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Constitutionality of Mandatory Insurance

A few months ago I wrote a post about the types of “constitutional chicanery” that certain political advocates utilize to confuse debate over key issues. And here we go again…

This time we have state attorneys general declaring that they are going to use the courts to challenge healthcare reform as unconstitutional because it constitutes a mandatory direct tax. A short while ago on Fox News I saw a segment that included one “expert” who claimed that healthcare reform would do something “unprecedented,” namely, requiring citizens to purchase some commodity.

Unprecedented? Really?

Let’s start with the direct part. I would encourage anyone who believes such claims to pull out his or her most recent paycheck. Someplace on there you will see FICA deductions that (in theory at least) are set aside to fund Social Security (OADSI) and Medicare programs. These are the two biggest government-sponsored insurance programs administered by the feds, and two of the largest line items in the federal budget. These paycheck deductions are not optional, and for all but the self-employed they are taken out immediately.

Put another way, you are already required by law to buy the commodities we might simply call “retirement insurance” and “medical insurance.” You can’t opt out of either program and you can’t delay the payments–which we may as well think of as “premiums”–until April 15 each year. (I suppose you can opt out of taking the benefits later.) Moreover, you only see in your paycheck the true impacts of half your premiums, because the other half is hidden by being “contributed” by your employer–although this also ought to be considered lost income and thus a mandatory direct tax because employers account for this tax obligation when setting salaries or wages. Although there’s no payroll deduction for unemployment insurance, employers also must consider these “premiums” when setting those wages and salaries, so let’s classify that a mandatory but indirect tax.

As for mandatory, although there is some debate about whether the insurance mandate will actually be enforced–and strong evidence that it won’t be because there are no criminal penalties for people who fail to buy insurance–it is clearly less mandatory given that it requires citizens to actively go out and buy it instead of having it taxed automatically from their paychecks.

In sum, the newly legislated insurance tax is at least as indirect as unemployment insurance, more indirect than either Social Security or Medicare taxes, and less mandatory than any of the three. And yet it will be challenged as unconstitutional on mandatory direct tax grounds? One’s head spins.

Now, the kicker: In a related segment moments earlier, Fox News’ Bret Bair was reporting on how the healthcare reform would entail “raiding” Medicare to pay for the new healthcare programs. That is, there was an attempt to scare seniors by alluding to the possibility of touching a mandatory health insurance program that comes with a mandatory direct tax provision–but without so much as a pause to consider whether that programs fails the very constitutional standard raised in the next segment about the new healthcare law.

I’m sure there are many Americans who would like the government to get out of the business of providing insurance altogether. Fine. But if opponents want to object to healthcare mandates on constitutional grounds, they ought to at least be internally consistent and come out against Social Security, Medicare and probably unemployment insurance too. For they are the obvious and (as yet) constitutional precedents here, and they are all at least as direct and more mandatory than what the healthcare legislation requires.

Update: Reader Steve J. below raises a good point about being forced to buy a commodity in the private market v. from the government. I’m not a constitutional lawyer, but it seems to me that (other than the income tax constitutionalized by the 16th Amendment) the imposition of a direct tax AND the requirement that that tax be paid to the government would be less constitutional than simply mandating one buy something from a private company or entity. The point is that Social Security/Medicare/UI premiums would seem to be less constitutional than the healthcare tax, at least by this standard. My point is that there is an inconsistency here in what constitutes constitutionality, with a stricter taxing protocol regarded (not by everyone, of course) as constitutional.

Update 2: Those commenters below who raise the example of mandatory car insurance are correct in terms of a general precedent, of course, but I think constitutional lawyers (and/or conservatives) would say the key distinction here is these are state laws, not federal.