Thursday, June 6, 2019

The Impact of Federalism on Corporate Power in American Legislatures: The Case of Health-Insurance Reform

Florida, like about a dozen other states, debated in 2009 a proposed amendment to its state constitution that would have blocked, at least symbolically, much of the federal health-care insurance overhaul on the grounds that it tramples individual liberty. Behind the amendments was an industry with a vested interest—an industry that made substantial campaign contributions to the supporters of the amendment. I contend that there is an ethical conflict of interest lurking here, even if it is constitutional (assuming that wealth constitutes free speech, which itself is a problematic assumption), but the main issue here is how the blockage of federal law applying in Florida (and other states) would have affected federalism. What would have been better for the American federal system: federal or state legislation, or perhaps a combination? 
It was not just ideology that united the proposal’s legislative backers in Florida. The amendment's 42 co-sponsors, all Republicans, were almost all recipients of out-sized campaign contributions from major health care interests, a total of about $765,000 in 2008 alone. Around the 2008 election, moreover, the groups that provided health care contributed about $102 million to state political campaigns across the U.S., surpassing the $89 million the same donors spent at the federal level. 
The conflict of interest for the 42 co-sponsors in the Florida legislature opened them and their health-insurance backers to attack by those who wanted the federal government to be involved in health-insurance. Indeed, those federalists argued that the magnitude of the health-care industry’s contributions demonstrated the dangers of leaving such a question up to individual states, where campaign finance and ethics rules varied at the time from strict to negligible. The industry had enormous power at the state level, those federalists contended, and very few states had state-level consumer groups that were able to lobby effectively against the industry-legislator nexus. 
On the other hand, federalizing health-insurance law contributed to the consolidation-tendency of the "extended republic" at the expense of its member republics, or states. Indeed, the matter of the U.S. Government’s enumerated (i.e. limited) powers was not lost on the state legislators of several states who  were opposed to a federal health-care law. “We are trying to prepare, and trying to send a message that there is no reason for those decisions to get made at the federal level,” said Representative Linda L. Upmeyer, a Republican who was leading efforts in Iowa's legislature to prevent the anticipated federalization by the federal president, Barak Obama.[1] Upmeyer and anti-federalists knew that without “opt-in” or “opt-out” provisions in the federal legislation, state constitutional amendments would be preempted even should Congress refuse to reform health insurance. 
To be sure, states opting out of the eventual Affordable Care Act could have compromised the economies of scale assumed by the federal cost-saving measures. However, not even the cost-efficiency of proposed federal legislation should always overrule the contribution of the bill on the system of federalism. This focus had been a factor in the trend since the 1860's toward the consolidation of power at the federal level at the expense of the diversity-expressive power of the states. Too much "one size fits all" with not enough taking into account the differences between the member-states in an empire-level political union leads to an unbalanced system of federalism and thus eventual demise of the union itself. This point is lost when the focus is on particular pieces of legislation, and more specifically on their respective redeeming cost-efficiencies. 
What if industry power over legislation is strongest at the state level? Would not another incremental movement towards political consolidation at the expense of federalism have the virtue of protecting democracy from the encroachment of plutocracy, the rule by wealth? Yet leading up to Obama's Affordable Care Act of 2010, the president dropped his public-option for health insurance when the lobbyist for the private health-insurance industry threatened to withdraw its support. Obama's political calculus was doubtless that the vote would be so close that he would need the industry's support--hence, as often is the case in American legislation--incrementalism is the rule and large packages like FDR's New Deal are the exception. 
Therefore, even though the member-state legislatures are perhaps more easily dominated by big business, the federal head is also capable of being controlled or steered. Perhaps part of the solution to the problem of industry dominance over government lies in enabling the state governments to be able to check the federal government, and vice versa. In other words, the worst enemy of corporate corruption of public officials at either government may be balanced federalism.


1.  David D. Kirkpatrick, “Health Lobby Takes Fight to the States,” The New York Times, December 28, 2009.