National Federation of Independent Business v. Sebelius

Citation. 567 U.S. 519, 132 S.Ct. 2566, 183 L.Ed.2d 450 (2012)

Brief Fact Summary.

The Government argued that the “individual mandate,” a provision in the Affordable Care Act that would have required Americans to have minimum health insurance coverage or be subjected to a penalty, was within Congress’ Commerce Clause and Necessary and Proper Clause powers.

Synopsis of Rule of Law.

The Commerce Clause grants Congress broad authority to “regulate commerce,” but it cannot create commerce.  To allow Congress to compel people to act, based on the aggregate effects of their inaction, would grant Congress limitless power under the Commerce Clause.

Facts.

The Government argued that the “individual mandate,” a provision in the Affordable Care Act that would have required Americans to obtain minimum health insurance coverage or be subjected to a penalty, was within Congress’ Commerce Clause and Necessary and Proper Clause powers.  The Government argued that the “individual mandate” would provide greater access to health insurance while also preventing the “cost-shifting” problem.  The cost-shifting problem occurred when hospitals were forced to care for the uninsured, which would then cause insurance companies to increase their premiums, making healthcare more expensive for those who paid for it.

Issue.

(1) Whether the “individual mandate” in the Affordable Care Act was within Congress’ Commerce Clause powers;

(2) If not, whether the “individual mandate” was within Congress’ powers under the Necessary and Proper Clause.

Held.

CHIEF JUSTICE ROBERTS holding:  (1) No, the Act was not within Congress’ Commerce Clause powers.

(2) No.  Under the Necessary and Proper Clause, the Government may enact laws “incidental” to its enumerated powers.  See McCulloch v. Maryland, 4 L.Ed. 579 (1819).  However, the Clause does not grant the Government authority to enact general laws beyond the powers enumerated in the Constitution.

Dissent.

Justice Scalia

Justice Scalia dissented from the Court upholding the individual mandate under Congress’ taxing powers, but concurred with the Chief Justice on the Commerce Clause and Necessary and Proper Clause issues.  Scalia noted that the individual mandate would exceed even the most permissive reading of the Commerce Clause.  Allowing Congress to regulate inactivity under the Commerce Clause would be to “make breathing in and out the basis for federal [regulation].”

Further, the case was distinct from Gonzales v. Raich, 545 U.S. 1 (2005).  In Raich, the Court held that Congress could prohibit local growing and possession of marijuana because it was impossible to distinguish intrastate and interstate marijuana.  Here, there were other ways to reduce insurance premiums.  For example, uninsured persons “could be denied a full income tax credit.”

In responding to Justice Ginsburg’s dissent, Scalia agreed that Congress needs only a “rational basis for concluding that the regulated activity substantially affects interstate commerce.”  However, he underscored that there must be “activity.”  Allowing Congress to regulate inactivity would render everything commerce.

Justice Ginsburg

Justice Ginsburg would have upheld the mandate under the Commerce Clause.  Health care for all is not something that individual states can solve because if one State adopted universal health care, then unhealthy people would move to that State, causing higher taxes and insurance costs, leading to people and businesses leaving that State.  Further, the Framers rejected leaving commerce to the States because each State would serve primarily their own interests.  Thus, the Framers drafted the Commerce Clause to make far-reaching economic laws “for the general interests of the Union.”

In addressing whether Congress was within its Commerce Clause authority, the Court asks only (1) “whether Congress had a rational basis for concluding that the regulated activity substantially affects interstate commerce,” and (2) whether the means meet the ends.  Here, Congress undeniably had a rational basis to conclude that people without insurance affect interstate commerce.  Not having insurance “drives up market prices, foists costs on other consumers, and reduces market efficiency and stability.”  Thus, refusing to obtain insurance was not “doing nothing,” but it is “an economic decision.”  The means met the ends because Congress reasonably believed that the individual mandate would lead to more people having health insurance, thereby reducing the costs from the uninsured.

Ginsburg then rejected the Chief Justice’s argument that Congress may not “compel individuals to become active in commerce.”  Even accepting this argument as true, healthcare is unique in that everyone will need it at some point.  Therefore, no one would be  compelled to buy something that they would not need, they would merely be paying for something now that they would inevitably use later.  Further, this argument was not founded in the Commerce Clause, which itself says nothing about “those actively engaged in commercial transactions.”  In Wickard, by regulating farmers who grew wheat for personal consumption, those farmers were then compelled to the market to buy the wheat that they were denied from growing for themselves.

Finally, upholding the individual mandate would not grant Congress limitless power under the Commerce Clause.  Reiterating “the unique attributes of the healthcare market,” healthcare is something that everyone will eventually need, so Congress did not need to pile “inference upon inference” to predict a substantial effect on interstate commerce.  Moreover, Congress’ Commerce Clause powers still may not reach intrastate, noneconomic activity.  See United States v. Morrison, 529 U.S. 598 (2000).  Congress is further held in check by other constitutional provisions.  For example, a law enacted under the Commerce Clause cannot violate freedom of speech.

Discussion.

In rejecting the individual mandate under the Commerce Clause, Chief Justice Roberts reasoned that the “power to regulate commerce presupposes the existence of commercial activity to be regulated.”  The individual mandate, however, would have granted Congress authority to regulate those who were not doing anything.  To be within the scope of Congress’ Commerce Clause powers, Congress must be regulating some form of “activity.”  If “regulate commerce” included the power to create commerce, certain constitutional provisions would be superfluous.  For example, Congress has the power to “coin money” and to “regulate the Value thereof.”

The Chief Justice then found the individual mandate distinct  from the regulated activity in Wickard v. Filburn, 317 U.S. 111 (1942).  Wickard is largely considered the Court’s most permissive reading of the Commerce Clause.  In Wickard, the Court upheld regulations of personally harvested and consumed wheat because it would impact the overall wheat market by those people buying less wheat.  Roberts argued that “the farmer in Wickard was at least actively engaged in the production of wheat,” whereas those falling under the individual mandate were simply “not doing something the Government would have them do.”