Judge Martin's opinion on all three points.

1.  Presumption of Constitutionality

The minimum coverage provision, like all congressional enactments, is entitled to a âpresumption of constitutionality,â and will be invalidated only upon a âplain showing that Congress has exceeded its constitutional bounds.â United States v. Morrison, 529 U.S. 598, 607 (2000). The presumption that the minimum coverage provision is valid is ânot a mere polite gesture. It is a deference due to deliberate judgment by constitutional majorities of the two Houses of Congress that an Act is within their delegated power . . . .â United States v. Five Gambling Devices, 346 U.S. 441, 449 (1953).

2.  Constitutionality Under the Commerce Clause

The Act considered as a whole makes clear that Congress was concerned that individuals maintain minimum coverage not as an end in itself, but because of the economic implications on the broader health care market. Virtually everyone participates in the market for health care delivery, and they finance these services by either purchasing an insurance policy or by self-insuring. Through the practice of self-insuring, individuals make an assessment of their own risk and to what extent they must set aside funds or arrange their affairs to compensate for probable future health care needs.  Thus, set against the Actâs broader statutory scheme, the minimum coverage provision reveals itself as a regulation on the activity of participating in the national market for health care delivery, and specifically the activity of self-insuring for the cost of these services.

The minimum coverage provision regulates activity that is decidedly economic. … By requiring individuals to maintain a certain level of coverage, the minimum coverage provision regulates the financing of health care services, and specifically the practice of self-insuring for the cost of care. The activity of foregoing health insurance and attempting to cover the cost of health care needs by self-insuring is no less economic than the activity of purchasing an insurance plan.

Furthermore, Congress had a rational basis to believe that the practice of self-insuring for the cost of health care, in the aggregate, substantially affects interstate commerce. An estimated 18.8% of the non-elderly United States population (about 50 million people) had no form of health insurance for 2009. U.S. Census Bureau, Income, Poverty, and Health Insurance Coverage in the United States: 2009, at 23, table 8 (2010). Virtually everyone requires health care services at some point, and unlike nearly all other industries, the health care market is governed by federal and state laws requiring institutions to provide services regardless of a patientâs ability to pay. The uninsured cannot avoid the need for health care, and they consume over $100 billion in health care services annually.

Self-insuring for the cost of health care directly affects the interstate market for health care delivery and health insurance. These effects are not at all attenuated as were the links between the regulated activities and interstate commerce in Lopez and Morrison.

3.  Constitutionality Under the Necessary and Proper Clause

Alternatively, even if self-insuring for the cost of health care were not economic activity with a substantial effect on interstate commerce, Congress could still properly regulate the practice because the failure to do so would undercut its regulation of the larger interstate markets in health care delivery and health insurance.

As plaintiffs concede, Congress has the power under the Commerce Clause to regulate the interstate markets in health care delivery and health insurance.

Under the process of âmedical underwriting,â insurance companies review each applicantâs medical history and health status to determine eligibility and premium levels. As a result of this practice, approximately thirty-six percent of applicants in the market for individual health insurance are denied coverage, charged a substantially higher premium, or offered only limited coverage that excludes pre-existing conditions. Department of Health and Human Services, Coverage Denied: How the Current Health Insurance System Leaves Millions Behind, at 1 (2009). The Act bans this practice through a guaranteed issue requirement, which bars insurance companies from denying coverage to individuals with pre-existing conditions; and a community rating requirement, which prohibits insurance companies from charging higher rates to individuals based on their medical history. 42 U.S.C. §§ 300gg, 300gg-1(a), 300gg-3(a). No one denies that Congress properly enacted these reforms as part of its power to regulate the interstate markets in health care delivery and health insurance. 

Congress rationally found that the minimum coverage provision âis essential to creating effective health insurance markets in which improved health insurance products that are guaranteed issue and do not exclude coverage of pre-existing conditions can be sold.â  42 U.S.C. § 18091(a)(2)(I). Congress had a rational basis for concluding that the minimum coverage requirement is essential to its broader reforms to the national markets in health care delivery and health insurance. Therefore, the minimum coverage provision is a valid exercise of the Commerce Clause power.

Judge Martin's opinion represents a standard application of principles of constitutional law and congressional authority as they have been understood and applied in cases such as NLRB v. Jones & Laughlin Steel (1937) (upholding National Labor Relations Act); West Coast Hotel v. Parrish (1937) (upholding state minimum wage law); Helvering v. Davis (1937) (upholding Social Security Act); United States v. Darby (1941) (upholding federal minimum wage law); Wickard v. Filburn (1942) (upholding federal law setting maximum allotments for farmers growing wheat); Heart of Atlanta Motel v. United States (1964) (upholding 1964 Civil Rights Act);  Katzenbach v. McClung (1964) (same); Perez v. United States (1971) (upholding federal law prohibiting loansharking); and Gonzales v. Raich (2005) (upholding provision of Controlled Substances Act as applied to marijuana grown for personal medicinal use).   Judge Martin's opinion is squarely in the tradition of those cases.

In the next post I will discuss Judge Sutton's separate concurring opinion from this case.

Professor Huhn has taught Constitutional Law at the University of Akron for over a quarter century. You may access his websites on Constitutional Law and Health Care Financing Reform for additional materials and information about those subjects. Drafts of his scholarly work are available from his author page at ssrn: http://ssrn.com/author=83790

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