National Federation of Independent Business (NFIB) v. Sebelius

Following is the case brief for NFIB v. Sebelius, 132 S. Ct. 2566 (2012).

Case Summary of NFIB v. Sebelius:

  • Petitioners challenged the constitutionality of the Patient Protection and Affordable Care Act (ACA).
  • Petitioners found fault with the ACA’s “individual mandate” (requiring people to obtain minimum health coverage), and “Medicaid expansion” (requiring States to cover more individuals under Medicaid).
  • The Eleventh Circuit Court of Appeals struck down the individual mandate, but upheld the Medicaid expansion.
  • The U.S. Supreme Court disagreed.  The Court upheld the individual mandate, holding that it was a proper use of Congress’s Taxing Power.  The Court severed that portion of the Medicaid expansion that penalized States for not expanding Medicaid coverage.

NFIB v. Sebelius Case Brief

Statement of the Facts:

Congress enacted the Patient Protection and Affordable Care Act (ACA) in 2010.  The purpose of the ACA is to increase the number of Americans with healthcare insurance, and decrease the cost of healthcare.

One key part of the ACA is the “individual mandate.”  The individual mandate requires Americans (who are not otherwise covered) to obtain a minimum form of healthcare coverage.  If individuals choose not to obtain such coverage, the ACA imposes a penalty to be paid to the IRS.

Another key part of the ACA is the “Medicaid expansion.”  The Medicaid expansion requires States to cover more individuals under Medicaid and provides additional federal funding to cover those additional individuals.  If a State chooses not to cover those additional individuals, the ACA provides that the State may be penalized by losing all of its federal Medicaid funding.

Procedural History:

The National Federation of Independent Business, several individuals, and 26 States brought suit in Federal District Court, challenging the constitutionality of the individual mandate and Medicaid expansion.  On appeal, the Eleventh Circuit Court of Appeals found the individual mandate unconstitutional, and the Medicaid expansion constitutional.  The U.S. Supreme Court granted certiorari.

Issue and Holding:

Does the ACA’s individual mandate, requiring people to obtain minimum health coverage or pay a penalty, violate the Constitution?  No.

Judgment:

The Eleventh Circuit Court of Appeals decision is affirmed in part and reversed in part.

Rule of Law or Legal Principle Applied:

The ACA’s individual mandate is an appropriate use of Congress’s power under the Taxing Clause and is, therefore, constitutional.

Reasoning:

Chief Justice Roberts wrote the opinion of the Court on two issues in the case — the Anti-Injunction Act and the individual mandate.

  • The Anti-Injunction Act does not bar the lawsuit against the ACA.

The Anti-Injunction Act provides that a person must pay a tax before challenging whether that tax is appropriate.  Here, petitioners challenged the ACA before paying any penalty for not getting coverage under the individual mandate.  The Court held that the penalty required for failing to obtain coverage is a “penalty” not a “tax” for purposes of the Anti-Injunction Act.  Thus, petitioners are not barred from challenging the ACA.

  • The individual mandate is a valid exercise of Congress’s authority under the Taxing Clause power.

A 5-4 vote of the Court upheld the constitutionality of the individual mandate as a valid use of Congress’s power to “lay and collect taxes.”  Writing for the majority, Chief Justice Roberts reasoned that requiring people to pay a financial penalty for failing to obtain health coverage may appropriately be characterized as a tax.  The penalty payment is not so high that people have no choice but to get insurance.  The payment is not limited to willful violations.  Also, the payment is to the IRS through normal taxation means.

  • A majority of the Court found the Medicaid expansion penalty unconstitutionally coercive.

No single opinion held a majority of the justices regarding Medicaid expansion.  Yet, with regard to the Medicaid expansion penalty, a majority of the justices found it to be unconstitutionally coercive.  The Medicaid expansion penalty was severed from the ACA.  As a result, States may take part in the the Medicaid expansion on a voluntary basis.

Concurring and Dissenting Opinions:

Concurring/Dissenting Opinion (Ginsburg):

Justice Ginsburg would have upheld the individual mandate under the Commerce Clause and the Necessary and Proper Clause.  Justice Ginsburg reasoned that the uninsured, as a class, have a substantial effect on interstate commerce.  In addition, Justice Ginsburg would have upheld the Medicaid expansion penalty as a proper use of Congress’s spending power.  Congress should be permitted to have a say in what States need to do to receive federal funding, and not rest on a vague concept of whether States have “no choice” in the matter.

Dissenting Opinion (Scalia, Kennedy, Thomas, Alito):

Reclassifying the individual mandate as a tax is not interpreting the statute but rewriting it.  The ACA exceeds Congress’s constitutional powers by compelling the purchase of health insurance and removing Medicaid funding from non-consenting States.

Dissenting Opinion (Thomas):

Justice Thomas agreed with Chief Justice Roberts that the individual mandate cannot be upheld under the Commerce Clause.  The Commerce Clause covers economic activity, not inactivity.  That said, Justice Thomas took issue with the Court’s continued use of the “substantial effects” test because it encourages the Government to view the Commerce Clause as limitless.

Significance:

It is difficult to overstate the significance of NFIB v. Sebelius.  As a practical and political matter, this landmark case upheld a key facet of one of the most controversial laws in the last decade – the ACA, better known as “Obamacare.”  As a legal matter, the case demonstrates the Court recognizing limits on the Commerce Clause (i.e., that the Clause does not allow Congress to force people to buy something they do not want), and the spending power (i.e., that the Medicaid expansion penalty was coercive).

Student Resources:

https://www.law.cornell.edu/supremecourt/text/11-393

https://www.oyez.org/cases/2011/11-393

https://kaiserfamilyfoundation.files.wordpress.com/2013/01/8347.pdf

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