In 2010, Congress passed a controversial health care law, the Patient Protection and Affordable
Care Act (popularly known as ObamaCare, or the ACA). Shortly afterward, multiple parties,
including business organizations, individuals, and 26 states, filed suit in district courts
across the country to challenge the Act’s constitutionality. The results were fractured:
some courts upheld some or all of the ACA, others declared part or all unconstitutional,
some concluded offending provisions could be severed, and others argued that the Act
couldn’t be challenged until someone was forced to pay the penalty.
In National Federation of Independent Business v. Sebelius, the National Federation of Independent
Business, the State of Florida, and other plaintiffs sued in Florida federal court Katherine
Sebelius, Secretary of the U.S. Department of Health and Human Services. The ACA is a
massive piece of legislation, but the litigation challenged two key provisions: (1) the individual
mandate, which requires individuals to purchase health insurance or pay a “penalty” and
(2) the Medicaid expansion provision, which conditioned continued receipt of federal Medicaid
funds on states expanding their eligibility requirements for the program.
The district court held that Congress had exceeded its authority in passing the individual
mandate. The court concluded that the individual mandate was not severable and struck down
the Act as a whole. On appeal, the Eleventh Circuit Court of Appeals affirmed that the
individual mandate was unconstitutional. However, the court of appeals determined that the individual
mandate was severable; so, the rest of the Act remained intact. The Supreme Court agreed to hear the case
to resolve the split between the circuits.
Chief Justice Roberts, writing for a divided majority, found the Act constitutional in
part and unconstitutional in part. Roberts first concluded that the individual mandate
could not be justified as a valid exercise of commerce power, because the Commerce Clause
did not empower Congress to compel individuals to engage in commercial activity. Further,
Roberts concluded that the possibility that people would participate in the healthcare
market at some point in the future was not enough. Roberts viewed this as a slippery
slope that would open the door to congressional regulation of all sorts of activity (or inactivity)
not contemplated by the Framers. To illustrate this, Roberts said that obesity was more responsible
for increased healthcare costs than uninsured people, but under the government’s theory,
the federal government could mandate that people buy vegetables. Next, Roberts wrote
that the Necessary and Proper Clause only gave Congress the power to do things that
were incidental to the valid exercise of some enumerated power, and therefore the individual
mandate could not be justified on this ground either. However, Roberts reasoned the individual
mandate’s penalty provision operated more like a tax imposed on those opting against
purchasing coverage. Because the tax was assessed just like other taxes, based on income, and
collected by the IRS, the fact that Congress had called it a penalty was irrelevant. The
Court interprets legislation as constitutional if “fairly possible,” and the individual
mandate could be saved by interpreting the penalty provision as a tax.
With respect to the Medicaid extension, Roberts held that the federal government could not
withhold existing Medicaid funding from states that chose not to participate. Roberts acknowledged
that Congress could offer grants to states and condition the funds on compliance with
certain requirements, as happens frequently with highway and infrastructure funding. However,
Roberts found that the Act did not offer the states a genuine choice, because “they must
accept a basic change in the nature of Medicaid, or risk the loss of all Medicaid funding.”
Accordingly, the Medicaid provision was found unconstitutional. The majority found the provision
severable from the remainder of the Act, which was left intact.
Justice Ginsburg concurred in part and dissented in part, concluding that the individual mandate
should be upheld under the Commerce Clause, because there was a rational basis for Congress
to believe the large uninsured population substantially affected interstate commerce
and the mandate bore a reasonable connection to addressing the problem. Ginsburg disagreed
that the Medicaid expansion was unconstitutional. Ginsburg found that states had no “existing”
rights to federal funds and that Congress could decide whether federal funds should
be given to the states, and under what conditions. Justice Scalia dissented, writing that the
entire Act should be struck down as unconstitutional. He argued that neither the Commerce Clause
nor the power to tax and spend granted Congress the authority to require the individual mandate.
Scalia further argued that the Act’s “threats” to terminate states’ Medicaid funding absent
compliance with the Medicaid expansion were impermissibly coercive.
The Sebelius decision, particularly the portion of the opinion upholding the ACA’s individual
mandate, was hugely important in terms of federalism and national policy, and also highly
controversial.
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