## Facts

- Congress enacted the Patient Protection and Affordable Care Act (ACA) in 2010.
- The ACA required most individuals to maintain “minimum essential” health insurance coverage, enforced through a “shared responsibility payment” for noncompliance.
- The ACA also expanded Medicaid coverage and conditioned continued receipt of existing Medicaid funds on state acceptance of the expansion’s new requirements.
- The National Federation of Independent Business, 26 states, and individual plaintiffs sued federal officials, challenging the individual mandate and the Medicaid expansion as unconstitutional.
- The Eleventh Circuit held the individual mandate unconstitutional, upheld the Medicaid expansion, and found the mandate severable from the rest of the ACA.
- The Supreme Court granted certiorari and resolved challenges to the mandate, the Medicaid expansion, and the proper remedy.

## Issues

1. Whether the Anti-Injunction Act barred pre-enforcement review because the shared responsibility payment is a “tax.”
2. Whether the individual mandate is authorized by the Commerce Clause and the Necessary and Proper Clause.
3. Whether the individual mandate may be sustained under Congress’s taxing power.
4. Whether the Medicaid expansion exceeded Congress’s spending power by coercing states through threatened loss of existing Medicaid funding.
5. If the Medicaid condition was unconstitutional, what remedy was required.

## Decision

- The Court held the Anti-Injunction Act did not bar the suit because Congress labeled the exaction a “penalty,” not a “tax,” for Anti-Injunction Act purposes.
- The Court held the individual mandate was not valid under the Commerce Clause or the Necessary and Proper Clause because it compelled individuals to enter commerce rather than regulating existing commercial activity.
- The Court nonetheless upheld the individual mandate as constitutional under Congress’s power to tax, construing the shared responsibility payment as a tax for constitutional purposes.
- The Court held the Medicaid expansion funding condition was unconstitutionally coercive to the extent it authorized withdrawal of existing Medicaid funds from states that declined to expand coverage.
- The Court’s remedy prohibited the federal government from withdrawing existing Medicaid funding for nonparticipation, leaving states a genuine option to accept or decline the expansion while preserving the ability to offer new funds on new terms.

## Legal Principles

- Anti-Injunction Act applicability turns on Congress’s statutory characterization of an exaction as a “tax” versus a “penalty,” even if the exaction may be treated as a tax for constitutional analysis.
- The Commerce Clause permits regulation of existing economic activity but does not authorize compelling individuals to become active in commerce by purchasing a product.
- The Necessary and Proper Clause cannot be used to create a new substantive power not grounded in an enumerated power.
- An exaction may be upheld as a tax when it operates like a tax in function and collection, is not criminally punitive, and leaves a lawful choice to pay rather than comply.
- Under the Spending Clause, conditional federal funding cannot be structured so that states lack a genuine choice; threatening loss of existing, significant program funding may be unconstitutionally coercive.
- When a spending condition is unconstitutional, a court may sever the coercive enforcement mechanism rather than invalidate the broader program, if doing so preserves lawful options consistent with congressional design.

## Conclusion

The Court allowed immediate review, rejected the individual mandate as an exercise of commerce power, sustained it as a tax, and limited the Medicaid expansion by barring withdrawal of existing Medicaid funds from nonconsenting states, thereby preserving most of the ACA while imposing federalism constraints on both compelled commerce and coercive conditional spending.


Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012)