5-4 Supreme Court Upholds The Affordable Care Act, Rules The Individual Mandate A Constitutional 'Tax'

Speaking for the 5-4 majority in National Federation of Independent Business v. Sebelius, U.S. Supreme Court Chief Justice John Roberts, joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan, held that the most hotly contested provision of the federal Patient Protection and Affordable Care Act, the Individual Mandate, was a proper exercise of Congress's taxing power under the Constitution. The Supreme Court did not uphold it under the Commerce Clause, the principal ground advanced by the Obama Administration in defense of the constitutionality of the statute. The Court also found the expansion of the Medicaid program to be constitutional under the Spending Clause so long as the federal government does not bar states from continuing to participate in the existing Medicaid program on condition that they agree to the expanded coverage.

Individual Mandate

The Individual Mandate in the Affordable Care Act requires most Americans to maintain "minimum essential" health insurance coverage. 26 U.S.C. § 5000A. While many individuals will receive the required coverage through their employer, from the government through Medicare or Medicaid, or from some other third party, other individuals would be required to purchase insurance from an insurance company beginning in 2014. Failure to comply with the Individual Mandate will require those individuals to make a "shared responsibility payment" to the Federal Government. Id. at § 5000A(b)(1). This payment, described in the Affordable Care Act as a "penalty," is to be paid to the Internal Revenue Service ("IRS") with an individual's taxes, and "shall be assessed and collected in the same manner" as taxes.

Jurisdiction to Hear a Challenge to the Individual Mandate: A threshold issue for the Supreme Court to address was whether the courts have jurisdiction to decide the constitutionality of the Individual Mandate. Pursuant to the Anti-Injunction Act, "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed." 26 U.S.C. § 7421(a). In other words, this statute bars litigation to enjoin the imposition of taxes until after the taxes are paid. Accordingly, if the Court found that the penalties under the Individual Mandate were a "tax," the challenge to the Individual Mandate would not be ripe for the Court's review, because the Individual Mandate does not go into effect until 2014 and nobody has been assessed a penalty yet. Notably, neither the federal government nor the petitioners argued that the Anti-Injunction Act prevented the Court from rendering a decision on the merits.

The Court stated that the Anti-Injunction Act and the Affordable Care Act are both "creatures of Congress's own creation" and how they relate to each other is for Congress to decide. Accordingly, the Court found that, because the Affordable Care Act described the exaction...