If you read through all 207 pages of 11th Circuit Judge Hull and Judge Dubina’s co-authored majority opinion in Florida v. U.S. Department of Health and Human Services, you’ll notice that although the state Attorneys General succeeded in having the Health Care Act’s individual mandate declared unconstitutional, it wasn’t their arguments that ruled the day. You may also notice the unusual number of citations to amicus briefs. And you may notice that the 2-1 decision resulted, more than anything, from the persuasive power of arguments submitted by these “friends of the court.”
The parties in the Florida case and others challenging PPACA (a/k/a the Patient Protection and Affordable Care Act) have focused their arguments on the issue of whether the individual mandate compels citizens to enter into economic activity, and if so, whether the federal government’s power to “regulate commerce” under the Constitution includes the power to compel a citizen to engage in economic activity rather than merely to regulate the economic activity of citizens who are already engaged in it. Until now, so have the courts’ decisions in those cases.
Not the 11th Circuit majority. It was “not persuaded that the formalistic dichotomy of activity and inactivity provides a workable or persuasive enough answer in this case.” Instead, the court’s analysis focused on whether, assuming the individual mandate is properly characterized as regulating activities, the activities it regulates “substantially affect interstate commerce.”
Congressional findings in PPACA attempt to show that the individual mandate would have those substantial effects, by preventing the “cost-shifting” that results when uninsured persons are treated by medical providers but unable to pay, causing the providers to shift those unpaid costs to persons who do pay for treatment, i.e., health insurers and health insurance purchasers. But the 11th Circuit majority deemed those findings inadequate to satisfy the “substantial effects” test.
And key to that rejection was the majority’s embrace of a the position advanced by a group of economists who participated as amici curiae. Their brief included a breakdown of cost-shifting and argued that different types of uninsured persons are responsible for separable portions of cost-shifting, and that the group that the individual mandate would require to buy health insurance isn’t responsible for most of the cost-shifting. Brief of Amici Economists.pdf. Echoing that reasoning, Judges Hull and Dubina ultimately found that “in reality, the primary persons regulated by the individual mandate are not cost-shifters but healthy individuals who forego purchasing insurance.”
On that basis, the 11th Circuit majority concluded that the link between the activity regulated by the individual mandate, on the one hand, and cost-shifting, on the other, was too attenuated to satisfy the “substantial effects” test: “At best, we can say that the uninsured may, at some point in the unforeseeable future, create that cost-shifting consequence.” As such, the majority held that the Commerce Clause did not empower the federal government to enact the individual mandate.
Just how significant a role amici played in influencing the majority is perhaps even better illustrated by the pages of text Judge Marcus’s dissent devotes to responding to their arguments. Judge Marcus uses that space to express his strong disagreement with amici’s argument (which the majority appears to have accepted) that not all uninsured individuals will inevitably become healthcare consumers at some point in time. He goes on to discuss at length why the majority is wrong for adopting amici’s parsing of groups of uninsured, as well amici’s argument that it even matters.
But as much as the Florida PPACA case demonstrates the influence that “friends of the court” can have, the outcome also shows that there are limits. I doubt that the amici on either side of the case are particularly happy with the result; leaving PPACA intact sans the individual mandate was no one’s goal, and it would result in sky high health insurance premiums for everyone who buys it, including economists. And no one likes sky high premiums, especially economists. Even when their amici curiae briefs are responsible for that result.
Implyed responsibility of court/friends of court for rising cost of insurance premiums is technically misplaced blame.
High premiums are essential part of the Act due to the complex and somewhat unclear way the cost-sharing (shifting) subsidy reductions would actually filter through the system.
As an example:
1) The premium subsidies are provided as refundable tax credits, and as a result are exempt from the automatic cuts.
2) The cost-sharing subsidies are direct spending by the federal government and are thus subject to the budget reductions.
As a result low-income enrollees will be entitled to coverage with a higher actuarial value, and it requires participating health insurers to provide that coverage. The federal government then pays insurers directly for the extra costs associated with lower patient cost-sharing.
So, the direct (and expected) effect would be that low-income enrollees would still get improved coverage, but insurers would be paid less for providing that coverage. Insurers probably would try to recoup these losses by charging higher premiums (which would, in turn, also lead to higher federal tax credits). This might also make private plans reluctant to serve lower-income enrollees, and they could take steps to try to avoid that part of the market. This in turn will reduce competition and further drive price of premiums up.
Ok, this is really beyond the scope of my post, which doesn’t take a position on the relative merits of PPACA or whether it will inherently raise or lower premiums, etc. The point of the last paragraph is simply that I don’t think anyone was looking for the court to do what it did, i.e., to uphold most of the law but eliminate the individual mandate. And the consequence of eliminating the mandate but keeping the rest will be increased premiums. I don’t see a contradiction between that premise (which I don’t think is particularly controversial) and your assertion that other provisions of the Act will cause premium increases.
Great post Dan. I was wondering whether you knew who the “group of economists who participated as amici curiae” were that the majority relied on. I could not find a link or cite in the article and I would be very interested to read the economic analysis put forth in the brief.
Thanks Jeff. I added a link to the brief in my post where it’s first mentioned.