Article I, Section 8 of the Constitution gives Congress the power to "regulate Commerce...among the several states" and to "make all laws which be necessary and proper for carrying into Execution" that power.
In 1944, the Supreme Court held that Congress has the power to regulate the insurance industry:
Perhaps no modern commercial enterprise directly affects so many persons in all walks of life as does the insurance business. Insurance touches the home, the family, and the occupation or the business of almost every person in the United States. This business is not separated into 48 distinct territorial compartments which function in isolation from each other. Interrelationship, interdependence, and integration of activities in all the states in which they operate are practical aspects of the insurance companies' methods of doing business. A large share of the insurance business is concentrated in a comparatively few companies located, for the most part, in the financial centers of the East. Premiums collected from policyholders in every part of the United States flow into these companies for investment. As policies become payable, checks and drafts flow back to the many states where the policyholders reside. The result is a continuous and indivisible stream of intercourse among the states composed of collections of premiums, payments of policy obligations, and the countless documents and communications which are essential to the negotiation and execution of policy contracts. Individual policyholders living in many different states who own policies in a single company have their separate interests blended in one assembled fund of assets upon which all are equally dependent for payment of their policies. The decisions which that company makes at its home office-the risks it insures, the premiums it charges, the investments it makes, the losses it pays-concern not just the people of the state where the home office happens to be located. They concern people living far beyond the boundaries of that state.
United States v. South-Eastern Underwriters Association et al., 322 U.S. 533In addition, insurance spending pays for medical equipment, supplies, and drugs that travel in interstate commerce. In
Katzenbach v. McClung, 379 U.S. 294 (1964), the Supreme Court held that Congress could forbid racial discrimination at a restaurant even if it was patronized solely by local customers, because it served food that was purchased from out of state.