Tuesday, February 28, 2012

Does Obamacare Negate Its Own Insurance?

A brief recently filed by the Institute for Justice as a friend of the court (amicus curiae) in the Obamacare case now pending before the United States Supreme Court raises a most interesting point: contracts must be entered into voluntarily to be valid and enforceable. (This is what lawyers call "hornbook law": it is fundamental to the law of contracts, and has been with us since the very beginnings of the legal system.)

A contract entered into under duress, such as threat of sanctions, retaliation or punishment, on the other hand, is unenforceable, and may be set aside in court. That is because to make a valid contract, the law requires a "meeting of the minds" -- two individuals must come freely together, and freely decide and agree on the same terms for their contract. If one of those minds is under duress, it cannot meet the other in the free and voluntary sense which the law requires to make a contract.

The so-called "individual mandate" in Obamacare requires that everyone purchase a healthcare insurance policy, under threat of fines and, eventually, imprisonment for refusal to pay the fine. A more classic case of forcing people into a contract under duress could scarcely be imagined.

For insurance is, of course, a contract. The insurance company agrees with the insured to pay certain costs of the insured's medical care, in accordance with the terms of the insurance policy ("policy" in this usage is synonymous with "contract").

The IJ amicus brief thus poses the interesting question: how can any insurance contract entered into under the threat of Obamacare's sanctions be enforceable? Here is a short video by one of the authors of the brief, Professor of Constitutional Law Elizabeth Price Foley, which explains the huge ramifications of the argument:

And here is the link to download the brief (42-page .pdf file).

What I find most interesting is that I have been following a number of legal blogs which carry arguments pro and con regarding the healthcare mandate (especially The Volokh Conspiracy), but to date I have never seen any other law professor raise this fundamental argument. That they have not done so, and that many of them can entertain even the notion that the mandate is constitutional, speaks volumes about the institutional mentality that has crept over our law schools.

Here, for example, is the link to download the Government's brief in support of Obamacare. Read it through, if you wish, and you will not find a single discussion of the mandate from the point of view of contract law. (The word "contract" itself appears only twice in the brief, on page 42.) Instead, it is all about the commerce power of Congress (and its power to tax), and the reasonableness of requiring people to purchase insurance so that the plan overall will work. In other words, Government sees itself only in terms of extending the powers it has, and of defending the "reasonableness" of each such extension.

The IJ's argument, however, is a killer. If Congress can force people to enter into a contract for insurance, then Congress could force people to contract to purchase a Chevy Volt, in the name of fuel economy.

The Supreme Court has set aside three days in late March -- six hours of argument in all -- to consider the merits of Obamacare. It is sure to be covered heavily (although, alas, the Supreme Court refuses to allow streaming video), and will be well worth following for what it says about the current makeup of the Court, about the forces backing Obamacare, and about the nature of our federal government.

(Aside: if you want your eyes opened about the kinds of forces backing Obamacare --as well as the kind of lawyers there are in training right now who see nothing wrong with demanding free contraception as an economic right -- be sure to head over to Hot Air, and read this piece by Tina Korbe. Be sure, also, to watch the embedded video of a Georgetown Law student pleading her case to Congress to mandate that her school-provided insurance pay for free, unlimited sex while she is a student, so that she doesn't go broke buying contraception on top of having to pay tuition to learn the law.)

Make no mistake -- the stakes with Obamacare are huge. In the balance hangs the future of the liberties on which this country was founded.


  1. What about the laws that require us to carry liability insurance? Are they no good as well?

    Or those laws requiring insurance companies to re-insure?

    Or a law (in force, I understand, in some jurisdictions) requiring lawyers to carry professional liablity insurance, or business owners to carry some degree of business premises liability insurance? All no good?

    I'm not carping, just asking, how far does this argument take one?

  2. All good questions, Rick Allen. Let me see if they sink the argument.

    Laws requiring us to carry liability insurance are part of the privilege of registering a car that is driven on public roads. If your vehicle does not drive on public roads, you do not have to purchase liability insurance (nor do you have to register it).

    Likewise, laws requiring professionals to carry liability insurance (as here in California) are part of the privilege of being granted a license to practice that profession. If you are not going to have any clients, but just want to practice the profession academically, you don't need to purchase the insurance.

    Same with businesses -- in general, if your business needs a license from the government in order to operate, the government can condition the privilege of such a license on your carrying certain insurance.

    I am not familiar with the reinsurance laws you mention. However, insurance companies are a classic form of a business which needs to register with the state and obtain permission to engage in operations in that state, so I imagine the same analysis applies there, as well.

    In contrast, with Obamacare, the requirement is not imposed because you seek a privilege from the government in order to engage in business, or drive a car, etc. It is imposed on you just by virtue of your being an adult citizen. At least this far, at any rate, one is not yet required to get a license in order to become an adult citizen. (But I admit that if Obamacare stands, we are only a step or so away from such a requirement.)

  3. Dear Mr. Haley,

    Is this development not but the most recent, and most transparent to date, consequence of our having ignored the fundamental difference between law and legislation? The legal profession has been gradually indoctrinated so as to accept that any statute adopted according to the procedures required of the legislature is to be considered as of the same genus as the laws given by God and, by virtue of the latter's origins, equally applicable to us all. I know that there is terminology to distinguish between the natural law and legislation, but I am reluctant to attempt its use lest I recall it incorrectly.

    Ultimately, it comes down to an abandonment of what we all once understood as the natural law in favor of man-made laws, i.e., legislation.

    Pax et bonum,
    Keith Töpfer

  4. In some jurisdictions, the only thing needed for liability is proof of a bond that will cover the minimum set amount of liability.

    As to the basic idea embodied here, I think this must be the first documented introduction into the argument; however, I have heard/read the same effective sentiment expressed that if the government can make you buy health insurance they can make you buy the environmentally friendly car, they can make you buy only "healthy" food, they can make you buy ... well anything that is the whim of the zietgiest.

  5. "...if the government can make you buy health insurance they can make you buy the environmentally friendly car, they can make you buy only "healthy" food."

    Bill, it seems to me it already does. There are environmental standards for cars sold. There are purity and labeling requirements for food.

    I myself think these things good. I understand how others disagree. But my point to Mr. Haley, and to you, is that we have been going down this road for three generations, and the principles objected to, if found unconstitutional, would have a much more extensive scope that the president's health care legislation.

  6. Very interesting. I like that the video was very short and explained in simple language that many can understand- no legalese.

  7. I think Rick Allen makes some good points, though I am on the far other side of the argument. I view insurance laws as a whole as anti-freedom. Am I against insurance - no, but it should be a choice for the individual.

    Rick is also right in saying that we have been going down this road for 3 generations. I would argue that it is 3 generations that have failed to see where their path leads, and that the current crop of freedom limitation is predictable.

    I look forward to the generation that reverses this insanity in all areas (not just health care / insurance) and actually allows people to live lives without regular and systematic government intervention.