Are Obamacare’s health-insurance exchange requirements unconstitutional?

Usually, Congress can’t order state governments to do anything – it can only bribe them to do so, using federal grants.  If it tries to directly order states to do something, that’s considered a violation of the Tenth Amendment – which is why the Supreme Court ruled that Congress can’t make local sheriffs carry out handgun background checks (see Printz v. United States (1997)), or order a state to take possession of nuclear waste (New York v. United States (1992)). 

 Why, then, does Obamacare mandate that states “shall” set up health insurance exchanges?  (Section 1311(b)(1) of the law says, “Each state shall, not later than January 1, 2014, establish an American Health Benefit Exchange”). 

 Does that violate the Tenth Amendment? Defenders of Obamacare say no, claiming that the “shall” language is misleading, since the only consequence of a state’s failure to set up an exchange is that the federal government will set up the exchanges in that state instead. 

But that assumption appears to be wrong.  A state’s refusal to set up an exchange apparently leads to a massive denial of tax benefits to the state’s citizens — not just to a federal exchange being set up within its borders – according to employee-benefits lawyers like Thomas M. Christina and health policy analysts like Hadley Heath. 

This sounds a lot like an order enforced by big-time penalties.  As Hadley Heath notes,

“Shall” doesn’t sound like a very “cooperative” word.  It sounds like a mandate.  There are a lot of words available in the English language that communicate a voluntary act.  “States may” or “states choose” or “states have the option” are a few examples.  But the law says that the states “shall” . . . The health reform law provides income tax credits to individuals in exchanges established by states, but not to individuals in exchanges established by the federal government (in non-electing states). . .The choice of their state to establish or not to establish an exchange will impact the tax credits that citizens receive. The sovereignty of states is undermined, because the adoption of this law is hardly “voluntary.” 

However, Obamacare also contains yet another provision that “if a state chooses not to ‘elect’ to set up an Exchange, then the federal government ‘shall establish and operate’ an Exchange within that state.  Judge Vinson in the Florida case threw out the claim of the plaintiff states about the exchanges” based on that “elect” language, ruling that the “plaintiffs have not identified any provision in the Act that requires the states to enact a particular law or regulation… nor have they identified any provision that requires state officials to enforce federal laws that regulate private individuals.”  However, that ruling did not address the tax provisions discriminating against citizens of states that do not set up their own exchanges.

By the way, you may be wondering how Congress can pass civil-rights laws binding on the states if it can’t give states’ orders.  There is an exception to the rule against Congress giving the states’ orders, for civil-rights legislation enforcing the 14th and 15th Amendments, which ban racial and other discrimination by government officials.  They contain enforcement clauses giving Congress added authority.  This exception, however, is narrowly construed, and doesn’t cover things other than governmental discrimination, as the Supreme Court explained in striking down part of the Violence Against Women Act in United States v. Morrison (2000).  So Obamacare can’t be dressed up as a “civil right,” as some have attempted to do.

 Labeling Obamacare as a “civil right” is bizarre, given how it harms medical advances, patients, and consumers, and how it itself contains racial discrimination and racial preferences that were criticized by the U.S. Commission on Civil Rights.