Case 3.1
NATIONAL FEDERATION OF INDEPENDENT BUSINESS V. SEBELIUS
Supreme Court of the United States
132 S.Ct. 2566; 183 L.Ed.2d 450; 2002 U.S. LEXIS 4876 [June 28, 2012]
FACTS:
Congress passed the Patient Protection and Affordable Care Act (PPACA) in 2010 to increase the
number of Americans covered by health insurance and decrease the cost of healthcare.
A key provision requires most Americans to maintain “minimum essential” health care coverage.
If non-exempt individuals fail to maintain health coverage they must make a “shared responsibility
payment” (penalty) to the Internal Revenue Service.
Another key provision was the Medicaid expansion, which increased the number of individuals that
the states must cover.
The PPACA increased federal funding to cover the states’ costs; however, if a state decided not to
comply with the new expanded coverage, it would lose all of its federal Medicaid funding.
Twenty-six states, several individuals, and the National Federation of Independent Business
brought suits in federal district court challenging the constitutionality of the individual mandate
and the Medicaid expansion.
PROCEDURE:
-The U.S. District Court for the Northern District of Florida granted summary judgment to the
Defendants based on the unconstitutionality of the expansion of Medicaid. The individual mandate
exceeded constitutional authority and was not severable.
-The 11th Circuit Court of Appeals reversed on “nonseverability,” upheld the Medicaid expansion as a
valid exercise of Congress’s spending power, but concluded that Congress lacked the authority to enact
the individual mandate. The Supreme Court granted certiorari.
ISSUE(S): (1) Can Congress mandate by law that all individuals must either obtain health insurance or
pay a penalty? (2) Is it constitutional for Congress to require states to decide between complying with
the PPACA or risk losing all of its federal funding?
RULE: “The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not
obtaining health insurance may be reasonably characterized as a tax.” The constitution permits such a
tax. “Congress is not free to penalize States that choose not to participate in the [new] program by
taking away Medicaid funding.”
REASONING:
1. According to Chief Justice Roberts the Commerce Clause does not support the individual mandate.
2. The individual mandate is within Congress’s power to tax.
3. Congress cannot coerce states to adopt changes but can condition the receipt of funds to ensure
DISSENT: Dissenting Judges: Scalia, Kennedy, Thomas, and Alito.
“There are structural limits upon federal powers – upon what it can prescribe with respect to private
conduct, and upon what it can impose upon sovereign states.” They argue that the Federal
government is one of “limited powers” and that the PPACA undermines state sovereignty. They would
find the act invalid in its entirety.
ADDITIONAL INFORMATION:
The decision in this case was 5-4.
According to the White House, by April 2014, more than 8 million people selected health care plans