Remember that civics class you had to take in high school? If so, you might recall that the federal government possesses only those powers delegated to it by the U.S. Constitution. All remaining powers are reserved for the states or the people.
This is the main principle of the 10th Amendment to the Constitution. And for approximately 240 years, there has been a healthy tension between the states and federal government with respect to the authority and role of each.
A review of history teaches us that the founding fathers struggled with the tension that exists between states’ rights and a federal government. James Madison and Thomas Jefferson were both advocates for small and limited federal government. Both feared that a large central government would be too close to a monarchy. Alexander Hamilton, whom many suspected of being a monarchist at heart, favored a larger central government. Hamilton feared local democracy because it would allow control by the “masses.”
Since its ratification in 1791 there has always been issues between states’ rights and federal authority. However, over the past 10 years, the tension between the states and federal government has risen dramatically. We are now witnessing the impact of this tension on many policy issues, from sanctuary cities and immigration to health policy (Medicaid, Affordable Care Act) and pro-life/pro-choice policies.
How is this relevant to the employee benefits industry?
The Affordable Care Act (ACA) is illustrative. The federal government enacted a broad law imposing many new requirements on both individuals and states. Many states resisted the implementation of key elements of the ACA and sued in federal courts to either stop or limit the implementation. On one key issue the states were successful: the Medicaid expansion provisions of the ACA, which punished states for not adopting the federal rule by reducing other federal money.
Ruling with the 10th Amendment in mind, the U.S. Supreme Court noted that the federal government is not permitted to “put a gun to the head” of the states to achieve federally mandated results.
The Supreme Court held that states could elect to participate in Medicaid expansion but could not be forced to do so. As a result of that decision (and other similar decisions), during the 10 years that have passed since the law was enacted, the ACA has been, in some observers’ eyes, significantly watered down, resulting in a divergence in implementing (or not implementing) key components of the law at the state level. For example, some states have refused to implement the Medicaid expansion requirements, and some have expanded the eligibility of individuals to participate in Medicaid. Other states took an active interest in the development and introduction of insurance exchanges, while others participated at the absolute bare minimum.