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Constitutionality of Mandatory Insurance


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#1 rodeo

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Posted 23 March 2010 - 10:40 PM

by nate silver.

if you need background on him, just know that he is never wrong. about anything ever.

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.

http://www.fivethirtyeight.com/

#2 MadHatter

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Posted 24 March 2010 - 07:45 AM

I know everyone is screaming about "Mandatory Insurance". However, IF you want insurance companies to not be allowed to refuse you because of pre-existing conditions, you MUST have mandatory insurance.

Otherwise, people will play the odds when they are healthy (not get insurance) and then go out and buy it as soon as they become sick. This system will not work.

The only way insurance works is for healthy people to pay in and not use it....so the premiums can be used for those who do need it.

Without mandatory coverage, it would be like carrying no insurance on your car....having an accident....then calling to get insurance.

You can't force the insurance companies to cover people with known illnesses, if you don't force people to get coverage when they don't.

#3 cookinwithgas

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Posted 24 March 2010 - 07:59 AM

Holy poo who took over your brain overnight

#4 Davidson Deac II

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Posted 24 March 2010 - 08:08 AM

Nate Silver is never wrong? He must be a woman.

Edited by Davidson Deac II, 24 March 2010 - 08:13 AM.


#5 cookinwithgas

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Posted 24 March 2010 - 08:11 AM

or at least just positioned that way in the Rodeo/Nate relationship

#6 Panthers_Lover

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Posted 24 March 2010 - 08:22 AM

by nate silver.

if you need background on him, just know that he is never wrong. about anything ever.

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.

http://www.fivethirtyeight.com/


It's really simple.

Social Security and Medicare are TAXES. Constitutional (whether we like it or not)

Requiring an individual to purchase insurance, thus entering into a legal contract, is not a tax. It is not constitutional. Do I think they'll win? No, it's not likely they will.

#7 cookinwithgas

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Posted 24 March 2010 - 09:11 AM

Boy PL you need to get with the program. Republicans have taken great pains to make sure they call it a tax instead of a fee over the past year to scare people. Now that it's passed we should call it something else to try and end it?

Yeah, thats the Republicans stategery in a nutshell.

#8 Panthers_Lover

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Posted 24 March 2010 - 09:19 AM

Boy PL you need to get with the program. Republicans have taken great pains to make sure they call it a tax instead of a fee over the past year to scare people. Now that it's passed we should call it something else to try and end it?

Yeah, thats the Republicans stategery in a nutshell.


I don't get with the program because I'm not a Republican.

I can see trying to compare it to a tax, but it's not ... it has the effect of one, but it is not ....

#9 MadHatter

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Posted 24 March 2010 - 11:23 AM

Holy poo who took over your brain overnight



The biggest issue I have with the Healthcare bill is the costs and likely overestimated savings that can be pulled from Medicare. I don't think this country can afford the massive debt that it will bring.

We will be forced into a situation where the costs will be 1.5X the estimate and we will have to have another round of tax increases to try and keep it anywhere near the black.

I also philosophically disagree with social programs that are designed to support people fo rtheir entire lives. I believe in helping people who are workign to help themselves.

The current welfare, food stamps, and now medical insurance will be a mean of supporting families...not helping them.

I also have an issue with giving stax breaks to families making up to nearly $90k per year. That income level does not warrant goverment subsidies.

#10 rodeo

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Posted 24 March 2010 - 11:34 AM

The current welfare, food stamps, and now medical insurance will be a mean of supporting families...not helping them.


this is going to derail the thread, but that's just not true. there is a stereotype that what you're saying is true, and it is in some cases, but not nearly enough to invalidate the whole of those programs.

when i was a child, my family qualified and were on food stamps for a brief period. my mother had to steal toilet paper out of the mcdonald's bathroom even. it didn't 'support' us.

it helped my family stay on our feet for that period, and by the time i was in high school my father was making 6 figures at a large corporation. i got multiple degrees and own 2 companies with several other side projects.

without that brief period of help, we may have lost our home or any number of other things and my life would've ended up very different.

#11 MadHatter

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Posted 24 March 2010 - 11:39 AM

this is going to derail the thread, but that's just not true. there is a stereotype that what you're saying is true, and it is in some cases, but not nearly enough to invalidate the whole of those programs.

when i was a child, my family qualified and were on food stamps for a brief period. my mother had to steal toilet paper out of the mcdonald's bathroom even. it didn't 'support' us.

it helped my family stay on our feet for that period, and by the time i was in high school my father was making 6 figures at a large corporation. i got multiple degrees and own 2 companies with several other side projects.

without that brief period of help, we may have lost our home or any number of other things and my life would've ended up very different.


I am not saying that ALL people use the social programs as a means of support. Your personal example is why the programs were enacted and why they do provide a necessary benefit.

However, I believe you are the minority when discussing people on welfare, food stamps, etc... The current systems have no time limits...do not incent people to get off the programs....and do not require able bodied people to do anything to get the assistance.

You could easily convert Welfare to Workfare....requiring recipients to EARN the monies. There are jobs and activities that could be performed.

Unlike these programs, Unemployment Payments are temporary and designed to assist while somone is down. There are time limits. I know they have been extended several times during this recession, but these were unique economic times and warranted an extension.

Edited by MadHatter, 24 March 2010 - 11:41 AM.


#12 rodeo

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Posted 24 March 2010 - 12:20 PM

could be, i don't know the current laws very well.

#13 Mr. Scot

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Posted 24 March 2010 - 03:57 PM

I know everyone is screaming about "Mandatory Insurance". However, IF you want insurance companies to not be allowed to refuse you because of pre-existing conditions, you MUST have mandatory insurance.

Otherwise, people will play the odds when they are healthy (not get insurance) and then go out and buy it as soon as they become sick. This system will not work.

The only way insurance works is for healthy people to pay in and not use it....so the premiums can be used for those who do need it.

Without mandatory coverage, it would be like carrying no insurance on your car....having an accident....then calling to get insurance.

You can't force the insurance companies to cover people with known illnesses, if you don't force people to get coverage when they don't.

Actually, you can still do that.

If you don't buy insurance, you'll pay a fine. The numbers I'm hearing are about $700.00 a year, cheaper than a lot of insurance policies would be.

So unless you make the fines more substantial, to the point that more people will be forced to buy insurance than not, it's still quite possible to lay off of buying until you actually get an illness. And I have little doubt that plenty of people will do just that.

#14 MadHatter

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Posted 24 March 2010 - 04:01 PM

Actually, you can still do that.

If you don't buy insurance, you'll pay a fine. The numbers I'm hearing are about $700.00 a year, cheaper than a lot of insurance policies would be.

So unless you make the fines more substantial, to the point that more people will be forced to buy insurance than not, it's still quite possible to lay off of buying until you actually get an illness. And I have little doubt that plenty of people will do just that.


Good point....I did not even think about that scenario.

#15 Carolina Husker

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Posted 24 March 2010 - 04:05 PM

The fines increase after the first penalty.


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