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The Justices Are Not Writing On A Blank Slate

June 27, 2012 Leave a comment
Will the Justices really wipe the venerated "Commerce Clause" slate clean? Source of Photo: Shift at ja.Wikipedia, http://goo.gl/jwdHR

In the final analysis, the Supreme Court did not erase the Obama Administration’s signature piece of legislation. The Court upheld it.  Source of Photo: Shift at ja.Wikipedia, http://goo.gl/jwdHR

When legal scholars consider instances over the past 25 years in which the Supreme Court has struck down federal legislation as unconstitutional, two cases come up most frequently: United States v Lopez, 514 U.S. 549 (1995), and United States v. Morrison, 529 U.S. 598 (2000). I decided recently to take a second look at those cases – and was surprised at what I found.

In Lopez, the Supreme Court struck down the Gun-Free School Zones Act, which made it a federal crime to possess a gun within 1,000 feet of school property.  In Morrison, the Court invalidated the section of the Violence Against Women Act that gave victims of gender-motivated violence a federal cause of action.

In each case, the Court held that Congress had exceeded its authority under the Commerce Clause because what it was regulating wasn’t “commerce.”  It was “acts of violence” or noneconomic conduct of a criminal character, matters over which the states have traditionally had jurisdiction.  However, I also found reaffirmation of the general principle that where Congress’ goal is to regulate commercial transactions or control prices or stabilize markets, its legislation will be upheld. In other words, where the transactions or markets Congress is regulating are economic in nature, its enactments will be sustained.

I found a second thing when I revisited Lopez. I also found Justice Kennedy’s concurring Opinion.  It is inspiring.  Here are the highlights of this lengthy opinion. Justice Kennedy makes four basic points:

Point #1:  After reviewing the history of the Commerce Clause and the jurisprudence concerning it, Justice Kennedy concluded that the Court was and should be committed to a “practical conception of the commerce power.”

“Commerce” was not intended to be “a technical legal conception,” he said, “but a practical one, drawn from the course of business.”[1]  Consistent with this view, he eschewed the practice in which the Court had engaged for many years of drawing “content based or subject matter distinctions, thus defining by semantic or formalistic categories those activities that were commerce and those that were not.” For example, he specifically rejected the distinctions that had once been made between

  • ‘transportation’ on the one hand, and “manufacture” or “production” on the other;  and between
  •  activities ‘directly’ affecting commerce and those only ‘indirectly’ affecting it.

Point #2:  Congress is owed considerable deference in determining how its powers under the Commerce Clause are to be exercised.

The powers conferred on the government by the Commerce Clause have been vested in Congress, not the Courts.  As a consequence, the Court has long recognized that Congress is owed considerable deference in determining when and how that power is to be exercised and when the states alone are to be left to regulate a field.

While “the States and the National Government both have authority to regulate certain matters absent the congressional determination to displace local law,” it is Congress’ obligation, not the Court’s, “in the first and primary instance” to determine the federal-state balance.  Put another way, the Commerce Clause “grants Congress … ample discretion to determine its appropriate exercise.”

In order to give proper effect to this deference, the Court has adopted the “rational basis” test.  Under that test, it does not ask whether the subject matter of specific legislation sufficiently affected interstate commerce to justify its enactment.   It is, instead, limited to asking whether Congress had a “rational basis” for concluding that it did.  If Congress did have a rational basis for so concluding, then it is deemed to have acted within the scope of its Commerce Clause powers.  If it didn’t have a rational basis for so concluding, then it can be found to have exceeded its powers under the Commerce Clause and the legislation it has enacted can be stricken.

This is the test nearly all of the Court’s current members have embraced and the Lopez and Morrison majorities applied.  The history of its application “counsels great restraint” before the Court determines that the Clause is insufficient to support an enactment.

Point #3:  In addition to deferring to Congress, it is important for the Court to adhere to its already established Commerce Clause jurisprudence.

Given the history of its decisions in this area, Justice Kennedy concludes that “the Court as an institution and the legal system as a whole have an immense stake in the stability of our Commerce Clause jurisprudence as it has evolved to this point.”  That means that judicial restraint counsels against calling into question “the essential principles now in place” regarding the commerce power, and against reverting to earlier “semantic or formalistic” artifices:

 “That fundamental restraint …forecloses us from reverting to an understanding of commerce that would serve only an 18th century economy…; it also mandates against returning to the time when congressional authority to regulate undoubted commercial activities was limited by a judicial determination that those matters had an insufficient connection to an interstate system.

In Justice Kennedy’s view, the holding in Lopez was a “limited” one that did not “call[ ] in question” the Court’s “practical conception of commercial regulation” or resurrect former obstacles to Congress’ exercise of its plenary power.

Point #4:  The Court should intervene to preserve the federal-state balance only where Congress has clearly exercised powers that are not its own but belong exclusively to the States.

While acknowledging that the duty to maintain the balance between national and state power is entrusted “in the first and primary instance” to Congress, Justice Kennedy perceives the courts as having a back-up role to play – in especially clear-cut and egregious cases.  Thus, “when one or the other level of Government has tipped the scales too far” and trespassed upon the other’s exclusive territory, the Court may be required to intervene to say which side of the Federal/State divide certain powers fall on.

That was the case in Lopez.  There, Congress sought to take over “an area of traditional state concern, … having nothing to do with the regulation of commercial activity” and, in so doing, it ““foreclose[d] the States from experimenting and exercising their own judgment in an area to which States lay claim by right of history and expertise.”  The Court was, accordingly, obliged to intervene to vindicate federalism.

The same is not true of the Affordable Care Act for at least two reasons.  First, the Act’s nexus to commerce is incontrovertible.  Second, as I have already demonstrated, here , States have not in any event been foreclosed from experimenting in the creation and operation of insurance exchanges or otherwise attaining the Act’s goals.  Accordingly, short of a challenge to the Act “as applied,” the Court has neither cause nor occasion to intervene on these grounds.

* * *

UPDATE:  This morning the United States Supreme Court upheld all but one provision of the Affordable Care Act – 42 U. S. C. §1396c.  That provision would have permitted the Secretary of Health & Human Services to take away a State’s existing Medicaid funding if it did not agree to a proposed Medicaid expansion.  The provision was found to be severable and the remainder of the Act upheld. The upshot is that States have three options when it comes to the Medicaid Program: 1) They can choose to participate in the expansion and receive additional federal funding; 2) They can choose not to participate in the expansion and maintain their current level of funding; or 3) They can choose not to participate in the program at all and forego federal funding altogether.

As to the more sensational provisions of the Act, the line-up was as follows: Five members of the Court, including the Chief Justice, voted to uphold the so-called mandate as an exercise of Congress’ power to “lay and collect Taxes.”  Four members of the majority (Ginsburg, Breyer, Sotomayor & Kagan) believed that it could also be sustained under the Commerce Clause.  Justices Scalia, Kennedy, Thomas & Alito issued a joint dissent, arguing that the Act should have been stricken in its entirety.


[1]   All of the quotes in this blog post are from Lopez.  For reasons of time and readability, I am not including legal citations.  On request, I will glad to provide a version that does include them.

Health Care Reform: Has The Supreme Court Already Embraced The Individual Mandate?

May 30, 2012 Leave a comment

The United States Supreme Court

Is President Obama’s health-care law dead? Ever since the United States Supreme Court heard arguments about its constitutionality in late March, speculation has been rife that, at a minimum, the Justices will strike down the individual mandate.[1]  The predictions rest on a single assertion: that individuals have never before been required, under the authority of the Commerce Clause, to purchase a product or service from a private party.

The assertion is mistaken. There is not only clear precedent for the mandate, but conservative, centrist and liberal Justices alike have embraced the precedent in principle.  This includes nearly every member of the current Court, including the Chief Justice and, in order of seniority, Associate Justices Scalia, Kennedy, Thomas, Ginsburg, Breyer and Alito. It also includes former Chief Justice Rehnquist and other eminent Justices from the past.  On the current Court, only Justices Sotomayor and Kagan have never had the opportunity to weigh in on the issue.

So, when has anyone ever previously been required to purchase a product or service from a private party? What have they been required to purchase?  And, from whom?  The answer: employees have been required to purchase services – i.e., negotiating, grievance-handling, dispute resolution and litigation services – from their collective bargaining agent or union.  Under agency shop principles, even those who choose not to become union members must pay an in lieu “fee.” This fee is known by one of three names: “agency fee,” “service fee” or “fair share fee.”  It is a per capita approximation of the costs the union incurs in performing its statutory duties.

Significantly, the Supreme Court has never said Congress lacks authority under the Commerce Clause to require employees to purchase such services.  On the contrary, it has repeatedly said the opposite.  Congress can require employees to purchase services from a union under the Commerce Clause without either depriving them of “liberty” or violating the First or Fifth Amendments.[2]

The Genesis Of Agency Fee Principles

The origin of agency fee principles can be traced back to Railway Employes’ Department v Hanson, 351 U.S. 225 (1956).  In Hanson, a group of non-union employees brought suit to challenge Section 152 (Eleventh) of the Railway Labor Act (“RLA”) and enjoin provisions of a collective bargaining agreement that required them to join or financially support a union.[3]  The Supreme Court upheld the negotiated and statutory provisions under authority of the Commerce Clause.  It found that Congress’ power “to regulate labor relations in interstate industries [wa]s … well-established,” 351 U.S. at 233, and that achieving “industrial peace along the arteries of commerce is a legitimate objective” of such regulation.  Id.

While it questioned the wisdom of requiring rather than persuading employees to pay union dues and fees, the Court held that the choice of means to achieve a proper legislative goal “rests with the policy makers, not with the judiciary.” 351 U.S. at 234.  “If …[Congress] acts unwisely, the electorate can make a change,” the Court observed.  Id.  It is not for the Court to sit as a supra-legislature. Rather, the Judiciary’s task “ends once it appears that the legislative measure adopted is relevant or appropriate to the constitutional power which Congress exercises.”  Id.  After that, Congress has “great latitude in choosing the methods” to be employed in achieving its legislative objectives. Id. at 233.  In fact, it has the “final say.” Id. at 234.  Accord, United States v. Comstock, 130 S.Ct. 1949, 1956-57 (2010)(it is within Congress’ authority to use any “means that is rationally related to the implementation of a constitutionally enumerated power,” which is not otherwise prohibited by the Constitution); McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 421 (1819)(“Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional.”)

Hanson only decided the facial validity of the RLA provision requiring the payment of dues and fees, however, not its constitutionality “as applied.”  It expressly left open the question of whether specific charges levied under authority of the statute might be unconstitutional.

Five years later, the Court revisited this question in Machinists v Street, 367 U.S. 740 (1961).  There, it concluded, as a matter of statutory construction, that the only costs nonmembers can be required to pay are those that are “germane” to the union’s activities as collective bargaining agent.  See also Communication Workers v. Beck, 487 U.S. 735 (1988); Abood v. Detroit Board of Education, 431 U.S. 209, 235-36 (1977). Objecting nonmembers cannot be required to pay costs that are not germane or that are associated with ideological or political activities.

Since first articulating this test, the Court has spent nearly fifty years deciding where costs fall on the “germaneness” spectrum and whether particular costs can or cannot be characterized as “germane.”  If they are germane, nonunion employees can be required to pay them.  If they are not germane, such employees cannot be charged.  The Court has considered this and related questions in four contexts – the railway labor context, maritime context, and private[4] and public sectors. Throughout these years, it has repeatedly reaffirmed Hanson’s validity and the constitutionality of agency fee principles. See, e.g., Machinists v. Street, 367 U.S. 470 (1961); Railway Clerks v. Allen, 373 U.S. 113, 115-121 (1963); NLRB v. General Motors, 373 US 734, 741-744 (1963); Oil Workers v. Mobil Oil Corp., 426 U.S. 407 (1976); Abood v Detroit Bd. Of Education, 431 U.S. 209, 217-232 (1977); Ellis v. Railway Clerks, 466 U.S. 435, 439 (1984); Chicago Teachers v. Hudson, 475 U.S. 292, 294 (1986); Communication Workers v. Beck, 487 U.S. 735, 738, 749-751 (1988);  Keller v. State Bar of California, 496 U.S. 1, 10-13 (1990); Lehnert v. Ferris Faculty Ass’n, 500 U.S. 507, 511-512 (1991);  Air Line Pilots’ Ass’n v. Miller, 523 U.S. 866, 872-873 (1998);  Marquez v. Screen Actors Guild, 525 U.S. 33 (1998); Locke v. Karass, 555 U.S. 207 (2009).[5]

Although the precise formulation of the “germaneness” test has varied over the years, the rationale for requiring the costs that meet that test to be paid has never varied.  Justice Scalia has explained this rationale clearly and succinctly:

 Where the state imposes upon the union a duty to deliver services,  it may permit the union to demand reimbursement for them;   or, looked at from the other end, where the state creates in the nonmembers a legal entitlement from the union, it may compel them to pay the cost. The “compelling state interest” that justifies this constitutional rule is not simply elimination of the inequity arising from the fact that some union activity redounds to the  benefit of “free-riding” nonmembers …  What is distinctive … about  the “free riders” [here] … is that, in some respects, they are  free riders whom the law requires the union to carry …  Thus,  the free ridership (if it were left to be that) would be not incidental, but calculated, not imposed by circumstances, but mandated by government decree.

Lehnert, 500 U.S. at 556 (Justice Scalia, concurring in the judgment in part and dissenting in part)(the word “here” added for clarity).  See also, Ellis v. Railway Clerks, supra, 466 U.S. at 436, 447, 453.

Under the aegis of both the NLRA and RLA, Congress has required unions to provide certain services.  Thus, by “prescribing collective bargaining as the method of settling … disputes … [and] conferring upon … unions the status of exclusive representatives … Congress has given … unions a clearly defined and delineated role to play in effectuating the basic congressional policy of stabilizing labor relations . . . “.  Machinists v. Street, supra, 367 U.S. at 760.   In performing that statutory role, it is incumbent upon them to afford representation to everyone in the bargaining unit, whether or not they are union members.  See Abood, supra, 431 U.S. at 220-221. See also, generally, Air Line Pilots Ass’n v. O’Neill, 499 U.S. 65, 74-75 (1991); Karahalios v. Federal Employees, 489 U.S. 527, 531-532 (1989); Vaca v. Sipes, 386 U.S. 171, 177 (1967); Humphrey v. Moore, 375 U.S. 335, 342 (1964); Steele v. Louisville & Nashville R. Co., 323 U.S. 192, 203 (1944).

The corollary of requiring unions to afford everyone representation is the requirement that those entitled to call on the union’s services share the costs incurred in their performance.  As both Congress and the Court have recognized, these costs can be considerable. Street, 367 U.S. at 760 (performance of the union’s statutory duties “entails the expenditure of considerable funds”).  This is so because, as a practical matter, the union must retain “[t]he services of lawyers, expert negotiators, economists, … a research staff, as well as general administrative personnel …”, Abood, 431 U.S. at 221.  Fairness requires that these costs be spread among those for whose benefit the experts are retained, whether or not they desire the services or in fact call on them.  Street, 367 U.S. at 762.  “This argument was decisive with Congress.”  Id.

Nothing in the Commerce Clause provides that Congress has greater power over employees than it has over non-employees, or that unions and no other service providers are to be compensated for their statutory services.  It necessarily follows that Congress can require individuals to purchase other products or services from other private parties.  Glickman v. Wileman Bros. & Elliott, Inc., 521 U.S. 427 (1997),[6] confirms this conclusion is correct.

In sum, it is indisputably clear that Congress has some measure of authority under the Commerce Clause to require individuals to purchase a product or service from a private party.

Does Timing Matter?

Opponents of the individual mandate have a fallback position.  Even if they are wrong, they say, and Congress does have authority under the Commerce Clause to require the purchase of goods or services from a private party, they contend it only has that authority at the “point of sale,” not before.  This means, they say, in the case of health care insurance that the earliest point at which that authority can be exercised is the point at which a patient voluntarily contracts for health care services for which he or she will need to pay.  Put another way, they say that individuals cannot be compelled to purchase health care insurance in advance.

As with their principal argument, the “agency fee” cases demonstrate the fallacy in their fallback position.  Two cases are of particular interest:  Lehnert v. Ferris Faculty Ass’n, 500 U.S. 507 (1991) and Locke v. Karass, 555 U.S. 207 (2009).  There, as in many of the other “service fee” cases, the Court was confronted with the task of determining the germaneness of a long litany of charged costs.

Only two of the costs at issue in Lehnert concern us here:  the “affiliation fees” a local union paid to belong to its parent state and national bodies, and “extra-unit litigation costs” the national union had incurred in pursuing lawsuits on behalf of other locals.[7]

The Court treated these two sets of charges differently.  It held that the “affiliation fees” were properly charged to dissenting unit members, but could not reach agreement on how to dispose of the costs associated with “extra-unit litigation.”  In ruling that the affiliation fees were chargeable, the Court observed that “we have never interpreted … [the germaneness] test to require a direct relationship between the expense at issue and some tangible benefit to the dissenters’ bargaining unit.”  Lehnert, supra, 500 U.S. at 522 (material in brackets added for clarity).  To require such a direct relationship, it held, would be to ignore the fact that locals are part of a “unified-membership structure,” which affords each a right, when it needs them, to draw on pooled resources:

 The essence of the affiliation relationship is the notion that  the parent will bring to bear its often considerable conomic,  political, and informational resources when the local is in need of them. Consequently, that part of a local’s affiliation fee which contributes to the pool of resources potentially available to the local is assessed for the bargaining unit’s protection, even if it is not actually expended on that unit in any particular membership year.

Lehnert, supra, 500 U.S. at 523.

In an opinion concurring in part and dissenting in part, in which Justice Kennedy joined, Justice Scalia concurred in finding the affiliation fees chargeable.  In the course of explaining his reasons for doing so, Justice Scalia articulated several important principles:

Another item relating to affiliated organizations that the Court allows to be charged consists of a pro rata assessment of NEA’s[8] costs in providing collective bargaining services (such as negotiating advice, economic analysis, and informational assistance) to its affiliates nationwide, and in maintaining the support staff necessary for that purpose. It would obviously be appropriate to charge the cost of such services actually provided to Ferris itself, since they relate directly to performance of the union’s collective bargaining duty. It would also be appropriate to charge to nonunion members an annual fee charged by NEA in exchange for contractually promised availability of such services from NEA on demand. As Ferris conceded at argument, however, there is no such contractual commitment here. The Court nonetheless permits the charges to be made … I think that resolution is correct.  I see no reason to insist that, in order to be chargeable, on-call services for use in the bargaining process be committed by contract, rather than by practice and usage ….

Lehnert, 500 U.S. at 561 (Justice Scalia, joined by Justices Kennedy, O’Connor and Souter, concurring in part and dissenting in part)(italics in the original; highlighting added).

Perhaps even more importantly still, Justice Scalia lay the groundwork in his Lehnert Opinion for the following proposition: that individuals derive a tangible benefit from services that are available to them on demand or on call, even in the years when they are not used.  Lehnert, supra, 500 U.S. at 562 (Justice Scalia, concurring in part and dissenting in part) and 500 U.S. at 563 (Justice Kennedy, concurring in part and dissenting in part). Accord, Ellis, supra, 456 U.S. at 454-455 (nonmembers could not recover payments they had been forced to make into a death benefit plan because they had “enjoyed a form of insurance for which the union collected a premium”.)

Although the Lehnert majority could have applied the same rationale to “extra-litigation costs” as it had to “affiliation costs,” it did not do so.  Instead, a plurality of the Court likened the extra-unit litigation costs to lobbying costs, which were neither germane to bargaining nor chargeable.  Lehnert, 500 U.S. at 528.  Justice Kennedy took issue with this conclusion, pointing out the inconsistency in Justice Blackmun’s reasoning:

JUSTICE BLACKMUN removes litigation … from the scope of the Court’s holding that a local bargaining unit may charge employees for their pro rata share of the costs associated with “otherwise chargeable” expenses of affiliate unions.  This makes  little sense if we acknowledge, as JUSTICE SCALIA articulates, ante, at 560-561, that we permit charges for affiliate expenditures because such expenditures do provide a tangible benefit to the local bargaining unit, in the nature of a prepaid but noncontractual consulting or legal services plan.  Will a local bargaining unit now  be permitted to charge dissenters for collective bargaining-related litigation so long as the unit enters into a contractual arrangement or insurance policy with its affiliate?  If so, JUSTICE BLACKMUN’s distinction has little meaning.  If not, then why not …

Lehnert, supra, 500 U.S. at 563 (Justice Kennedy, concurring in part and dissenting in part).

As we have already noted, nearly twenty years later, the Court embraced Justices Scalia’s and Kennedy’s position that tangible benefits accrue from making advanced payments under a bona fide pooling arrangement. See Locke v. Karass, 555 U.S. 207 (2009). In a unanimous Opinion written by Justice Breyer, the Court held that a local union can charge nonmembers a “service fee” to cover “national litigation”[9] provided two conditions are satisfied: (i) the subject matter of the national litigation is of a kind that would be chargeable if the litigation were local, i.e., it relates to collective bargaining; and (ii) there is a “reciprocal relationship” between the local and its affiliates.

Without defining precisely what it meant by a reciprocal relationship, the Court observed that “a local non-member benefit[s] from national litigation aimed at helping other units if the national or those other units will similarly contribute to the cost of litigation on the local union’s behalf should the need arise. Locke v. Karass, supra, 555 U.S. at 217 (emphasis added).  They can be reasonably assured of that, the Government argued, in at least two circumstances: where there is a “bona fide pooling arrangement” or “an arrangement … akin to an insurance policy” between the entity disbursing funds from a pool and those contributing to it.  Id. at 222 (Justice Alito, joined by Chief Justice Roberts and Justice Scalia, concurring in the judgment).  Since the parties had conceded reciprocity in the case before it, 555 U.S. at 220, 221, the Court had no occasion to reach two further questions, either (i) whether the union’s pooling arrangement was in fact a “bona fide” one or (ii) whether any less formal arrangement than an insurance policy would suffice to establish reciprocity in a disputed case.

Nor need these questions detain us here because the payments the “individual mandate” requires be made are premium payments to purchase insurance policies.  In other words, reciprocity would be assured.  Because this is so, they come within the limited class of payments the Court has recognized that individuals can be forced to make in advance.

In sum, the government can require individuals to purchase services in advance of their need for them provided it does so through a bona fide pooled or reciprocal funding arrangement.  It is not restricted to requiring that they
make purchases “at the point of sale.”

Limiting Principles

One might think that would be the end of the matter and there would be nothing further to discuss.  After all, McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819), teaches us that, once it has been determined legislation serves a legitimate end, “all means” plainly adapted to accomplish that end are also constitutional, provided they are not themselves “prohibited” by the Constitution.  Id. at 421.  See also, United States v. Comstock, 130 S.Ct. 1949, 1956-57 (2010); Gonzalez v. Raich, 545 U.S. 1, 36 (2005)(Scalia, J., concurring in the judgment, quoting from United States v. Wrightwood Dairy Co., 315 U.S. 110, 118-19 (1942)(“[W]here Congress has the authority to enact a regulation of interstate commerce, ‘it possesses every power needed to make the regulation effective’”). Since it is conceded by everyone that ACA serves a legitimate end and we have just seen that the “individual mandate” is not prohibited by the Constitution, the mandate must be constitutional.

A nagging question remains, however.  In Justice Scalia’s inimitable words:  What about broccoli?

If Congress can require you to purchase insurance, is anything out of bounds?  Is everything fair game?  Can it require you to purchase broccoli or, indeed, eat broccoli or drink tea?

The question is a fair one and, thankfully, one that Justice Scalia himself has already answered in the collective bargaining context.  There, he said:

Once it is understood that the source of the state’s power …  to compel nonmembers to support the union financially, is elimination of the inequity that would otherwise arise from mandated free-ridership, the constitutional limits on that power naturally follow.  It does not go beyond the expenses incurred in discharge of the union’s “great responsibilities” in “negotiating and administering a collective bargaining agreement and repre- senting the interests of employees in settling disputes and processing grievances,” Abood, 431 U.S., at 221; the cost of performing the union’s “statutory functions,” Ellis, 466 U.S., at 447 …

Lehnert, id. at 556-557 (Justice Scalia).

One can easily extrapolate from this limiting principle to one that is applicable more broadly.[10]  It might be stated, very generally, as follows:

If Congress has found it reasonably necessary, in order to achieve a legitimate legislative goal, to require  the members of Group A to provide particular goods or services to the members of Group C, it follows it can require the members of Group C to pay the pro rata or proportional cost of the goods or services.

(For ease of reference, we shall refer to the first mandate – the mandate imposed on Group A – as the “Provision or Coverage Mandate” and the one imposed on Group C as the “Purchase or Payment Mandate.”)[11]

The Payment Mandate can only be imposed when two conditions are met: (1) the legislation Congress has passed serves a legitimate legislative goal,[12] and (2) Congress has determined that imposition of the Coverage Mandate is reasonably necessary to the accomplishment of that goal.  When both conditions are satisfied, imposition of the Payment Mandate follows as a matter of course.

Both conditions are satisfied in the “Agency Fee” and “Health Care” contexts.  In each, there is a proper legislative goal and determination by Congress that imposition of the Coverage Mandate is essential to its achievement.  In the collective bargaining context, the goal is nothing less than “industrial peace,” with Congress having determined that, in order to achieve that goal, it was necessary to adopt a collective bargaining model founded on the “principle of exclusivity.”[13]  Under that principle, there can  only be one labor organization designated to represent a “craft or class,”[14] and it provides all collective bargaining services.[15]  While a majority of the craft chooses the bargaining representative, once chosen, “it represents, as the Act by its terms makes plain, the craft or class, and not the majority.”  Steele v. Louisville & Nashville R. Co.,  322 U.S. 192, 202 (1944).  This means that “[s]o long as a labor union assumes to act as the statutory representative of a craft, it cannot rightly refuse to perform the duty, which is inseparable from the power of representation conferred upon it, to represent the entire membership of the craft.”  Id. at 204.  And, “entire” means entire.[16]   The representative cannot discriminate among employees based on whether or not they are union members.  Id. at 200.  Hence the Coverage Mandate: The union is obligated to perform its statutory functions and provide “collective bargaining” services to everyone in the designated unit.[17] See, e.g., Karahalios v. National Federation of Federal Employees,  Local 1263, 489 U.S. 527, 531-532 (1989)(federal sector); Vaca v. Sipes, 386 U.S. 171, 180-183 (1967)(private sector); Steele v. Louisville & Nashville R. Co.,  322 U.S. 192, 202-207 (1944)(railway labor sector).

The legislative goal in the case of the Affordable Care Act is no less weighty.   It is nothing less than addressing the health care crisis in this country by increasing access to health care insurance and, therefore, also medical services.  Towards this end, Congress has required that a series of health insurance “exchanges” be set up so that individuals and businesses can compare terms of coverage and prices, and purchase policies.  Even more critical to the accomplishment of its goals, it has required all insurance companies participating in these exchanges to “guarantee issuance” to all comers.  This means they must be prepared to sell a policy to any individual or employer seeking to purchase one through their exchange.  Hence, the Act’s Coverage Mandate:

… each health insurance issuer that offers health insurance coverage in the individual or group market in a State must accept every employer and individual in the State that applies for such coverage”.

42 U.S.C. §300gg-1(a).  And, once again, “every” means every.  Thus, a participating issuer cannot deny coverage based upon pre-existing conditions or “health status”-related factors, or charge higher premiums for a basic policy based upon such conditions or factors.[18]  42 U.S.C. §§300gg-3 and -4(a) and (b).  Nor once a policy has been issued can the issuer discontinue or rescind it or refuse to renew based upon those conditions or factors.  Rather, it is required to renew or continue the policy, provided the insurer continues to participate in the relevant exchange and the insured continues to pay his, her or its premiums.[19]  42 U.S.C. §300gg-2.

Just as in the collective bargaining context, therefore, the Coverage Mandate in the health care context is comprehensive – with private insurance companies being statutorily required to cover not only those they have traditionally covered, but also those that, absent the statutory mandate, they would not cover and did not cover in the past.  Indeed, they are not only being required to cover persons they would not otherwise cover, but to set premiums at rates that do not discriminate based on pre-existing conditions or “health-status.”

As a practical matter, this means that each of the “health benefits” exchanges[20] and the participants in each such exchange must collectively put themselves in a position to cover all of the residents of a state not otherwise covered by insurance and to insure against all risks.  In turn, this means not only readying themselves to handle insurance applications from everyone, but also referrals, quality assurance issues, claims adjustment issues, negotiations over health care costs, etc., and to pay out on legitimate claims.  Just as in the collective bargaining context, therefore, each exchange and those insurance companies participating in it will need to have an array of experts on hand, as well as administrative personnel, to fulfill their statutory duties.  “Just as Congress doubtless could have required workers to pay the cost of … bargaining had it chosen to have … [it] carried on by the Secretary of Labor …,” Lehnert, supra, 500 U.S. at 552,[21] here, Congress can doubtless require citizens to pay for services it has required insurers to provide.

As far as I am aware, no one contends that ACA’s objectives are improper or that the Coverage Mandate is unconstitutional.  On the contrary, those challenging the individual mandate appear to concede both the legitimacy of the statute’s goals and the propriety of the mandates imposed on the issuers.  Their sole claim is that the second mandate – i.e., the “individual mandate” or what we have here called the “Purchase or Payment Mandate” – is not a permissible means of achieving the other concededly legitimate goals.  As we have already demonstrated, of course, this characterization is mistaken.  The individual mandate is not only perfectly permissible, it is a necessary corollary of the first mandate.

This then is the key to understanding why there is no danger that upholding the individual mandate in the context of the ACA would lead to legislation requiring individuals to buy broccoli:  because there is a proper legislative purpose and sustainable primary mandate in the first instance, but not the second.  It is simply impossible to conceive there being a legitimate legislative goal the achievement of which would require everyone be provided broccoli.[22]  Absent such a goal, however, there is no basis either for enacting a valid Provision Mandate or imposing a dependent Payment Mandate.[23]

History also assures us that there is no cause for concern.  In the nearly eighty years since Congress first adopted legislation requiring employees pay union dues and fees, Congress has adopted similar requirements in only a handful of instances.  In each of these instances, its modus operandi has been the same:  Having concluded that some form of collective action or representation was essential to achieving its goals, it has created units, groups (or “exchanges”) that one or more private parties are required to serve.  It has then required those encompassed by each group to share in the costs the service-providers incur in performing their statutory duties.  At no point throughout this period has Congress employed this model to require individuals to purchase consumer goods or foodstuffs.  Nor has the Hanson-Street-Abood-Keller-Lehnert line of cases ever been employed to such an end or in such a context.

So, service fees?  Yes, without a doubt.  Broccoli?   Not a chance.

A Final Question:  Who Gets To Regulate?

Although there are obviously limits on Congress’ powers under the Commerce Clause, see e.g., United States v. Lopez, 514 U.S. 549, 558-559 (1995), not surprisingly, there are also substantial areas of overlap between commerce that is external and internal to a state, and intrastate activities often impact interstate commerce.  See generally Gonzalez v. Raich, 545 U.S. 1 (2005)(majority and concurring opinions); United States v. Wrightwood Dairy Co., 315 U.S. 110 (1942)(Stone, J.); NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937)(Hughes, J.); Kansas City Southern R. Co. v. Kaw Valley Drainage Dist., 233 U.S. 75, 79 (1914)(Holmes, J.).

Where there are genuine areas of overlap or substantial impact, Congress has a number of options.  See generally Retail Clerks Int’l Ass’n v. Schermerhorn (Schermerhorn “II”), 375 U.S. 96, 99 (1963) (“We start from the premise that … Congress could preempt as much or as little of this interstate field as it chose”). It can choose to “occupy the field” and preempt state law on a subject.  It can choose not to enter a field and leave it entirely to state regulation.  Or, it can choose a middle road that allows for both state and federal regulation.

Sometimes, it has adopted more than one of these regimes.  The “agency fee” is a case in point.  Thus, Congress has decreed “as a matter of federal law” that agency-fee arrangements are valid. Oil Workers, supra, 426 U.S. at 416.  It has then gone on in different sectors to take different positions on the interplay between state and federal law.  In the railway labor sector, it has “occupied the field,” effecting across-the-board preemption.[24]  45 U.S.C. §152 (Eleventh).  In the private sector, under the NLRA, it has done the opposite.  Rather than simply refrain from enacting a preemption provision, it has given affirmative “directions to give the right of way to state laws …”.  Schermerhorn II, 375 U.S. at 103. See 29 U.S.C. §164(b).[25]  Under this grant of Congressional authority, a state can ban the agency shop. Oil Workers, id. at 416-417; Schermerhorn II, id. (1963).[26]

The result of these different approaches is a patchwork of regulation: The “national policy” of recognizing agency-fee arrangements as valid is the law of the land in the railroad, airline and maritime sectors,[27] and 27 states that have not passed contrary legislation.  In 23 states that have passed so-called “right to work laws,” federal law defers to the state’s ban.

In the Affordable Care Act, Congress has adopted still another approach to reconciling federal and state regulation.  It permits states to seek “waivers” from the application of certain of the Act’s provisions. See 42 U.S.C. §18052.  This includes the individual mandate. To obtain a waiver, a state must satisfy the Secretaries of Health & Human Services and the Treasury that it has an alternative health care plan that

.       will cover at least as many residents as the ACA would have covered;

.       will provide coverage that is at least as comprehensive,

.       will make coverage at least as affordable,

.       but will not increase the federal deficit.

While in each of these two contexts Congress’ power is plenary, the degree to which it chooses to exercise its authority is a matter for its legislative judgment.  Its legislative judgment may change over time.  Its authority under the Constitution does not.

CONCLUSION

         Congress clearly has authority under the Commerce Clause to require individuals to pay for services it obligates others to provide.  The individual health care mandate is therefore constitutional.

 


[1]   The individual mandate is referred to in the Affordable Care Act as the “minimum essential coverage provision.”  26 U.S.C. §5000A(a).  Under it, an “applicable individual” is required “for each month beginning after 2013 [to] ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month.” 26 U.S.C. §5000A(a).  Minimum essential coverage is, in turn, defined as coverage under: (1) an employer plan, (2) government-sponsored plan, (3) policy purchased through an exchange, (4) a grandfathered plan or (4) policy approved under a waiver. 26 U.S.C. §5000A(f).

[2]   The only circumstances under which individuals’ liberty may be at stake is where they are charged more than their per capita “fair share” of the union’s statutory costs or are compelled to pay for services that are not germane to the union’s role as collective bargaining agent.

[3]   Although the wording of RLA Section 152 ( Eleventh) and NLRA Section 8(a)(3) would appear to require employees to actually become “members” of a union, the Court has always interpreted this language as only requiring employees to pay the union’s initiation fee and dues, not to become members.  See, e.g., Marquez v. Screen Actors Guild, 525 U.S. 33, 37 (1998); NLRB v. General Motors, 373 U.S. 734, 741-744 (1963); Hanson, supra, 351 U.S. at 235.  As Justice Scalia has noted, the reasons for this construction are clear: to avoid interpreting the statutes in a fashion that would leave their constitutionality in serious doubt.  See, e.g., Lehnert, 500 U.S. at 555 (Scalia, J., concurring in part and dissenting in part.).

[4] In other words, under the National Labor Relations Act or “NLRA.”

[5]  Although at first blush, public sector cases might be thought to raise distinct issues, the Court has repeatedly held that principles articulated in Hanson apply across the board.  See Locke v. Karass, No. -610 (2009) at *4 (“In Hanson, Street, and Abood, the Court set forth a general First Amendment principle: The First Amendment permits the government to require both public sector and private sector employees who do not wish to join a union designated as the exclusive collective-bargaining representative at their unit of employment to pay that union a service fee as a condition of their continued employment”); Abood, supra, 431 U.S. at 224-226, 232.  See also Lehnert, supra at 555 (Justice Scalia, concurring in part and dissenting in part)(“Street, Ellis, and Beck were statutory cases, but there is good reason to treat them as merely reflecting the constitutional rule suggested in Hanson and later confirmed in Abood”.)   

[6]   In Glickman, supra, the Supreme Court confirmed that, under the Agricultural Marketing Agreement Act and marketing orders issued by the Secretary of Agriculture, fruitgrowers, handlers and processors were compelled to fund “generic advertising” programs a trade association undertook on their behalf.

[7]   “Extra-unit litigation” is litigation that is brought on behalf of other bargaining units, and not for the benefit of the unit to which the objector belongs.

[8]  “NEA” or the National Education Association was the parent body of the Local.

[9]  The “national litigation” the Karass Court refers to and the “extra-unit litigation” the Lehnert Court referred to are essentially the same.  Locke v. Karass, No. 70-610 at *3 (where the Court defines “national litigation” as litigation activities “which do not directly benefit Maine’s state employees’ local but rather directly benefit other locals or the national organization itself”).

[10]  The only “limiting principle” we examine here is the one that would be applicable were the individual mandate to be upheld on the same theory as the “agency fee.”  There are other grounds on which the mandate could be upheld, of course  – e.g., as an exercise of the taxing authority, under McCullough’s “all means” rationale or as an exercise of Congress’ powers under the “Necessary and Proper Clause.” See Raich, supra, 545 U.S. at 36 (Scalia, J., concurring).  The limiting principle would, of course, vary with the ground.

[11]  When we talk about the provision or purchase of “goods” being mandated, we shall refer to the mandates as the “Provision” and “Purchase” Mandates.  When we talk instead about “services,” it seems more appropriate to call them the “Coverage” and “Payment” Mandates.

[12]   A legislative measure or goal is legitimate if it is “relevant or appropriate to the constitutional power which Congress exercises.”  Hanson, supra, 351 U.S. at 234.

[13]   The Abood Court described Congress’ reasons for adopting an exclusive representation model this way:

The designation of a single representative avoids the confusion that would result from attempting to enforce two or more agreements specifying different terms and conditions of employment. It prevents inter-union rivalries from creating dissension within the work force and eliminating the advantages to the employee of collective-zation. It also frees the employer from the possibility of facing conflicting demands from different unions, and permits the employer and a single union to reach agree-ments and settlements that are not subject to attack from rival labor organizations.

Abood, supra, 431 U.S. at 220-221.

[14]   The RLA refers to a “craft or class;” the NLRA, to “bargaining units.”  Since for our purposes, they are the same, we shall use the terms interchangeably.

[15]   These include, among other things, ensuring that employees are covered by any already existing agreements, administering those agreements, negotiating new agreements, handling grievances and arbitrations and, more generally, representing employees in dispute resolution procedures.  As the Abood Court noted, these “tasks … are continuing and difficult ones.”  431 U.S. at 221.

[16]  This is always subject to the proviso that they pay the requisite fees or dues.

[17]  To the extent that agreements are already in place, this means ensuring everyone is covered by them. To the extent that new agreements are negotiated or administered, this means fairly representing everyone’s interests.

[18]  ACA permits participating issuers to sell several levels of coverage.  The mandate only requires purchase of the most basic or ‘minimum essential” coverage.  Even that level must include ten specified categories of services.  See 42 U.S.C. §18022(b)(1).

[19]  Even if one issuer withdrew from the exchange, its insureds would be able to obtain continued coverage because other insurers participating in that market would still be under the mandate to “guarantee issuance.”

 [20]  There are separate exchanges for individuals and small businesses.  The exchanges set up for individuals are commonly referred to as the “health benefits” or AHBE exchanges.

[21]  Justice Scalia, in his opinion concurring in part and dissenting in part, quoting from Justice Black’s dissent in Machinists v. Street, supra, 367 U.S. at 787.

[22]  There are two and only two products I can presently imagine ever legitimately being made the subject of a “Provision” Mandate: bottled water, and serum for innoculations – and then only in an emergency.  In that event, of course, it is more likely the Government would fund the purchases than enact a Purchase Mandate

[23]  If it could be sustained at all, the constitutionality of a payment mandate that is independent rather than dependent  – i.e., that does not arise as the result of Congress having imposed statutory duties on a private party – would have to be sustained on the basis of a theory other than the one discussed in this article.  It follows that a decision upholding the health care mandate on a “service fee” rationale would not open the floodgates or support upholding any such other mandates.

[24]  In other words, it has declared that the agency shop is valid “[n]otwithstanding any other provisions of this chapter or of any other statute or law of the United States, a Territory thereof, or of any State …”.  45 U.S.C. 152 (Eleventh).

[25]  Section 14(b) provides in relevant part:

Nothing in this Act shall be construed as authorizing … agreements requiring membership in a labor organization … in any State or Territory in which such execution or application is prohibited by State or Territorial law.

29 U.S.C. §164(b).

[26]   At least, it can ban certain forms of it.  See Retail Clerks Int’l Ass’n Local 1625 v. Schermerhorn (Schermerhorn “I”), 363 U.S. 746, 751-754 (1963)(in the case before it, the Court found that the service fee being charged was “the exact equal of membership initiation fees and monthly dues” and that the union could use the money it collected for a “variety of purposes, in addition to meeting the union’s costs of collective bargaining”).

[27]   In the maritime sector, the agency shop is valid as a matter of federal common law.  See Oil Chemical & Atomic Workers Int’l Union, AFL-CIO v. Mobil Oil Corp., 426 U.S. 407 (1976).

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