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The Minimum Coverage Requirement Oral Argument: A Comprehensive Discussion By Timothy Jost



March 27th, 2012

The central issue in the Affordable Care Act (ACA) litigation, or at least the issue that has received the most media and public attention, is the constitutionality of the minimum coverage requirement, commonly called the individual mandate.  Section 5000A of the Internal Revenue Code, added by the ACA provides:

An applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month.

“Applicable individual” is defined broadly to include citizens and legal residents of the United States who are not incarcerated and do not have a religious objection to being insured or belong to a health care sharing ministry.  “Minimum essential coverage” includes most forms of insurance, including Medicare, Medicaid, employer-sponsored insurance, and individual coverage.

The minimum coverage requirement will be enforced after 2014 by a penalty, which will have to be paid along with taxes.  Many Americans will be exempted from this penalty, however, including persons whose household income falls below the tax filing limit (currently $8500 for individuals and $19,000 for joint filers) and persons who cannot find a basic high-deductible policy that costs 8 percent or less of their income.  The “below 8 percent” exception will exempt from the penalty middle-income Americans who do not have access to affordable employer-sponsored insurance and whose household income exceeds 250 percent of the federal poverty level (and are thus not eligible for premium tax credits that would reduce their premium liability to 8 percent).

The Congressional Budget Office estimates that in 2016, an individual ‘bronze” policy will cost between $4500 and $5000 and a family policy between $12,000 and $12,500; thus, an individual with income below $56,000 and a family with an income below $150,000 would not be subject to the penalty.  The penalty also does not apply to individuals who are uninsured for less than 3 months, to Native Americans, or to persons who qualify for a “hardship” exception.   This is hardly a penalty that applies to all Americans who do not purchase health insurance, from cradle to grave, as it has been portrayed.  Several justices, including Chief Justice Roberts, expressed skepticism on the first day of oral arguments whether the coverage requirement and penalty could be separated; thus, the Court might well view the requirement as not actually applying to millions of Americans not covered by the penalty.

Opponents of the ACA identified the requirement as the Achilles heel of the legislation, and the day the ACA became law, lawsuits began to be filed claiming that Congress had no constitutional authority to adopt a requirement that Americans purchase a product in private markets.  Cases were filed by state governors and attorney generals in federal courts in Florida and in Virginia and by private parties in many other federal courts. The Sixth Circuit and District of Columbia Circuit federal courts of appeals held the provision to be constitutional, but the Eleventh Circuit held it to be unconstitutional.  A number of other federal courts held that they lacked jurisdiction to consider the question.

The Supreme Court agreed to review the federal government’s appeal of the Eleventh Circuit decision.  The federal government argues that Congress had authority to enact the minimum coverage requirement under its power to regulate interstate commerce (the “Commerce Clause”) and to collect taxes (the “Tax and Spend” power) — since the penalty is arguably a tax — augmented by its power to enact laws “necessary and proper” to the exercise of its other powers.  The states argue that the minimum coverage requirement is  “an unprecedented law that rests on an extraordinary and unbounded assertion of federal power.”

The federal government was represented in the March 27, 2012 oral argument by Solicitor General Donald Verrilli Jr., who was allotted one hour to argue his case.  The attorney representing the states, Paul Clement, had one half hour to argue, as did Michael Carvin, who represents the private plaintiffs.

Four sure votes to uphold the ACA, but an uphill climb for a fifth one. One thing is clear after the March 27 oral argument, the second of four arguments over three days:  The federal government has four votes for upholding the minimum coverage requirement.  It is also clear, however, that there is no obvious fifth vote for reversing the Eleventh Circuit.  Justice Thomas, as is his wont, remained silent through the entire argument, but his vote has never been in question.  Chief Justice Roberts and Justices Scalia, Kennedy, and Alito, however, pelted the Solicitor General repeatedly with pointed questions, rarely giving him a chance to complete an answer.  Justices Kennedy and Roberts, however, showed just enough skepticism regarding the arguments offered by the state and private parties to leave the result in doubt.

Solicitor General Donald Verrilli’s Argument For The Government

Solicitor General Verrilli began his argument by describing the dysfunctional market for health insurance in the United States and the inadequate steps that the federal government had taken prior to the ACA to address this issue.  Justice Scalia interrupted immediately, asking why the federal government did not address this problem directly.  General Verrilli attempted to explain how Congress had addressed the problem in the ACA, but Justice Kennedy then raised the question that would be repeated over and over again in different forms for the next hour:  “Can you create commerce in order to regulate it.”

General Verrilli replied that what was being regulated was the purchase of health care, an economic activity with substantial effects on interstate commerce, prompting Justice Scalia to ask the limiting principle question, also repeated throughout the argument:  Does any failure to purchase in a market subject a person to regulation?  General Verrilli attempted to explain how the coverage requirement works — it exempts certain people from regulation (those with religious objections, the incarcerated), but argued that everyone else is in fact already in the market for health care.

This provoked a series of questions from Justice Roberts  and Justice Alito as to other hypothetical markets that everyone might be engaged in.  Could Congress require everyone to have a cell phone to reach 911 since an emergency could happen to anyone?  Could Congress require everyone to buy burial insurance since we all die?  General Verrilli attempted to articulate a difference based on the necessity of the coverage requirement to prevent cost shifting in health care markets, but Justice Alito turned this argument against him, pointing out that the effect of the coverage requirement was to create more cost-shifting, by shifting costs on to the young and healthy to insure unhealthy individuals.  Finally Justice Ginsburg came to General Verrilli’s rescue, pointing out that that is how insurance works.  General Verrilli attempted to develop this point — in the absence of a minimum coverage requirement, guaranteed issue and community rating increase the cost of insurance making it less, not more, available.

A skeptical question from Justice Kennedy. Here Justice Kennedy weighed in with a statement most discouraging to those who had hoped he would be the fifth vote for upholding the law:

Assume for the moment that this is unprecedented, this is a step beyond what our cases have allowed, the affirmative duty to act to go into commerce. If that is so, do you not have a heavy burden of justification?  I understand that we must presume laws are constitutional, but, even so, when you are changing the relation of the individual to the government in this, what we can stipulate is, I think, a unique way, do you not have a heavy burden of justification to show authorization under the Constitution?

General Verrilli responded by noting that the plaintiffs had conceded that Congress could require people to be insured at the point at which they consumed health care, so the only issue was one of timing.  Congress was simply requiring people who were certain to use health care to purchase insurance before rather than when they did so.

Justice Scalia responded that everyone may use health care, but not everyone needs a liver transplant.  Moreover, everyone is in the market for food — can you make people buy broccoli?  (It was, I suppose, only a matter of time until someone got to the broccoli sound bite, though Scalia had to strain to get there).  General Verrilli began to distinguish the markets for health care and food — the use of health care is less predictable; health care must be provided without cost if you cannot afford it — but Justice Scalia interrupted, asking: Is there a principle under which the coverage mandate can be brought within the enumerated powers of Congress?

General Verrilli began to answer, but Justice Ginsburg again came to his rescue, noting that one brief had pointed out that hospital bills in Maryland cost 7 percent more because of the costs imposed by those who choose to self insure.  Justice Breyer at that point chimed in, responding to previous questions posed by Roberts and Alito, asserting that Congress could perhaps require prepayment for cell phones and burials if those markets were as heavily regulated by the federal government and as dysfunctional as the market for health care.

In response to a further question from Justice Kennedy regarding the limits to federal power under the Commerce Clause, General Verrilli responded that Congress cannot create demand, but can respond when people are already participating in a market, as they are in health care.  Here the Chief Justice brought up broccoli again—isn’t broccoli just a means to an end like health insurance?  Justice Ginsburg came to the rescue again, returning to the cost-shifting argument, but Justice Scalia wasn’t having it—the price of everything goes up if people refuse to buy it.  Congress could always justify mandating purchases to increase demand.  General Verrilli responded that the difference was that people get health care whether they pay for it or not—it is not simply a matter of increasing demand.  Justice Scalia responded that we do not need to obligate providers to provide health care, but General Verrilli fairly responded that Congress has simply responded to a “deeply embedded social norm” of caring for people in emergencies.

At this point, it was Justice Sotomayor’s turn to try to get the argument back on track.  She laid out at some length the three arguments she understood the government was trying to make.  One advantage of being a Justice is that you can talk without being interrupted.  First, mandated purchase is necessary if Congress requires insurers to issue coverage to all applicants.  Second, the government can regulate self-insurance.  Third, everyone uses health care and the government can require you to pay for it ahead of time.  With additional prodding from Justice Kagan, General Verrilli rearticulated this argument, stressing that Congress has wide latitude to choose the means through which it addresses a problem it perceives with commerce.

This argument elicited some sympathy from Justice Kennedy, who acknowledged that Congress could have solved the problem by establishing a single payer system (although under a different enumerated power) so perhaps it could reach the same result through the Commerce Clause.  When General Verrilli tried to build on this, arguing that Congress was merely trying to use private markets to fix our broken health care system, Justice Scalia slapped him down—repeating that Congress is trying to creating rather than regulating commerce.

Justice Scalia proceeded to argue that although the coverage requirement may be “necessary” to regulate insurance markets, it may not be proper if it violate the sovereignty of the states.  Congress has limited powers under our Constitution.  If Congress can do this, what can’t it do? General Verrilli responded that the boundary of the power is Congress is that it can only regulate economic activity that has a substantial effect on interstate commerce, and Congress already heavily regulates health care.

A Scalia comment suggests a likely vote against the minimum coverage requirement. At this point it became quite evident that Justice Scalia was a lost cause:

I mean, the Tenth Amendment says the powers not given to the Federal Government are reserved, not just to the States, but to the States and the people. And the argument here is that the people were left to decide whether they want to buy insurance or not.

This was followed by an extended colloquy between the Chief Justice, Justice Alito, and General Verrilli about whether it was necessary to make healthy people buy the full essential benefits package to cross subsidize the unhealthy, but Verrilli correctly responded that cross-subsidization is common in economic regulation, and that, in any event, young people would eventually need health insurance so they were ultimately subsidizing themselves.  Scalia argued this point at length, acknowledging that there was a problem here, but arguing that forcing people into the market was not the solution.

Chief Justice Roberts picked up this theme and pursued it at length—if we allow compelled purchase in this market, what are the limits?  Justice Alito joined in this question.  General Verrilli gave it one more shot:  Congress can require participation in a market 1) when it is necessary to carry out an otherwise authorized comprehensive regulatory scheme and 2)  when the issue is merely one of the timing of a purchase of a product people are certain to need at some point in any event.

General Verrilli then turned to the argument that the minimum coverage requirement is an appropriate exercise of the taxing power.  The primary question here is whether the exaction that enforces the requirement is a penalty or a tax, and whether it makes a difference.  The federal government had argued, of course, on the first day of argument that the exaction is not a tax for purposes of the Anti-injunction Act, and had thus made the argument that it is a constitutional tax more difficult for itself.  General Verrilli defended the position that the exaction is in fact a tax for constitutional purposes, despite probing questions from not only the Chief Justice and Justice Alito but also from Justices Ginsburg, Sotomayor, and Kagan.  None of the Justices seemed extraordinarily sympathetic to the tax argument, but none seemed to completely reject it, except possibly Justice Scalia, who having asked whether the government believed the power to tax independently justified the coverage requirement, ended Verrilli’s argument with the exclamation, “extraordinary.”

Paul Clement’s Argument For The States

Mr. Clement then stepped to the podium, representing the states.  Almost immediately, Justice Sotomayor asked whether Mr. Clement in fact conceded that Congress could force people to purchase insurance at the point that they actually consumed health care.  Clement replied affirmatively, prompting Justice Kagan to ask whether the question was not simply one of timing, to which Mr. Clement replied that it was not, because Congress also applied the requirement to those who did not want to purchase insurance and did not need health care.

To this Justice Kennedy stated that he understood the government to argue that persons not using health care were in fact an “actuarial reality” as well, to which Mr. Clement responded that it was the intent of Congress to force the young and healthy into the market to subsidize the unhealthy.  Justice Ginsburg noted that is how Social Security works — why can’t this be done through private markets?  Justice Sotomayor probed further—could the government simply tax everyone, but exempt those who were insured from the tax (effectively, what the minimum coverage requirement penalty does).  Mr. Clement seemed to concede this for a moment, but then argued that this would be an unconstitutional direct tax.  (See here if this argument provokes your curiosity).

At this point Justice Breyer launched into an extended series of hypothetical situations under which Congress had arguably forced someone to engage in commerce (creating the Bank of the United States or prohibiting people from growing their own wheat) or could in the future (requiring mass vaccinations in the face of an epidemic).  Mr. Clement attempted to distinguish each case, asserting that Congress had simply regulated people already in the market rather than forcing people to engage in commerce.

Is health care or health insurance the relevant market? The Chief Justice pointed out that the government’s argument was that everyone was in the market already in this case, but Mr. Clement responded that the regulated market was the health insurance market, not health care, and not everyone was in the market.  To Justice Kagan’s subsequent question — whether the two markets could be separated — Mr. Clement responded in the affirmative.  He also vigorously rejected Justice Sotomayor’s attempt to analogize car insurance mandates (which are state law and depend on someone already having a car), as well as Justice Kagan’s further attempt to merge the markets for health care and health insurance.

Mr. Clement’s response to Justice Kagan’s question, however, brought in Justice Kennedy again, who asked whether the uninsured aren’t already in the health insurance market to the extent that they create a risk for which the market must account.  At this point, Mr. Clement started pushing the argument that General Verrilli had such a hard time countering — the lack of a limiting principle once the federal government gains the authority to compel commerce, emphasizing (in response to further probing from Justices Breyer and Kagan) that the performance of every market in commerce could be improved if Congress could force people to participate in it.  Mr. Clement also raised again the argument that Justice Alito had raised earlier, that requiring healthy young people to subsidize insurance for unhealthy people also results in a huge cost shift.

Justice Breyer at this point offered his own limiting principles, noting that there was no slippery slope leading to a broccoli mandate.  (Broccoli was mentioned eight times in the two hours of argument.)  These limiting principles included those described earlier by General Verrilli, as well as the good sense of Congress not to adopt silly laws.  Mr. Clement responded that General Verrilli had not offered a limiting principle, but merely a description of the health insurance industry and that the Court should not default on its  responsibility to oversee Congress.   Mr. Clement concluded by arguing that the exaction was not a tax, and if it was it was an unconstitutional direct tax.

Michael Carvin’s Argument For The Private Plaintiffs

Mr. Carvin, representing the private plaintiffs, continued Mr. Clement’s argument that Congress has only the power to regulate, not to promote commerce.  But the Chief Justice and Justice Ginsburg pushed back:  Isn’t Congress merely trying to deal with the problem of free riders who are already engaged in commerce by using health care, but not paying for it?  Mr. Carvin tried to argue that the free riders were “an entirely different group of people” than the uninsured, but were only “statistically connected” to them, and thus not subject to regulation.

Justice Breyer raised again his hypothetical of an inoculation mandate in the face of a mass epidemic, but Mr. Carvin stood his ground, claiming that the federal government would not have the power to do this, just as it did not have authority to outlaw violence against women.  Here Justice Alito came to the aid of Mr. Carvin, noting that the real problem here was that Congress had created a problem requiring hospitals to treat patients in emergencies without prepayment, and that now it was trying to solve the problem it had created.  Justice Breyer probed further, asking if Congress could not require the installation of antipollution devices in cars because of a statistical relationship to pollution, but Mr. Carvin again said that this would be regulation of preexisting activity.

Justice Ginsburg then returned to the question she had asked Mr. Clement, if government can require people to contribute to Social Security, why can’t it require people to participate in essentially a private social security system.  Mr. Carvin responded once again that Congress can only regulate commerce, not force people into it.  Going around one more time, Justice Kagan (with support from Justice Roberts) reiterated the government’s argument that people are already in the health care market, not being forced into it, but Mr. Carvin again said that the uninsured were not the same as those who consume uncompensated care, simply “statistically related.”  Justice Sotomayor pressed on, noting that all regulation involved compulsion, joined by Justice Breyer who invoked Judge Sutton’s concurring opinion in the Sixth Circuit case.  Mr. Carvin yielded no ground, continuing to argue that Congress could require insurers to guarantee issue and community rate without the mandate and could require people to purchase insurance when they attempted to use emergency health care services, but not before.

Justice Kennedy gives hope to Affordable Care Act supporters. A colloquy between Justice Sotomayor and Mr. Carvin ensued in which the Justice contended that the mandate was no different from current uses of regulation and tax subsidies to regulate commerce and Mr. Carvin arguing that the coverage requirement was completely different, prompting Justice Kennedy to observe (offering some hope to supporters of the law):

And the government tells us that’s because the insurance market is unique. And in the next case, it’ll say the next market is unique. But I think it is true that if most questions in life are matters of degree, in the insurance and health care world, both markets — stipulate two markets — the young person who is uninsured is uniquely proximately very close to affecting the rates of insurance and the costs of providing medical care in a way that is not true in other industries.

Mr. Carvin’s argument concluded with a discussion led by Justice Kagan (but joined in briefly by Justice Alito) of whether the activity/inactivity dichotomy was any more viable than many dichotomies that the Court has rejected over the years in interpreting the Commerce Clause.  Mr. Carvin maintained that the real distinction he was arguing was between commerce and non-commerce, and that was textually grounded in the Constitution.

At this point, General Verrilli retook the podium and was allowed to complete his reply without interruption, summarizing both his Commerce Clause and taxation arguments.

Assessing The Arguments And Reading The Tea Leaves

I had gone into this argument expecting, based on the briefs, a stronger showing from the federal government.  General Verrilli was pressed very hard by the Chief Justice and Justices Scalia, Alito, and Kennedy.  He seemed often to lose his way and rarely seemed to respond decisively to questions, although he was rarely given much of a chance to respond before being hit again.  In particular, he did not seem to satisfy the more conservative justices’ search for a “limiting principle.”   Mr. Clement and Mr. Carvin were also pressed hard, but seemed better able to respond.  Their responses, on the other hand, became repetitive and often did not seem to move the ball.  They did not convincingly explain why the minimum coverage requirement was not a proper response to the cost-shifting problem.

As I said at the outset, it is clear that the four Democratic appointees on the Court will vote to uphold the requirement.  It is very likely that Justice Thomas and Justice Scalia will not.  Justice Alito also seems like a long shot.  But although Justices Kennedy and Roberts pushed General Verrilli hard, they did not seem entirely to side with Mr. Clement and Mr. Carvin.  The game is not over yet.

Editor’s note: Timothy Jost signed an amicus brief by health policy history scholars in support of the constitutionality of the ACA’s minimum coverage requirement. For more on the debate over the constitutionality of the Affordable Care Act’s minimum coverage requirement — or individual mandate — and day two of the Supreme Court’s oral arguments concerning the ACA, see additional Health Affairs Blog posts by Marc Rodwin, William Sage, Alice Noble and Mary Ann Chirba, Sara Rosenbaum, and Wendy Mariner.

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2 Trackbacks for “The Minimum Coverage Requirement Oral Argument: A Comprehensive Discussion By Timothy Jost”

  1. Commentary on Yesterday’s Supreme Court Action | The Doctor Weighs In
    March 28th, 2012 at 7:28 pm
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    March 28th, 2012 at 7:11 am

1 Response to “The Minimum Coverage Requirement Oral Argument: A Comprehensive Discussion By Timothy Jost”

  1. civis isus Says:

    Saw this posted & felt it might be of interest re: the search for a limiting principle:

    Justice Scalia’s Law School Economics (Matt Yglesias, Slate)
    http://www.slate.com/blogs/moneybox/2012/03/28/justice_scalia_s_law_school_economics.html

    “…It’s true that in a market for health insurance characterized by regulations limiting firms’ ability to screen customers for health status that expanding the pool of customers will lower average prices.

    But that’s not true of the market for cars or broccoli or anything else.

    Scalia seems to me to have stumbled right in to the limiting principle he’s asking for, namely that the minium coverage rule is a way of reducing average prices in the special circumstances of an insurance market in which Congress is seeking to ban health status discrimination.”

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