Is the Provision of Health Insurance Interstate Commerce Under the Original Meaning?

Over at the Originalism Blog, Mike Ramsey has been arguing that the provision of health insurance is interstate commerce.  Ramsey writes:

 My insurer (in California) is Anthem Blue Cross, which claims to be the largest health insurer in California; it’s a subsidiary of WellPoint, Inc., a company headquartered in Indianapolis with health insurance operations in at least 14 states.  This all sounds pretty interstate to me, and I think my insurance situation is fairly typical, although I know little about the details of the health insurance industry and I could be persuaded otherwise.  (It would be different if WellPoint were just a passive investor in independent insurance operations within various states, but my sense is that this is an integrated and centrally-managed operation.)

Let’s assume, as I think plausible, that the sale of insurance is commerce.  But is it interstate commerce?  It seems clear that the sale of insurance by a California corporation to California residents would be intrastate insurance.  How does the ownership of the California corporation change things, if at all?

The mere fact a corporation has shareholders from other states seems unlikely to turn the sale of insurance from a California corporation to Californians into interstate commerce.  After all, that would make all actions of publicly held corporations interstate.  But why doesn’t the existence of these out of state shareholders make the corporation’s actions interstate?  One very plausible reason is that there is a formal distinction between the shareholders of the corporation and the corporation itself.  It is the corporation, not the shareholders, that are engaged in the action.  It matters where the business is located, not its shareholders.  And the corporation is providing the insurance in California.

If that analysis is true, then how does it apply to an Indiana Corporation that owns and centrally manages a California subsidiary?  Under this analysis, the fact that an Indiana Corporation owns the California subsidiary does not matter.  It is the California subsidiary that is legally making the decisions to provide the insurance and the insurance is occurring in California.

But it might be argued, as Mike Ramsey implies, that if the decisions are actually made in Indiana – “if its a centrally managed operation” – then the provision of insurance is not occurring only in California but also in Indiana.  This is possible, but the opposite conclusion is also possible.  It is true that one might say that the decisions in fact are made in Indiana.  But legally, based on my limited memory of corporate forms, the decision is technically made by the California corporation (ultimately the President or the Board) and that might be what counts.  It is not clear to me which of these two possibilities is the right answer here.

What then are the implications for the provision of health insurance by Anthem?  First, Anthem might not be centrally managed in Indiana and therefore would be engaged in intrastate commerce.  Second, Anthem might be centrally managed, and then whether it is engaged in interstate commerce would depend on how one answers the question I raised in the previous paragraph.  Finally, I should note that some health insurance corporations may not be subsidiaries of corporations in other states and those health insurers will then be engaged in intrastate commerce.  (Some would attempt to claim that the intrastate provision of health insurance can be regulated under the Necessary and Proper Clause as affecting the interstate market for health insurance, but I am skeptical of this power except in the most exceptional cases.)

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on May 24, 2012 at 07:08:38 am

I think that, as "interstate" was originally defined, it really doesn't matter where your corporate decisions are made: If you buy wheat in Kansas, grind it in Kansas, and sell the flour in Kansas, you're engaging in intrastate commerce even if your corporate headquarters happens to be in Iowa.

This is pretty much how the provision of health insurance works in this country.

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Brett Bellmore
on May 24, 2012 at 09:13:27 am

Doesn't your argument imply that any national corporation selling services could render all of its sales "intrastate" simply by setting up enough state-specific subsidiary corporations? If so, are you comfortable with that implication?

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Image of Philip
on May 24, 2012 at 14:46:04 pm

Another intrusion:

Let's be clear that we are discussing _ insurance _ and not healthcare.

Insurance is the transfer of risk (if you think it is something else stop reading now).

The business of insurers is _ not _ the taking of risk, but the _ spreading _ of risk.
How that business (risk-spreading) is transacted should determine whether the business is engaged in interstate commerce as interstate commerce was originally conceived (not as the functions of insurers might have been conceived by their limited operations in days of yore).

If all the activities of risk-spreading occur within a single jurisdiction, as might be the case with a small mutual or co-op (they still exist) with no outside reinsurances, an argument can be made to exclude interstate involvement - if -- the risk remains within the jurisdiction.

What passes today as "Health Insurance" is no longer simple risk transfer and risk spreading; today it has become more largely _ cost-spreading _ and the containment of cost occurrence within one jurisdiction has lost feasibility.

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Richard Schweitzer
on May 24, 2012 at 20:21:35 pm

Any corporation selling services could render it's commerce intrastate by restricting itself to intrastate commerce, yes. I am perfectly comfortable with the implication; Does the contrary make any sense at all? That you *couldn't* make your commerce intrastate by only engaging in intrastate transactions?

And, Richard, whether the cost spreading is restricted to one jurisdiction is something of a factual question, which surely varies from company to company. But the law strangely has no interest in this question.

It's the usual evolution of usurpations of power: They start as work-arounds and rationalizations by people who feel they have to admit the limitations exist, even as they find ways to circumvent them. But after long practice, the notion that there are any limits that need to be respected loses it's grip, and finally the usurper stops bothering with the circumvention, and just directly exercises the power they weren't granted.

That's the point Congress has reached: They're not bothering to pretend anymore that they care if commerce is interstate or not. Hopefully the courts still care, a bit.

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Brett Bellmore
on May 25, 2012 at 09:37:49 am

"Original Meaning" is the issue. It may no longer be the "definition" or description of Commerce among the several States. The lowlands have long been flooded since that Dyke was breached.

And - surprise - the question of facts is involved!

The "reason" the "Law" has no interest in those facts, is that whilst they may have had some determinative effect in the application of the original meaning, they have little application to our now flooded lowlands.

Much can be said for the idea of rebuilding the Dykes (many of them), which would have to be followed by years of pumping out the plains. Meanwhile, many are catching their little fish in these waters and will oppose and even resist restoring the dykes.

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Richard Schweitzer
on May 25, 2012 at 09:55:27 am

[...] Ramsey-Rappaport exchange on the “interstate commerce” nature of insurance raises issues that have played a huge role in [...]

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Commerce and Insurance | Online Library of Law and Liberty
on June 09, 2012 at 11:52:05 am

Finance1o1.blogspot.com / Not knowing your total fnaincail situation, it would be difficult to recommend which term life insurance you should get. Maybe you need a 10 year term, maybe 20 or 30 year term. I don't know. If you have over 20 years left to pay on your mortgage, then you should get a 30 year term. Between 11-20 years left on your mortgage, get a 20 year term. 10 years or less OR you don't have a mortgage, get a 10 year term insurance.Term insurance is very affordable compare to all the other types of life insurance that builds cash value. That means you can get lots of coverage for a low amount of premiums.In 10 to 30 years, all your children will be grown adults. Hopefully your youngest child (who will be 23 years old) will have a job and be able to support himself. Your debts should be paid off or have a low balance on them. And you better have lots of money saved for retirement.When I sit down with families, I examine their entire fnaincail situation. I look at their current debts, examine their life insurance policy, check out their retirement plan and other long term plans. Then I make recommendations and move money around. With majority of my clients, not one of them pay a cent more than what they are currently spending. I don't know your situation, maybe you don't have to pay a cent more either (of course, this depends on which company you go with. I recommend Primerica because they help middle income families solve common fnaincail challenges).

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on June 09, 2012 at 18:07:52 pm

, I do not believe the oinrgial understanding of the Constitution at the time of its ratification would have supported the interpretation that it did grant plenary legislative power to Congress--whether via the IC clause, the necessary and proper clause, or any kind of "inherent" sovereignty power.In such cases since I believe oinrgial understanding is the most sensible and most honest interpretative method, I often simply do a thought experiment--just imagine what would have been the reaction of the framers and intelligent laymen at the time, had you asked them if the language being ratified meant what is now being proposed. For example, if you had asked in 1789 whether the Constitution establishes a central, national state of plenary, general legislative powers--pointing to whatever text you wish--it seems quite clear that you'd receive resounding NO's. IF you had asked whether a state choosing to leave the union later could be militarily attacked (again--point to any clause you want), it seems again clear the answer would be not.As for the Fourteenth Amendment, nowadays we have modern libertarians arguing that it incorporates fundamental rights, the Bill of Rights, rights to engage in sodomy, etc. Imagine asking the Framers and ratifiers of that Amendment in the 1860s if the language meant federal judges could outlaw state laws prohibiting homosexual sodomy. To ask is to answer.Now while such considerations are not dispositive--it is possible for people to simply be incorrect about the consequences of the language they do approve--I think they can help inform a realistic and honest inquiry as to what the language really means, as opposed to what one wants it to mean."Second, I am all for construing things against the grant of power. But where are judges instructed by the Constitution to do that?"What judges? I am very sympathetic to the nullification ideas of Jefferson and Madison, and think states can nullify federal laws, including state judges. So I think they would tend to construe the federal Constitution like this quite naturally.As for federal judges--again, this is another area of ambiguity. It is not even clear that there is judicial review, though I think the tripartite division of power and the equal obligation of each branch to abide by the Constitution does imply at least a "veto" on the part of the federal judiciary, on any federal law they believe is unconstitutional. So one of their jobs is to refuse to enforce an unconstitutional law. Given the federal scheme of enumerated powers, it's clear (in my view) that a federal law that Congress is not authorized to enact is unconstitutional. This means as a practical matter that a judge as a preliminary step has to first look for an enumerated power in the Constitution authorizing the federal statute. But the mere act of looking for this authority, for this power, is tantamount to construing things against a grant of power. In other words, it presupposes that there IS no authority to enact the law UNLESS one can find authority in the Constitution. This is a unique way of examining the validity of law by a "sovereign," since all other sovereign states in the world are held to have general or plenary legislative and police power. But not the feds. So merely by trying to identify an authorizing provision in the Constitution, one is in effect adopting an implicit rule against a grant of power. The presumption is that there is not a grant of power--unless one an find one.I think it's almost impossible to argue with a straight face that the IC or other clauses were actually meant to grant Congress plenary legislative power. To argue this is in effect to endorse the reasoning of Wickard v. Filburn, which is one of the worst reasoned cases in Supreme Court jurisprudence.

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on June 09, 2012 at 22:37:23 pm

anything about secession yet. But I might, sneoor or later. At this point, as a legal (though not moral) matter, it doesn't look good. But that is highly tentative on my part."I'd be curious to see your thoughts on this."Did I say a general power to regulate commerce is justified because it's in the Constitution? Where did I say or even hint at that?"Hmm, did I imply you said this? I didn't think I had. I was just disagreeing with this "people of the state" construction, esp. as it ties into the anti-secession views of the pro-centralists; and I disagree with you that Crosskey's construction is unchallengeable fact."I (and the Supreme Court) think the income tax is constitutional without the Amendment XVI, but that doesn't justify income taxation, as far as I am concerned."Right--I think you and I are in basic agreement here."The "so what?" is this: it is important to understand what the framers intended so that when invoke the Constitution, we know what we are talking about."Of course--except, strictly speaking, the framers' intent is irrelevant--rather, relevant only insofar as this is evidence of the original public meaning (the original understanding) of the document at the time of ratification."Here's all I will say tonight about Stephan's last comment: May I dismiss it because it is clearly tendentious?"Sheldon: what is tendentious about my comment? Why is it biased? I have no axe to grind. If I had any hope that the Constitution could be reformed or used to support liberty, I suppose I might be tempted to put forward a lawyer's argument trying to argue that the Constitution "does" mean what I personally want it to mean. But this is one reason I am wary of the perils of activism.In any event, my point was not that Crosskey is necessarily wrong because he's got a bias and an agenda--it's that this helps to inform the reader and to realize that his conclusions are not "fact"--they are just one argument of many."'Since the states were jealous of their powers and were grudgingly making only a limited grant of powers to the feds--and only those that were expressly enumerated--then if the power is not clearly and expressly enumerated, the feds just don't have that power.'"Wrong. See this."Sheldon, I don't think the wording of the tenth amendment contradicts my proposed understanding of the nature of the Constitution. The Constitution was ratified 2 years before this amendment. And it affirms that the powers have to be delegated. Since they have to be done by means of the written constitution, they have to be written in the language of the Constitution--expressed in written language. Surely you do not disagree with this? (BTW the writing of law professor Thomas McAffee is very illuminating on these matters, e.g. regarding the limited and enumerated powers scheme of the Constitution.)

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on June 10, 2012 at 03:33:19 am

Sheldon, you may find of interest the coemnmts in this post: , e.g. this excerpt:"While it is clear that the Constitution has failed to limit the central government, Mr. Royce raises some very uncomfortable of questions: What if the Constitution did not restrain the State because it was, in fact, designed to increase the power of the State? What if the Constitution has not "failed" to protect liberty, but has accomplished exactly what the authors wanted it to do? "I used to believe [the Constitution was meant to limit the power of the central state] until I read Hans Hermann Hoppe's essay Prof. Hoppe's argument convinced me that a written Constitution could never limit the State. Since the State is the ultimate judge of conflict including conflicts involving itself, it will almost always rule in its own favor. Hence, a Constitution designed to limit the State is destined to fail; the State will continue to grow because ultimately it is the judge of its own powers."... If liberty were first and foremost on their [the Founders'] minds, why pass into law a document whose flaws were clear to everyone?Royce answers that the Constitution "was never meant to enshrine State autonomy or hold your individual rights over federal interests. And finally, it was never meant to stunt federal growth."... If this is true, then the only solution to advance is to reject our (second) Founders' Constitution."

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on June 10, 2012 at 03:43:44 am

is not allowed here. :)"What is in dsuipte here is whether the national government is "an agent of limited powers." You can't use this as a premise. C'mon, Stephan. You know better."Well, I was quoting from a previous post. But I do think this interpration makes sense, in any events.Is the federal gov't unlimited? No; no state is unlimited.Is it as limited as utopians and Randians say it is ? Well, as a factual matter, it's not--the constitution has done nothing but help to enshrine the state's legitimacy and thus to get away with more than it otherwise could have (like democracy). BUt it was not even intended to set up some minarchy. However, it certainly was meant to impose more limits than are currently respecte."Your final paragraph about morality appears to withdraw the earlier portions of the comment."No; there are just different levels of analysis, different perspectives. Ultimately, we libertarians are radicals, not "constitutionalists.""I think this subject is worth being clear on because many libertarians (not to mention conservatives) invoke the Constitution as a trump."I do not. I simply resist statists and centralists dishonestly using pro-state arguments and pretending they are "objective" when they are really just tendentiously using them to forward their statist cause.

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on June 11, 2012 at 23:13:15 pm

"In such cases since I believe ornigial understanding is the most sensible and most honest interpretative method...."Whose ornigial understanding? It is certainly true that many, including judges after 1789, gave the Constitution more of an Antifederalist reading than the authors intended. As Jeffrey Rogers Hummel wrote, "To oversimplify only slightly, the Federalists got their Constitution, but the Anti-Federalists determined how it would be interpreted." Given that that different people had different understandings, I don't see how that is a guide to interpretation. A sounder guide would be to determine what the words of the text typically meant back then. Crosskey did that. But of course we may not like what we find. That's the danger of playing the constitution game.Re secession, it is not clear that people would have been surprised by what happened in 1861. The Antifederalists' statements clearly indicate that they understood the Constitution to be creating not a confederation, but a consolidated nation. By the way, the full title of the Articles of Confederation is: Articles of Confederation and Perpetual Union. This doesn't help the pro-secessionist case. I'm beginning to think there is no legal authority to secede. Moral authority is a different matter, of course.

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on June 11, 2012 at 23:55:28 pm

Sheldon, I have some disagreements with your asinotsres.First, I firmly believe it is not at all an "established fact" as you imply. It is *arguable*, sure--but in my view, it's a ridiculous argument; Crosskey's book is tendentious. I do completely agree we should recognize facts, even if we disagree, and then deal with that. For example, it is a fact that it is constitutional for the feds to tax income. It is a fact that slavery used to be legal and constitutional.Further, even if Crosskey were right--so what? It does not prove that there was no constitutional right to secede, which is what the centralist, pro-war, pro-Union, pro-federal-judge, pro-14th-Amendment naive-centralist-statist libertarians want to argue, with similar reasoning.And so what if the Constitution was meant to give Congress these powers. Well, it also condoned slavery, and gives the feds the power to tax income. The fact of positive law has no relevance as to its justification.Stephan

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on June 12, 2012 at 01:38:38 am

Sheldon, ""It's probably a bit wuihfsl thinking to think the IC clause sets up an internal free market and nothing else."Please, no question-begging allowed. You can't call it the "IC clause" until you demonstrate that..."Okay, fair point. That was not meant to be question-begging; it's just a common way to refer to it. Anwyay,this all makes me feel unclean--arguing what the positivist, illegal, immoral, statist, unlibertarian, disastrous document "really means". Would we really be expending so much energy handrwringing and debating over what the mafia's "basic document" "really means"? The enemies are those who seek to *use* this as an excuse to justify institutionalized aggression against innocent people--as centralist (statist, non-) libertarians do.

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on June 12, 2012 at 01:42:16 am

his story is absolutely eblsstiahed fact. He ofter qualified his sentences to indicate just the opposite. But he presents voluminous linguistic and other evidence, about which you say nothing except that it's tendentious. Marshall's quote in Rawle is worth knowing about, but it hardly counters all the examples to the contrary Crosskey provided. Despite what Marshall says, Crosskey establishes that "among the (several) states" was often used to mean among the people of the states, without any exclusively interstate implication. One Marshall quote can hardly overturn that. Re your final point, Crosskey offers persuasive evidence that virtually no one -- neither the Federalists nor Antifederalists -- thought Amendment X changed the nature of the Constitution. On the contrary, it was taken as a reaffirmation.

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on June 12, 2012 at 02:20:44 am

"BTW my own view of the commerce cuasle is that it was basically meant to give Congress power to prevent states from choking interstate commerce--in effect, to ensure an internal free market. So it is a limited grant of power--limited by the states' right to secede."Such is the danger of a priori history. Calvin Johnson, after closely examining the debates about the Commerce Clause, shows that trade barriers between states was not what was on the framers' and ratifiers' minds. What was on their minds was mercantilism, protectionism vis-a-vis foreign nations. Hamilton openly argued in the Federalist that tariffs against other nations could be far higher with a strong central government. See .

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on June 12, 2012 at 02:56:16 am

"if the document is amibougus, or unclear, you construe it against a grant of power."That assumes the document is amibougus. Crosskey goes to great lengths to show that it was not amibougus to the people of late-eighteenth-century America. It was amibougus to the Antifederalists. That's for sure. What if a clause in amibougus only because we haven't done the empirical research about its meaning? For instance, what if that research would reveal that back then "commerce" meant business in general.Second, I am all for construing things against the grant of power. But where are judges instructed by the Constitution to do that?

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on June 12, 2012 at 04:30:28 am

Roderick, I might have not have made myself clear. Crosskey was not saynig the Commerce Clause is the source of the power to put down insurrections within states. He was simply saynig that references to the federal government's duty to safeguard peace and tranquility "among the states" was not exclusive of intrastate insurrection. He was analogizing to the phrase in the Commerce Clause to show that it most probably did not mean interstate commerce only. He made the point in the context of discussing the phrase "among the (several) states."

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