NFIB v. Sebelius
Citation: 567 U.S. 519 (U.S. Supreme Court, 2012)
Facts
The Affordable Care Act (ACA) included an individual mandate requiring most Americans to purchase health insurance or pay a penalty, as well as a dramatic expansion of Medicaid that threatened states with loss of all existing Medicaid funding if they declined to participate. The National Federation of Independent Business and twenty-six states challenged both provisions.
Issue
(1) Does the individual mandate fall within Congress’s Commerce Clause or Necessary and Proper Clause power? (2) Is the mandate a valid exercise of the Taxing Power? (3) Is the Medicaid expansion coercive and therefore unconstitutional?
Holding
Chief Justice Roberts, writing for a fractured Court, held: (1) the individual mandate could not be sustained under the Commerce Clause (Congress may not compel commerce) or the Necessary and Proper Clause; (2) the mandate was nonetheless valid as a tax under the Taxing and Spending Clause; and (3) the Medicaid expansion was unconstitutionally coercive because threatening to strip states of all existing Medicaid funds left them with no real choice.
Rule
The Commerce Clause does not empower Congress to compel individuals to engage in commerce (the activity/inactivity distinction). However, Congress may impose a tax that incidentally encourages or discourages behavior. The Spending Clause’s conditions on federal grants must not be so coercive as to leave states no real choice (the “gun to the head” test).
Significance
NFIB is the landmark ACA case. It drew a new constitutional limit on the Commerce Clause (no compulsion of activity), while saving the mandate under the Taxing Power. It also established a meaningful anti-coercion limit on Spending Clause conditions, giving states a partial victory on Medicaid. The decision illustrates how a single statute can be upheld or struck down on multiple constitutional grounds depending on how it is characterized.