National Federation of Independent Business v. Sebelius (On the Commerce Clause)

Brief Fact Summary.

Congress passed a law requiring all Americans to maintain health care.

Synopsis of Rule of Law.

The individual mandate provision of the Patient Protection and Affordable Care Act was an invalid exercise of the Commerce Clause and the Necessary and Proper Clause. By requiring individuals to purchase health insurance, the government was not regulating commerce, but creating it.

Facts.

In 2010, Congress passed the ACA. One provision of the ACA was the individual mandate, which required most Americans to maintain health insurance. The government claimed this provision was a response to a cost-shifting problem. They argued that everyone eventually needs health care, and some people do not have insurance and are unable to pay for their care. Hospitals are required to provide a certain degree of care regardless of individuals’ ability to pay, so they shift that cost to insurers, by charging them higher rates. Insurers shift that cost to their subscribers by charging them higher premiums.

Issue.

Was the individual mandate of the Patient Protection and Affordable Care Act a proper exercise of the Commerce Clause or Necessary and Proper Clause of the U.S. Constitution?

Held.

No, the individual mandate exceeded the government’s Constitutional authority.

Affirmed in part and reversed in part.

Dissent.

Justice Scalia

Justice Scalia argues that the individual mandate does not regulate commerce, but creates it, in requiring individuals to purchase health insurance. He also rejects the government’s argument that the individual mandate is valid because it regulates activities that have a substantial relation to interstate commerce. According to Justice Scalia, this argument incorrectly defines market participants to include everyone who will eventually probably purchase the goods or services covered by their mandated insurance.

Justice Thomas

Justice Thomas argues that the substantial effects test under the Commerce Clause is invalid.

Concurrence.

Justice Ginsburg, concurring in part, concurring in the judgment in part, and dissenting in part.

Justice Ginsburg argues that the individual mandate is a valid exercise of the Commerce and Necessary and Proper Clauses. According to her, Congress has the power to regulate economic activities that substantially affect interstate commerce, and Congress has wide discretion to enact economic and social legislation. Gonzales v. Raich. They must only have a rational basis of concluding that the regulated activity substantially affects interstate commerce, and show a reasonable connection between the regulation and the goal. Hodel. The Court can only strike a statute down upon a plain showing that Congress acted irrationally. Morrison. According to Justice Ginsburg, the Congress had a rational basis for concluding that uninsured people substantially affect interstate commerce, and the individual mandate is reasonably connected to Congress’ goal of protecting against the adverse effects of uninsured people on the health insurance market.

Justice Ginsburg also disagrees with the Court’s assertion that uninsured people are not active in the health insurance market, and she argues that there is no Constitutional or jurisprudential basis for limiting the commerce power to only regulation those who are actively engaged in commerce.

Justice Ginsburg argues that the individual mandate is a proper exercise of power under the Necessary and Proper Clause, because it is reasonably adapted to achieving a legitimate end under the commerce power. The legitimate end, she argues, is the elimination of insurance pricing based on subscribers’ medical history.

Discussion.

The Court held that the government did not have the authority to enact the individual mandate under the Commerce Clause, because the individual mandate did not regulate commerce, but attempted to create commerce, by requiring people to purchase health insurance. According to the Court, allowing the individual mandate under the Commerce Clause would exceed the limitation on Commerce Clause authority established in Wickard v. Filburn, and it would also be inconsistent with the Framers’ vision of the Commerce Clause.

The Government argued that everyone requires healthcare eventually, so uninsured people are in fact active in the healthcare market. The Court held that individuals’ future participation in a particular market does not authorize Congress to require them to participate today.

The Government argued that the individual mandate was also a proper exercise of governmental power under the Necessary and Proper Clause, because it was an integral part of a comprehensive scheme of economic regulation. The Court rejected this argument, because the individual mandate was not in service of a governmental power granted by the Constitution. Under McCulloch v. Maryland, the government has the power to enact laws that are necessary and proper for executing powers enumerated in the Constitution.