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The Surprising Way the Election Could Affect Your Car Insurance

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Health insurance and car insurance. The two entities are ostensibly part of the same subsection of our lives — protecting our assets, protecting our selves. But throughout the 2012 Election one got infinitely more air time, while auto insurance was muted entirely. There’s good reason for this; President Obama used the political capital from his first election to pass the extremely controversial Patient Protection and Affordable Care Act, the most significant change to the U.S. health care system since the 1960s. But while supporters of the President and his health care overhaul cheered the Supreme Court’s already-famous decision in National Federation of Independent Business v. Sebelius to uphold the major provisions of what is more commonly known as Obamacare, the case yields interesting effects on the car insurance market as well. And now that the President has won a second term, Obamacare is set to become the law of the land along with its collateral effects on auto insurance.

Chief Justice Robert’s surprising move in his landmark Sebelius opinion was much less of a fudge than it was a succinct compartmentalization. He concluded that Obamacare couldn’t survive under the Constitution’s Commerce Clause, but could, however, be regulated as a tax. Meaning those who go without health insurance could be charged a penalty tax, with some exceptions. The tax is intended to cost less than the price of insurance, and is not considered a criminal fine.

Generally speaking, the Commerce Clause gives the federal government power to regulate interstate commerce. A good example is the Patriot Act, which is dependent on the Department of Homeland Security’s ability to monitor suspected bad guys as they cross state lines; the government has broad powers to surveil and arrest suspected terrorists — pretty much agnostic of which state serves as their base of operations at any given time.

And while the new Obamacare tax is getting all the headlines, the language Roberts used to uphold the Commerce Clause might someday be even more historically noteworthy.

The Chief Justice clearly established that the Commerce Clause could not monitor “inaction.” In other words, the federal government can’t punish someone for not doing something. Selling weapons without a license is clearly an “action,” and therefore covered under the Clause, but neglecting to purchase health insurance is merely an inaction, and therefore not covered by it, according to the Roberts decision.

Meanwhile, the framework can be shifted to the auto insurance market. Contrary to what’s generally believed, car insurance is not actually mandated by the federal government. And now, based on the precedent set in Sebelius, it can’t be. The Justice Department can of course investigate insurance fraud cases crossing state lines, but Washington cannot force someone to enter the auto insurance market — just as it can’t force Americans to purchase broccoli even though we all agree it’s healthy for us.

Some worried that the decision would usher in a period marked by “government takeovers” of other large industries such as auto coverage. Yet the takeaway from the Obamacare care decision shows that this cannot be the case. At worst, from the perspective of free marketeers, the government can tax people and employers for not adequately insuring their vehicle. Car insurance will remain a state-by-state affair, indefinitely. Each state will continue to set its own limits, prices, regulations and taxes.

Image: Tom Wolf | Photography, via Flickr

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