Obamacare and the Constitution

This came across one of the email lists that I enjoy being on; if only more of our elected officials would ask themselves before voting on new laws "and this squares with the Constitution – how?"

By Gregory M. Sorg

Entirely absent from the national debate on proposed federal reform of the health insurance industry and the health care delivery system has been any inquiry into its constitutionality. The fact that such governmental intervention has long existed in European nations and Canada has no bearing on the issue, since, unlike theirs, our central government’s authority is derived from and limited by the Constitution. The present debate appears to have taken for granted that our federal government can engage in any activity it wishes, but no candid student of the Constitution – no matter his opinion of the desirability from a policy standpoint of a European-style health care delivery system – can concede this.

The Obama Administration has promoted a so-called “government option” whereby the federal government would offer health insurance in competition with the private sector. “Insurance,” however, is by definition the pooling of resources to cover losses experienced by some of its contributors that may – but which are by no means certain – to occur in the future, or losses which have already – but are not yet known – to have occurred in the past. The so-called “government option,” by reason that it would cover losses that are certain to occur or which have already occurred and are known to have occurred, would in fact be a welfare program in the guise of insurance. Requiring private sector insurance providers to cover such losses would transform them from private insurance businesses into quasi-public welfare agencies, thereby removing the very concept of health insurance from the free enterprise system. Again, one’s opinion of the desirability of this is beside the point if our fundamental law forbids it.

Even those among the Founding Fathers not yet familiar with Adam Smith’s classic 1776 exposition and defense of free enterprise capitalism, An Inquiry into the Nature and Causes of the Wealth of Nations, already knew from their study of history and the experience of their own times that no government, no government-run business, and no government-protected private monopoly can perform as efficiently, economically, or equitably as a private business permitted to function in an unregulated competitive environment. They also knew that, lacking competition and a profit motive and being able to maintain themselves by forcing consumers either to purchase their products or services, or to subsidize them through taxation, government-run businesses and government-protected private monopolies have no incentive to be economical, innovative or responsive, inevitably resulting in ever-decreasing quality at ever-increasing cost.

It is the very structure of the Constitution that enables the foregoing to be stated with such confidence. Under the federal system it established, the ability of demagogues and oligarchs to assume and exercise dictatorial power over the economy was curbed, among other ways by – as James Madison put it in The Federalist, No. 45 – delegating to the federal government powers that were few and defined, and reserving to the states powers that were numerous and indefinite. The “few and defined” powers of the federal government were and are specified in the 18 clauses of Section 8 of Article I. None of these authorizes the federal government to engage in or regulate the business of insurance, including the so-called “commerce clause,” which as early as 1869 was found by the Supreme Court to be inapplicable, insurance policies being held to be personal contracts, and the business of issuing them not to constitute interstate commerce.

The Court has also long since determined that, except where federal authority to regulate interstate commerce is implicated, a state in the exercise of its reserved powers may exclude a foreign corporation – including specifically an insurance company not incorporated under its laws – from engaging in business within the state; may prescribe generally the terms and conditions under which insurance companies may do business within the state; may take action to substitute competition for monopoly in order to protect the public from the evils arising from combinations of those engaged in the insurance business; and may authorize a public officer to bring an insurance company before a state tribunal to determine whether it had exceeded its lawful powers and whether its continuance in business within the state would no longer be in the public interest.

Given these precedents, which have for well over a century conceded the entire field of insurance regulation to the states, by what authority do the Congress and the President justify proposed legislation that would put the federal government into the insurance business in competition with private insurers, displace the states as insurance regulators, dictate to private insurance providers with whom they must do business and what coverages they must offer, and – worst of all from the standpoint of “securing the blessings of liberty to ourselves and our posterity” – require all Americans to purchase it?

Gregory M. Sorg, an attorney in private practice residing in Easton, New Hampshire, represented Grafton County District 3 in the New Hampshire House of Representatives from 2002 through 2008.