An academic colleague of mine raised an interesting question the other day concerning the constitutionality of the so-called “mandate” to purchase health insurance under the Affordable Care Act (ACA, otherwise known as “Obamacare”). Specifically, since the federal government has the power to compel U.S. citizens to pay into Social Security, why doesn’t it also have the power to compel U.S. citizens to purchase health insurance? For what it’s worth, here’s my understanding of the answer to this question.
The reason why the Social Security “mandate” is constitutional is because it is legally set up as a tax paid to government (i.e., the so-called Federal Insurance Contributions Act (FICA) tax), and under Article I, Section 8, Clause 1 of the Constitution (AKA the “Taxing and Spending Clause”), “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises”. Furthermore, Social Security does not involve any private sector intermediation; FICA taxes are formally entrusted to various “funds” that are administered by the Social Security Administration. As Dan Henninger points out in his recent WSJ article, an important problem with the Affordable Care Act “mandate” is that purchasing insurance is defined by that law as a “required contribution”” and not a tax per se. Furthermore, while ACA conveys a tremendous amount of discretion to the federal government (particularly the Secretary of the Department of Health and Human Services) in terms of the way that it regulates health insurance contracts and institutions, the contracts that are entered into under ACA are mostly with private sector institutions as opposed to public sector institutions. So it seems that the constitutional challenge created by Obamacare is whether the federal government has the power to coerce citizens into purchasing goods and services from private sector institutions. This is a right that state governments clearly have (e.g., most states have mandates requiring drivers to purchase auto insurance), but not the federal government. Ironically, a so-called “single payer” approach such as Canada and the UK have would not have any constitutional issues for the same reasons that Social Security is constitutional, since under single payer, taxes would be collected and entrusted to some type of federally administered trust fund. However, “single payer” is a political non-starter (at least at this point in time).