National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012), is a landmark United States Supreme Court decision in which the Court upheld Congress's power to enact most provisions of the Affordable Care Act (ACA), commonly called Obamacare, and the Health Care and Education Reconciliation Act of 2010 (HCERA), including a requirement for most Americans to pay a penalty for forgoing health insurance by 2014. The Acts represented a major set of changes to the American health care system that had been the subject of highly contentious debate, largely divided on political party lines.
The Supreme Court, in an opinion written by Chief Justice John Roberts, upheld by a vote of 5–4 the individual mandate to buy health insurance as a constitutional exercise of Congress's power under the Taxing and Spending Clause (taxing power).
A majority of the justices, including Roberts, agreed that the individual mandate was not a proper use of Congress's Commerce Clause or Necessary and Proper Clause powers, although they did not join in a single opinion.
A majority of the justices also agreed that another challenged provision of the Act, a significant expansion of Medicaid, was not a valid exercise of Congress's spending power, as it would coerce states to either accept the expansion or risk losing existing Medicaid funding.
Background
In March 2010, President Barack Obama signed the Patient Protection and Affordable Care Act into law. A number of parties sued, including the National Federation of Independent Business, claiming that the sweeping reform law was unconstitutional for various reasons. The Supreme Court granted certiorari to three cases, totaling 5½ hours of oral arguments: National Federation of Independent Business v. Sebelius (which consolidated a part of Florida v. Dept. of Health and Human Services) on the issues of the constitutionality of the individual mandate and the severability of any unconstitutional provisions, Dept. of Health and Human Services v. Florida on the issue of whether review was barred by the Anti-Injunction Act, and Florida v. Dept. of Health and Human Services on the matter of the constitutionality of the Medicaid expansion.
District Court proceedings On behalf of the state of Florida, Florida Attorney General Pam Bondi sued the United States Department of Health and Human Services, challenging the law's constitutionality. On January 31, 2011, Judge Roger Vinson ruled that the mandatory health insurance "individual mandate"—the provision of Internal Revenue Code section 5000A imposing a "shared responsibility penalty" on nearly all Americans who fail to purchase health insurance—was outside the power of Congress. Vinson also held that the mandate could not be severed from the rest of the Affordable Care Act and struck down the entire act.
Eleventh Circuit appeal
The Department of Health and Human Services appealed to the 11th Circuit Court of Appeals. A three-judge panel issued a 2–1 ruling affirming Vinson's findings in part and reversing in part. The court affirmed the District Court's holding that the individual mandate was unconstitutional, but, contrary to the District Court's view, it held that the individual mandate could be severed, leaving the rest of the law intact.P. 15, slip op., National Federation of Independent Business v. Sebelius, U.S. Sup. Ct. (June 28, 2012). The government decided to not seek en banc review from the full Circuit and instead petitioned the United States Supreme Court to review the Eleventh Circuit's rulings.
Related cases Other federal courts heard cases related to the Affordable Care Act that were not directly reviewed by the Supreme Court, but caused a divide regarding the law's constitutionality. Two federal judges appointed by President Bill Clinton upheld the individual mandate in 2010. Judge Jeffrey Sutton, a member of the Sixth Circuit Court of Appeals appointed by George W. Bush, was the first Republican-appointed judge to rule that the law is constitutional in June 2011, as part of a divided three-judge panel that upheld the law.Thomas More Law Ctr. v. Obama, 2011 U.S. App. LEXIS 13265, 2011 WL 2556039 (6th Cir. Mich. 2011)
Briefings and oral arguments On November 14, 2011, the Supreme Court granted certiorari to portions of three cross-appeals of the Eleventh Circuit's opinion: one by the states (Florida v. U.S. Dept. of Health and Human Svcs.), one by the federal government (U.S. Dept. of Health and Human Svcs. v. Florida), and one by the National Federation of Independent Business (Nat'l Fed. of Independent Bus. v. Sebelius).
Oral arguments The Court announced in December 2011 that it would hear approximately six hours of oral argumentation over a three-day period, from March 26 to March 28, 2012, covering the various aspects being questioned by the principal parties involved in this and other related cases concerning the ACA.
The court first heard argument on whether the Anti-Injunction Act, which limits suits "for the purpose of restraining the assessment or collection of any tax", barred a decision before the ACA fully entered into force in 2014. Since neither the government, represented by Solicitor General Donald Verrilli, nor the states, represented that day by Gregory G. Katsas of the law firm Jones Day, were willing to defend that position (which had been accepted by three of the 12 appellate court judges who heard the cases),Think Progress: Ian Millhiser, "What The Heck Is The Tax Anti-Injunction Act?" March 23, 2012, accessed July 1, 2012, the Court appointed Robert Long of the law firm Covington & Burling as amicus curiae to defend that position.
On the second day, the court heard arguments over whether the ACA's "individual mandate" fell under the constitutional powers of Congress. The states (Florida et al.) were represented during the hearings by former Bush administration Solicitor General Paul Clement while the government was represented by current Solicitor General Donald Verrilli. Tom Goldstein of SCOTUSblog, while acknowledging that Verrilli had an initial stumble, called Verrilli's performance "tremendous", but also said that Clement's performance was "the best argument I've ever heard".
On the morning of the third day, the Court considered the issue of severability—whether the ACA could survive if the Court struck down the individual mandate. Paul Clement, Deputy Solicitor General Edwin Kneedler, and Court-appointed amicus curiae H. Bartow Farr, III of the law firm Farr & Taranto argued their various positions before the Court.
On the afternoon of the third day, the Court considered whether the Medicaid expansion the ACA instituted was coercive. Both Clement and Verrilli again argued before the Court. Chief Justice Roberts extended the time limit for both parties by 15 minutes during the arguments.
Verrilli's performance during the hearings was widely criticized by analysts.
Outcome
Question Ginsburg Sotomayor Kagan Breyer Roberts Kennedy Alito Scalia Thomas The Commerce Clause does not empower Congress to legislate the individual mandate. The ACA's threat to withdraw all Medicaid support to the states is unconstitutionally coercive. The Tax Anti-Injunction Act does not apply to the ACA. Absent the threat to withdraw Medicaid support, the Medicaid expansion remains permissible. The Taxing and Spending Clause empowers Congress to legislate the individual mandate.
The case generated a complex division on the bench. With respect to the Tax Anti-Injunction Act and individual mandate penalty, judgment was for the U.S. Secretary of Health and Human Services. With respect to the Medicaid expansion, judgment was for the challenging states.
All the justices were in rough agreement that the Anti-Injunction Act did not apply. Five justices (Roberts, Ginsburg, Breyer, Sotomayor, and Kagan) joined an opinion as to this.
One combination of five justices (Roberts, Scalia, Kennedy, Thomas, and Alito) were of the opinion that the individual mandate was not within the scope of Congress's Commerce Clause or its Necessary and Proper Clause powers. As four of them did not concur in the judgment, their votes could not count toward a controlling opinion.
A separate combination of five justices (Roberts, Ginsburg, Breyer, Sotomayor, and Kagan) held the individual mandate was a valid exercise of Congress's taxing power. As these five justices concurred in judgment and agreed to the same parts of Roberts's opinion, this was the binding and controlling majority as to this aspect of the case. As the individual mandate was upheld, the issue of its severability from the rest of the Affordable Care Act was not reached.
A final combination of seven justices (Roberts, Scalia, Kennedy, Thomas, Breyer, Alito, and Kagan) concurred in judgment that the Medicaid expansion of the Affordable Care Act, in combination with existing statutes, amounted to an unconstitutionally coercive use of Congress's spending power; however, those seven justices were divided as to the appropriate legal remedy.
Opinion of the Court Roberts authored an opinion, of which three parts gained the assent of five justices (Roberts, Ginsburg, Breyer, Sotomayor, and Kagan) and became the opinion of the Court, and one part gained the assent of a plurality (Roberts, Breyer, and Kagan) and became part of the holding. Those parts of Roberts's opinion that gained the assent of five justices were Parts I, II, and III-C. Part I recounted the facts and procedural history of the cases. Part II concerned the applicability of the Anti-Injunction Act to the individual mandate penalty. Part III-C held that, for constitutional purposes, the individual mandate penalty was a valid exercise of Congress's taxing power.
Tax Anti-Injunction Act The Anti-Injunction Act prohibits federal courts from enjoining agencies of the federal government from collecting a tax while a challenge to the tax is pending. Congress's motivation in passing the act was to prevent the starvation of the federal treasury while tax issues are being litigated before the courts. Instead, Congress requires a taxpayer who challenges any tax to first pay that tax, and only afterwards is the taxpayer allowed to bring suit and seek a refund. Challengers of the Affordable Care Act maintained that the individual mandate's enforcement mechanism was not a tax. The Court agreed. Because the ACA calls the individual mandate's shared responsibility payment a "penalty" instead of a "tax", it prevents the penalty from being treated as a tax under the Anti-Injunction Act.
Congress's taxing power
Taking a functional view to the individual mandate penalty,567 U.S., at 565. the Court held that it was a tax for constitutional purposes.567 U.S., at 563–80. The Court noted that the label of the individual mandate shared responsibility payment as a penalty for the purposes of the Anti-Injunction Act did not control whether it was a tax for purposes of constitutional analysis.567 U.S., at 564. The Court asserted that the individual mandate penalty, in practical operation, exhibited all the characteristics of a tax—the penalty "looks like a tax in many respects."567 U.S., at 563. That is, the individual mandate penalty had all of the following features of a tax: payment went to the U.S. Treasury when taxpayers filed their tax returns;567 U.S., at 563–64. the amount of the penalty was determined by factors such as the individual's taxable income, number of dependents, and joint filing status; the penalty was found in the Internal Revenue Code, and enforced by the Internal Revenue Service in the same manner as taxes are collected; and the penalty produced "some revenue" for the government.
Neither did the penalty's operation as a tax run afoul of even "our narrowest interpretations of the taxing power",567 U.S., at 573. which disallows punitive taxation: