In April 2007 an orthopedic surgeon in Arizona began a fringe fight over healthcare policy with the help of some libertarian supporters. Now, thanks to the intervention of a conservative policy group, that initiative has become a central issue of the 2010 elections.

The American Legislative Exchange Council (ALEC) has a history of using its web of state legislative connections to drive national debate, quietly pushing the agenda of its corporate backers [see Kusnetz, "Where Bad Bills Come From," June 28]. With its model legislation, the Freedom of Choice in Health Care Act, ALEC is encouraging state legislators to begin chipping away at the central components of the Obama administration’s healthcare reform before it’s fully implemented. What’s more, ALEC and its allies have already contributed to a growing legal challenge that could give the conservative Supreme Court an opportunity to overturn the legislation even if Congress does not.

From their beginnings in Arizona to their nationalization through ALEC, the so-called healthcare freedom acts have followed a course charted by a network of conservative organizations created by wealthy donors. The acts are an indication that the most important fights over healthcare may take place not in Congress but at the state level and in the courts.

In 2007, before the healthcare debate was making national headlines, Eric Novack, the Arizona surgeon, conferred with Clint Bolick of the Goldwater Institute and Sally Pipes, president and CEO of the libertarian Pacific Research Institute. Massachusetts had passed its universal health coverage the year before, extending subsidies to the state’s poorest and requiring those who could afford it to buy insurance. Novack wanted to prevent anything similar from passing in Arizona.

The group drafted a citizen initiative in 2008 that would have amended Arizona’s Constitution to prevent any laws from compelling a person to buy insurance. It would also have secured a right for individuals to pay directly for any service, in essence precluding a single-payer system. The initiative failed to pass, but it gained the attention of libertarian groups and donors, who saw the potential to promote their core principles. Frayda Levin, who sits on the board of the conservative advocacy group Americans for Prosperity and is a prominent donor to the libertarian Cato Institute, gave $100,000 to the initiative. "It was the one opportunity, I felt, where we could continue to have some choice," she told me. "This is about individual liberty, and it’s a huge deal."

Within a month of the initiative’s failure in November 2008, ALEC had adopted the cause and crafted model legislation based on the failed initiative. "The bill seeks to ban a Canadian-style, single-payer healthcare system," a spokesperson for the group told me in an e-mail.

ALEC brings together state legislators and lobbyists from the country’s largest corporations to form issue-based task forces. These committees write antiregulatory model bills that legislators then introduce in their capitols. The group is almost entirely funded by its corporate members, including Koch Industries, ExxonMobil and the heavyweight pharmaceutical trade group PhRMA.

Most recently, ALEC and its corporate allies defeated attempts to regulate greenhouse gases. It’s now clear that climate-change legislation is dead for the foreseeable future, and there’s an alarming wave of climate-change-denying candidates running for office in November. ALEC is also behind a vigorous assault on various state and regional pacts, such as the Regional Greenhouse Gas Initiative. Other prominent campaigns have included pushing for conservative education policies and opposing net neutrality.

With the healthcare freedom act, the group’s legislative members followed ALEC’s lead, filing or prefiling bills in thirty-eight states, according to the organization. Six of those measures have passed. In August Missouri became the first state in the country to amend its Constitution to enshrine the act’s goals. In states that pass them, the acts could handcuff agencies from implementing parts of Obama’s reform. They could even help build momentum to dismantle the reform entirely, providing political cover for Republicans and their recently announced Pledge to America, which promises to repeal federal healthcare reform.

The "individual mandate"—the requirement that all individuals have health insurance—is one of the more unpopular aspects of Obama’s reform package, and the bills’ proponents have seized on that weak spot to attack overall reform. Sponsors of the efforts in Arizona and Missouri told me they suspect federal reform is only the first step toward a single-payer system, and that insurers and the business community are worried about the same thing. "They realize federal government is putting a huge financial and regulatory lug on them," says State Senator Jane Cunningham, who sponsored the Missouri bill.

In its immediate policy implications, the state amendment changes little for Missourians, nor would similar initiatives now on the ballot in Arizona, Colorado and Oklahoma, if voters pass them in November. Because the Constitution’s supremacy clause ensures that federal law supersedes those of the states, the acts’ central tenets would take effect only if the legislation Obama signed in March is repealed or ruled unconstitutional by the Supreme Court.

"It’s not real," says State Representative Kyrsten Sinema, the second-ranking Democrat in Arizona’s House. "The only thing that will change in Arizona if this amendment passes is, we’ll have another expensive lawsuit on our hands." Sinema is on the board of the Progressive States Network, a national group of state legislators, and she has met with her peers around the country to help them counter healthcare freedom acts. As their greatest success, she cites the twenty-six states that did not pass the measure.

But the forces fighting healthcare reform have a longer-term strategy. In conjunction with the bills, more than twenty state attorneys general and governors have filed suit with the goal of influencing the federal courts, and eventually the Supreme Court. In Virginia a federal judge used a healthcare freedom act that state legislators had passed only weeks before the lawsuit was filed to rule that the state had standing to challenge the federal reform.

"A state can’t nullify a federal law, so the only question is, Is the federal law constitutional?" says Timothy Jost, an expert in health law at Washington and Lee University. Jost notes that in addition to its unpopularity, the individual mandate is one of the weaker aspects of the reform legally and provides an opportunity to attack the bill’s constitutionality. But still, he says, even the conservative Supreme Court would have to change course dramatically to strike down the mandate.

That could happen, says Simon Lazarus, public policy counsel for the National Senior Citizens Law Center. Lazarus has written about the lawsuits and is not as quick as Sinema to dismiss the threat the initiatives pose. "Over a period of time, frankly, it makes it much more likely that our five friends on the Court would feel emboldened to carry their water for them," he says, speaking of the conservative justices and their ideological counterparts who are pushing the bills and lawsuits.

Lazarus points to the High Court’s recent ruling on the Second Amendment, which gives individuals and not just militias the right to bear arms. That ruling would have been unthinkable, he said, without decades of organizing by the National Rifle Association and other gun-rights advocates. "I think there’s a great deal of interplay between what happens in the courts and what happens on the political ground."

This may help explain the prominent role of groups like Americans for Prosperity and the Cato Institute, and their wealthy supporters, in pushing these bills nationwide. Board members of the groups have contributed tens of thousands of dollars to the initiatives in Arizona and Missouri. In Colorado, the Independence Institute, which addresses public policy issues from what it calls a "free-market, pro-freedom perspective," is the primary backer of that state’s ballot initiative.

Eric Novack tells me his effort started as a purely local affair. "In 2007 I was able to get some folks together and the idea was effectively, What can we do here in Arizona to protect individual healthcare freedoms?" His biggest opponents, he claims, have been insurance companies. "This effort was all individual and grassroots based."

Healthcare interests have spent money on both sides of the debate. In 2008 a group of physicians and healthcare providers joined the Greater Phoenix Chamber of Commerce in spending hundreds of thousands of dollars to defeat the measure; opponents worried that the language was too vague and could have interfered with the state’s Medicaid program. But State Representative Nancy Barto, a Republican who has worked with Novack and introduced the bill’s second incarnation in the state legislature last year, tells me this time insurers have been helpful in working out the initiative’s kinks. "They did not oppose it," she says. "They helped make the language stronger and clearer." Since becoming involved, Barto says, she’s been elevated to ALEC’s Health and Human Services Task Force, which includes representatives from Bayer Healthcare, Johnson & Johnson and PhRMA.

Most of the nearly $2 million given to the Arizona effort has come from a nonprofit started by Novack and other supporters. Donations to that group are anonymous, but the committee supporting the measure lists Frayda Levin among its top funders. In addition to their Arizona contributions, Levin and her husband, Kenneth Levy, have given enough money to the Cato Institute for that organization to lend the couple’s names to the roof garden of its Washington headquarters. Another large donor to the Arizona measure is Jeffrey Yass, a member of Cato’s board of directors. Once the movement went national, Novack was named a senior fellow at Americans for Prosperity and advised the group on healthcare policy (he says he no longer fills this role).

The picture is similar in Missouri. Jane Cunningham, the state legislator who sponsored the bill there, sits on ALEC’s board. She says that as Congress began debating healthcare reform in 2009, she started hearing from constituents who were frightened and angered by what they saw in Washington. That spring an ALEC conference brought the model legislation to her attention, and she introduced it in January. "What it does is, it shields Missourians from the individual mandate of the federal law," she said. "It preserves the present freedoms."

Cunningham says a grassroots movement pushed the measure over the top, with more than 70 percent of voters approving it. But it also attracted some large donations. Ethelmae Humphreys, who sits on Cato’s board, gave $25,000, more than 20 percent of all the money raised. Humphreys and her husband have also given at least $100,000 over the past few years to the libertarian Mercatus Center, based at George Mason University in Virginia. On the board of that group is another prominent donor to the Missouri initiative, Menlo Smith. "This is what the right does," Sinema tells me. "They take an issue or two, test it in a state to see how it does, and then take it around the country."

A key player in this campaign is the "Kochtopus," the political machine created by Charles and David Koch and detailed in a recent investigation by Jane Mayer in The New Yorker. The Kochs, who run the oil and chemical giant Koch Industries and who together are worth $35 billion, have spent the past few decades building a conveyor belt for right-wing and libertarian policies. Mostly through various charities, they have showered more than
$100 million on dozens of think tanks and advocacy groups—including the Goldwater Institute, the Pacific Research Institute, Cato, Mercatus and ALEC—which push antiregulatory policies that coincide with Koch Industries’ and other large corporations’ financial interests. The Kochs started Americans for Prosperity in 2004 and have since given it more than $5 million. That group has been the driving force against healthcare reform since it sent angry protesters to disrupt town hall meetings in the summer of 2009. The healthcare freedom acts are the latest, loudest product of this antiregulatory policy web. ALEC’s role also suggests corporate influence. The organization’s $7 million budget comes almost entirely from groups like PhRMA, ExxonMobil, Bayer and AT&T, which are represented on ALEC’s Private Enterprise Board and task forces and must approve any legislation the organization passes.

As the Americans for Prosperity rallies raged in the summer of 2009, Bob Ingram, then vice chair of pharmaceuticals for GlaxoSmithKline, received the Adam Smith Free Enterprise Award at an ALEC meeting in Atlanta. Standing in front of a photograph of a capitol dome, Ingram told the crowd that as Congress took up healthcare reform, they needed to energize the entire business community to ensure that ALEC’s values—free enterprise, competition and personal responsibility, as he put it—help shape the debate. "I just want to say to all of you as ALEC members, you have my commitment, but more importantly, GlaxoSmithKline’s commitment, to increase our partnership with you," he said. He promised to encourage the seven other corporations on whose board he sat to do the same. Donations to ALEC are not public, so it is impossible to account fully for the group’s finances. But tax records show that PhRMA gave ALEC nearly $380,000 in 2008. The group’s members, including Bayer, Glaxo and Pfizer, which sit on ALEC’s board, surely gave many thousands more in membership dues.

The initiatives’ backers acknowledge that they are targeting more than healthcare reform. Ken Cuccinelli, Virginia’s attorney general, has led that state’s legal challenge. He told the Heritage Foundation that healthcare was "secondary to the real important aspect of the case, and that is to protect the Constitution as we essentially define the outer limits of federal power."

Some progressive groups maintain that these initiatives are a distraction from more important issues in the November elections. Justine Sarver, executive director of the Ballot Initiative Strategy Center, which calls itself the "nerve center" for progressive ballot initiatives, downplayed the significance of the healthcare measures. "It’s barely a blip on the political radar in the states where it’s happening," she said. Sarver pointed to the low turnout for the Missouri initiative, with about one-third the number of voters as in the 2008 presidential election. She also pointed out the number of states where the measure has failed to pass. "I’d call it more of a Tea Party failure," she said. Sarver and Sinema believe the best counterstrategy is to not get distracted from what they see as more important issues, like unemployment and immigration.

It is true that so far the acts pose little immediate threat to federal healthcare reform. But they may help to turn out conservative voters where the initiatives are on the ballot, and as Cunningham claims in Missouri, a candidate’s stance on the issue could become a litmus test for voters. The initiatives would have an even larger impact, however, if they were to serve the role that Simon Lazarus suggested. It is really the lawsuits they prompt that he worries about. "What is striking, it seems to me, about these lawsuits is the very radical constitutional theorizing behind them," he says. "They are basically an attack on the jurisprudence that has held since the New Deal." Lazarus agrees with Cuccinelli and Frayda Levin that this is about much more than healthcare. He thinks progressives ought to embrace this fight as an opportunity to argue that government should be in the business of providing environmental protection and Social Security, for example. "If we can’t convince people that that’s the case, then we should go into another business. But we’ve got to get out there and do it. I think we haven’t really recognized the agenda behind these lawsuits."

Many legal scholars agree with Jost that it would be a long shot for the Supreme Court to rule against the federal government in these suits. But if Lazarus’s "five friends" on the Court were to surprise everyone by doing so, he warns, it could encourage a sustained assault on the many institutions we have come to take for granted since the New Deal.

Even if the Supreme Court does not intervene, the political effects could be more subtle and powerful than just turning out more voters. As we’ve seen with climate change, these seemingly frivolous state initiatives can help build a movement. These bills could be the first step in a long Republican and corporate battle to kill healthcare reform.