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Key Provision of Healthcare Reform Law Held Unconstitutional

A federal judge in Virginia just ruled that the “individual mandate” – the cornerstone of the healthcare reform law supported by President Obama – is unconstitutional. The individual mandate is by far the most important part of the Patient Protection and Affordable Care Act (PPACA – the official name of the healthcare reform law). Without it, there’s simply no way the other important provisions can work. As different provisions of the law go into effect over the next few years, the individual mandate is meant to be the final capstone.

It requires that almost everyone in the country who is not covered by some form of public insurance (Medicare, Medicaid, the VA, etc.) must obtain health insurance, either through their employer or by purchasing it for themselves, or pay an annual financial penalty. The government will partially subsidize the premiums for private insurance for those who cannot afford it.

The law also has provisions that will prohibit health insurance companies from denying coverage to people based on pre-existing conditions, and from dropping customers, under almost any circumstances. It also includes other reforms, such as banning annual spending caps.

Obviously, complying with these requirements will be very, very expensive. But it just so happens that a large percentage of America’s 30 million (give or take) uninsured are young, healthy individuals who simply choose to go without health insurance. It happens that this demographic is very cheap to insure, so covering them tends to be extremely profitable for insurance companies. When insurance companies take on millions of these highly profitable customers, the cost of insuring the traditionally “uninsurable” (people with pre-existing conditions, mostly) should be offset.

So, what does this ruling mean for healthcare reform? Well, if it is eventually upheld by the Supreme Court, healthcare reform (in its current incarnation) is effectively dead. Whether that’s a good or bad outcome, I leave up to the reader.

In the short term, however, none of us will see any practical difference, because the provision that the court ruled against isn’t scheduled to go into effect until 2014. Furthermore, this was just one federal trial judge (two others have actually upheld the law, in separate lawsuits challenging it). This ruling won’t mean much until the 4th Circuit Court of Appeals hears the case, after which it’s nearly certain to go to the Supreme Court, which will have the final say.

So, what are the chances that the Supreme Court will sustain this ruling? It’s hard to tell.

The plaintiffs are arguing that Congress lacks the constitutional authority to require individual Americans to buy health insurance. Now, regardless of one’s opinion on the wisdom of this type of healthcare reform, you can make a non-frivolous argument that it exceeds the constitutional scope of the federal government’s power, and there are plenty of good arguments that it does not.

Under the Constitution, the federal government’s powers are limited. Basically, if the power to do something isn’t explicitly granted to the federal government in the Constitution, the federal government can’t do it. However, some of these grants of power are extremely broad and vague, so there’s a lot of disagreement over exactly how far some of these grants of power go.

One of the most expansive federal powers laid out in the constitution is the power to regulate interstate commerce. During this nation’s first 150 years or so, the Supreme Court was pretty clear that “interstate commerce” (and the federal government’s power to regulate it) was limited to the most literal interpretation of the term: the sale and transport of goods and services across state lines.

However, during the Great Depression, Congress, along with the Roosevelt administration, began to implement some extremely ambitious programs, which involved unprecedented expansions of federal power. At first, the Supreme Court shot down a large number of these programs in close 5-4 decisions. But a sudden apparent shift in Justice Owen Roberts’ judicial philosophy led to the Court creating precedents which greatly expanded the federal government’s power under the Commerce Clause.

Now, the general rule is that the federal government can regulate any economic activities which, in the aggregate, have an effect on interstate commerce. Using this rule, the Supreme Court has ruled that the federal government can prohibit a person from growing wheat on his own property for personal use, because if such activity were widespread, it would have an aggregate effect on the nationwide price of wheat, and therefore an effect on interstate commerce.

There’s no question that the millions of uninsured have a significant effect on the national economy: hospitals are required by law to treat and stabilize all patients who come in with an emergency condition, without regard to their insurance status ability to pay. Hospitals incur serious expense in meeting this obligation, which they pass on to patients with the ability to pay out-of-pocket, or to insurance companies.

Furthermore, the uninsured strain public health resources such as Medicare, Medicaid, and the Children’s Health Insurance Program, affecting state and federal budgets.

It’s crystal clear that going without health insurance affects healthcare costs for everyone else, and therefore affects the national economy and interstate commerce. The problem, however, is that there’s no precedent supporting the idea that not doing something (in this case, not purchasing health insurance) is an “activity” that can be regulated by Congress. Of course, there doesn’t seem to be much, if any, precedent refuting that notion, either.

We’re truly headed into uncharted constitutional territory with this one. While one’s opinion on the constitutionality of the PPACA will largely depend on their policy preference, we can all agree that, whatever the final result, it’s going to be a pivotal moment in our legal history, and it’ll be an interesting ride getting there.

Shouldn’t a Mazda Seatbelt Lawsuit be Allowed to go Forward?

Faulty cars have been making all the news lately. Toyotas, especially, have been at the forefront of all this backlash for some time now. Just this morning I saw yet another article about how officials are blaming a faulty Toyota as the reason behind a fatal car crash.

So imagine if one of your loved ones was involved in an accident in one of these allegedly faulty cars. Further imagine that after the accident, you were not even allowed to bring a lawsuit against the car manufacturer because your claim was somehow “pre-empted.” While this is not happening with Toyota accidents (thank goodness), it’s exactly the case of what’s happening to one family whose loved one was killed in a 1993 Mazda minivan.

Apparently the passenger who was killed in this accident was sitting in the rear seat and was wearing a “lap-only” seatbelt. Family members are alleging that if the passenger had been wearing a “shoulder-and-lap” seatbelt instead, this death could have been prevented. I’m not an expert on all the scientific workings behind seatbelts, but from the face of this description, it seems like the family has made a legitimate claim and should be able to proceed with a lawsuit.

However, the Supreme Court is divided on whether to even allow this lawsuit to proceed because it’s allegedly pre-empted by federal law. The thinking goes that at the time the Mazda was made, federal law did not require car makers to install shoulder-and-lap seatbelts; a lap-only seatbelt was all the law required. (As a side note, this is no longer the law. Starting in September 2007 most passenger vehicles are required to have shoulder-and-lap seatbelts for rear seats).

Anyway, going back to the argument, family members and consumers understandably made the next logical point, which is that, just because Mazda complied with the federal law doesn’t mean that they’re immune from future lawsuits. However, Mazda is contending that federal regulators at the time knew exactly what they were doing when they enacted the law. Federal regulators had expressly considered the option of requiring shoulder-and-lap seatbelts, and had deliberately rejected that option for economical reasons. Thus, the federal regulators’ stance on seatbelt regulations back then was conclusive, and they had made it clear car makers were not to be sued for anything but failing to provide lap-only seatbelts.

So, the Supreme Court appears to be divided over this issue, and it will be interesting to see which way they eventually decide. Ultimately, the disposition of the case will probably turn on whether they really think the federal regulators had meant to make the law conclusive, in terms of exactly what kind of seatbelts were required. Or, if the federal regulators had only meant to set a minimum, rather than conclusive standard, on the type of seatbelts required.

Personally, I think that it’s kind of a pointless exercise to go about deciding the outcome of the case this way. I mean, courts can conduct all the research they want into the legislative history, but will they ever really be able to know what federal regulators were thinking at the time they enacted federal law? Even if they could find an answer to this, what’s the point of knowing what federal regulators were thinking anyway?

I mean, isn’t the issue really…what was Mazda thinking when they decided to forego the shoulder-and-lap seatbelts. For example, did Mazda think this was just an easy way to save on costs, and blindly look the other way in terms of consumer safety? Or did Mazda assess the situation, and come to their decision only after accurately concluding that shoulder-and-lap seatbelts were not necessarily more safe, economical, or practical to implement?

Of course, we’ll never get to explore these questions if the Supreme Court ultimately decides to not even let this lawsuit go forward based on pre-emption grounds. However, because it’s the Supreme Court deciding this case, they’re actually not bound to follow the law on pre-emption as strictly as other courts have to. They can instead choose to decide this case based on other factors, such as what’s best for public policy.

To me, this makes much more sense, because like I said before, who really knows (and cares) what federal regulators were thinking back then. But given public policy reasons, I believe it would be a good idea to let this lawsuit go forward. For example, allowing this lawsuit to go forward would give car makers more incentive to devise safer vehicles. Car makers would not be complacent with just meeting the minimum standards of safety by law, but would be more pro-active in considering consumer safety first.

However, I’m not the Supreme Court, and this case is obviously not for me to decide. It just seems ridiculous to me though, as a common observer, that a family whose loved one died in a car accident cannot even be allowed to bring a lawsuit against the car maker. I’m not saying the family is entitled to win by any means, but they should at least be able to have their day in court.

Why Prop 19 Failed And What Will Happen Now

In case you didn’t know already Prop 19, the marijuana legalization bill, was defeated by voters in California’s mid-term elections.  Much to the dismay of the Golden State’s many pot-lovers, the drug will remain illegal for all intents and purposes in California, but nonetheless still be available for all those with chronic migraines.

There are many reasons why Prop 19 failed; however the larger question is what will happen now among legalization enthusiasts and the legalization movement in general?

But back to the first question: why didn’t Prop 19 pass?  I think its failure can be attributed to a number of factors:

Voter Apathy

Despite a slightly higher voter turnout for this election, many supporters of Prop 19 failed to actually vote or even register to vote for their beloved marijuana legalization.  Who were these voters?  Here’s a hint: this demographic generally smokes up a lot despite the fact that homework still poses a problem in their lives.  Give up?

Youth voters.  Specifically, those in the 18 to 24 year old demographic.  This large and potentially game-changing group continues to remain blissfully unaware of their power to change state and national governance.  Many polls indicated that despite heavy support for Prop 19 among young people, many of those polled stated they didn’t intend to vote for its passage citing a number of reasons such as distrust of the democratic process and not believing their vote would affect the proposition’s outcome.  All of this is code of course for being too lazy.  Older voters on the other hand turned up in record numbers to ensure Prop 19 was crushed.

Questionable Monetary Gain

As Prop 19’s campaign continued, many questions began to emerge over how much money its passage would actually bring to California.  Conflicting research reports started to raise doubts over the original $1.4 billion tax revenue estimates; some citing the figure could be as low as $351 million.  Furthermore, the potential immediate loss of federal funding, estimated at over $9 billion if Prop 19 passed, served to further degrade the proposition’s support.

Though it was estimated that Prop 19 could have saved California over $17 billion annually, many viewed this potential savings as more speculative and not as real or immediate as the impending federal funding loss.  Growers and distributors of marijuana also started to worry about their earnings.  Currently medical marijuana remains a highly profitable niche market.  The thinking became if Prop 19 passed, the price of marijuana would drop significantly as new growers and distributors entered and competed in the market, ultimately resulting in lower profit margins.

Federal Government’s Vow To Fight Legalization

Though marijuana would be legal in California if Prop 19 passed, it would still remain illegal under federal law.  US Attorney General Eric Holder stated that if California legalized pot he’d prosecute those who imbibed in the drug to the full extent of federal law.  This stance was backed by the president and, if legalization occurred, would likely have create a Prohibition Era-like situation in which DEA agents would be converging on California.  It would have also tied up the state in a lengthy and expensive legal battle.  All of this made Prop 19 look less and less sexy.

It also didn’t help that the Gov. Schwarzenegger reduced marijuana possession to an infraction right before the election in a transparent attempt to kill off support.

Ultimately though, despite the fact Prop 19 was defeated, it’s likely that we haven’t heard the last of this push for legalization.  Prop 19 failed only by a 6 percent margin; this reflects Californians’ changing sentiments toward the drug.  Furthermore, attitudes toward decriminalization across the country seem to be lightening, too, especially among young people.  The question isn’t why Prop 19 and other similar bills continue to fail, but rather when will the young adults of today finally outnumber the older generation and legalize marijuana?

For now though, we’ll likely see Richard Lee and the folks over at Oaksterdam University continue to lobby for the Prop 19 inevitable return to the ballot in the next election cycle.

Is The Minimum Wage Unconstitutional?

No, and no.Minimum Wage

But, a few candidates (also reported here) for the United States Senate have gone on the record as being of the opinion that it is, despite unambiguous holdings by the U.S. Supreme Court that both state and federal minimum wage laws are perfectly constitutional. The case upholding the federal minimum wage was unanimous, and over the past 70 years or so, under Courts of widely varying political and judicial philosophies, there has been no serious move to overturn either of those cases. Virtually every Supreme Court justice, regardless of their liberal or conservative leanings, views those cases as well-settled law. Even in today’s court, an argument that the minimum wage is unconstitutional is unlikely to fall on sympathetic ears.

I should note that there is some disagreement among economists as to whether or not the minimum wage is good policy, and whether it makes economic sense, but I won’t be discussing that issue here, mainly because I’m not an economist, and this is not an economics blog.

So, what are the possible arguments that the minimum wage is unconstitutional? Well, it boils down to the nature of the federal government, and its constitutional power, compared to the constitutional power of state governments. Basically, the constitution sets up a federal government of enumerated powers. This means that it expressly grants certain powers to the federal government, and denies it the rest. So, in theory, if the federal government does something which it isn’t specifically authorized to do, that’s unconstitutional. Under the 10th Amendment, all other powers not granted to the federal government are granted to the states, unless it specifically prohibits the states from doing something.

So, this means that the federal government can only do that which is expressly permitted. And state governments can do anything which is not expressly forbidden.

Now, if you look through the constitution, you won’t see anything that authorizes the federal government to impose a minimum wage on private employers. So, that’s the end of the debate, right? Not even close. In fact, the federal government does a ton of stuff that isn’t specifically authorized under the constitution. So, what’s the deal?

Many, if not most, of the constitution’s grants of power to the federal government are extremely vague and broad. For example, one of the things Congress is allowed to do is regulated interstate commerce. Unfortunately, the Founding Fathers didn’t see fit to tell us what that means, nor did they think to place a copy of This is What We Meant: A Guide to Constitutional Interpretation from the Authors in the Library of Congress. That would have been nice of them, but alas, it was not to be.

What they did leave us, however, is a Supreme Court whose job it is (among a few other things) to be the final arbiter of what interpretation of the Constitution is the correct one. Since the Great Depression, the Supreme Court has gradually expanded the scope of power granted to the federal government under the Commerce Clause. At this point, it grants the power to regulate virtually any economic activity that might affect something in another state. In this interconnected day and age, that includes basically everything.

With that in mind, there can really be no doubt that establishing a minimum wage is well within the federal government’s power. Some constitutional scholars believe (and their argument is certainly not frivolous) that the Supreme Court has expanded the federal government’s regulatory power far beyond anything that the Founders intended. This may or may not be true, but the fact remains that

I don’t doubt that these Senate candidates are perfectly aware of this fact, and were likely playing to their “Tea Party” base.

But for any employers who want to test the law, they should know that the federal minimum wage is $7.25 per hour (your state may have a higher minimum wage, which you are also bound by), and that LegalMatch case data from the past several months shows that alleged wage and hour violations by employers are still very common. And while these cases might not net plaintiffs a lot of money, typically little more than back wages and possibly attorney’s fees, wage and hour violations are comparatively easier to prove than many of the other common employment causes of action, such as discrimination and harassment.

So, if you’re an employer, and don’t think you should have to pay your employees the minimum wage, you’re certainly entitled to your opinion. And it’s your right to vote for candidates who promise to eliminate or reduce the minimum wage, if you want. But if you decide to make a stand against the minimum wage laws that you view as unjust, prepare to face the likely consequences: a trip to court, a court order requiring you to pay your employees any back pay that they’re owed, their attorney’s fees, and possibly punitive damages.

In the long run, it will probably prove much easier and cheaper to simply pay your employees at least the minimum wage.

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California Might Legalize Marijuana: What Are The Feds To Do?

It looks like Proposition 19 has a very real shot at passing in November. In case you haven’t been following the news, Proposition 19 is a California ballot measure which would legalize the recreational use of marijuana in that state. It would also legalize the sale and cultivation of marijuana for recreational use, while allowing local governments to grant licenses to retailers to sell marijuana, and to tax sales of the drug.

If this passes, it will be a true game-changer for national drug policy. The federal government already seems to be preparing for Proposition 19’s passage: Attorney General Eric Holder recently announced that the Justice Department would continue to enforce federal laws against marijuana, no matter what the voters of California decide.

This is certainly not a surprising response: in 2005, the U.S. Supreme Court ruled that it is constitutional for the federal government to enforce federal anti-marijuana laws anywhere in the U.S., even in states that have legalized medical marijuana, so there’s no doubt that the federal government has the constitutional authority to do this.

But if Prop 19 passes, the practical consequences for ordinary Californians are difficult to predict. The vast majority of drug busts are conducted by state law enforcement. While the federal government is also heavily involved in the enforcement of drug laws, it usually focuses on larger-scale dealers and traffickers, as opposed to users, of drugs. It also relies heavily on cooperation from state authorities.

So, what would the federal government’s options be if Proposition 19 passes? Well, it has a few options, but I doubt it finds any of them particularly attractive. Let’s go over them one by one.

1) Step up federal enforcement in California

This is the most obvious approach: if marijuana is legal in California, thus preventing state authorities from cooperating with the feds, the federal government can simply divert more enforcement resources to California to fill in the gap. While the DEA and FBI already have a significant presence in California, it’s likely that a huge increase in personnel would be needed to completely fill in the enforcement gap left by Proposition 19.

As you might be aware, the federal government is kind of strapped for cash. Its resources are finite. Under the Bush Administration, the Justice department vowed to vigorously prosecute everyone who sells marijuana, even if they’re selling for medicinal use, in accordance with state law. Well, medical marijuana dispensaries in California operated relatively unimpeded during those years. Sure, the DEA would occasionally raid a grower or dispensary, and indict the owners to make examples of them, but they were never serious about completely shutting down the business, so the overall risk that the medical marijuana industry entailed was fairly low.

The fact is, the federal government simply doesn’t have the resources to fill the enforcement void that Prop 19 would create without diverting significant resources from other areas.

2) Try to get Prop 19 overturned in court

In theory, the federal government could sue California in federal court, arguing that Prop. 19 is unconstitutional. The problem is that they wouldn’t have a very good argument. Nowhere is it written that California, or any other state, has to criminalize marijuana. Proposition 19, at its core, simply removes a California law. It would be one thing if California passed a law and the federal government wanted to stop its enforcement (perhaps on the grounds that it encroaches into territory that the constitution specifically reserves for the federal government, such as the Arizona immigration law). It’s quite another thing to have the courts force a state to ban a drug.

It seems very unlikely that the federal government could force California to criminalize marijuana, if the voters of that state decided to legalize it.

3) Make federal funding to states conditional on criminalizing marijuana

Ever wonder why every single state has made 21 its legal drinking age? Not that long ago, the legal drinking age in most states was 18. What changed? In an effort to reduce drunk driving, Congress, rather than simply passing a law raising the drinking age nationwide (it was highly debatable, at the time, whether or not they’d have the constitutional authority to do so), passed a law in 1984 that withheld federal highway funds from states that did not raise the drinking age to 21. Some states held out for a few years, but ended up caving when they realized that they simply couldn’t do without the money.

If the federal government is serious about keeping marijuana illegal, and other states begin flirting with the idea of following in California’s footsteps, this is probably their best option. However, it’s at least theoretically possible that states would be able to offset the loss of some federal funds through tax revenue generated by legal marijuana sales, and a reduction in expenditures on law enforcement and prisons, so the federal government might find this ineffective, but that would require the most optimistic predictions regarding tax revenues and savings stemming from legalization to be true.

4) Do nothing

Finally, the federal government could simply make no changes to its drug-enforcement activities in California. This is pretty unlikely, since small-time growers and users of marijuana would basically have nothing to fear, since they are almost never targeted by federal authorities.

This would essentially give other states the go-ahead to legalize marijuana, if they decide it’s a policy they want to pursue. If enough states legalize marijuana, and the federal government attempts to fill every void that this creates, the federal government would probably, for the first time in decades, have to seriously reconsider its own marijuana policy.

If Prop 19 passes, it will most likely be a watershed moment in our country’s legal history, and put our country’s drug policy at a crossroads. And even if it doesn’t pass, polls indicate that, if it is defeated, it will be by a very narrow margin. If this is the case, it would show other states that passage of similar initiatives may well be within reach, emboldening supporters to try and pass similar laws. So, whatever happens in November, it’s likely that marijuana policy in the U.S. is going to be seriously tested.