Supreme Court upholds ACA individual mandate in 5-4 vote

In a 5-4 ruling, the Supreme Court has held the individual mandate provision of the Affordable Care Act to be constitutional, but not as a valid exercise of Congress’s power under the Constitution to regulate interstate commerce. Instead, the mandate, codified as Sec. 5000A of the Internal Revenue Code, is upheld as within Congress’s power under the Taxing Clause. Chief Justice Roberts was joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan to reach this result.

Because the five justices agreed to uphold the mandate, they did not need to reach the severability issue.

Commerce clause battle

In the short term, the Court’s ruling in National Federation of Independent Business v. Sebelius, 567 U.S. ___ (2012), decides the fate of the Affordable Care Act (at least until November). Those taking the longer view might come to see the debate over the individual mandate as the latest battle in the Court’s long-running dispute over the power of Congress to enact sweeping legislation via its Commerce Clause authority.

Ginsburg opinion. Only four justices (Ginsburg, Breyer, Sotomayor, and Kagan) saw the mandate as an appropriate use by Congress of its commerce power.  Speaking for this group, Justice Ginsburg began by noting that Congress enacted the ACA in part to address a national problem: the burden placed upon the national health-care market by the large number (50 million in 2009) of uninsured Americans. Given the difficulty those with preexisting conditions have in acquiring health insurance in the private market, the so-called “guaranteed issue” and “community rating” provisions contained with the ACA play a key role in addressing this problem. However, in order to avoid an adverse selection problem for insurers, Congress also created the individual mandate.

Reviewing the line of Commerce Clause precedents set by the Supreme Court since the mid-1930s, Ginsburg explained that the Court must presume a statute under review to be constitutional and must strike it down “only on a ‘plain showing’ that Congress acted irrationally.”  In her view, Congress had a rational basis for concluding that the “uninsured, as a class, substantially affect interstate commerce,” thus requiring a national remedy.  Having found such a rational basis for legislative action, the Court’s analysis under the Commerce Clause should end.

Roberts opinion. The Chief Justice rejected the view of the left-leaning Justices and enunciated his own view, which is that the individual mandate fails under the Commerce Clause.  (In turn, the four dissenting justices penned a separate opinion regarding the mandate’s failure to pass muster under the Commerce Clause.)

Certainly, Roberts noted, the Constitution gives Congress the power to “regulate Commerce.” But, rather than regulate existing commercial activity, the mandate compels individuals to “become [the Chief Justice emphasized] active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce.” Permitting Congress to regulate individuals precisely “because [the Chief’s emphasis] they are doing nothing would open a new and potentially vast domain to congressional authority.”

He rejected the argument that a health care mandate is permissible because eventually everyone will participate in the health care market. Everyone, Roberts noted, will likely participate in many types of markets, including, for example, the one for food (such as broccoli), but that mere fact does not authorize Congress to direct them to purchase products in a given market today. “Any police power to regulate individuals as such, as opposed to their activities, remains vested in the States,” Roberts said.  Thus a law like the individual mandate will not pass muster under the Commerce Clause.

Necessary and Proper clause

In addition, Roberts continued, the mandate cannot be upheld under the Necessary and Proper Clause as an essential component of the health insurance reforms. Prior cases upholding laws under this clause “involved exercises of authority derivative of, and in service to, a granted power,” wrote Justice Roberts. “The individual mandate, by con­trast, vests Congress with the extraordinary ability to create the necessary predicate to the exercise of an enu­merated power.”

“Just as the individual mandate cannot be sustained as a law regulating the substantial effects of the failure to purchase health insurance, neither can it be upheld as a ‘necessary and proper’ component of the insurance re¬forms,” Justice Roberts concluded.

Taxing power

The Chief Justice then turned to the argument that the mandate could be upheld as authorized by Congress’s Article I power to “lay and collect Taxes.”  As noted above, he found this argument to be persuasive, as did the left-leaning Justices. “Congress’s authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more. If a tax is properly paid, the Government has no power to compel or punish individuals subject to it. We do not make light of the se­vere burden that taxation — especially taxation motivated by a regulatory purpose — can impose. But imposition of a tax nonetheless leaves an individual with a lawful choice to do or not do a certain act, so long as he is willing to pay a tax levied on that choice.”

Although under the ACA the mandate was characterized as a “penalty,” and not a tax, Congress’s power to impose the requirement stems from its authority to tax. The mandate may thus be reasonably characterized as a tax, and is therefore permitted by the Constitution.

Dissents

There were two dissents. Writing jointly in a 65-page opinion (Justice Kennedy read excerpts from the bench as the opinion was announced), Justices Scalia, Kennedy, Alito and Thomas explained their view that Congress exceeded its Commerce Clause authority when it enacted the individual mandate. Further, the mandate did not fall within Congress’s taxing power under the Constitution.

Having determined the mandate to be invalid, the dissenters then proceeded to hold that severability is not possible: the entire ACA is invalid.

Justice Thomas also wrote a brief, separate dissent, which no other Justice joined.

Other holdings

The Court also concluded as a threshold matter that the Anti-Injunction Act did not bar the suit. In addition, the provisions expanding Medicaid have been narrowed, but not invalidated.

(We’ll have more on the dissents and the other holdings in tomorrow’s post.)

What’s next for ACA

As of now: up and running. Except for the curtailment of the Medicaid expansion, all provisions of the ACA remain intact after the High Court’s ruling. This includes the market reforms already in effect (e.g., adult child coverage; phase-in of annual/lifetime limits; and the requirements for preventive care), as well as the reporting and disclosure requirements already rolled out by the regulatory agencies (e.g., the new appeals process and the Summary of Benefits and Coverage requirements--compliance with the latter must begin no later than September 23, 2012).

In addition, the regulatory agencies presumably will continue to get ready for implementation of provisions not effective until 2014: finalizing the requirements for the essential benefit package, continuing to work on the nondiscrimination rules, etc…

Also still alive at this point is the requirement that States have up and running by 2014 a health benefit exchange that will allow those seeking health coverage to compare qualified plans and choose the one that works best for them. Fewer than 20 States to date have established an exchange: many were waiting for the ruling from the High Court.

November election.  However, it’s not likely that States that have resisted enacting the legislation necessary to create an Exchange will rush to do so now. Instead, they may await the outcome of the next test for the Affordable Care Act. It’s scheduled for November 6, 2012.