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The unconstitutional Reid Bill

December 28, 2009 Leave a comment Go to comments

Law professor Richard Epstein has made one in a number of arguments that show how the Patient Protection and Affordable Care Act-the Reid Bill-is ultimately unconstitutional.

His argument is available at the Point of Law website in its entirety.

Even though other, equally valid arguments have been made about the Bill’s unconstitutionality in the context of its overreach by limiting individual choice, Epstein focuses on the Bill’s constitutional defects based on the Court’s past rulings in ratemaking cases.

Epstein says that this interpretation is confirmed by the CBO, which says that the Reid Bill essentially makes private health insurers a public utility and it places onerous new responsibilities on them at the same time it constricts their revenue stream.

This arrangement will most likely not pass constitutional muster, because the Fifth Amendment affords regulated health-insurance companies protection against the taking of property without compensation and without due process of law.

In ratemaking cases, Epstein contends, the Supreme Court has determined that the Constitution requires that regulations permit regulated firms to recover a risk-adjusted competitive rate of return.

In plain language, that means that any regulatory scheme placed upon a private industry, must allow it make  a return on their investment and to make enough profit to remain competitive with other insurers.

Epstein believes that the Reid Bill fails this test as it limits the ability of health-insurance companies to raise rates, and restricts their ability to deny coverage, thus making costs of providing insurance out of reach for insurers and will drive them out of the individual and small group plan insurance markets. This makes the regulatory scheme confiscatory and the Reid Bill unconstitutional.

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