According to multiple news sources, several state attorneys general are poised to bring legal challenges to the healthcare reform legislation. According to most sources, the legal challenges will center around the constitutionality of the individual mandate.
Commerce Clause and Taxation Power
Most legal analysis I have found on this subject concludes that Congress has at least two sources of authority to mandate the purchase of health insurance. These include the commerce clause and the taxation power. The individual mandate is literally drafted as a tax on uninsured individuals. It is also part of a larger statute regulating interstate commerce -- which is a standard that the Supreme Court, including Justice Scalia, has approved to test the legitimacy of regulations of noneconomic activity. I have written on this subject before. Please feel free to read that analysis.
There is an interesting irony in many of the conservative objections to the individual mandate. Conservatives argue that Congress cannot use its commerce power to compel individuals to enter into commerce (i.e., purchase health insurance). While I would argue that Congress is really using its commerce and taxing power to entice people to cover the risks associated with their own health, that is a side argument.
Most importantly, conservative arguments in this area unwittingly support more expansive regulation. Here's why.
Conservatives believe that Congress cannot mandate that individuals purchase insurance. In order to avoid this outcome, Congress could have raised taxes on everyone, created a public plan, and fully subsidized participation by indigent uninsured individuals. This alternative is more expansive than the voted upon exchange system, coupled with a mandate. The latter option uses a market based approach. The public plan, however, represents government sponsorship of health care. Yet, because the public plan would not involve coercion, it is presumably fine under existing commerce clause and taxation precedent -- according to conservative logic.
Clearly, conservatives cannot contest a public plan on constitutional grounds, as this is the same as Medicare, Medicaid, TRICARE, SCHIP and other government-sponsored plans. Accordingly, Congress could have chosen this more expansive route, but this is certainly not what conservatives want.
Conservatives also argue that Congress has never used its commerce power to force individuals to engage in commercial activities. That point is not true.
Take two leading cases on the commerce clause: Wickard v. Filburn and Gonzales v. Raich. In Wickard, the Court upheld a production limit on wheat as applied to someone who produced and consumed "home grown" wheat. Congress did not want suppliers to produce more than the statutory maximum because doing so would result in lower prices. The law was a basic price control. But for the homegrown wheat consumer, enforcement of this requirement would mean individuals had to purchase wheat on the open market. The Court, however, validated this outcome.
In Raich, the Court (a 7-2 majority, including Justice Scalia) upheld the enforcement of federal drug laws that ban possession of marijuana. The Court concluded that the federal government could enforce the laws against someone who used homegrown marijuana for medical purposes. Consequently, the individual would have to purchase some alternative treatment on the open market (as in Wickard). This outcome, however, did not render enforcement unconstitutional.
Similarly, with respect to the insurance mandate, Congress has determined that the alternatives to having almost universal coverage are an impediment to commerce. Removing this impediment will require a few consumers who are uninsured to purchase insurance, but this is not a novel concept. It is true that the regulations in the other cases did not directly mandate that individuals engage in commerce, but this was the impact of the regulations in those cases.
Even assuming that the Supreme Court finds the mandate unconstitutional, the Court would not then invalidate the entire statute. Instead, it would only invalidate the mandate itself. This would leave intact the many other components of the legislation that conservatives presumably loathe. Many conservatives, however, seem to believe that if the mandate is declared unconstitutional, that they have defeated healthcare reform. That is untrue. They will simply have defeated the mandate, which President Obama campaigned against in the first place.
Furthermore, if the Court invalidates the mandate, Congress could implement a voluntary public plan option (see above). It could also expand the income limits for Medicaid or lower the age requirements for Medicare to cover many uninsured individuals. Also, Congress could (and almost certainly would) continue to subsidize the purchase of insurance by individuals who cannot afford to do so. Accordingly, attacking the mandate does not seem to carry much promise for opponents of the legislation. It could, in fact, open the door to more expansive approaches.
See also: Is Healthcare Reform "Unconstitutional"? No -- Why Rivkin and Casey Are Wrong
UPDATE: It is unclear that a state attorney general would even have standing to bring a suit in federal court regarding the mandate. The mandate applies to individuals, not to state governments. Also, the mandate does not take effect immediately. Federal courts could avoid this litigation altogether if standing does not exist.