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Q: Under what authority could an individual State demand that AARP or COSTCO be "licensed" to "sell" insurance?
If one works for a company that provides pre-paid health insurance for its employees, by what authority can the State demand the company have a license to "sell" insurance?
A: The 10th Amendment to the Constitution is the legal authority. It states:
"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."
In a nutshell, the above means that the states have the power to create laws, so long as they don't step on the toes of the Federal government. Accordingly, if a state wants to require AARP or Costco or an employer to obtain a license to sell insurance under the facts that you describe, then it may do so. The law would be constitutional so long as it is rationally related to a legitimate government interest (which is a very low threshold).
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