Is the Individual Mandate “Necessary”?

Like my co-conspirators, I believe the Necessary & Proper Clause provides the strongest basis for the constitutionality of the individual mandate.  I”m inclined to agree with Ilya nad Randy, rather than Orin, but I believe it’s a close call.

The constitutional argument, as has been rehearsed in this space before,  is that that mandate is a “necessary and proper” means of facilitating some of the regulations of health insurance markets contained in the recent health care reform legislation that are themselves constitutional exercises of the commerce power.   But is the individual mandate, as enacted, really a  ”necessary” part of health care reform?  I am not so sure.

An individual mandate is intended to mitigate the economic effects of other regulatory measures contained in the health care reform legislation, such as the prohibition on insurers excluding coverage for preexisting conditions, and prevent insurance premium increases due to adverse selection.  The fear is that healthy people will rationally decline to purchase coverage until they are sick, and that this will cause health insurance premiums to increase, which will cause more health people to opt out, and so on.  By requiring  all Americans to purchase health coverage, the mandate prevents adverse selection and keeps healthier (and cheaper to ensure) people in the insurance pools.  At least that is how it works in the theory.

A sufficiently stringent individual mandate could well eliminate the adverse selection problem, but that is not what Congress enacted.  Instead, Congress enacted a mandate that does not solve the adverse selection problem.  For many Americans, the penalty for failing to purchase health insurance will remain substantially below the cost of purchasing a federally approved health insurance policy.  This is one of the reasons no one expects health care reform to achieve universal coverage.  This is also why the individual mandate is expected to generate substantial revenue from the imposition of the penalty — which is convenient for those who wish to argue that the mandate is a proper exercise of the taxing power.  This is also a reason why the health care reform legislation will not be as effective at controlling health insurance costs as some hope.

What this means is that it is hard to argue that the individual mandate Congress adopted is really “necessary” to the success of health care reform.  If Congress believed eliminating adverse selection were absolutely essential to the success of reform, it could have adopted a tougher mandate.  It did not.  Instead it adopted a mandate which helps on the margin, but does not eliminate the economic consequences of other measures, such as the bar on excluding preexisting commissions, and adverse selection will continue.

Does this matter in the current litigation?   The Necessary & Proper Clause has rarely (if ever) been interpreted by federal courts to limit Congress only to those measures which are truly necessary to carry into execution other powers.  So even if the mandate is not “necessary,” it may still be “necessary and proper,” and thus constitutional.  But if the mandate is not truly necessary for health care reform to work — that is, if (as enacted) it cannot hope to fix the problem it was ostensibly adopted to fix —  I think that the argument for its consitutionality is, on the margin, somewhat weaker.