The Constitutionality of the AHCA’s Continuous Coverage Provision

March 7th, 2017

During last night’s town hall at the National Constitution Center on the future of the ACA, the moderator asked me if the Constitution was still relevant for the Obamacare debate. “Of course,” I answered! When parties lose at the ballot box, they invariably turn to the Constitution–and the courts–for relief the political process will not afford. I wildly speculated that Chief Justice Roberts would break my heart (once again) by holding that requiring states to accept block grants, rather than the extent-Medicaid expansion, would be unconstitutionally coercive. I was mostly being facetious, but the point stands. Indeed, Abbe Gluck seemed intrigued by the idea.

Little did I know that as I spoke, some were already fashioning arguments that the new health care bill is unconstitutional. Section 133 of the American Health Care Act, known as the “Continuous Health Insurance Coverage Incentive,” was designed to replace the individual mandate. It allows insurers to increase the premium for certain individuals by 30% who have not maintained sufficient coverage over a specified period of time. Seth Chandler’s post explains how it operates:

The substitute mechanism employed in section 133 of the AHCA requires insurers to charge purchasers a 30% “penalty” if they obtain coverage in a given year without having had coverage in the preceding year. The idea is that, in order to avoid those higher rates, individuals will be incentivized to purchase health insurance even in those years when they feel the premiums are high relative to their expected costs. No one will be forced to do so — it won’t be a tax on doing nothing like the Affordable Care Act imposed — but, if people know about the penalty, it might be fairly effective and feel somewhat less coercive.

Seth’s assessment is directly on point. This provision merely allows insurers to charge certain individuals higher premiums.

Yet, Senator Rand Paul now contends that the continuous coverage provision is in fact an unconstitutional penalty. He said:

Believe it or not, it also keeps the individual mandate. Instead of paying the government a penalty, you have to pay the insurance company penalty. I predict that will actually be unconstitutional and may drag the whole thing down.

For purposes of full disclosure, I advised Senator Paul’s presidential campaign, though in this case, I’m not sure precisely what his argument for unconstitutionality is. I’ll do my best.


Since the Supreme Court’s 1944 decision in United States v. South-Eastern Underwriters Association, the act of purchasing insurance is an economic activity that has a substantial effect on interstate commerce. As a result, Congress had broad power to regulate that transaction under its commerce power. Further, when augmented by the Necessary and Proper Clause, Congress can regulate intrastate acts incidental to that transaction.

Assessing a penalty on the purchase of insurance is well-within Congress’s commerce powers. There is no need to resort to the taxing power, or even the saving construction, because the decision to purchase insurance is an economic act. In contrast, under the Court’s opinion in NFIB v. Sebelius, the decision to go uninsured was not within a class of activities (Raich), so Congress lacked the power to regulate it. Once a person decides to actually purchase insurance, Congress has broad power over that act.

This provision is constitutional. Now, if you’d like to overturn South-Eastern Underwriters, I’m with you.