Supreme Court Hears Arguments on the Constitutionality of the Individual Mandate

Over a period of three days, from March 26 through March 28, 2012, the United States Supreme Court heard a historic series of oral arguments addressing the constitutionality of the Patient Protection and Affordable Care Act (the “Act”). The Court addressed the following issues which are discussed briefly below:

  • Does the Court have jurisdiction to consider the constitutionality of the Act under the Anti-Injunction Act?
  • Is the Act’s individual mandate, which requires all individuals (with limited exceptions) to maintain “minimum essential health coverage” or pay a penalty, constitutional?
  • If the mandate is not constitutional, do any provisions of the Act apply or is the entire Act unconstitutional?

Road to the Supreme Court
In the two years since the passage of the Act, the constitutionality of the individual mandate has been challenged by 26 states1 even though it is not slated to take effect until 2014. Six Circuit Courts of Appeals have also heard challenges to the provision. While three of the Circuits have dismissed the challenges2, and the Courts of Appeals in the Sixth Circuit and the District of Columbia have upheld the constitutionality of the individual mandate [<1>See Thomas More Law Center v. Obama, 651 F.3d 529 (6th Cir. 2011); see also Seven-Sky v. Holder, 661 F.3d 1 (D.C. Cir. 2011)], the Eleventh Circuit Court of Appeal ruled otherwise in Florida v. U.S. Department of Health and Human Services, 648 F. 3d 1245, 1328 (11th Cir. 2011). Writ of certiorari to the Supreme Court was ultimately filed on behalf of the numerous parties involved in these federal cases, and on November 14, 2011,* the Supreme Court agreed to hear arguments on the issues set forth above.

* The Supreme Court also granted certiorari to hear arguments relating to the constitutionality of the Medicaid Expansion provision of the Act. However, that discussion is beyond the scope of this article.

Background on the Individual Mandate
Beginning January 1, 2014, the Act will require most individuals to maintain “minimum essential health coverage” each month for themselves and their tax dependents or face a penalty under Section 5000A of the Internal Revenue Code (the “Code”). The following are considered “minimum essential coverage” under the Act:

  • Government sponsored programs (including Medicare and Medicaid, the Children’s Health Insurance Program, TRICARE, the Veteran’s health care program and Peace Corp volunteers health coverage)
  • Eligible employer-sponsored health plans (including governmental plans, grandfathered plans and other plans offered in the small or large group market)
  • Health plans in the individual market within a State
  • Coverage under a grandfathered health plan
  • Other coverage recognized by the Secretary of the Department of Health and Human Services (the “Secretary”) as being minimum essential health coverage

If an individual does not maintain such coverage and does not fall within any of the categories of exempted individuals set forth below, a penalty will apply to the individual and must be paid on the individual’s tax return for that year. The penalty will be equal to the greater of:

  • a flat dollar amount (phased in at $95 in 2014, $325 in 2015 and $695 in 2016 and beyond (adjusted for inflation)), or
  • a percentage of household income over the filing threshold (1% in 2014, 2% in 2015 and 2.5% in 2016 and beyond), subject to a maximum flat dollar penalty cap per household and a threshold penalty amount for individuals under the age of 18.

The minimum coverage requirement will not apply to the following categories of individuals:

  • Individuals with a valid religious conscience exemption
  • Individuals who are not lawfully present in the United States
  • Individuals who are incarcerated
  • Members of Indian tribes
  • Individuals who cannot afford “minimum essential coverage” as defined in the Act during the applicable year
  • Individuals whose incomes are below the income tax filing threshold during the applicable year
  • Individuals without coverage for less than three months during the applicable year
  • Individuals who are experiencing a hardship situation as defined by the Secretary of the Department of Health and Human Services (the “Secretary”) during the applicable year

Arguments before the Supreme Court

Day One — Does the Court Have Jurisdiction to Consider the Constitutionality of the Individual Mandate?
On Monday, March 26, 2011, the Supreme Court heard ninety minutes of oral arguments on whether the constitutional challenge to the individual mandate is barred by the Anti-Injunction Act (26 U.S.C. section 7421(a)) (the “Act”). See Department of Health and Human Services v. Florida, U.S., No. 11– 398, argued March 26, 2012. The Anti-Injunction Act prohibits pre-enforcement challenges that are brought for the purpose of restraining the assessment or collection of any tax (Code section 7421(a)). Thus, if the Court determines that the penalty for failing to maintain “minimum essential coverage” is a tax, the Court would not have the jurisdiction to determine the constitutionality of the individual mandate.

The Court heard arguments from the attorney it specifically appointed to address this jurisdictional issue, Robert A. Long, Jr. of Covington & Burling LLP, from Solicitor General of the Department of Justice Donald B. Verrilli, Jr., and from George G. Katsas on behalf of the National Federation of Independent Business (the “NFIB”) and the 26 states challenging the Act. Both Verrilli and Katsas contended that the penalty was not a tax that would divest the Court of jurisdiction over the issue while Long asserted otherwise. Based on its questioning, the Court seemed skeptical of Long’s arguments and appeared to signal its desire to rule on the constitutionality of the mandate. It was noted that Congress:

  • did not label the mandate and related penalty as a “tax”, and
  • did not appear to design the mandate as a revenue raiser.

During the second day of arguments, Justice Ginsburg noted that the mandate would be considered successful if few taxpayers are subjected to the penalty.

Day Two — Is the Mandate Constitutional?
On Tuesday March 27, 2012, the most anticipated arguments surrounding the individual mandate provision were heard by the Supreme Court. The Court considered whether Congress had the authority to require individuals to buy qualifying health coverage or pay a penalty under the Commerce Clause of the U.S. Constitution. See Department of Health and Human Services v. Florida, U.S., No. 11– 398, argued March 27, 2012.

By way of background, the Commerce Clause of the Constitution gives Congress the authority to “regulate commerce… among the several states.” The Necessary and Proper Clause of the Constitution authorizes Congress to pass any laws or regulations that are necessary and proper to carry out its Commerce Clause power, including regulating:

  • the channels of interstate commerce (e.g., rivers and roads);
  • the instrumentalities of interstate commerce (e.g., ships and cars) as well as persons or things in it; and
  • other economic activities, even wholly intrastate activities, that substantially affect interstate commerce when viewed in the aggregate.

The Justices questioned whether the individual mandate was a broad expansion of the federal government’s authority under the Commerce Clause. Solicitor General Verrilli, on behalf of the federal government, asserted that the mandate was Congress’s way of regulating existing commerce — people’s participation in the health care market — and dealing with the existing effects on commerce, i.e., the shifting of the health care costs that are incurred by the uninsured to those with coverage. Solicitor General Verrilli noted that 40 million individuals in the United States do not have health coverage and that Congress determined it was necessary to take action, or else the cost of coverage would continue to increase for everyone. He argued that the individual mandate, which requires coverage prior to the date that health care is actually needed (and which would expand the number of individuals in the insurance risk pool, including young people who will help subsidize the cost of other’s coverage), was the means Congress chose to regulate the method of paying for coverage. Justice Kagan noted that while Congress could have chosen other alternatives to achieve the goal of expanding health coverage, including requiring the purchase of coverage at the time care is needed, the Court was required to afford substantial deference to Congress in its selection of the means to accomplish its objectives.

Many of the Justices, however, seemed uneasy with the idea that failing to buy quality health insurance was an act of interstate commerce that falls under Congress’ scope of authority granted through the Commerce Clause. Paul D. Clement, representing the NFIB and the interests of the 26 states challenging the individual mandate, argued that Congress lacked the authority to force individuals into the health insurance market. Mr. Clement contended that if the individual mandate is found to be constitutional, there would be no limit on Congress’ power which would, in turn, disrupt the Constitution’s fundamental principles of federalism as set forth in the Tenth Amendment. Justice Scalia stated, “I don’t agree … that the relevant market here is healthcare. You’re not regulating healthcare. You’re regulating the insurance market… you’re saying that some people who are not in it must be in it, and that’s different from regulating in any manner of commerce that already exists out there.” In addition, Justice Kennedy stated that the individual mandate “changes the relationship between the individual and the government in a very fundamental way.”

Day Three — If the Mandate Is Unconstitutional, Will Any Part of the Act Survive?
On Wednesday, March 28, 2012, the third and final day of arguments began as the Supreme Court heard 90 minutes of oral arguments on whether the individual mandate provision is severable from the remaining provisions of the Act. See National Federation of Independent Business v. Sebelius, U.S., No. 11– 393, argued March 28, 2012. The Justices appeared to be divided on this issue. They noted that many of the provisions of the Act (such as the provisions on breastfeeding, Black Lung and Indian Health Serves) are unrelated to the mandate and insurance market reforms and could probably survive if the mandate is held unconstitutional. However, it was also argued that if the mandate is considered the heart of the Act and is held unconstitutional, no other part of the Act could remain without it.

Impact on Employers and Insurers
The Supreme Court is expected to issue its opinion in June 2012, which will determine if individuals will be required to maintain minimum essential health coverage starting in 2014. While it is not clear how the Supreme Court’s decision will affect the remaining provisions of the Act, employers and insurers may want continue to comply with the provisions of the Act that are currently in effect until further definitive guidance is issued.

Updates regarding the status of this monumental case, including transcripts for all oral arguments, can be found on the Supreme Court’s website at:


1 Alabama, Alaska, Arizona, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Ohio, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Washington, Wisconsin and Wyoming

2 See Virginia v. Sebelius, 656 F.3d 253 (4th Cir. 2011); Liberty University v. Geithner, 2011 WL 3962915, C.A.4 (4th Cir. Va.) 2011; Baldwin v. Sebelius, 654 F.3d 877 (9th Cir. 2011); New Jersey Physicians, Inc. v. Obama, 653 F.3d 234 (3rd Cir. 2011).