National Federation of Independent Business v. Sebelius

Brief Fact Summary.

The constitutionality of the Affordable Care Act was challenged by an attack on the individual mandate, requiring individuals to purchase minimal essential health insurance coverage.

Synopsis of Rule of Law.

The individual mandate portion of the Affordable Care Act, requiring individuals to purchase a health insurance policy providing a minimum level of coverage or else face a penalty, is a tax and therefore does not violate the Constitution.

Facts.

The individual mandate of the ACA requires most Americans to maintain minimum essential health insurance coverage. Those who do not comply with the mandate must make a payment to the federal government. The ACA describes such payment as a penalty, calculated as a percentage of household income, subject to a floor based on a specified dollar amount and a ceiling based on the average annual premium the individual would have to pay for qualifying private health insurance. Plaintiffs bring suit, alleging the unconstitutionality of the individual mandate of the ACA.

Issue.

Does the individual mandate portion of the ACA violate the Constitution?

Held.

The individual mandate portion of the Affordable Care Act is a tax and therefore does not violate the Constitution.

Dissent.

Justice Scalia, Kennedy, Thomas, and Alito, JJ.

Disagreed with the majority, arguing that Congress characterized the payment as a penalty, not a tax. Thus, Congress lacks the constitutional authority to enact the individual mandate under the Taxing and Spending Clause.

Justice Ginsburg, Sotomayor, Breyer, and Kagan, JJ.

The Commerce Clause authorizes Congress to enact the minimum coverage provision because the large number of individuals without health insurance heavily burdens the national healthcare market.

Discussion.

The majority held that neither the Commerce Clause nor the Necessary and Proper Clause provide Congress with the constitutional authority to enact the individual mandate. Rather, the majority concluded that the individual mandate penalty is a tax for the purposes of the Constitution’s Taxing and Spending Clause and is a valid exercise of Congressional authority. The payment is not so severe as to be coercive, is not limited to willful violations like fines for unlawful acts, and is collected by the Internal Revenue Service by normal means.