Why I love not collecting on my life insurance, Goudy-Bachman edition

Federal District Court Judge Connor issued the Goudy-Bachman opinion while I was teaching class. By now, you know the highlights; I’ll give you some solid analysis.

Judge Connor agreed that “Congress undoubtedly has the power to regulate the national health care services and health insurance markets.” (at p.8) He distanced himself from conspiracy theories and “ominous predictions of the commerce power run amok” (at 32) like federal broccoli digestion camps. He also refused to channel Randy Barnett, rejecting clever linguistic dyads with a “been-there; done-that” dismissal:

This court rejects any distinction between activity and inactivity for purposes of Commerce Clause analysis. Such wordplay is imprecise and unhelpful to the court’s analysis and ultimate conclusion…The Supreme Court, on at least two occasions, has adopted linguistic distinctions in the context of the Commerce Clause only to later abandon them.  (at 32)

But Judge Connor ruled the individual mandate exceeded the Commerce Clause because it was issued “in anticipation of a probable but uncertain future transaction.” (at 32)

Section 1501 … is a mandate in anticipation. It regulates many individuals who have not yet entered the market—whether one defines the market as the broader market for health care services or the market for health insurance—in anticipation of their entrance into the health care services market…  To date, all exercises of Commerce Clause authority have proscribed or prescribed activity by individuals already engaged in commerce who are active in the relevant interstate market. (at 33-34)

The Court makes a major error here. How can one say Raich and Wickard were already engaged in commerce? They most certainly had not engaged in commerce. The most you could say is that they had a small effect on interstate commerce, which, when aggregated with many others similarly situated, was substantial. The closest this court comes to distinguishing Raich and Wickard is that they had a way to avoid the penalty – stop growing the plants:

Importantly, the respondents in Raich could stop cultivating and possessing marijuana and thus place themselves beyond the scope of the Controlled Substance Act. Roscoe Filburn, the farmer in Wickard, could avoid penalty by simply choosing to grow less wheat, or none at all. (at 36)

The Court concluded that the plaintiffs weren’t doing anything yet, so they have no such option to avoid the penalty; ergo the mandate exceeds the Commerce Clause. But by claiming that the Commerce Clause protects people who aren’t doing anything yet, Judge Connor’s argument collapses back into the action/inactivity distinction he so soundly rejected just a few pages previously.

Judge Connor fundamentally misunderstands insurance markets. I own life insurance. It didn’t pay off this year. Am I upset? No – I’m happy to be alive. I also have fire and auto insurance and I’m glad that mayhem didn’t strike. Insurance covers the risk of loss as well as the loss itself. Health insurance provides “coverage” even if you never get sick. I’m happy as a clam if the life and health insurance companies make money off me for years to come.

Likewise, staying out of the health insurance market clearly has an immediate, substantial effect on health insurance premiums for those who do participate. If millions of people opt out today, actuaries crunch their numbers and health insurance premiums change immediately for everyone else.

So Judge Connor is simply mistaken on the facts when he says:  “Congress cannot mandate or regulate in anticipation of conduct that may or may not occur in the future.” (at 36) He is thinking about actual medical claims years in the future, not the “coverage” value of insurance or the immediate effect on everyone else’s premiums. The choices made by the plaintiffs, when aggregated with other like-minded people, will undoubtedly alter health insurance premiums in the interstate market. Immediately.

In the rest of the opinion, Judge Connor walks a tight rope on which provisions in the ACA are “necessary.” He focused on the preexisting condition and guaranteed issue provisions.  When it comes to assessing severability, provisions that are “necessary” to the individual mandate will fall as well. But these two provisions are clearly constitutional themselves, as direct regulation of interstate insurance markets. If the individual mandate is “necessary” for the proper functioning of constitutional insurance market regulations, then the individual mandate may be “necessary” under the Necessary and Proper clause.

In essence, Judge Connor needs to argue that the mandate isn’t necessary to the insurance provisions, but the insurance provisions are necessary to the individual mandate. He fumbles a bit here, first on the Necessary & Proper Clause:

Absent the individual mandate, or some other source of subsidy, enforcement of these guaranteed issue and community rating provisions will likely drive insurers from the market, threatening the stability of the health insurance market. Hence, as currently written, these provisions are sustainable only in conjunction with the individual mandate. Moreover, these provisions are only part of a 907 page statute regulating and reforming the health care market. Indeed, other health insurance reform provisions have already gone into effect, such as the provision prohibiting preexisting condition exclusions for children under 19 years of age. See 42 U.S.C. §300gg-3. The individual mandate is clearly not essential to this provision, nor the Act’s other insurance reforms: its creation of health benefits exchanges, the imposition of penalties on employers who do not offer coverage or adequate coverage to their employees, or the Medicaid expansion. Viewed in context, the individual mandate is simply not essential to the larger regulatory scheme of the Act. (at 43)

When discussing severability four pages later, Judge Connor ignores this discussion and latches onto a concession from the government that he completely ignored heretofore:

The government conceded, however, that two insurance reform provisions—the preexisting conditions provision and the guaranteed issue provision—“are absolutely intertwined” with the minimum coverage provision and must be severed should the individual mandate provision be severed. (47)

You can’t have it both ways.

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