Is the Affordable Care Act Constitutional? What the Supreme Court Has Said So Far

Decided on June 28, 2012, National Federation of Independent Business v. Sebelius was the case where the Supreme Court upheld the Affordable Care Act's "individual mandate" and struck down the Act's Medicaid expansion provision.

Use these links to jump to different sections:

• Background: Challenges to the Patient Protection and Affordable Care Act
• What Is the Anti-Injunction Act?
• The ACA's Individual Mandate
• Medicaid Expansion Under the Affordable Care Act
• The Supreme Court's Complex Decision in Sebelius
• Dissenting Opinions

Background: Challenges to The Patient Protection and Affordable Care Act

The Patient Protection and Affordable Care Act, also known as Obamacare, the Affordable Care Act, or the ACA, became effective in March 2010. Part of an effort to make health care in the United States more affordable, it sought to lower health insurance costs by ensuring everyone in the country had at least minimum coverage. To achieve this, it required that everyone either obtain insurance through their employer or through the private marketplace by 2014. The ACA also aimed to expand Medicaid coverage by encouraging states to cover more people, as discussed below.

The plaintiffs, the National Federation of Independent Business as well as a handful of state governments, challenged the ACA on three grounds:

1. Congress exceeded its Constitutional power by including an "individual mandate" to buy health insurance
2. The Medicaid expansion provision was unconstitutionally coercive
3. The law's employer mandates interfered with state sovereignty

At the district court level, Judge Roger Vinson ruled that the individual mandate was outside of Congress' power under the commerce clause and, therefore, invalid. And in a dramatic conclusion, he found that the individual mandate could not be separated from the rest of the statute - finding the entire Affordable Care Act invalid.

The Department of Health and Human Services appealed the district court's decision to the Eleventh Circuit Court of Appeals. There, a three-judge panel found that, while they agreed with his conclusion that the individual mandate was an unconstitutional use of power by the federal government, the rest of the law could still stand. That decision was 2-1.

The government appealed once again, asking the United States Supreme Court to weigh in. The Supreme Court granted the petition, agreeing to examine the three questions above. They also had to decide whether the lawsuit itself was valid or if it was barred by the Anti-Injunction Act.

What Is the Anti-Injunction Act?

The Anti-Injunction Act prohibits lawsuits filed "for the purpose of restraining the assessment or collection of any tax." Basically, someone who wishes to challenge a tax must pay it and then sue for a refund. In National Federation of Independent Business v. Sebelius, the Supreme Court found that the case was not barred because Congress did not intend for the individual mandate penalty to be treated as a tax for the purposes of the Anti-Injunction Act. However, they concluded, that didn't necessarily prevent it from being a tax for the purposes of Constitutional issues.

The ACA's Individual Mandate

One of the ACA's main provisions is the "individual mandate," a requirement that everyone must purchase a minimum essential level of health insurance or make a "shared responsibility payment." The law described the payment as a penalty, which someone would pay to the IRS with their taxes. The plaintiffs argued that Congress had overstepped into territory not meant for the federal government by creating such a penalty.

Article I of the Constitution gives Congress the power to "lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States." This is often called the "taxing and spending" clause. Congress can use its taxing and spending powers to influence areas it cannot directly regulate, usually by placing conditions on funds it gives to the states. The Constitution also grants Congress the authority to regulate commerce. Most importantly, perhaps, the Constitution reserves specific powers to the federal government, granting all other powers to the states.

The National Federation of Independent Business, along with 13 state governments and several individual plaintiffs, argued that Congress exceeded its commerce clause powers with the individual mandate. The government, specifically the Department of Health and Human Services, argued that health insurance was a unique product. Requiring everyone to purchase minimum coverage was different than a mandatory purchase of "a car or broccoli."

Chief Justice Roberts, joined by Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan, held that the individual mandate was a valid tax under the Constitution's taxing and spending clause. Chief Justice Roberts wrote the majority opinion.

The majority agreed with the district court and Eleventh Circuit's conclusion that the individual mandate did not fall under Congress' power to regulate commerce. However, because the penalty was paid to the IRS they held that for Constitutional purposes it could be viewed as a tax. Therefore, it was a valid exercise of congressional power.

Medicaid Expansion Under the Affordable Care Act

Although they found the ACA's individual mandate did not violate the Constitution, it was a different story for the law's Medicaid portion. Generally, Medicaid gives states federal funding to provide medical care for pregnant women, needy families, the blind, the elderly, and the disabled. It traditionally did not cover childless adults.

The Affordable Care Act sought to expand Medicaid to include adults with incomes up to 33% above the federal poverty line. The Act increased federal funding to the program to cover these costs, but it also required states to provide the new coverage. If they didn't, they risked losing all of their federal Medicaid funding.

The Supreme Court found that the Medicaid expansion provision was unconstitutionally coercive towards state governments. The threat of losing all Medicaid funding was too strong for states to say no to the new coverage requirements.

The Supreme Court's Complex Decision in Sebelius

National Federation of Independent Business v. Sebelius was a complicated case, so it's no surprise that the Supreme Court's decision was equally complicated. All nine justices more or less agreed that the Anti-Injunction Act did not apply to the case. But the simple answers end there.

Five justices (Antonin Scalia, Anthony Kennedy, Clarence Thomas, Samuel Alito, and Chief Justice John Roberts) believed that the individual mandate was outside of Congressional powers under both the commerce clause and the necessary and proper clause of the Constitution. The commerce clause allows Congress to regulate commercial activity, they argued, not force people to participate in it.

However, Roberts joined the remaining four justices (Ginsburg, Breyer, Sotomayor, and Kagan) in concluding that the individual mandate was a tax, and therefore a valid exercise of Congress' power under the taxing and spending clause.

Dissenting Opinions

Justices Scalia, Kennedy, Thomas, and Alito disagreed with the majority's conclusion on the individual mandate. In a jointly written dissent, they argued that Congress specifically referred to the payment as a "penalty" - and characterizing it as a tax amounted to rewriting the law.

Justice Ginsburg, in an opinion concurring in part and dissenting in part, wrote separately to disagree on the commerce clause issue and the Medicaid expansion problem. To distinguish between economic "activity" and "inactivity," she concluded, was not supported by the Constitution or previous Supreme Court cases. She also argued, along with Justice Sotomayor, that Congress did have the authority to condition federal funds on the expansion of Medicaid programs. This authority "is not confined to spending programs as first launched," she wrote, "the legislature may, and often does, amend the law."

Read the full decision from National Federation of Independent Businesses v. Sebelius on FindLaw's Cases & Codes.