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NFIB v. Sebelius

Supreme Court of the United States · 2012 · Constitutional Law

Commerce ClauseNecessary and Proper Clausetaxing powerindividual mandateenumerated powerslimited federal governmentindividual mandateshared responsibility payment

Facts

The Affordable Care Act requires most Americans to maintain minimum essential health insurance coverage or make a shared responsibility payment to the IRS. The Act describes that payment as a penalty, calculates it by income-related formulas, and collects it through normal tax processes, though the IRS may not use certain ordinary enforcement tools such as criminal prosecutions or levies. The Act also expands Medicaid by requiring States to cover additional low-income adults and offers additional federal funds for that expansion. If a State does not comply with the new expansion requirements, the Secretary may withhold not only new expansion funds but all existing Medicaid funds.

Issue

Whether the individual mandate is authorized by Congress's powers under the Commerce Clause, the Necessary and Proper Clause, or the Taxing Clause, and whether the Anti-Injunction Act bars the suit. Whether the Medicaid expansion is constitutional under the Spending Clause when States risk losing existing Medicaid funding for refusing to adopt the expansion.

Rule

The Commerce Clause authorizes Congress to regulate existing commercial activity, not to compel individuals to enter commerce by purchasing a product. The Necessary and Proper Clause does not permit Congress to create the predicate for exercising an enumerated power when doing so is not a proper means consistent with the Constitution's structure of limited federal powers. An exaction may be treated as a tax for constitutional purposes based on its substance and application even if Congress labels it a penalty, so long as it functions like a tax rather than punishment for unlawful conduct. Under the Spending Clause, Congress may offer States funds with conditions, but it may not coerce States by threatening loss of existing substantial funding so that they have no real choice whether to accept a new program.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Congress enacts the Home Preparedness Act, requiring every adult in Denver, Chicago, and the rest of the country to buy a federally approved disaster kit each year. Congress finds that people who fail to prepare rely on interstate relief systems after emergencies, shifting billions of dollars in costs nationwide.

If challenged as beyond Congress's commerce power, how should a court rule?

Explanation. The majority rule is that Congress may regulate existing commercial activity, but may not compel individuals to become active in commerce by purchasing a product. Even if nonpurchase has substantial economic effects, treating inactivity as commerce would create a vast new federal power inconsistent with limited and enumerated powers.