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A legal victory for Obamacare

October 7, 2010 |  4:44 pm

Obama healthcareIn the first ruling on the merits of a constitutional challenge to the new healthcare reform law, a federal judge in Michigan has ruled  that Congress has the power to order Americans to buy health insurance.

The case -- Thomas More Law Center et al vs. Barack Hussein Obama et al -- was brought by a Christian public interest law firm  and four uninsured Michigan residents, who contended that the tax penalties that the law would force them to pay could be used to fund abortions. They argued that the healthcare law exceeded Congress' powers under the commerce clause and constituted an illegal tax, as well as violating the 10th Amendment, the due process and equal protection clauses of the 5th Amendment, and the free exercise of religion clause of the 1st Amendment.

U.S. District Judge George Caram Steeh's ruling addressed only the commerce clause and tax claims, which also are at the heart of the two lawsuits brought by state attorneys general.  According to Steeh:

The crux of plaintiffs’ argument is that the federal government has never attempted to regulate inactivity, or a person’s mere existence within our Nation’s boundaries, under the auspices of the Commerce Clause. It is plaintiffs’ position that if the Act is found constitutional, the Commerce Clause would provide Congress with the authority to regulate every aspect of our lives, including our choice to refrain from acting.

Although the Supreme Court has ruled that Congress may regulate local economic activities  if they "substantially affect interstate commerce," Steeh concedes that the justices haven't addressed the question of whether Congress can regulate inactivity. Nevertheless, he held that there was a "rational basis" to conclude that people who choose to go without insurance drive up insurance premiums and the healthcare costs covered by taxpayers:

Far from “inactivity,” by choosing to forgo insurance plaintiffs are making an economic decision to try to pay for health care services later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars, $43 billion in 2008, onto other market participants....

[P]laintiffs in this case are participants in the health care services market. They are not outside the market. While plaintiffs describe the Commerce Clause power as reaching economic activity, the government’s characterization of the Commerce Clause reaching economic decisions is more accurate.

He also found that the mandate was an essential part of Congress' broader effort to curb cherry-picking and other abusive practices by insurers. The centerpiece of that effort is the bill's requirement that insurers offer coverage to everyone, regardless of preexisting conditions. Without a mandate, Steeh wrote, individuals could wait until they became sick before taking advantage of the coverage guarantee. This form of adverse risk selection would be ruinous to the system:

As a result, the most costly individuals would be in the insurance system and the least costly would be outside it. In turn, this would aggravate current problems with cost-shifting and lead to even higher premiums. The prospect of driving the insurance market into extinction led Congress to find that the minimum coverage provision was essential to the larger regulatory scheme of the Act.

The plaintiffs contended that the tax penalty in the law violated the constitutional requirement that direct taxes be apportioned by population. Steeh flatly rejected this argument, saying the commerce clause gives Congress the power to impose penalties on behavior it deemed harmful to commerce.

The ruling doesn't bind the courts in other districts considering the attorney generals' lawsuits. Clearly, there will be much more ink spilled on the legal questions raised by the new healthcare law. Still, this round clearly goes to the administration.

-- Jon Healey

Photo: President Obama talks about the healthcare reform law at an event in Virginia. Credit: AP Photo / Pablo Martinez Monsivais

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