In June 2012, the Supreme Court largely affirmed the constitutionality of ACA. With respect to the individual mandate, Chief Justice Roberts wrote the controlling opinion and found that while the Commerce Clause did not provide Congress with the authority to enact the individual mandate, the mandate could be upheld as an appropriate exercise of the taxing power. It should be noted that the Supreme Court also rendered a decision on the constitutionality of the ACA's expansion of the Medicaid program, which required that states provide coverage to adults under the age of 65 with incomes up to 133% of the federal poverty level. For a discussion of the Supreme Court's decision on the Medicaid expansion, see CRS Report R42367, Medicaid and Federal Grant Conditions After NFIB v. Sebelius: Constitutional Issues and Analysis , by [author name scrubbed]. While the Chief Justice acknowledged that Congress's authority to regulate interstate commerce is quite broad, he also pointed out that Congress had never attempted to use this power to make individuals buy an undesired product. The Chief Justice further noted that the language of the Clause (i.e., the power to regulate interstate commerce) reflects the idea that there must be something to regulate in the first place (i.e., some type of "activity"). The problem with the individual mandate, as indicated by the Chief Justice, is that it "does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product on the ground that their failure to do so affects interstate commerce." Another argument made against the constitutionality of the individual mandate was the lack of a limiting principle—the idea that if Congress could require the purchase of health insurance, it could require Americans to purchase anything. The Chief Justice disagreed with the Administration, noting that if the Court followed its reasoning, a mandatory purchase could be permitted to solve almost any problem. Possible Implications

While no other Justice joined the opinion of Chief Justice Roberts with respect to the Commerce Clause analysis, four Justices (Scalia, Thomas, Kennedy, and Alito) issued a dissenting opinion that reached the same conclusion based on somewhat similar reasoning. The Chief Justice's opinion answered affirmatively, upholding the provision as a valid exercise of Congress's authority. For this portion of the opinion, Chief Justice Roberts was joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan. Is the Individual Mandate a Tax or Penalty? Rather than looking at labels, the Court used a functional approach under which it looked at the provision's "substance and application." The Court began by finding that the mandate provision "looks like a tax in many respects." Second, the mandate provision clearly included no scienter requirement. Applied here, the Court found that Section 5000A, while clearly intended to encourage the purchasing of health insurance, did not have to be read as making the failure to do so unlawful. Once the Court determined that the individual mandate was a tax for constitutional purposes, it turned to look at whether the mandate violates the Constitution's limitations on Congress's taxing powers. If so, it would be unconstitutional since it is not apportioned among the states based on population, unless it were a "tax on income." On the other hand, the Court has, on occasion, found that a tax was functionally a regulatory penalty and therefore not supported by the taxing power.
In one of the most highly anticipated decisions in recent years, the Supreme Court released its ruling regarding the constitutionality of the Affordable Care Act (ACA) in June 2012. In NFIB v. Sebelius, the Court largely affirmed the constitutionality of ACA, including its individual mandate provision. In a move that was unexpected to many, the Court upheld the mandate as a valid exercise of Congress's taxing power, but not its Commerce Clause power.
First, Chief Justice Roberts, in a controlling opinion, found that the Commerce Clause does not provide Congress with the authority to enact the individual mandate. While the Chief Justice acknowledged that Congress's authority to regulate interstate commerce is quite broad, he also pointed out that Congress had never attempted to use this power to make individuals buy an undesired product. The Chief Justice further noted that the language of the Clause (i.e., the power to regulate interstate commerce) reflects the idea that there must be something to regulate in the first place (i.e., some type of "activity"). The problem with the individual mandate, as indicated by the Chief Justice, is that it "does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product on the ground that their failure to do so affects interstate commerce." The Chief Justice also noted that if the mandate were permissible under the Commerce Clause, a mandatory purchase could be permitted to solve almost any problem, thus agreeing with those who had raised concerns about a lack of a limiting principle—the idea that if Congress could require the purchase of health insurance, it could require Americans to purchase anything. While no other Justice joined the opinion of Chief Justice Roberts with respect to the Commerce Clause analysis, four Justices issued a dissenting opinion that reached the same conclusion based on somewhat similar reasoning.
The Chief Justice then found the mandate provision to be a valid exercise of Congress's taxing power. For this portion of the opinion, Chief Justice Roberts was joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan. The key question here was whether the mandate provision was a tax or penalty. The Court used a functional approach to find the provision was in fact a tax, looking at its substance and application, rather than any statutory labels (which used the term "penalty"). The Court rejected the argument that the provision was actually a regulatory penalty, and therefore outside the scope of the taxing power, because it was not prohibitory, had no scienter requirement, and would be collected just like any other tax by the IRS. The provision's obvious regulatory purpose was not a significant factor, with the Court noting that it is common for taxes to be intended to influence behavior. Further, the Court found the provision did not have to be read as making the failure to buy health insurance unlawful. Finally, the Court found the mandate provision, while a tax, was not a "direct tax" and therefore was not subject to the Constitution's requirement that direct taxes be apportioned among the states based on population.
It should be noted that the Supreme Court also rendered a decision on the constitutionality of the ACA's expansion of the Medicaid program. For a discussion of the Supreme Court's decision on the Medicaid expansion, see CRS Report R42367, Medicaid and Federal Grant Conditions After NFIB v. Sebelius: Constitutional Issues and Analysis, by [author name scrubbed].