Richard A. Booth
It is a curse to live in interesting times. Right now, the interesting question before the Supreme Court is whether Congress has the power to compel the purchase of health insurance under the individual mandate of the Patient Protection and Affordable Care Act of 2010 (PPACA) – better known as ObamaCare. It is an interesting question because it is difficult to think of another situation in which Congress has sought to regulate inaction as commerce. But it is the wrong question. The real question is whether Congress may regulate an existing market that is deeply flawed – a market in which the failure of some to buy insurance forces insurance companies to adopt strategies that exclude others from the market altogether. When the question is so framed, the answer becomes quite clear. Congress does indeed have the power to impose the individual mandate under the commerce clause and maybe even under the equal protection clause.
Health insurance as we know it is a thinly veiled swindle. If you can buy it at all, it will likely exclude preexisting conditions and come with lifetime limits. You are covered unless you are sick – or too sick – or your coverage is cancelled despite paying premiums for years. Health insurance without the individual mandate is not really insurance as we usually understand it. Indeed, there is an odor of fraud about a product whose very existence depends on pooling the risks of large numbers of individuals but then excluding some from the pool in order to lower the price for others.
It helps to think about how insurance works. Insurance is a way to spread risk – over people or over time or both. We buy insurance with the understanding that on average we will pay a bit more than we collect. We do so because it is worth it to avoid the risk of catastrophe. In addition, health insurance is essentially a savings plan in which some pay more than they collect and some collect more than they pay. Some collect earlier, others collect later. The difference is that this bank may decide to keep your money when you want it back. 
To be fair, denying coverage for preexisting conditions, imposing lifetime limits, reserving the right to cancel coverage, and other hard-hearted practices are not the fault of the insurance companies. They would like to sell insurance to everyone who wants it. But no individual company can afford to assume the risks that go with covering the sick. If it did so, it would need to raise rates for the healthy – who would leave for another insurance company. Or the insurance company would need to charge a rate to the sick that they could not possibly pay. The bottom line is that insurance companies chase after the cheapest to insure in order to minimize cost and maximize profit. It follows that if insurance is really insurance – and not just a system of financing in which those who collect must eventually pay full freight – everyone should be welcomed.
Insurance companies could all agree to cover everyone at a somewhat higher price. But that is called price fixing. Besides someone would form a new insurance company to cover only the healthy. Of course, the government could require all insurance companies to cover all comers, thus precluding the very healthy from forming their own insurance companies. But the very healthy might choose then to go naked – to form a sort of noninsurance company. Hence the individual mandate.
This is where things get interesting as a matter of constitutional law. Opponents of ObamaCare argue that Congress cannot require consumers to buy health insurance any more than Congress can require consumers to buy broccoli. But insurance is different. Consumers who refuse to buy it when they can afford to do so – and with the plan to buy it later when they think they might get sick – effectively deny the product to consumers who need coverage now. It is as if the failure of one consumer to buy broccoli somehow prevents another consumer from buying broccoli even though she is willing to pay a market price or even more. The words of Joni Mitchell come to mind: "Some get the gravy. And some get the gristle. Some get the marrow-bone. And some get nothing though there's plenty to spare."
How can it be that there is too little of a product available when there is unmet demand even at above market prices? The answer to this puzzle is monopsony – a monopoly in reverse – where consumers have so much power that they can force suppliers to cut prices. A monopolist makes extra profits by restricting supply and charging higher prices. A monopsonist makes extra profits by exacting discounts and reducing supply into the bargain. To be sure, the uninsured are usually characterized as free riders. But free riders might just as well be seen as co-conspirators in a scheme that has the effect of reducing health insurance premiums for the healthy and very healthy.
Just like a monopoly, a monopsony is a restraint of trade and is illegal under the antitrust laws. This is not to suggest that we should indict the uninsured. Rather, the point is that Congress has the power under the commerce clause to fix the health care insurance system because it embodies a restraint of trade.
Indeed, the antitrust laws are a prime example of a situation in which Congress has regulated inaction. No one doubts that a group boycott is a violation of the antitrust laws. But a group boycott is in essence inaction. To be sure, it usually involves a group decision – which may be seen as a form of action. But conscious (or even unconscious) parallel behavior may suffice: The Sherman Act outlaws any contract, combination, or conspiracy in restraint of trade. And presumably health insurance companies are fully conscious of how they promote this monopsony.
Moreover – and more important – the restraint of trade inherent in the health care insurance system provides the elusive limiting principle that prevents Congress from using its commerce power to require consumers to buy broccoli or anything else in the absence of a restraint of trade or other market failure. There is no reason to think the market for broccoli is affected by a restraint of trade. So there is no reason to think that Congress has the power to compel consumers to buy broccoli simply because it has the power to enact the individual mandate.
Insurance is an odd product that sometimes needs to be regulated to work well. Although we think of insurance as a contract with the insurance company, it is really a multilateral agreement among all the policyholders brokered by the insurance company. (Indeed, insurance companies were traditionally organized as mutual companies.) But because it is impossible for thousands of consumers to negotiate with each other, the insurance company is left to guess about the bargain that consumers would strike if they could. Needless to say, a for-profit insurance company (as many now are) is likely to choose terms that offer the most profit rather than the best coverage. So it is perfectly understandable that it might seek to sell cheaper policies to healthier consumers so as to maximize sales. Although a mutual company may be indifferent to profit potential, it must compete with for-profit companies for customers. And vice versa. This explains why the states – the traditional regulators of insurance – often require insurance companies to offer particular kinds of coverage, leaving insurance companies to compete over price. In the absence of such regulation, competition would likely drive all insurance companies to exclude certain types of risks and thus certain types of consumers in an effort to offer the cheapest product to the people who need it least. But the effect of regulation is that consumers are often required to buy some kinds of insurance that they would prefer to forgo. Moreover, because insurance works on the law of large numbers differing types of risk may need to be aggregated to form a sufficiently large risk pool. So it may be cheaper in the end for consumers to buy coverage for both breast cancer and prostate cancer even though no individual consumer is at (much) risk for both. In short, the free market is not a free for all. When markets fail law matters.
Again, the regulation of insurance is typically a matter of state law. And a state may have more power than Congress to mandate the behavior of its citizens. But the Supreme Court itself has been rather aggressive about the terms of insurance. In Arizona Governing Committee for Tax Deferred Annuity and Deferred Compensation Plans v. Norris, the Supreme Court ruled that under the Fourteenth Amendment, state agencies are prohibited from using gender-based pricing in connection with employee benefit plans even though the effect is to require women to pay higher rates for life insurance (because men are in the pool) and men to pay the higher rates for annuities (because women are in the pool). Incidentally, the European Court of Justice has recently ruled that all life insurance products sold in the European Union must be unisex priced. To be sure, the ruling in Arizona Governing Committee was based on state action and the Fourteenth Amendment. In other words, the ruling was that gender-based insurance rates constitute illegal sex discrimination in the context of employment benefits for state workers (even though the cost and the present value of benefits are equal under gender-based pricing). In effect, the Court ruled that benefits must be equal irrespective of the difference in cost (presumably because benefits are what matter to real people and even though the result is to compel individuals to bear costs that are not their own).
Is it possible that the idea of equal treatment might serve as a constitutional basis for the individual mandate? Maybe access to health insurance is akin to access to public accommodations. Because insurance ultimately depends on group behavior, is it not somehow discriminatory to exclude a group of willing buyers or to charge some group higher prices because another group refuses to participate in the system? Ironically, the Civil Rights Act of 1964, from whence comes the law relating to public accommodations, was based on the commerce clause as much as the equal protection clause because of doubts about whether the latter empowered Congress to compel private business to do business with all comers. In other words, under its power to regulate commerce, Congress enacted a law that compels a private business to act under circumstances in which it might otherwise choose not to act. In short, it seems that Congress has used its commerce power against inaction before.
Another curiosity about insurance – and one that further distinguishes it from broccoli – is that in the aggregate insurance is a losing proposition. Insurance – like trading in commodities futures – is at best a zero sum game. Society would have more aggregate wealth if no one bought insurance. To be sure, some people would suffer ruin in the process. But by definition, the savings would outweigh the loss. The obvious explanation is that individuals buy insurance because they value the reduction of risk. But once we have eliminated risk (or most of it), there is no reason to buy more insurance. No rational person buys more insurance than she needs.
This suggests yet another curiosity about insurance. Most markets work because goods are scarce. The basic idea of the free market is that trade will result in goods being allocated to their highest and best uses, thus maximizing aggregate (social) wealth. The prospect of gain induces sellers to sell and buyers to buy. If goods were not scarce in some sense, trade would not arise. But insurance is different. There is no prospect of gain – only avoidance of loss. And you cannot sell your insurance to someone else if you find that you have more than you need. Moreover, insurance is a product that becomes more plentiful as more of it is consumed. The more we share risk, the less risk there is. When all the risk is gone, there will be no more demand for insurance. So if there is a shortage of insurance, there must be a market failure somewhere. The point is that we need to think about commerce involving insurance in a different way. For most goods, commerce is trade. But in the antimatter world of insurance, commerce may include failure to trade.
In the end, insurance is different from other products because it is necessarily a group undertaking. It is different from other forms of commerce that depend on the expression of preferences by individual consumers. Indeed, insurance depends to some extent on ignoring individual tastes. Rather, insurance works because in large groups of people we can predict with near certainty that some number of individuals will suffer specified ailments and indeed that some specific number of the uninsured will consume some specific amount of healthcare over the course of the year. Thus, the individual mandate may be seen as a user fee assessed against a group – not against individuals that will someday use the healthcare system – but rather against a group that uses the system continuously. Indeed, one might argue because the healthcare system is funded with substantial sums of federal money, Congress has the power under the Fourteenth Amendment (as well as the commerce clause) to impose the individual mandate as a way of eliminating the cross subsidies and outright losses foisted on the system by the uninsured. In other words, the individual mandate is a way of assuring equal protection to the insured and the solvent uninsured.
The question thus becomes whether there is anything in the Constitution that protects individuals from a regulation that applies to them because they are members of an identifiable group – the uninsured – that is known to be gaming the system. To be clear, the question is whether rights and obligations must be viewed as attaching to individuals rather than to groups of individuals. There is little doubt today that Congress may focus its power on groups. The Supreme Court itself has identified numerous suspect classes in interpreting the Fourteenth Amendment and the civil rights laws, including classes based on race, religion, and gender (if not sexual preference). To be sure, these classes are protected. But there is little doubt that Congress can adopt laws that single out groups – such as sex offenders – for extra regulation. Because insurance is by definition a group undertaking, it would seem to follow that Congress has the power to regulate such commerce with rules that focus on groups rather than individuals.
Finally, given that our health care delivery system has become "inextricably intertwingled" with the insurance business, one might argue that the operation of the whole is a matter of national security. If so, perhaps the individual mandate is constitutional for the same reason that the draft is constitutional. In other words, perhaps Congress has the power to conscript consumers into the insurance pool. Again, this is not to say that the power to raise and maintain an army comes from the commerce clause. It is only to say that the power to regulate may include the power to compel when there is no other way to achieve the goal. Thus, one might even argue that the individual mandate raises a political question from which the Court should abstain. Presumably, Congress is loathe to resort to its power to compel and is not likely to do so in the absence of considerable political will.
The bottom line is that the individual mandate is clearly within the constitutional power of Congress. Aside from the fact that the distinction between action and inaction is a slippery one, it is clear that Congress has enacted many statutes ranging from the antitrust laws to the civil rights acts that compel action under both the commerce clause and the equal protection clause. Moreover, insurance is an unusual product that requires the formation of groups, disregard for individual preferences, and often regulation because of endemic market failures. In short, insurance is not like other forms of commerce. It would be unfortunate (to say the least) for the Supreme Court to strike down the individual mandate without due consideration for the peculiarities of the insurance market.
 Martin G. McGuinn Professor of Business Law, Villanova University School of Law.
 Generally speaking, Congress need not specify where it finds the power to do what it does. The one possible exception may be that Congress must say so when it exercises its power to impose taxes – possibly in order to invoke the Anti-Injunction Act.
 The idea of insurance varies from one situation to the next. With life insurance, there is a sense in which everyone must pay his own way. No one seems to object to the idea that older people should pay more than younger people even though that might seem like age discrimination. Everyone dies eventually. So insurance premiums must equal an amount that if invested over the average lifetime would yield enough to equal the payout. On the other hand, fire insurance is different. Relatively few houses ever burn down. Ironically, fire-fighting companies were originally operated in much the same way that the health care industry works in the United States today. For a fire company to answer your call you would need to have paid in advance to subscribe to the service. If not, the company might show up to protect a subscriber's house next door, but the fire fighters would stand and watch the house of a non-subscriber burn – which also encouraged others to subscribe. The solution was a government takeover – the equivalent of a single-payer system funded by taxes – thus avoiding the individual mandate problem. Indeed, no one seems to advocate a return the old system despite the potential tax savings. To be sure, health care is a bit different in that doctors and hospitals have (or feel) a duty to treat (and the right to send a bill after the fact). Nevertheless, Congress could presumably nationalize health care. But ObamaCare stops short of that solution by commandeering the private insurance system. Thus, it could be argued that PPACA is a delegation of government authority to private industry akin to the system of self-regulation under the federal securities laws. See Richard A. Booth, Self-Regulation in a Democratic Society, 50 J. Air L. & Com. 1301 (1985). Finally, although it might not qualify as a constitutional justification, it is difficult to argue that it is preferable to raise taxes to fund a system in which health care is then given away for free. As Reagan Solicitor General Charles Fried said: “I’ve never understood why regulating by making people go buy something is somehow more intrusive than regulating by making them pay taxes and then giving it to them.” See Paul Krugman, Broccoli and Bad Faith, N. Y. Times, Mar. 29, 2012. ObamaCare is a preferable alternative to nationalization and one that is largely consistent with the existing regulatory scheme that governs insurance (as discussed further below). Moreover, one could argue that if Congress has the power to adopt an extreme solution such as nationalization, it has the inherent authority to adopt a less drastic alternative. Cf. City of Boerne v. Flores, 521 U.S. 507, 520 (1997) (legislation enacted under the Fourteenth Amendment must be both congruent and proportional as between the injury to be prevented or remedied and the means adopted to that end). See also Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985) (takeover defenses must be proportional to threat); hen an asserted business purpose for exclusion of a minority stockholder is advanced by a majority stockholder, it is up to the minority stockholder to demonstrate that the same legitimate objective could have been achieved through an alternative course of action less harmful to the minority's interest); Schwartz v. Marien, 37 N.Y.2d 487 (1975) (same).
 It is also the right thing to do. As Rawls famously argued, a just rule is one that people would choose behind a veil of ignorance, not knowing if they would gain or lose in the end. See John Rawls, A Theory Of Justice 136-42 (1971). Incidentally, it is not uncommon in the commercial context for an insurance policy to include a clawback feature that requires the policyholder to pay higher premiums in the future to compensate the insurance company for any excess benefits paid in the past. See, e.g., Cont’l Ins. Co. v. Schneider, Inc., 582 Pa. 591 (2005).
 See Transcript of Oral Argument at 13-18, 76, Dep’t of Health & Human Servs. v. Florida, No. 11-398 (argued Mar. 27, 2012).
 Joni Mitchell, Banquet, in For the Roses (1972). In other words, most are covered by health insurance. Most who do not have it want it but cannot get it at an affordable price. Some prefer to go naked rather than to buy any coverage that benefits others. But the system will work only if everyone participates. Incidentally, the law relating to indecent exposure may be seen as a mandate to wear clothing. And the individual mandate may be seen as a prohibition on going without insurance.
 See, e.g., Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 549 U.S. 312 (2007). To be more precise, under the extant system those who have insurance would pay lower prices but for the fact that doctors and hospitals have a duty to care for all and thus must charge higher prices to make up for patients who cannot or do not pay. In effect, health insurance premiums include the equivalent of uninsured motorist coverage. Nevertheless, the uninsured are usually charged higher prices than those negotiated by insurance companies for their customers – and much higher prices than those paid by Medicare – presumably at least in part to compensate for those who do not pay. Cf. Nina Bernstein, Insurers Alter Cost Formula; Patients Pay, N. Y. Times, Apr. 24, 2012, at A1:1 (describing shift to reimbursement rates for out of network care based on multiple of Medicare rates). So one reason for the individual mandate is to eliminate cross subsidies (and price gouging) inherent in the system as it stands. In any event, it is far from clear that those of us with insurance do much better as things stand or would do much worse under ObamaCare. But see John F. Cogan, R. Glenn Hubbard & Daniel Kessler, ObamaCare and the Truth About Cost Shifting, Wall St. J., Mar. 11, 2011, at A15 (arguing that much of the cost of care for the uninsured is borne by nonprofits and the government).
 This is not to say that all instances of free-riding can or should be characterized as restraints of trade. In most cases, sellers can exclude free-riders through various monitoring mechanisms. But again, refusing health care to the uninsured is not an option. Incidentally, Medicare and Medicaid considered together probably constitute a true monopsony.
 In some cases, not even regulation will work to induce insurance companies to engage in price competition. That is why the federal government writes all flood insurance and why many states have been required to offer worker compensation insurance. As for flood insurance, presumably no insurance company can assume the risk without a nationwide monopoly because floods tend to affect all properties in a given area. One could make the same argument about other types of casualty insurance. But other natural disasters such as hurricanes and tornadoes usually affect properties somewhat randomly.
 Section 2(b) of the McCarran-Ferguson Act, 59 Stat. 34 (1945), 15 U. S. C. § 1012 (2006), provides that "No Act of Congress shall be construed to invalidate, impair or supersede any law enacted by any State for the purpose of regulating the business of insurance." This is not to say that Congress could not regulate insurance if it wanted to do so, although it may be that insurance by its nature may sometimes fail to qualify as commerce. See SEC v. Variable Annuity Life Ins. Co. of Am., 359 U.S. 65 (1959).
 Ariz. Governing Comm. for Tax Deferred Annuity and Deferred Comp. Plans v. Norris, 463 U.S. 1073 (1983).
 See generally Richard A. Booth, Sex, Lies, and Life Insurance, 6 Va. L. & Bus. Rev. 403 (2012).
 See Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241 (1964). Again, it is sometimes difficult to distinguish action from inaction. See note 5 supra. One could argue that the law compels public accommodations to serve all comers or that it prohibits discrimination. Thus, in the end it may not be useful to measure the power of Congress based on this distinction.
 Although one can avoid the requirement to buy unwanted coverage by not buying any insurance at all – which may distinguish the unisex mandate from the individual mandate – practically speaking state employees have no choice with regard to the benefits that go with their jobs. In other words, the fact that a state employee could buy gender-based insurance products with her own money is no answer. In addition to laws relating to restraints of trade such as group boycott and public accommodations, Congress has also outlawed price discrimination (in effect requiring business to deal with all comers on the same terms) and establishing legal tender (in effect requiring everyone to accept paper money when they might prefer gold or silver). Although the wisdom of the prohibition against price discrimination has been seriously questioned, there is little doubt about the power of Congress to enact such a law. See also 46 U.S.C.S. §2304 (2006) (imposing duty on vessel master to provide assistance to any individual found at sea in danger of being lost). Cf. Jones v. Ahmanson & Co., 1 Cal.3d 93 (1969) (controlling stockholder could not create market for his own shares without extending the opportunity to minority stockholders). The individual mandate might also be likened to a forced sale under the power of eminent domain. In other words, the fact that the young and very healthy may decline to buy insurance is essentially a holdout problem.
 This is not to say that it is a good idea to eliminate all risk nor that consumers do not sometimes seek to maximize their benefits by milking their insurance for all it is worth (or more). But the overuse of insurance is a different problem that can be addressed by traditional copayment requirements and the elimination of tax benefits for luxury plans (as ObamaCare does). Indeed, few seemed to notice when Congress took the unusual step of prohibiting private insurance to cover copayments under Medicare. Similarly, one cannot use funds in a health care spending account to pay health insurance premiums. On reflection, these are quite remarkable rules that effectively force consumers to use generally disposable funds to pay for a portion of their health care expenses.
 Why buy the cow when the milk is free? This is not to say that commerce depends on shortages. It is enough that consumers might want more of a product.
 Life insurance may be an exception to this rule. See Richard A. Booth, Sex, Lies, and Life Insurance, xx Va. L. & Bus. Rev. xxx (2012). Cf. Sauber v. Northland Insurance Co., 251 Minn. 237 (1958) (ruling that buyer of a 1952 Hudson who thought he had bought the insurance that went with it was covered because someone who answered the phone at the insurance agency confirmed as much).
 Cold fusion comes to mind.
 Karl Marx comes to mind.
 This is not to say that society can somehow afford all of the healthcare it might want if only everyone would cooperate. It is only to say that there must be a problem with the market if the quantum of healthcare for which we already pay cannot be distributed under the system
 Although it is not clear that Justice Holmes would have voted to uphold ObamaCare, he seems almost to have anticipated the controversy: "A man need not, it is true, do this or that act, the term act implies a choice, but he must act somehow. Furthermore, the public generally profits by individual activity. As action cannot be avoided, and tends to the public good, there is obviously no policy in throwing the hazard of what is at once desirable and inevitable upon the actor. The state might conceivably make itself a mutual insurance company against accidents, and distribute the burden of its citizens' mishaps among all its members. There might be a pension for paralytics, and state aid for those who suffered in person or estate from tempest or wild beasts. As between individuals it might adopt the mutual insurance principle pro tanto, and divide damages when both were in fault, as in the rusticum judicium of the admiralty, or it might throw all loss upon the actor irrespective of fault. The state does none of these things, however, and the prevailing view is that its cumbrous and expensive machinery ought not to be set in motion unless some clear benefit is to be derived from disturbing the status quo. State interference is an evil, where it cannot be shown to be a good. Universal insurance, if desired, can be better and more cheaply accomplished by private enterprise. The undertaking to redistribute losses simply on the ground that they resulted from the defendant's act would not only be open to these objections, but, as it is hoped the preceding discussion has shown, to the still graver one of offending the sense of justice. Unless my act is of a nature to threaten others, unless under the circumstances a prudent man would have foreseen the possibility of harm, it is no more justifiable to make me indemnify my neighbor against the consequences, than to make me do the same thing if I had fallen upon him in a fit, or to compel me to insure him against lightning." Oliver Wendell Holmes, The Common Law (Lecture III – Torts: Trespass and Negligence) 95-96 (1881).
 Many commentators seem to assume that the market for insurance is just another market and should be regulated (or not) as such. See David B. Rivkin, Jr. and Lee A. Casey, Overturning ObamaCare Isn't 'Judicial Activism,' Wall St. J., Apr. 24, 2012, at A15:1.
 Cf. Jean Paul Sartre, Being and Nothingness 107-12 (1943) (Pocket Books 1966) (discussing at some length whether engaging in an act of pederasty makes the offender a pederast for all time).
 Indeed, Arizona Governing Committee proves the point. To be sure, numerous commentators have expressed concern about the use of statistical evidence in criminal cases (and elsewhere). See, e.g., Ronald Dworkin, Taking Rights Seriously 13 (1977); Alex Stein, The Refoundation of Evidence Law, 9 Canadian J.L. & Juris. 296-322 (1996); L. Jonathan Cohen, Subjective Probability and the Paradox of the Gatecrasher, 1981 Ariz. St. L.J. 627 (1981); Andrew von Hirsch, Prediction of Criminal Conduct and Preventive Confinement of Convicted Persons, 21 Buff. L. Rev. 717, 744-50 (1972); Charles Nesson, The Evidence or the Event? On Judicial Proof and the Accessibility of Verdicts, 98 Harv. L. Rev. 1357 (1985); Michael J. Saks & Robert F. Kidd, Human Information Processing and Adjudication: Trial by Heuristics, 15 Law & Soc'y Rev. 123, 151 (1980-1981); Laurence Tribe, Trial by Mathematics: Precision and Ritual in the Legal Process, 84 Harv. L. Rev. 1329 (1971); Barbara D. Underwood, Law and the Crystal Ball: Predicting Behavior with Statistical Inference and Individualized Judgment, 88 Yale L.J. 1408, 1412 (1979). See also Report of the Panel on Statistical Assessments as Evidence in the Courts, The Evolving Role of Statistical Assessments as Evidence in the Courts 78-79 (1989).
 My thanks to the late Professor Charles Black for this neologism.
 This assumes that the draft is constitutional notwithstanding the Thirteenth Amendment. Cf. Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241 (1964) (rejecting objections to 1964 civil rights act based on compulsion contrary to Thirteenth Amendment and takings clause). Presumably, the power of Congress to regulate commerce is not affected by the possibility that the healthcare system could be organized in some other way.