National Federation of Independent Businesses v. Sebelius (2012)

Introduction

After election, President Barack Obama and his administration had been focused on healthcare which led to the creation of the Patient Protection and Affordable Care Act. This highlighted the need for reform in the American health care system which has been highly costly. The reform had been highly controversial, and questions about if this Act was the best solution or if this would solve anything were raised. This has led to discourse over the constitutionality of the Act.   The questions and concerns about the constitutionality of the Act had led several states to file a suit against it which reached the Supreme Court. The National Federation of Independent Business v. Sebelius (2012) became a major Supreme Court case that reevaluated the limits of what the Federal Government could regulate and how they would enforced it.

The disagreement, though highly partisan, had arisen from several constitutional issues that the Act raised. The arguers had questioned the application of the two main things which were the individual mandate and the Medicaid expansion. The individual mandate is law requiring certain civilian to purchase particular goods or services, in this case health insurance. The Medicaid expansion was the expansion of Medicaid program to wider reach of individuals within a certain income bracket and under 65 and the objection to the expansion would lead to the loss of all Medicaid funds.  Previously, all precedent cases had involved economic activity that the federal government wanted to regulate, but this case involved regulating inactivity. When the Court had reviewed the individual mandate part of the Act, they declared that this was unconstitutional under the Commerce clause and the Commerce clause and the Necessary and Proper clause, but they decided that this was constitutional under Power to Tax. This landmark case had also considered if the Act was too forceful when creating incentives for the States to comply with it. In this case, Medicaid expansion had been decided by the Supreme Courts as coercive because States that did not comply could not receive any Medicaid funding and were required to pay back the Medicaid funding that was previously given.  

The Court’s decision on this case had led to the Supreme Court’s examining the regulation of inactivity. In this case, the Court gave authority to the Federal Government to penalize civilians who were inactive, but the significance of this case focuses on the Court’s decision to allow this. Although it is not questionable that both inactivity and activity both have an effect, they still are two distinct things. This case ponders about the limits of the federal government’s jurisdiction is if this applies, if this is too much of an extension of the federal government’s authority, power that could inhibit States from conceding to their own ways of run their territory. The decision on this case opens up what the federal government could do in terms of regulation and will be debated further in succeeding cases to decide where the limits are.

Case Timeline

 

Background

President Obama was adamant about health care reform, and it was the focal point of his first presidential campaign (Levy, 2015). The bill reforming the health care system was called the Patient Protection and Affordable Care Act (PPACA), but it was colloquially known as “Obamacare.” Obama sought to insure the more than 45 million Americans without health insurance (Kocher, Emanuel, & DeParle, 2010). Congress passed the PPACA in 2010, and Obama signed the bill into law soon after.

Numerous parties sued on the constitutionality of the law, including 26 states which eventually joined with the NFIB, a conservative interest group for businesses. The Supreme Court only granted certiorari to three cases. One of them was Florida v. Dept. of Health and Human Services which merged with the NFIB case (Barnes, 2011) and focused on two main issues with the law.

First, the case looked at the issue of whether or not the individual mandate penalty for not complying was justified under the substantial effect doctrine under the Commerce Clause, Necessary and Proper Clause and/or taxing power. Second, it looked at the constitutionality of the law giving congress authority under its spending power to take away a state’s Medicaid funds if a state does not comply with the law (Barnes, 2011; NFIB v Sebelius, 2012).

Procedural History

The case first appeared in the district court of Florida. The court ruled in favor of the state that argued the individual mandate was outside congress’ power. The Department of Health and Human Services appealed to the 11th Circuit of Appeals, which upheld the lower court’s opinion, but said taking out the individual mandate did not necessarily destroy the rest of the law (NFIB v Sebelius, 2012). The government then appealed to the Supreme Court. Oral arguments in the case lasted five and a half hours since it was the consolidation of several cases. This case would ultimately be the case that upheld the constitutionality of the PPACA.

Issues

Individual Mandate 

The Tax Power- 

The court has to weigh the constitutionality of Congress’s ability to tax in reference to NFIB v. Sebelius (2012). There is no doubt congress has the enumerated power to tax given to them in Article I Section 8 of the Constitution. However, the court had to consider whether or not Congress could apply a tax penalty on individuals who do not participate in government healthcare. In addition, they had to decide whether or not the individual mandate is a tax or a fine The constitutionality of this penalty on the people must pass the test of whether or not people can make a “reasonable financial decision” to pay the penalty instead of following the government mandate. Additionally, the penalty must be collected in the same manner as all other taxes. Finally, the court must decide whether or not imposing a penalty on inactivity is constitutional.

Commerce Clause- 

Article I Section 8 of the Constitution gives Congress the power to regulate commerce among the states. The NFIB v. Sebelius case does challenges whether or not Congress has the ability to regulate non-activites through the substantial effects doctrine in the  commerce clause. However, this case does call into question the ability of Congress to regulate inactivity. In other words, Congress has the ability to regulate something that can clearly be defined as commerce as well as economic activities that are not defined as commerce themselves. In this case, the court had to determine whether or not mandating citizens to join the healthcare market is constitutional under the substantial effects doctrine. The Commerce Clause and the substantial effects doctrine are most often used by the federal government as an avenue by which they can expand its power. The key constitutional issue surrounding the Commerce Clause in NFIB v. Sebelius (2012) is whether or not the PPACA’s individual mandate is regulating an activity or not.

Necessary and Proper Clause- 

The Necessary and Proper Clause exists within Article I Section 8 of the constitution. The Constitution grants Congress the ability to make all laws, which are considered to be necessary and proper for carrying into execution of all other powers listed in the constitution. The constitutional issue concerning the PPACA is whether or not the law is both necessary and proper. The Supreme Court may consider some laws as necessary, but that does not, in turn, guarantee that the law is indeed proper.  In order for the Necessary and Proper Clause to be properly implemented, the act must be an example of a power granted to Congress already by the Constitution. The Commerce Clause plays a critical role in the constitutionality in NFIB v. Sebelius (2012). Congress used the Commerce Clause in combination with the Necessary and Proper Clause in order to strengthen the government’s case for the constitutionality of the PPACA. Congress used a combination of both the Commerce Clause and The Necessary and Proper Clause in order to justify the individual mandate.

Medicaid Expansion

Article I Section 8 gives Congress the ability to spend money for debts, defense, and the general welfare of the United States. Through this section of the Constitution, Congress has the ability to encourage states to abide by federal laws. The question in NFIB v. Sebelius (2012) is whether or not Congress is using the spending power in a coercive manner toward the states. Congress is allowed to use their enumerated power to spend in an encouraging way; however, Congress may not use this power to coerce states into abiding by federal law. The court has to weigh whether or not the effects on state budgets concerning the cutting of federal funding for Medicaid if a state does not comply with this particular federal law is coercive in any matter. The constitutional issue the court faces surrounding the spending power clause is whether or not the expansion of Medicaid through the means of withholding all federal Medicaid funds is coercive or not. Medicaid expansion through the PPACA broadens Medicaid to cover over half of the poorest uninsured Americans.

Holdings

Individual Mandate

Is it constitutional under the Commerce Clause- NO

Is it constitutional under the Commerce Clause plus the Necessary and Proper Clause- NO

Is it constitutional thourgh Congress’ Power to Tax- YES

Medicaid Expansion

Is it constitutional under Congress’ Power to Spend- NO

Each Justice held:

Justice Roberts– (Yes) As Chief Justice, Roberts assigned himself to write the majority opinion.

Justice Ginsburg– (Yes) Justice Ginsburg also wrote what is considered to be a concurring and dissenting opinion. She concurred, by stating the Commerce Clause was the proper means by which the individual mandate could be enforced. She also dissented with Justice Roberts on the issue of striking down the Medicaid expansion.

Justice Breyer– (Yes) Justice Breyer joined Justice Ginsburg’s dissent, agreeing that the Commerce Clause was constitutional for enforcing the individual mandate. However, Justice Breyer did not dissent along with Justice Ginsburg in thinking that the expansion of Medicaid was constitutional.

Justice Sotomayor– (Yes) Justice Sotomayor joined Justice Ginsburg’s dissent, agreeing that the Commerce Clause was constitutional for enforcing the individual mandate. Additionally, Justice Sotomayor join in the dissent along with Justice Ginsburg in thinking that the expansion of Medicaid was constitutional.

Justice Kagan– (Yes) Justice Kagan joined Justice Ginsburg’s dissent, once again agreeing that the Commerce Clause was constitutional for enforcing the individual mandate. However, Justice Kagan joined Beyer and did not dissent along with Justice Ginsburg in thinking that the expansion of Medicaid was constitutional.

Justice Scalia– (No) Justice Scalia joined in the dissenting opinion. Justice Scalia believed that the individual mandate was an extension beyond the powers of the Commerce Clause and the reinterpret the Affordable Care Act as a tax was to rewrite the law.

Justice Alito– (No) Justice Alito joined Justice Scalia in the dissenting opinion. Justice Alito also believed that the individual mandate was an extension beyond the powers of the Commerce Clause and the reinterpret the Affordable Care Act as a tax was to rewrite the law.

Justice Thomas– (No) Justice Thomas also wrote a separate dissenting opinion of his own. Justice Thomas emphasized the expansion of Congressional power in his short dissenting opinion.

Justice Kennedy– (No) Justice Kennedy joined both Scalia and Alito in the dissenting opinion. Additionally Justice Kennedy also believed that the individual mandate was an extension beyond the powers of the Commerce Clause and the reinterpret the Affordable Care Act as a tax was to rewrite the law.

Majority Opinion

Individual Mandate-

The Court considered three arguments in support of the constitutionality of the individual mandate. First, the Court considered (and rejected) the argument that the individual mandate is authorized under the Commerce Clause Even though it has been stated that individual mandate involves interstate economic activity, the majority stated that Congress was not regulating activity, but it was regulating inactivity. Congress cannot force citizens to buy products. Thus, this was not a proper use of the Commerce clause. The Court felt like this went beyond what Congress could force states and individuals to do and create a power that was not stated in the Constitution. Furthermore, the Court felt like the Act was particularly infringing on a class of people who were not getting health insurance and felt that they could not regulate the inactivity of that class. The majority reversed the District Court’s decision and decided that the individual mandate could be removed and separated from the rest of the Act which then allowed them to debate the other two issues that they had.

The next argument for the individual mandate was that it was a “Necessary and Proper” means for regulating interstate commerce in health insurance. The Court decided while it was necessary, it was not a proper action to seek reform in the healthcare system because this regulated inactivity and not activity.

Lastly, the Court considered (and accepted) the argument that individual mandate was a tax authorized under the Tax and Spend Clause of Article I, Section 8. When examining whether the individual mandate was a tax, the Court found that it functioned like a tax, was obtained through normal means, and that Congress had no intent of a wrongdoing requirement (i.e., a scienter requirement). Although the government does not have the ability to require people to purchase health insurance, it does have the ability to impose taxes on people who do not buy health insurance. This is due to the fact that Congress has broad ability to use its taxing and spending power to promote the general welfare.

Medicaid Expansion-

The Court next examined whether the Act’s expansion of Medicaid abused the Article I, Section 8 Spending Clause. The Supreme Court has stated that the Spending Clause cannot override state sovereignty. The Constitution does not allow for the states to be manipulated by Congress or the Federal government. This perspective was vital in striking down this section of the PPACA. The Congress or Federal government could easily create incentives for states to comply with whatever the Federal government wanted the states to do, but to force them to comply with the Federal government is “power akin to undue influence.” It’s is overly coercive. Specifically, since the state loses all of its Medicaid funds rather than a small percentage of it and yet has to pay the taxes for the PPACA, the Court ruled it coercive. Especially since the Act also requires previous funds for Medicaid to be paid, which the state could not have anticipated when it originally accepted those funds, it clearly exceeds what the Federal Government is constitutionally authorized to do.

Separate Opinions

The individual mandate was seen as a universal pose on people to require them to purchase health insurance. Some saw it as a desperate and unjust act of congress. The dissent did not see the mandate as addressing an active economic issue, but monitoring the inactivity.  The dissent feels like it is beyond congress power to impose health insurance on all individuals. “The Constitution is not that. It enumerates not federally soluble problems, but federally available powers. The Federal Government can address whatever problems it wants but can bring to their solution only those powers that the Constitution confers, among which is the power to regulate commerce. None of our cases say anything else. Article I contains no whatever-it-takes-to-solve-a-national-problem power.” The dissent feels if it is not explicitly stated in the constitution, then it is up to the states or people. However, the owning of health insurance is a responsibility tied to congress’s regulation of commerce.  They interpret that they are beyond their control by regulating the inactivity of individuals of not purchasing health insurance. Where there is no economic activity and no economic production then congress can not regulate. The issue at state is that the inactivity of those not purchasing health insurance weighs a substantial effect on the interstate commerce, with a four billion dollar debt yearly increase.  

Medicaid assist pregnant women, children, needy families, the blind, the elderly, and the disabled in obtaining medical care. The Affordable Care Act expands  the Medicaid program and increases the number of individuals the States must cover. Of the dissent it states, “The ACA does not legally compel the States to participate in the expanded Medicaid program, but the Act authorizes a severe sanction for any State that refuses to go along: termination of all the State’s Medicaid funding.” The dissent argued it violated the equal protection law, and due process mentioned in the 14th amendment. The dissent also, includes how congress impedes on states jurisdiction. They insist that congress is beyond their power, and assume themselves as a parliament by overthrowing state without due process of the law. However, the 14th Amendment only limits state government action, not the actions of the federal government. The dissent felt the Federal Government made a controversial decision while acting on its own, giving no power or choice for state. This action was deemed unconstitutional.

The only argument that was deemed constitutional was the congress’s taxing power. In the dissent, it states, “Even if a State believes that the federal program is ineffective and inefficient, withdrawal would likely force the State to impose a huge tax increase on its residents, and this new state tax would come on top of the federal taxes already paid by residents to support subsidies to participating States. It is congress duties as mentioned before “…lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.”  Congress has decided to call it a penalty. However, many consider it as a tax still. Though, this is not the first time Congress has done such. Just like you get penalized for probation, that too still may be considered a tax. Ahead, those who do not purchase health insurance will be penalized as a necessary and proper action.

Significance / Impact

 The significance of the court’s decision in NFIB v. Sebelius (2012) has yet to be seen besides the execution of the revised PPACA. However, scholars tend to argue the future effects the case will have in respect to different majorities of the court’s ruling on the Commerce Clause, spending powers, and taxing powers. This controversy becomes more inflamed when looking at how Chief Justice Roberts’ sole writing of the majority opinion created a doctrine relating to these components of the constitution (Barnett, 2013; Margarian, 2013). Roberts’ differences with the other justices that ultimately decided in favor of the constitutionality of the PPACA revolved around the distinction that upheld the individual mandate, such as whether or not the Commerce or Necessary and Proper Clauses upheld it. Scholars argue the future impact and readings of these clauses and how they will affect future welfare programs and spending by congress. Therefore, while it is too soon to see how NFIB v. Sebelius (2012) will affect future cases, we can discuss how scholars have predicted how this case will affect future constitutional law decisions.

The Roberts Doctrine

The specific issues of the case have been debated by scholars, and it tends to fall under the overall argument of whether or not Roberts’ opinion was even legally justified. To make this argument clearer, we’ll separate the constitutional issues of the law from this overall argument and make it stand-alone. Scholars tend to agree Roberts “rewrote” the PPACA by taking out the parts he saw as unconstitutional while leaving other parts in to make the scrutinized act legal other than deeming the whole law unconstitutional (Barnett, 2013).  However, some see this as illegal as well as setting conservative precedents on issues involving the Commerce Clause, Necessary and Proper Clause, and taxing powers (Margarian, 2013). Margarian (2013) calls Roberts “lawless” in how he interpreted the constitutional powers provided to congress. Roberts’ lack of justification by any binding precedent to make new precedents on the Commerce and Necessary and Proper Clauses—despite those clauses not even being used for upholding the law (Margarian, 2013)—allows the court to revert to pre-1937 limits on congress (Feldman, 2013). Margarian (2013) even goes so far as to say that the decisions may undermine all Federal mandates that require action. While Margarian (2013) gives no examples, broad examples of unfunded mandates that could be undermined include environmental and educational mandates.

These statements may be seen as overly pessimistic; after all, Roberts’ decision ultimately upheld a largely conservative-opposed law to create a new welfare program. Barnett (2013) claims Roberts saved congress from assuming too much power—power that could have resulted in congress taking any means necessary to regulate the national economy. Instead, Roberts seeked to protect states’ rights from a congress that has had little limitations on it (Barnett, 2013). But, what Barnett (2013) states is that this decision by Roberts to ultimately rewrite the law enhanced individual liberties by eliminating the mandates’ coercive components. In other words, his decision is legally justified by the adhering to the overall liberties granted by the constitution, even if they go against some of its provisions.

These scholarly arguments appear politically biased once one gets to their sections on whether this judicial activism by Roberts is legal or not. The arguments tend to align along ideological lines. The more conservative scholars applaud Roberts’ activism of rewriting an unconstitutional law to make it legal (Barnett, 2013). On the other hand, the more liberal scholars call this practice lawless (Margarian, 2013). Feldman (2013) goes even further claiming it as political stunt, despite it looking like an act of political independence. Rather, he calls it a stunt to create conservative precedent while only upholding the taxing power to uphold the individual mandate to allow for a new tax that will allow conservatives to point to Obama and the democratic congress and blame them for a tax increase (Feldman, 2013). These arguments make the case for Roberts’ Doctrine to be constitutionally legal or not are hard to get onboard with because of their own political biases. However, this only comes to light because of Roberts’ tactics to create conservative precedent that will ultimately limit congress’ powers through an

overall liberal decision. Therefore, Roberts’ political bias comes through making a strong case that his approval of NFIB (2012) was an effort to eventually create a more conservative government.  This allows many to conclude the common view of a judicial supremacy needs to dissipate, especially for cases such in cases such as NFIB (2012) (Margarian, 2013).

Text of Case Opinions

Majority Opinion (Roberts)

Part Concurrence / Part Dissent (Ginsburg)

Dissent (Joint – Scalia, Kennedy, Thomas, Alito)

Dissent (Thomas)

External Resource Links

Antos, J. (2013). The medicaid expansion is not such a good deal for states or the poor. Journal Of Health Politics, Policy & Law, 38(1), 179-186 8p. doi:10.1215/03616878-1898848

(The opportunity costs for states for expanding Medicaid or waiting.)

Barnes, R. (2011). Supreme court to hear challenge to Obama’s health-care   overhaul. Washington Post. Retrieved from          http://www.washingtonpost.com/politics/supreme-court-to-hear-challenge-to-obamas-health-care-overhaul/2011/11/11/gIQALTvrKN_story.html

(This source clarifies background of case as well as others involved with it.)

Barnett, R.E. (2013). No small feat: Who won the health care case (and why did so many law professors miss the boat)?. Florida Law Review. Retrieved from http://ssrn.com/abstract=2218387

(Talks about some misconceptions, how commerce clause justified unconstitutional mandate, and why tax on inactivity is less dangerous than on commerce.)

Berman, M. N. (2013). Coercion, compulsion, and the medicaid expansion: A study in the

doctrine of unconstitutional conditions. Texas Law Review, 91(6), 1283-1348.

(Argues Roberts’ manipulated terms to strike down Medicaid expansion.)

Feldman, S.M. (2013). Chief Justice Roberts’s marbury moment: The affordable care act case (NFIB v. Sebelius). Retreieved from: http://ssrn.com/abstract=2566225

(Political significance in relation to Marbury v. Madison, and how Roberts changed doctrine that preceded the case.) 

Kocher, R., Emanuel, E., & DeParle, N.M. (2010). The affordable care act and the future of clinical medicine: The opportunities and challenges. Medicine and Public Issues. Retrieved from https://monroecollege.edu/uploadedFiles/_Site_Assets/PDF/Kocher.2010.pdf

(A medical perspective detailing significance of the PPACA and its purpose.)

Levy, M. (2015). Patient protection and affordable care act (PPACA). Britannica Encyclopedia. Retrieved from http://www.britannica.com/topic/Patient-Protection-and-Affordable-Care-Act

(Detailed explanation of the PPACA for background of the case.)

National Federation of Independent Businesses v. Sebelius, 11-393 U.S. (2012). Retrieved from http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf

(This is the opinions of the Supreme Court on the case.)

Major Statute Under Review

The Patient Protection and Affordable Care Act

Important Precedents

U.S. v. Lopez (1995)

South Dakota v. Dole (1987)

McCulloch v Maryland (1819)

Important Subsequent Cases

Because of the recency of NFIB v. Sebelius (2012), there are no relevant succeeding cases, or cases that have been perceived as a succeeding case. However, for scholarly debate on the possible future effects because of the case as well as speculation on what succeeding cases will focus on, see  http://ssrn.com/abstract=2218387

https://monroecollege.edu/uploadedFiles/_Site_Assets/PDF/Kocher.2010.pdf

 

 

 

 

 

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