June 29, 2012

Health Care's New Commerce Clause: Implications for Environmental Law

Although the Supreme Court upheld the Affordable Care Act’s requirement that most individuals purchase health insurance (called the individual mandate) as within Congress’ power to levy taxes, it stated that Congress lacked the power to enact it under the Commerce Clause.  Under prior case law, Congress could regulate activities substantially affecting interstate commerce by any means not offending the bill of rights.  Since the Affordable Health Care Act regulates a set of activities that substantially affect interstate commerce, namely the provision of health care (including insurance), it posed no substantial issue under that case law.  The objection to the “individual mandate” at bottom involved an effort by conservatives to defend individual liberty of the type protected by the Court during the Lochner era, when it created “substantive due process” doctrines to ward off progressive legislation. 

Yet, the Court agreed to redefine the issue as whether the activity regulated by a single provision of this plainly constitutional statute, namely the individual mandate provision, substantially affected interstate commerce.  On this matter, five justices—Alito, Kennedy, Roberts, Scalia, and Thomas—answered, in essence, that this provision regulated inactivity, the failure to purchase insurance. They created, out of whole cloth, a brand new constitutional principle that the federal government may not order somebody to purchase a product. 

If it were clear that ordering somebody to purchase a product was, as the Court seemed to imagine, an unprecedented extension of federal authority, the Court’s ruling would have little practical impact on federal power.  But consider the following question: 

Under the Clean Air Act, the government has the authority to order a company to install a pollution control device. Does use of this authority compel a firm inactive in the market to become a market participant against their will in violation of the Health Care ruling? 

It might seem, at first blush, that the statute authorizing such an order would clearly exceed Congress’ newly circumscribed power to regulate interstate commerce.  In order to install the device the owner would, after all, have to purchase it.  The Court at one point articulated a principle that the federal government may not compel “citizens to act as the Government would have them act.”  But that is exactly what a lot of regulation does, including regulations demanding private inspection of food, filing of reports, and disclosure of information about securities. 

Yet, there are many signs that the ruling will not invalidate all of the many regulations that compel action. The opinion contains significant doctrinal limits.  The Court said Congress may regulate what individuals do, not what they do not do.  The pollution control requirement does regulate an ongoing activity, pollution producing production, not inactivity, even if it does so by ordering a product purchase. 

The distinction between regulating activity and inaction, however, will likely prove as slippery as formal distinctions between direct and indirect effects that embarrassed the Lochner Court’s effort to limit federal Commerce Clause power.  The decision contains some hints about how the Court might approach this new line drawing.  Justice Roberts resisted characterization of ordinary individuals required to purchase insurance under the mandate as active in the health care market by virtue of their need for medical care on the grounds that they are not currently engaged in any commercial activity.  This current engagement test may indicate that those who are currently engaged in an activity can be required to purchase an item related to that activity. 

The Court’s decision not to rely on a distinction between the health products market, which the individual would surely participate in at some point, on the one hand, and the insurance market that the individuals targeted by the mandate consciously did not participate in, will prove significant.  It suggests that as long as there is some nexus between an ongoing activity and the purchase requirement, the courts will uphold the purchase requirement. 

There is some doubt whether this decision will have any practical value at all for businesses.  The Court seemed very focused on individual liberty.  Although doctrinally, the Court has virtually erased distinctions between corporations and real people, it remains easy to imagine defections from the opinion’s strict logic if applied to ongoing commercial concerns.  And businesses will, at least in ordinary cases, be hard pressed to argue a lack of engagement in commercial activity.    

On the whole, this decision will probably spur more litigation than direct results.  It will create whole new classes of arguments that lawyers can invoke to try to get courts to transform their feelings about regulation’s impingement on individual liberty into constitutional rulings—again.  Although I suspect that the victories from this new campaign against federal regulation will prove few in number and quite narrow, this new front on the regulatory battlefield will likely enrich a lot of lawyers.  It may also influence regulation indirectly.  Government lawyers advising agencies may give more weight to the new arguments than they merit and seek to narrow potential infringements of imagined liberty interests.  For example, federal agencies for a long time have moved away from requiring specific pollution control devices in favor of more flexible approaches like performance standards and emissions trading.  Doctrinally, all of these techniques do order somebody to purchase something, but usually somebody already engaged in a commercial activity, so the Health Care Decision creates no constitutional distinctions among these regulatory techniques.  Yet, government lawyers’ instincts tend toward mollification on the margins, and one can imagine them choosing the most flexible techniques possible, even where technical limitations (like monitoring difficulties) make them poor policy choices, to avoid an order to purchase a specific type of device.    

So, on the whole this decision does not, as the Court seems to imagine, address some unique sui generis situation making it wholly irrelevant to the mine-run of federal regulation, as the government should have pointed out.  On the other hand, the decision does not, except on a very superficial reading, suggest the demise of all regulation requiring purchases of new products and services.

David Driesen, CPR Member Scholar; University Professor, Syracuse University College of Law, Syracuse University . Bio.

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