Obamacare, free speech, and giving insurance companies the power to tax


Author:  Anne Hayes

For all that the administration pooh-poohs the idea that the national healthcare bill is no big constitutional deal, there is no avoiding the fact that the Patient Protection and Affordable Care Act, otherwise known as Obamacare, is unprecedented.  For the first time, Congress is mandating that citizens spend their own money to purchase a service from privately-run and -owned companies. And while legal debate has, for obvious reasons, centered around the limits of federal commerce power, there are other issues that are also implicated by Obamacare.

Insurance is already a highly regulated industry, but the fact remains that insurance companies are private, profit-making enterprises.  So long as individuals have the freedom–for the time being, anyway–to forego purchasing health insurance, they are also free to avoid contributing to an insurance company’s bottom line.  Thus, the profits that a private insurance company makes are entirely fair, in the sense that no one is actually coercing anyone else to help them make money.

I can already hear the naysayers point out that auto insurance is also a mandatory payment to a private company.  However, since the state licenses drivers, and states have general police powers, auto insurance is not as troublesome: people still have a choice.  Even more, Obamacare mandates the purchase of insurance simply by virtue of being alive.  Surely, we have not arrived at the conclusion that merely living is a government privilege akin to driving on the public roads, or that living, in any way, implicates the same public safety concerns as operating a vehicle.

Given the fact that Obamacare mandates a private purchase, Congress has purported to be sensitive to this concern, by requiring that insurance company spend between 80% to 85% of premiums on patient care.  Put another way, of course, this means that 15% to 20% of premium payments go into the insurance companies’ own coffers.  That hardly seems like a fair deal to those who have trouble affording insurance payments: it's bad enough to be forced to buy insurance coverage, but how come I also have to hand over extra money?  But more than that: is that concept, by itself, constitutionally problematic?

Caselaw suggests it may be.  A long line of First Amendment cases coming out of the United States Supreme Court under the “compelled speech” doctrine have held that private individuals may not be compelled to contribute money toward causes with which they disagree. This doctrine has been applied in union dues cases, notably in the landmark 1977 case of Abood v. Detroit Board of Education.

Abood involved a group of teachers who objected to an “agency shop” arrangement between the Detroit Board of Education and a teacher’s union, whereby anyone who wanted to teach within the city system had to pay dues to the union, whether or not they opted to actually join the union.  Several teachers objected, arguing that this violated their First Amendment rights of free speech and free association.

Ultimately, the Supreme Court upheld the agency shop arrangement, and upheld Michigan state law, holding that teachers could be compelled to pay dues to compensate the union for its collective bargaining efforts from which all teachers, union or non-union, benefitted.

But the Court went further.  Addressing additional First Amendment claims, the Court noted that the objecting teachers “specifically argue that they may constitutionally prevent the Union’s spending a part of their required service fees to contribute to political candidates and to express political views unrelated to its duties as exclusive bargaining representative. We have concluded that this argument is a meritorious one.”

While acknowledging that unions could generally spend their members’ dues as they wished, the Court pointed out “the Constitution requires only that such expenditures be financed from charges, dues, or assessments paid by employees who do not object to advancing those ideas and who are not coerced into doing so against their will . . .”  (emphasis mine). Quoting Thomas Jefferson in a footnote, the Court recited the principle: “to compel a man to furnish contributions of money for the propagation of opinions which he disbelieves, is sinful and tyrannical.”

Thus, the unions had to refund that portion of collected funds spent on any activities beyond collective bargaining to avoid running afoul of the First Amendment rights of objecting teachers.

So one has to ask with Obamacare: on what basis does the government require the insured to pay for insurance company expenditures that exceed any benefit received, especially since many insurers spend a great deal of money on matters completely unrelated to the provision of medical care?

For example, UnitedHealth Group, the largest health insurance company in the United States, had revenues of over $87 billion in 2009, with earnings in excess of $6 billion. A portion of those revenues was used for lobbying, donating to political causes, and supporting a selection of charities, including charities that had plainly partisan and ideological agendas.  Under accounting principles, those funds are deemed legitimate corporate "expenses" and do not come out of profits.  Why should those forced into paying premiums against their will pay for shareholder profits and political, charitable, or ideological causes in addition to their own healthcare costs?

Ironically, standing in opposition to the notion of compelled speech is the converse principle of First Amendment law that corporate speech, also, is entitled to First Amendment protection. As the recent FEC v. Citizens United case emphasized, the First Amendment was designed to prevent government from suppressing speech with which it disagreed, whether by an individual or any other entity.  Any notion that “corporations,” as such, were somehow not entitled to First Amendment protection would similarly allow Congress to ban speech by media corporations such as newspapers and television networks–a result that the FEC decision’s detractors have never fully appreciated.

This leads us to an interesting conundrum regarding Obamacare’s mandate: the government now gives individuals no choice but to pay for private corporate speech, as well as contribute to private corporate profits, and diminishing those profits to a “mere” 15% or 20% hardly discounts the principle.  On what basis does the federal government empower or allow private companies to essentially levy a 15% to 20% “tax” on its own citizens that those companies may use for their own purposes?

Thus, while there are those who dismiss the notion that Obamacare “nationalizes” the insurance industry, Obamacare forces one to ask two questions that go to the heart of free-market principles: should the government be limiting the amount of profit a private insurance company can make? And will the mandate impel the government to subsequently limit how private companies may or may not spend their profits?
It may be unlikely that one would be able to make out a clean First Amendment case against an insurance company, but the precedent is there and it has a compelling justification given Obamacare's mandate.  Whatever the outcome might be, however, this entire scenario should give anyone pause. If the agreement to purchase insurance is a private decision, it is relatively easy to accept the idea that the voluntary agreement to purchase insurance gives insurance companies the freedom to spend their money as they please.  But the mandate of Obamacare transforms health insurance companies into serving a quasi-governmental function, and freedom-loving Americans are right to be suspicious about the problems that are likely to develop down the road from the government’s increasing and excessive entanglement in private enterprise, to the point that it can limit what those "private" businesses charge for their services, how much profit they may make, and how they can spend those profits.

As one who upholds the principle of free speech, I question the legitimacy of compelling Americans purchase services from profit-making corporations that are free to spend their profits as they please.  As a proponent of free enterprise, I have to ask under what authority the government can purport to tell private companies how much revenue they can earn and what they can do with those earnings.

Frankly, these developments, underlying the debate about the commerce power, spell out with stark clarity that Obamacare constitutes a significant inroad into our basic liberties, and undermines the economic foundation upon which our country has operated.  At least, until now.