National Federation of Independent Business v. Sebelius


DISPOSITION: Affirmed in part, Denied in part


SUMMARY: The individual mandate of the Affordable Care Act does not violate the Commerce Clause of the Constitution, and even if it did, the petitioner only has grounds to challenge the individual mandate, not the rest of the law.


JUDGES: Authored by Joseph Sims and Thomas Shellum with whom Chief Justice Jim Hanson concurs.




March 1, 2012, Filed

PRIOR HISTORY: Appeal from the United States Court of Appeals for the Eleventh District Nos: 11-393 &11-400.  Date filed: August 12, 2011

COUNSEL: For Appellant(s): Zachary Johnston, Salem Law Services, Salem, OR

For Respondent(s): Mitchell S. Dunn, Damascus Legal Ltd., Damascus, OR


          On March 23, 2010, President Obama signed into law the Affordable Care Act, a sweeping piece of legislation that included an individual mandate, or a tax on individuals who decide not to buy health insurance.  The plaintiff (The National Federation of Independent Business, or NFIB) sued Secretary of Health and Human Services Kathleen Sebelius on the ground that the individual mandate was unconstitutional and that the importance of the mandate to the bill means that the entire bill should be struck down. The Eleventh Circuit Court of Appeals held that the individual mandate was unconstitutional but that it was severable.


II. Decision


The Powers of Congress concerning the regulation of commerce give it jurisdiction to impose an individual mandate such as the one in the Affordable Care Act. There is no doubt that both the Appellants and Respondents agree that the Constitution allows the regulation of the health care industry as part of its power to regulate commerce.  The Constitution gives Congress the power “to regulate Commerce … among the several States.” See Art. I, § 8, Cl. 3.  Health insurance, as a huge industry that affects millions of people (as of September 2011, the Census Bureau said that about 260 million Americans have health insurance) and amounts to 16% of the United States’ GDP is clearly an “activit(y) that substantially affect(s) interstate commerce” and thus is an activity that Congress may regulate Gonzales v. Raich, 545 U.S. 1, 16-17 (2005).  However, what the Appellant and the lower Court argue is that this does not give Congress the power to create commerce among states, and that the Affordable Care Act’s tax on individuals who chose to not get health insurance is a creation of commerce because it makes individuals choose between health insurance and being taxed. 

However, we hold the individual mandate of the Affordable Care Act is a regulation of commerce, not the creation of it.    A particular individual may have no active interest in purchasing health insurance, but just by their existence as a potential, indeed almost inevitable customer of health care, they attract the attention of health insurance companies who make offers to them (and other individuals just like them) in an effort to convince them to buy their insurance.  Congress is not, as the Appellant writes, “creating markets from the day they are born to the day they die that may not necessarily exist” (Appellant Brief).  On the contrary, whether they like it or not, everyone is already active in all types of commerce, from the moment of their birth until the day they die.  In addition, “inactivity” of an individual in not buying health insurance is actually an active choice in the economy.   As the Sixth Circuit Court of Appeals noted, “by choosing to forgo insurance, plaintiffs are making an economic decision to try to pay for healthcare services later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars - $43 billion in 2008 - onto other market participants” Thomas Moore Law Center vs. Obama.  The decision to be “inactive” is actually an active decision by the individual which results in billions of dollars being shifted around in the economy, and is thus an act of commerce which can be regulated.  This point is reinforced by Gonzalez v. Raich 541 U.S. 1 (2005), where the Court ruled that “Congress can regulate purely intrastate activity that is not itself ‘commercial,’ in that it is not produced for sale, if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity.”  Raich establishes that Congress can regulate the activities of people, despite the fact that they are “not produced for sale,” if a failure to do so would inhibit its ability to regulate the interstate market of that commodity (in this case, health insurance).  With this in mind, the individual mandate of the Affordable Care Act regulates pre-existing commerce by “prescrib(ing) the rule by which commerce is to be governed” in accordance with Gibbons v. Ogden, 22 U.S. 1, 75 (1824) and our Constitution.



The individual mandate can be implemented constitutionally without setting a precedent that would give Congress too much power. The Appellant makes the argument that the individual mandate of the Affordable Care Act is unconstitutional because it allows Congress to punish inactivity on the part of an individual by levying a tax on those who do not buy health insurance.  We disagree. This mandate is no different than the tax reliefs that are given to people and businesses for fulfilling certain requirements thus penalizing those who do not fulfill those requirements.  For example, a non-profit business is exempt from taxes, but for-profit businesses are not (they are taxed for choosing not to be non-profit just as individuals choose not to insure themselves for their own, assumedly, financial benefit).  Congress is in complete accordance with the Constitution when it “forces” businesses to choose between not paying taxes and making a profit.  Similarly, people can get a tax deduction for their children by counting them as “dependents” on their tax forms.  This could be seen as imposing a tax penalty on those without children for their “inactivity,” but since the law is worded as giving a tax reduction (or a “reward”) for having children, it is legal, even though it has the exact same effect as if the law were reworded to impose a tax penalty on those without children.  Similarly, if the Affordable Care Act were simply reworded to raise taxes on all residents of the United States and give tax breaks to those with health insurance, then it would be the same situation as giving a tax deduction for dependents, and it would have the same effect as it has right now.

          Furthermore, the individuals who are taxed for not buying health insurance are not being “inactive,” as the Appellant argues.  In addition to being constantly “wooed” by insurance companies trying to sell policies to them, they are shifting billions of dollars in the market to others.  By making the decision to not buy insurance, these individuals are directly affecting interstate commerce, and thus their actions may be regulated. In addition, the method in which the penalty for not buying insurance is issued under the individual mandate is a tax, which is in accordance with Congress’ powers under the Constitution.  Congress is given the power to “lay and collect taxes... and provide for the... general welfare of the United States” on the population of the United States, and by enforcing the individual mandate via a tax, Congress made that part of the Affordable Care Act constitutional. 

The Constitution requires that taxes be for the general welfare of the United States.  Slippery slope claims that the government will force people to purchase other, unnecessary, items lack merit.  Such requirements would need to demonstrate they are part of commerce affecting the general welfare and that the decision not to purchase an item would have a significant commerce affect because of that decision. As a taxable mandate, Congress already gives significant tax breaks for home owners effectively creating higher taxes for those renting. Further, the health insurance mandate is akin to the government’s requirement of flood insurance. Just as people are at risk of flood and thereby are forced to purchase flood insurance, so too are individuals forced to purchase health care insurance.  We do not see a difference; these are constitutionally permissible acts of Congress in its effort to regulate commerce.

Further, it is worth reminding readers that the Act provides significant financial support to families to make purchasing insurance affordable making the mandate a reasonable, and not onerous requirement. Under the Act, people earning 133% or below federal poverty rates received Medicaid. Middle class families receive significant subsidies to pay for their insurance if it is not provided by their employers (for example, a family of 4 with earnings of $40,000 and a policyholder aged 35 receives a $9,122 health insurance subsidy; Henry J. Kaiser Family Foundation,  As such, the individual health insurance mandate coupled with government support clearly provides for the general welfare in that it is estimated to lead 32 million more Americans to receive health insurance than receive it today (CBO Study as cited in a CBS News article, March 22, 2010, The mandate also helps health insurance providers who will benefit from this, and the doctors who know that they will be paid for their work. Congress has every right to make these kind of commerce conclusions in determining the legitimacy of their legislation.



           The Court has long held that an individual can only challenge the constitutionality of a law if he or she can prove direct injury as a result of the law. This is in accordance with the Anti-Injunction Act, 26 U.S.C. 7421(a)(2996). The court recognizes the respondent’s example of a man getting hit by a car as a valid comparison to this case. Just as only the man who gets hit by the car can sue the driver, and not a bystander who simply witnessed the crime, the petitioner can challenge only the portion of the Act that he claims caused personal injury. To challenge the constitutionality of the rest of the Act based on potential injury to others is just as invalid as a bystander suing the driver of a car that he witnessed run someone over. The petitioner cannot challenge parts of the Act such as the Community Rations Provision 42 U.S.C.A § 18091(a)(2)(I). The petitioner claims that without the individual mandate the other parts of the Act, specifically the Community Ration Provision, will drive up premiums around the country. Because of this, the petitioner claims, the Rations Provision should be repealed along with the individual mandate. While the Court does agree that the Community Rations Provision would function differently without the individual mandate, petitioner has no standing regarding these laws because the petitioner is only before the Court claiming personal injury because of the individual mandate. If an individual did claim injury because of these other parts of the law, he or she would certainly have ground to challenge them in a separate court case. In the case before the Court today, however, the only injury presented is direct result of the individual mandate, and no other portion of the law.  Any injury found on behalf of a third party is not relevant to this case and gives the petitioner no standing See, e.g., Warth v. Seldin, 422 U.S. 490, 499 (1975).  Regardless of the arguments made by the petitioner on behalf of other people regarding premium prices, the Court holds that at the point where the petitioner cannot prove injury from any part of the Act outside of the individual mandate, they have no ground to argue that parts of the Act other than the Individual mandate should be repealed.

Were the Court to grant the petitioner standing on other parts of the case, it would be contrary to this long standing precedent, and open up the floodgates for cases regarding the constitutionality of laws.  This precedent is needed to help protect the Court from being dragged into political battles. If an injury found as a result of one small part of the law  were to be considered grounds for the repeal of the entire law, politicians would use this to challenge any law that the found disagreement with. Most bills are hundreds of pages long. If people could search through an entire bill to find one line that they could claim “injury” because of and get the entire bill repealed, it would undoubtedly become an enticing strategy to use the inherently neutral judicial branch as a means to a political end. To rule and say that the petitioner has grounds would legitimize the tactic of using one small part of a bill as a wedge to serve a political agenda under the guise of justice.  As it stands, one must claim injury to every part of the law individually that is claimed to be unconstitutional. This way, the Court is specifically targeted to challenging only actions by the government that are unconstitutional rather than have to make rulings on comprehensive bills with political implications such as the Affordable Care Act. 


D.    Aside from the Guaranteed-Issue and Community-Ration provisions, the    Affordable Care Act should stand regardless of the Constitutionality of the


The Court recognizes that the individual mandate is necessary for the functionality of the Guaranteed-Issue and Community-Ration provisions. Without the mandate, both of these parts of the bill would not function as intended, and would drive up healthcare costs and reduce coverage. Because this is contrary to the purpose of the bill, both of these provisions should be considered severable along with the individual mandate, should the mandate be found unconstitutional by a higher court than this, the Hanson Court of Zsa Zsa. 

The Hanson court holds that the status of the individual mandate, along with the two provisions mentioned above, has no influence on the validity of the rest of the law. The Court has established that “when confronting a constitutional flaw in a statute,” a court must “try to limit the solution to the problem, severing any problematic portions while leaving the remainder intact.” Free Enter. Fun v. Public Co. Accounting Oversight Bd., 130 S. Ct. 3135, 3161 (2010).  In adhering to this precedent, the Hanson court rules that the rest of the act should be considered independently from the individual mandate, the Community-Ration provision, and the Guaranteed-Issue provision. The petitioner makes the argument that removing a certain part of the bill changes the bill into to something that was not the intent of congress to pass. This argument is invalid because it is impossible to know every individual legislator’s intent in amending and voting for the bill. Because there is no way of knowing this, three standards were set up in United States v. Booker, 543 U.S. 220, 258-259 (2005) for determining which portions of a bill should be retained in precisely a situation like this. In Booker, the Court held that it “must retain those portions of the Act that are (1) constitutionally valid, (2) capable of functioning independently, and (3) consistent with Congress’ basic objectives in enacting the statute.” Because only the Community-Ration provision and the Guaranteed-Issue provision are not consistent with these three standards in that they do not function independently, they are the only parts of the Affordable Care act that should be repealed if a higher court were to find the mandate unconstitutional. The rest of the act functions completely independently from these provisions. Many of the regulations put in place by the Act serve to protect insurance customers and expand access to medical insurance. They do so regardless of the presence of the individual mandate. These measures cannot be challenged based on the constitutionality of one specific portion of the act that has no effect on the outcome of the rest of the provisions.  If the court were to rule against the severability of the mandate and the provisions dependent on it, this would be the equivalent of failing an entire test because of one incorrect answer. The burden is on the petitioner to prove how every individual portion of the Act is dependent on the individual mandate. Since many parts of the Act have already been put into action without the individual mandate in effect, it is clear that the majority of the Act does in fact function independently from the individual mandate.  The petitioner cannot make the argument that the Act is entirely dependent on the individual mandate when much of the Act is functioning without the presence of the individual mandate. The petitioner is attempting to frame the case in a way that suggests that the entirety of the bill’s purpose and functionality hinge on the individual mandate. As such, they appear to view the mandate as a foothold to overturn the entire act for political reasons. Repealing the entirety of the bill would nullify all of the work that Congress has put into this Act and itt is simply not appropriate for the Court to engage in the legislative process this way.


E.     Conclusion

The Hanson Court rules that the individual mandate does in fact fall under Congress’ power to regulate commerce. The Act allows congress to regulate healthcare in a way that does not give congress excessive power over the states nor individuals, and is entirely constitutional. Additionally, the Court holds that the petitioner does not have grounds to argue against the entirety of the bill just because they have found injury with one part of it. Although the Court did not find the mandate unconstitutional, it is important to note that even if it had, the majority of the bill functions independently from the bill and would stand regardless of the ruling on the mandate. The Court will not be used as a method of fulfilling a political agenda, this is best left for Congress to address.


Chief Justice Hanson concurring

I wholeheartedly support the Court’s decision but I wish to note that I concur with Section C concerning the petitioner’s standing only insofar as in this case, there is no claim of harm nor unconstitutionality advanced by the other sections of the Act. These other sections advance the general welfare by reducing health care costs and providing health insurance coverage to Americans; their constitutionality is not at issue whatsoever other than by rejecting severance. As such, petitioner does not have a claim of standing and the Court’s concern that this is an attempt to use one section of the law to undermine the rest as an effort to make the Court part of a political act appears to be a justified concern. We should not engage in that fashion.