One Year Out: Health care law and "minimum essential coverage"

March 9, 2011

Health Care

(Editor’s Note: As we approach the one-year anniversary of the enactment of the Patient Protection and Affordable Care Act (PPACA) a.k.a. the 2010 Health Care Bill, or “Obamacare” depending on the source, we’ll be looking at the state of the legal challenges to the law in a series of blogs throughout March.  Specifically, we’ll look at pertinent points of law that are at the center of any analysis of the law.)

As of today, two judges have ruled against the law’s constitutionality, while three have done the opposite.

One of the cases ruling against the law based much of its findings on the issue of whether the Minimum Essential Coverage Provision of the health care law was within congress’s power under the U.S. Constitution.

The provision, which takes effect in 2014, requires that all U.S. citizens, except those specifically exempted, maintain a minimum level of health insurance coverage.  Those not in compliance face a tax penalty, and such is regulated as part of the Internal Revenue Code.

In finding the provision unconstitutional, the federal court in Virginia relied on United States v. Butler, along with other New Deal-era decisionsButler dealt with New Deal legislation that directly taxed farm product processors and paid the proceeds directly to farmers who adhered to certain congressionally-determined conditions.

The Butler court ruled the law unconstitutional because it found that the tax was meant solely as a vehicle to regulate an area that the court felt was strictly reserved for the states (farming and agriculture).  Basically, the Court concluded that while the Spending Clause gave congress broad taxation powers, it was never intended as a vehicle to destroy the local self-government of the states.

The Virginia court’s reliance on Butler is somewhat flawed for several reasons.

First, Butler, while it has not been explicitly overruled, is a 75-year old case.  Since then, no other Supreme Court case has struck down any Act of Congress for overstepping its Spending Clause authority.

Next, Butler dealt with farming regulation in a very limited scope.  While farming regulations have traditionally fallen within the police powers of individual states (and probably still does to a large extent), insurance regulation has seen complex changes over the past 50 years.

In fact, there is well-developed jurisprudence dealing with where the line is drawn between state regulation and federal regulation of health insurance.

1945’s McCarran-Ferguson Act gave states power to regulate the “business of insurance.”  “Business of insurance” was better defined by the Supreme Court in Union Labor Life v. Pireno.

What does all of this law tell us?

“Business of insurance” applies only to insurance companies and insurance industry practices.  As such, a provision requiring individuals to purchase a product does not fall within the rights specially conferred on the states.

Unfortunately for the Virginia court, Butler was its best bet for attacking the Minimum Essential Coverage Provision.  Because of Butler’s weakness in the ruling, should the case be heard by the Supreme Court, its chances of survival are low.

That conclusion assumes, of course, the Supreme Court uses precedent, rather than ends-based reasoning, to reach a judgment.

What are your thoughts about the Virginia court’s decision?  Will the Supreme Court overrule or affirm it?  Will it even get reviewed?  Is the PPACA unconstitutional in part or wholly?