National Federation of Independent Business v. Sebelius

"National Federation of Independent Business v. Sebelius" is a landmark Supreme Court case that addressed the constitutionality of several key provisions of the Affordable Care Act (ACA), also known as "Obamacare." Introduced in 2010, the ACA aimed to reduce the number of uninsured Americans, which was estimated to be around 40 million at the time. The law included an individual mandate requiring most Americans to purchase health insurance, an expansion of Medicaid, and an employer mandate for businesses to provide health insurance to employees.

In this case, a coalition of states and the National Federation of Independent Business challenged the ACA, arguing that these provisions exceeded Congressional authority and violated principles of federalism. The Supreme Court's decision, rendered in June 2012, upheld the individual mandate as constitutional under Congress's taxing power, while also deeming the Medicaid expansion coercive and unconstitutional. This ruling allowed the ACA to largely remain intact, though it made the Medicaid expansion optional for states. The case generated significant political debate and continues to influence discussions around healthcare reform in the United States.

Published in: 2022

By: Manos, John K.

Subject Terms

National Federation of Independent Business v. Sebelius

Date: June 28, 2012

Citation: 567 US ‗‗‗ 2012

Issue: Patient Protection and Affordable Care Act (ACA)

Significance: In a 5–4 decision the Supreme Court of the United States determined that the ACA’s requirement that some individuals pay a penalty if they do not obtain health insurance is constitutional. In a limited 5–4 ruling the Supreme Court determined that the ACA’s "Medicaid expansion" is unconstitutional, but the rest of the ACA remains intact.

Background

The 2010 Patient Protection and Affordable Care Act (ACA), commonly called "Obamacare," was the signature domestic legislation of President Barack Obama’s first term in office. It was passed amid intense debate. The ACA was intended to address the issue of uninsured American citizens who at the time of the law’s passage were estimated to number around 40 million people.

The ACA had three requirements that were planned to take effect in 2014. First, it required individuals who were not exempt from the law to purchase insurance or pay a tax penalty. This was known as the individual mandate. Second, it expanded Medicaid, which states were required to accept in order to continue to receive federal Medicaid funds. And third, it included a mandate for non-exempt employers to provide health insurance coverage for their employees.

Florida was joined by twelve states in filing suit against the ACA. The states argued that the law was unconstitutional. Thirteen additional states joined the action, along with the National Federation of Independent Businesses and two individuals. The plaintiffs argued that all three provisions of the ACA were unconstitutional. First, they asserted, the individual mandate was beyond the powers granted to Congress under the Commerce Clause of the Constitution. Second, the Medicaid expansion was coercive and therefore unconstitutional. And third, the employer mandate was an unconstitutional violation of states’ rights.

The United States District Court for the Northern District of Florida granted standing to all of the plaintiffs and ruled that the individual mandate was unconstitutional, holding the entire ACA invalid. However, it held that the Medicaid expansion was not unconstitutionally coercive. It also dismissed the challenge to the employer mandate.

The Eleventh Circuit Court of Appeals upheld the District Court’s decision regarding the individual mandate and the Medicaid expansion, but it reversed the District Court in the lower court’s decision that the unconstitutionality of the individual mandate rendered the entire ACA invalid. In other words, according to the Court of Appeals, the ACA could stand.

The Department of Health and Human Services petitioned the US Supreme Court to review the rulings. Because the law was being administered by the department, Secretary Kathleen Sebellius was named as the defendant. The Court asked four questions: (1) Is the suit challenging the minimum coverage provision of the Patient Protection and Affordable Care Act barred by the Anti-Injunction Act, 2 U.S.C. 7421(a)? (2) Does Congress have power under Article I, Section 8 of the Constitution, specifically under the Commerce Clause or the Taxing and Spending Clause, to require most Americans to purchase health insurance? (3) Is the individual mandate severable from the ACA? (4) Did Congress exceed its powers and violate principles of federalism when it pressured States into accepting the Medicaid expansion by threatening to withhold all federal funding under Medicaid? Oral arguments were presented over three days in March of 2012.

Opinion of the Court

The Supreme Court was narrowly divided on all of the questions. Chief Justice John Roberts wrote the majority opinion on the Anti-Injunction Act and the taxing powers of Congress. On the Anti-Injunction ruling he was joined by Justices Ruth Bader Ginsberg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan. They held that the Anti-Injunction Act does not preclude litigation against the individual mandate because the ACA calls for a penalty instead of a tax. In dissent Justices Antonin Scalia, Clarence Thomas, Samuel Alito, and Anthony Kennedy also held that the Anti-Injunction Act did not apply but because the mandate was not a tax at all.

Chief Justice Roberts also wrote the majority opinion that the individual mandate was within the power of Congress to lay and collect taxes. Roberts wrote:

The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.

Justices Scalia, Thomas, Alito, and Kennedy disagreed, arguing in dissent that the individual mandate was characterized as a penalty. Calling it a tax, they said, was rewriting the ACA.

Because the majority opinion was that the individual mandate is constitutional, the severability question was not addressed. However, Justices Scalia, Thomas, Alito, and Kennedy argued that the individual mandate and Medicaid expansion are both unseverable. Thus the ACA is unconstitutional in its entirety.

In a 7–2 ruling, in which Chief Justice Roberts again wrote the opinion and was joined by Justices Scalia, Thomas, Alito, Kennedy, Breyer, and Kagan, the Court found that the Medicaid expansion was unconstitutionally coercive. As written, they concluded, Congress exceeded its authority when it threatened to withdraw federal Medicaid funding from states that refused to comply with the expansion. However, Justices Roberts, Ginsburg, Kagan, Sotomayor, and Breyer argued that the rest of the Medicaid expansion could stand. Justices Scalia, Thomas, Alito, and Kennedy argued that the Court could not remedy the law as it was written and dissented.

Impact

The Court returned its rulings on June 28, 2012, setting off a firestorm of Congressional and media criticism and praise. Republicans in Congress had been attempting unsuccessfully to repeal the ACA since the beginning of 2011, and the Court’s decision renewed their efforts.

On the other side of the aisle, supporters of the ACA were jubilant that the law had passed the first test regarding its constitutionality. Supporters considered the ruling the most important federalism decision in more than sixty years.

In confirming that the individual mandate is constitutional under the taxing power of Congress, the Court in effect left the law as it was written. The mandate went into effect in 2014, as intended by the ACA.

Under the terms of the ACA, states were offered federal grants to establish state-based health insurance exchanges. These were intended as insurance markets for individuals to purchase qualified health-insurance plans. States that had not made provisions for implementing the law had to scramble in order to meet the law’s requirements by November 2012.

At the same time, the Court’s decision regarding Medicaid expansion in effect made that expansion optional. Some states therefore did not participate. The ACA remained controversial following the Court’s decision, but one of the main lines of attack against it—the constitutionality of the individual mandate—had been settled.

Bibliography

Allhoff, Fritz and Mark Hall, eds. The Affordable Care Act Decision: Philosophical and Legal Implications. New York: Routledge, 2014. Electronic.