Impermissible Ratemaking in Health-Insurance Reform: Why the Reid Bill Is Unconstitutional.

Richard Epstein examines Supreme Court precedent in rate-making cases and concludes that, even apart from the question of whether the health-care overhaul is an unconstitutional extension of Congress’s power to regulate interstate commerce, it is unconstitutional under the takings and due process clauses of the Fifth Amendment.  According to Epstein, the Supreme Court’s “basic constitutional requirement” in this realm is that “any firm in a regulated market must be allowed to recover a risk-adjusted competitive rate of return.”  Because the Reid bill (which, in connection with the Reconciliation Act, became law) sharply limits health insurers’ ability to raise premiums or deny applicants, it “emphatically fails this test” — as there is a “near mathematical certainty” that it would drive insurers out of the individual and small-group markets.