Supreme Court Upholds the Individual Mandate of the Affordable Care Act
By Jie Zhang – Edited by Michael Hoven
National Federation of Independent Business v. Sebelius, Nos. 11–393, 11–398 and 11–400 (U.S. June 28, 2012)
The Supreme Court partially reversed the Court of Appeals for the Eleventh Circuit, which had held that the individual mandate of the Patient Protection and Affordable Care Act (“ACA”) was unconstitutional but severable from other provisions of the act, and that the Medicaid expansion of the ACA was constitutional.
A five-justice majority held that the individual mandate was a valid exercise of Congress’s taxing power, although four justices would have upheld the individual mandate under the Commerce Clause. On the other hand, seven justices found that the Medicaid expansion was unconstitutional because it exceeded Congress’s spending power by coercing the states to accept the expanded Medicaid coverage. The majority, however, held that the unconstitutional application of the Medicaid expansion could be severed from the remainder of the ACA, and thus left the ACA largely intact.
The Wall Street Journal reported on the case and commented on its impact on all aspects of health care. The Economist noted that states have been slow to implement the health exchanges that the ACA requires, partly because of political opposition to the ACA. The New York Times reported that the decision place limits on the power of the federal government and that, without the Medicaid expansion, many Americans may still be left without health care.
In 2010, Congress passed the ACA with the goal of expanding health care for Americans. The individual mandate provision of the ACA would require nearly all individuals to maintain minimum health insurance coverage or to pay a penalty to the IRS. The Medicaid expansion provision of the ACA would expand the coverage of Medicaid to include any adult with an income up to 133 percent of the federal poverty level. Upon the enactment of the ACA, Florida and 12 other states sued the federal government in the District Court for the Northern District of Florida, challenging the constitutionality of the ACA. The District Court found that the individual mandate was unconstitutional and could not be severed from the rest of the act, and thus struck down the entire ACA. The Eleventh Circuit, however, found the individual mandate severable and upheld the rest of the ACA.
Chief Justice Roberts, joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan, reversed the Eleventh Circuit and upheld the individual mandate as a valid exercise of Congress’ power to tax. Chief Justice Roberts noted that it was reasonable to construe the individual mandate as imposing a tax on those who do not maintain health insurance, because the payment had features of tax and gave people a choice between purchasing insurance and paying a less fee to the IRS. Although upholding the constitutionality of the individual mandate, Chief Justice Roberts concluded that the Commerce Clause was not a valid basis for it, because the Constitution only granted Congress the power to regulate preexisting commercial activities, not the power to compel people to become active in commerce by purchasing insurance.
Justice Ginsburg, with whom Justices Breyer, Sotomayor, and Kagan joined, concurred in the judgment but would have held that the individual mandate was constitutional under the Commerce Clause. Justice Ginsburg stated that, because all individuals would inevitably participate in health care market and failure to purchase insurance adversely affected such a market, the Commerce Clause gave Congress the power to mandate the purchase of health insurance.
Justices Scalia, Kennedy, Thomas, and Alito filed a joint dissenting opinion and would have held the individual mandate unconstitutional. They agreed with Chief Justice Roberts that the Commerce Clause did not give Congress power to compel people to purchase health insurance. But they would have found that the mandate imposed a penalty, not a tax, so that the Taxing Clause did not apply. In addition, finding the individual mandate an inseparable part of the ACA, the joint dissenters would have struck down the entire act.
As for the Medicaid expansion, seven justices held it unconstitutional because it threatens the states to take away their existing Medicaid funding unless they comply with the expansion. The Court found that this provision left the states no choice and was so coercive as to exceed Congress’ spending power. Justices Ginsburg and Sotomayor disagreed and would have held that the expansion was a valid amendment of the existing Medicaid program and was not coercive in nature.
The individual mandate is an essential part of the ACA, as both the federal government and the ACA’s challengers argued in the Supreme Court. Because the guaranteed issue and the community rate provisions require insurers to provide insurance to individuals with preexisting medical conditions without charging higher premiums, the individual mandate is necessary to prevent free-riding and cost-shifting. Without the individual mandate, insurance companies might raise health insurance premiums, and ultimately the health care market could become extinct. On the other hand, the Court’s striking down of the Medicaid expansion allows states to avoid providing insurance for low-income individuals who cannot obtain insurance by themselves, leaving those individuals outside of the health care market, which may impair the overall efficiency of the ACA.
Jie Zhang is a 2L at Harvard Law School.