This series is designed to teach you about our legal structure in the context of current political events. Go deeper, past news articles, with this infographic.
This map's topic is The Affordable Care Act in the Supreme Court.
the affordable care act in the supreme court 2012
The following parts of the Constitution are relevant in deciding whether Congress had the power to enact the Affordable Care Act (ACA).
This section describes the Constitutional provisions generally, and the Judicial section below gives the Supreme Court’s analysis in the case challenging challenging the Affordable Care Act (National Federation of Independent Business v. Sebelius (2012)).
Relating to State Autonomy:
The Tenth Amendment of the Constitution says that the States have all powers not specifically granted to the federal government. This is the concept of “Federalism.” Federalism is code for states’ autonomy (on all issues not-federal).
To respect Federalism (the Tenth Amendment), an action of the federal government must fall under a power specifically granted to it in the Constitution. Because the Affordable Care Act was a legislative act, we look to the Legislative Powers listed in the Constitution at Article I.
The Commerce Clause in Article I (Section 8, clause 3) gives Congress the power “To regulate Commerce . . . among the several States.” This is called the Interstate Commerce Clause. Congress has used this power, for example, to set labor standards, to prohibit racial discrimination in business places, and to outlaw loansharking. The federal government did not convince the Supreme Court that the Commerce Clause justified the ACA’s requirement that all individuals purchase health insurance or face a tax penalty (the “Individual Mandate”; see Legislative section for description).
The Necessary and Proper Clause in Article I (Section 8, clause 18) was another clause on which the federal government attempted (unsuccessfully) to justify the Individual Mandate part of the ACA. This clause is the catch-all provision, giving Congress the power “To make all Laws which shall be necessary and proper for carrying into Execution the . . . Powers vested by this Constitution.” This clause justified a very early Congress in creating the national bank (as “necessary and proper” to carry out the borrowing and taxing powers), and more recently, it justified Congress in criminalizing bribes involving organizations receiving federal funds (as “necessary and proper” to carry out the spending power).
The Taxing and Spending Powers in Article I (Section 8, clause 1) give Congress the power “To lay and collect Taxes, Duties, Imposts and Excises [Taxing Power], to pay the Debts and provide for the common Defence and general Welfare of the United States [Spending Power].”
The Supreme Court in NFIB v. Sebelius ruled that the Affordable Care Act was a valid exercise of Congress’s Taxing Power, except for the Medicaid Expansion portion (see Legislative column for “Medicaid Expansion”), which the Court ruled invalidly coerced the States. See the Judicial column for discussion.
The Affordable Care Act (formally the Patient Protection and Affordable Care Act) of 2010 revamped health policy in the United States.
Among its provisions:
Individuals have to buy insurance (Individual Mandate).
The Act created new state marketplaces (called “health exchanges”) to buy health insurance (mostly online). These marketplaces are regulated and standardized by the federal government. The Act required all people to have health insurance, or they’d have to pay a penalty. If someone was not already covered by an employer plan or by another government plan, that person would have to buy insurance on a state exchange, or they would owe a tax penalty. Each state government has the chance to set up its own exchange, which gives that state certain elements of control and discretion (negotiating plans with insurers, for example, or deciding whether certain types of care would be covered). For any state that chose not to set up its own exchange, the federal government would run that state’s exchange. See State section below for more information.
Federal government gives subsidies.
Individuals purchasing health insurance through the marketplace/exchange in their states may qualify for federal subsidies. People qualify for federal subsidies if their household income is between the poverty line and 4 times the poverty line. For example, based on 2015 federal poverty designation, a person living alone with an income between $11,770 and $47,080 qualifies for a subsidy. The subsidy comes as a tax credit.
Insurance companies cannot discriminate.
Insurance companies cannot discriminate against people based on pre-existing conditions (by refusing to cover or by charging more). They cannot discriminate based on sex either. Insurers may charge higher rates based on age, but even for the highest age bracket (45-64) they may charge only three times the premiums for young adults (18-24).
States have to expand (Medicaid Expansion).
The biggest imposition on the states was the Act’s requirement that states give greater access to Medicaid, the program providing health insurance for low-income individuals . Before the Affordable Care Act, states participated in Medicaid to varying degrees (see Social Security Amendments of 1965 below) because it was a choice. The ACA required states to expand Medicaid coverage to all individuals living at or below a certain income level (133% of the federal poverty level, which is an income of around $15,700 for an individual). The federal government would increase funding to states to pay for the increased coverage, but the states that did not comply would lose all Medicaid funding. This provision was the only provision of the Affordable Care Act that the Supreme Court Case (NFIB v. Sebelius) invalidated. See discussion in the Judicial section.
The Social Security Amendments of 1965 established Medicaid and Medicare.
Medicaid is a health insurance program jointly funded by the federal and state governments. It provides health insurance for people with low-incomes, their children, and individuals with disabilities that meet qualifications determined by each state. States have the option of receiving federal funds (to match state funds) for offering this health insurance. States determine whether or not they want to participate; they create eligibility categories, decide what services are provided, and set payment rates. All states participate to some degree (with varying categories of qualifications).
Medicare is a health insurance program managed by the federal government for individuals aged 65 and over (regardless of income or medical history). It covers Americans who meet the age requirement who have worked and contributed to the program through paying a payroll tax. The program also covers certain younger individuals with disabilities. It is not comprehensive coverage, and individuals often buy supplemental coverage to avoid major out-of-pocket costs. An amendment to the Act (Medicare Modernization Act (2003)) added to the program an entitlement to prescription drugs.
president and Executive agencies
As the leader of the executive branch, the President can influence healthcare policy by leading or encouraging Congress to pass legislation. Within the boundaries of legislation, the President can issue executive orders and executive guidance telling his agencies how to act.
The Department of Health and Human Services (HHS) (called the Department of Health, Education and Welfare when it was established in 1953) is the federal agency responsible for administering federal healthcare policy. A sub-agency within HHS, Centers for Medicare and Medicaid Services (CMS), is responsible for administering Medicare and Medicaid for the federal government and has authority to make rules to implement the Affordable Care Act. Because the Affordable Care Act was a major overhaul to the nation’s healthcare system, a huge list of federal agencies made new rules to soundly implement the Act across policy areas. Visit Regulations.gov (where all agency rules are listed) and search “Affordable Care Act,” to find a list of 85 agencies that have created rules.
The Affordable Care Act authorized the Secretary of HHS to carry out certain provisions of the Act that were challenged as unconstitutional in NFIB v. Sebelius. Kathleen Sebelius was the Secretary of HHS, who began carrying out the ACA policies, which is why Sebelius is named as the primary defendant in the case. HHS, the agency itself, was also named as a defendant.
National Federation of Independent Business v. Sebelius (2012)
On the date President Obama signed the Affordable Care Act into law, Florida and 12 other states sued the Secretary of HHS and the agency HHS in federal court (Northern District of Florida). Soon, these plaintiffs were joined by 13 more states, several individuals and a business association, National Federation of Independent Business. They argued that the Affordable Care Act was unconstitutional in two main ways: (1) that the “Individual Mandate” was invalid because Congress does not have the authority to impose the purchase of health care on individuals; and (2) that the “Medicaid Expansion” is invalid because Congress does not have the power to require states to participate in this federal policy.
As stated in the Constitution section above, Congress’s powers all come explicitly from the Legislative Power article in the Constitution (Article I). If Congress creates a law, it must be able to justified under a specific clause in Article I. The Supreme Court analyzed legislative power clauses, to determine if they could justify Congress in passing the Individual Mandate and the Medicaid Expansion:
Regarding the Individual Mandate:
The Commerce Clause gives Congress power to regulate business activities (“commerce”) across states. In describing the power, the Court said: "the power of Congress over interstate commerce is not confined to the regulation of commerce among the states, but extends to activities that have a substantial effect on interstate commerce." The federal government argued that because the Affordable Care Act requires insurance companies to give insurance to everyone, the Act had to require full participation because it might otherwise encourage only people who are more expensive to be insured. If the insurance companies have only high-cost individuals insured, the costs would rise. Thus, the government argued, by Congress’ power to regulate interstate commerce, Congress can establish the Individual Mandate. The Court disagreed with this argument. It said the Commerce clause does not allow Congress “to compel individuals not engaged in commerce to purchase an unwanted product.” The Commerce clause, the Court said, has been used to regulate individuals who are already in a particular market, but the Individual Mandate forces people into a market in which they may not like to participate (the healthcare market).
The Necessary and Proper Clause gives Congress a “catch-all” power, to “make all Laws which shall be necessary and proper for carrying into Execution" other powers stated in the Constitution. The Court described this clause as one that gives Congress “authority to enact provisions incidental to the [enumerated] power, and conducive to its beneficial exercise,” but that it does not give Congress any independent substantive power. Put another way, Congress can only use this power to assist another power, not as a new power. In trying to justify the ACA under the Necessary and Proper Clause, the federal government argued the Individual Mandate is an “integral part of a comprehensive scheme of economic regulation," and thus “necessary” to carry out the regulation. But the Supreme Court disagreed. The Court said that the Necessary and Proper clause power is only meant for the creation of laws that are incidental and minor pieces of assistance to a pre-existing system of governance. In this case, the federal government wanted to justify a major element of regulation (the Individual Mandate) on a new system of regulation (healthcare regulation). The Court said the Necessary and Proper clause is not meant to justify such a large reach of regulation.
The Taxing and Spending Clause is how the Court found Congress justified in passing the Individual Mandate (under the Taxing part).
The Taxing Clause gives Congress the power to “lay and collect Taxes.” The government argued that the Individual Mandate can be seen, not necessarily as a mandate to purchase insurance, but as an event (not having insurance) that triggers a tax. The Court agreed with this justification. It agreed to view the Individual Mandate part of the ACA as one that establishes a tax consequence, and it reasoned that the mandate (despite being called a “mandate”) acted like a tax in all important respects. For example, in the discussion the Court said that federal tax provisions (tax incentives) frequently have been used to encourage people to take certain action. Further, Congress’s power to tax is very broad (unlike its power to regulate under the Commerce clause). For those reasons, the Individual Mandate was a valid exercise of Congress’ Taxing power.
Regarding the Medicaid Expansion:
The Spending clause allows Congress to use federal funds to “provide for . . . the General Welfare of the United States.” Under this power, the federal government may offer money to state governments, and as a condition of getting the money, requires that the states take certain actions that Congress cannot force them to take. The Medicaid program is a program of this sort. The federal government offers states money to participate in the Medicaid program. However, as the Court notes, the federal government cannot use its Spending power to force the states into a contract. As the Court puts it, the Spending power does not allow Congress to use “financial inducements to exert a power akin to undue influence.” The problem with the Medicaid Expansion is that it threatens to cut all existing federal funding under the Medicaid program for states that do not comply. When Medicaid was originally enacted, the states could participate to the degree of their own choosing. Now, the state governments are already dependent on Medicaid funding. The Medicaid Expansion’s threat to cut all existing Medicaid funding, the Court reasoned, is coercion. The Court ruled that the federal government could not justify the Medicaid Expansion under the Spending power, nor elsewhere within Congress’s constitutional powers, and thus the Court invalidated that aspect of the Affordable Care Act.
As stated in the Constitution section above, the concept of Federalism (in the Tenth Amendment) ensures that states govern themselves except on issues specifically federal. The Supreme Court in NFIB v. Sebelius supported this concept in ruling that the federal government did not have the authority to require the states to expand their participation in Medicaid.
States do, however, have the option to participate in federal healthcare policy. A state could operate its own health insurance marketplace (see this map to learn which states have opted to do so). It also could participate in Medicaid as offered by the ACA and get more federal money in doing so (see this map).
States may offer more healthcare benefits than the Affordable Care Act. States are allowed to provide benefits to their own citizens above the federal benefits offered (as long as the state benefits do not conflict with federal policy). For example, Massachusetts offers residents of the state subsidies if they meet a low-income standard that is more generous than the federal standard. Massachusetts has (since 2006, predating the ACA), required all individuals to purchase health insurance, or be forced to pay a tax (like the ACA). The Massachusetts government faced a legal challenge when it was enacted (like the federal government when the ACA was enacted), but the case was rejected very early when it was brought in Massachusetts state court. Determining whether a state has the power to issue a mandate to buy insurance is a different analysis than whether the federal government has that power.