An earnest question about interstate health insurance

curtis's picture

As the Supreme Court gears up to hear oral arguments about the Patient Protection and Affordable Care Act (PPACA) – pejoratively referred to by some as "Obamacare" – I've been reading up various commentaries and blog posts about the potential constitutionality. For example, NPR has a good, uncharged guide to the questions involved. However, my favorite commentary and analysis can be found over at The Volokh Conspiracy, which offers conservative and libertarian views on the issues — and not always in predictable ways.

However, I have one question that I haven't found addressed anywhere. Maybe the answer is so obvious that it simply doesn't need to be discussed. Maybe it's so complex that nobody wants to discuss it. Maybe I'm making assumptions based on imperfect or incomplete knowledge. Or maybe there's some other reason nobody is asking (or answering) this question. First, a little background.

As I understand the current situation, it is not possible to purchase health insurance across state lines. Living in New York, I must buy health insurance from a company licensed to sell health insurance in my state. Companies may be licensed to sell health insurance in more than one state, but they can only sell health insurance designed for a particular state within that state.

This situation stems from the passage of the McCarran–Ferguson Act in 1945, which allowed states to regulate health insurance on their own and removed health insurance companies from the provenance of most federal anti-trust laws. The McCarran-Ferguson Act was a response to an earlier Supreme Court decision, United States v. South-Eastern Underwriters Association that ruled insurance was commerce and therefore could be regulated by the federal government under the inexorable Commerce Clause of the Constitution.

But there is something paradoxical, perhaps even downright Kafkaesque, about the whole situation. If insurance is indeed commerce (which nobody today denies that it is), then clearly the federal government can regulate it as such. However, federal regulation specifically removes health insurance from the purview of federal regulations.

Clearly the federal government could repeal or modify the McCarran–Ferguson Act, thus bringing health insurance companies back under the purview of federal regulation. However, the PPACA doesn't do that. Rather, it allows for states to create compacts (binding legal agreements between states) that would let individuals purchase health insurance from companies in other states that have compacted with their own state. Insurance purchased through such compacts would have to meet minimum federal regulations. This dynamic is very different than generally allowing individuals to purchase health insurance across state lines. (Also, states can create compacts without the PPACA, though they would need congressional approval, and it's unlikely Congress would approve a multi-state health insurance compact at this time.)

So, with all of that in mind, here is my question: If health insurance is considered commerce for the purposes of regulation between the states, but the federal government has regulated it such that in practice it's impossible to engage in interstate commerce with respect to health insurance, and if the PPACA doesn't change the situation in any meaningful way, then how can the PPACA be regulating interstate commerce?

I doubt I will get any satisfactory answer to this question, although it seems pertinent to me. Certainly, it's not one of the ones before the court.



Thank you for visiting my site. I am Curtis Weyant — a writer, musician and thinker of deep thoughts in the tradition of estimable personages such as Jack Handy and the Scarecrow from The Wizard of Oz.

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