Constitutional Monopolies

Why is the Affordable Care Act still so controversial?  I want to advance the following explanation:  Whenever the government gives substantial regulatory power to private firms (or a single private firm), serious constitutional doubts emerge.  This conclusion does fit neatly into any doctrinal category, but it does explain a lot of significant constitutional controversies.  Consider these examples:

1.  The Bank of the United States.  This was the great constitutional controversy at the start of the Republic.  Congress gave a private firm tremendous (and largely unregulated) power over monetary policy.  In effect, we had a private central bank.  All sorts of arguments were made against this arrangement, but the most persuasive one probably was that it was inappropriate for the government to delegate this fundamental authority to a private firm.

2.  The Slaughterhouse Cases.  There is no shortage of literature on these decisions, but one point that is often overlooked is that there were four votes to say that state monopolies should be viewed suspiciously–they were not like ordinary economic legislation.  Justice Field’s dissent explained at length why monopolies were different, drawing on the common law.

3.  The National Industrial Recovery Act.  FDR’s initial effort to tackle the New Deal delegated broad authority to firms and unions to set wages, hours, and work conditions.  The Supreme Court struck this down on non-delegation and Commerce Clause grounds, but again the deeper problem was that the private sector was being given broad discretion to make law.

The Affordable Care Act bears some resemblance to these precedents.  The individual mandate is a requirement that you subject yourself to private power.  In fairness, this is regulated more closely than the examples listed above, but insurance companies still have quite a bit of discretion over health care policy.  Moreover, there is a concern about corruption once the state and private companies get linked in this way–corruption was, of course, a leading argument against the Bank of the United States.

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16 Responses

  1. Joe says:

    Insurance companies had quite a bit of discretion, in some ways more, before ACA. The monopoly talk might be a good way to discuss the framing, but it’s controversial largely out of ignorance and political posturing.

  2. Brett Bellmore says:

    It’s not so much the creation of a private monopoly, IMO, as the covert nationalization of health insurance. This is a model you see in fascist (I’m taking economic fascism, here.) systems, where some private enterprise nominally remains private, but becomes so completely controlled by the government as to actually be a government agency.

    It was desired to keep the costs of this off budget, so instead of creating a single payer system with the government openly running it, the “private” insurers are both told the precise details of what they must sell, and the customers are compelled to buy it.

    This way not only do the cash flows not show up in the federal budget, but ideally the insurance companies get the blame for the nasty decisions they’ve been ordered to implement, instead of the politicians.

  3. Orin Kerr says:

    ” Whenever the government gives substantial regulatory power to private firms (or a single private firm), serious constitutional doubts emerge.”

    Are four examples over 200+ years really enough to make such a claim? Aren’t there many many examples of the government giving substantial regulatory power to firms in which no constitutional doubt emerged?

  4. Gerard Magliocca says:


    For example?

  5. Orin Kerr says:


    Off the top of my head, how about Fannie Mae and Freddie Mac, the rise of private prisons, the role of private companies serving as military contractors in war time, or the role of the ABA in lawyer accreditation?

  6. Bruce Boyden says:

    Utilities, cable franchises, ICANN, the Smithsonian, numerous bridge, road, and canal companies in the early nineteenth century.

  7. Bruce Boyden says:

    State bar or other professional licensing organizations, FINRA, NY Stock Exchange, PCAOB, FASB, GASB, bond rating agencies.

  8. Gerard Magliocca says:

    Well, I would say that most of these examples don’t involve a substantial grant of authority (e.g. the Smithsonian), but I don’t have a particularly great yardstick for assessing that.

  9. Peter Johnson says:

    There are, perhaps, an infinite number of ways to characterize the mandate, but the one offered here is merely a straw man. The mandate is a tax that aims to account for free riders in the health care system. No one is forced to subject themselves to private power. You have the option of buying (for many, heavily subsidized) insurance (in a newly regulated environment that endeavors to lessen the unequal bargaining power between insurance company and individual, and benefit the individual in a myriad of other ways – see, for example, medical loss ratios, PCORI, quality improvement incentives, etc.), or paying a tax that is meant to cover what it will cost the taxpayers if you refuse to insure yourself and then go to an emergency room for health care. Furthermore, the health insurance exchanges open competition in the health insurance industry. Most Americans are stuck with the insurance that their employer negotiates for them — now we can go out and find a policy that works for us. Subject to private power? More accurately, it’s using regulation to encourage competition.

    Also, what you do you mean when you say insurance companies have quite a bit of discretion over health policy? And, how does this tie-in to the mandate?

    Seems to me that someone is wading into an area that they clearly have no clue about..

  10. Douglas Levene (@DouglasLevene) says:

    Why is Obamacare still so unpopular? Well, this is just a wild guess, but maybe it’s because it will raise costs and lower the quality of care for most people?

  11. Sam Bagenstos says:

    Your argument seems to imply that a public option would have made the ACA less constitutionally problematic to those who oppose it — is that right?

  12. wreynolds says:

    Doug. Maybe opposition is based on the curious phenomenon that the press only covers opponents of theACA; coverage is given to Ted Cruz abd his ilk, rather than to those who extol the law. (BTW, the Admin seems to have done a lousy pro-ACA campaign.)

    Or maybe opposition to the ACA is a myth. Last Saturday Charles Blow showed that 30% of those “opposed” to the ACA did so because it was not liberal enough. That left a solid majority in favor, at least, of the ACA

  13. BJones says:

    The government is supposed to regulate business in order to protect against monopolies and allow capitalism to survive and flourish. Without the governments over site of major business there would be no way to control the market meaning the rich get richer, larger companies swallow up smaller ones and the market collapses. That is why bills such as this one should not be put in place. Such bills only force American citizens to pay for something they may not want. The passing of such a bill would only succeed in further infringing upon the rights of American citizens. The real problem is that a monopoly only exist if the government says it does and if the government stands to gain from the creation of one then they will do so without hesitation as they have done with the use of private contractors by giving them government contracts for military projects. So does the government really wish to protect against monopolies or just the ones that do not suit their needs?

  14. Brett Bellmore says:

    “Such bills only force American citizens to pay for something they may not want.”

    No, not “only”. In fact, that’s merely a funding mechanism for the “program”: The law gives the federal government control over the features of the policies, and the pricing, and denies the company the power to charge extra for or not cover pre-existing conditions. Since the rational customer response to this law would be to refrain from having insurance until they actually need it, and only then buy it, that would normally have the effect of driving the insurance companies so regulated into bankruptcy.

    In order to prevent this effect of the law itself, the law compels healthy people to buy policies, many of them at rates far too HIGH by underwriting standards, so that they can subsidize the people getting the unreasonably low rates. Essentially it’s a covert tax to pay for the covert single payer system.

    It’s rather as though the government decided that it wanted to feed the poor, but didn’t want to do so on the books. So it passes a law requiring grocery stores to sell food to the needy below cost. And then requires everyone else to buy their groceries at inflated prices, to keep the stores in business.

    The insurance companies have become sock puppets for the government, to conceal the creation of a single payer system. An extremely inefficient way to do this, but, what the heck, it’s other people’s money.

  15. Joe says:

    We don’t have a “covert single payer system,” though it very well might be the best way to go. A “single payer system” actually has a “single” provider. Brett again uses singular words to cover something that might be some sort of trend toward the thing, but is actually not that thing.

    The logic of the law is quite apparent — it wants to expand availability of insurance but to prevent free riders and to spread the risk, to incentive purchase of insurance generally or have people w/o it pay for adding to the cost of the overall system. People, e.g., have an incentive to gamble & then (as experience shown) go to emergency rooms or get care they could not afford, often going into bankruptcy to cover the bills. The basic logic of insurance is to stop this sort of thing.

    So, e.g., society sets up fire insurance. Everyone pays taxes and gets fire service when they need it. The fire departments generally are government run, but they need not be. They could, like use of private prisons etc., be privately run while people have an obligation to pay taxes to have the service available. Even if they don’t want it, being the gamblers they are.

    This sort of thing is helpful to protect interstate commerce overall, health care about 1/6 of the national economy. In part given the nature of how government system with filibuster and all, the actual program is imperfect. It is inefficient, like things are in the real world. Hopefully, yes, in time, it will be more efficient. The way to do this is slowly over time, seeing how things work.

    But, Brett isn’t a conservative, so he might want to go another path.

  16. Joe says:

    I think BJJones starts well — “The government is supposed to regulate business in order to protect against monopolies and allow capitalism to survive and flourish.” But, not sure about what follows.