NATIONAL FEDERATION OF INDEPENDENT BUSINESS V. SIBELIUS
567 U.S. --- (2012)
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH
CIRCUIT
Argued March 26, 27, and 28, 2012
Decided June 28,
2012
CHIEF JUSTICE ROBERTS announced the
judgment of the Court and delivered the opinion of the Court with respect to
Parts I, II, and III-C, an opinion with respect to Part IV, in which Justice Breyer and Justice Kagan join, and an opinion with respect
to Parts III-A, III-B, and III-D.
* * * *
III
The Government advances two theories for the proposition that Congress had constitutional authority to enact the individual mandate. First, the Government argues that Congress had the power to enact the mandate under the Commerce Clause. Under that theory, Congress may order individuals to buy health insurance because the failure to do so affects interstate commerce, and could undercut the Affordable Care Act’s other reforms. Second, the Government argues that if the commerce power does not support the mandate, we should nonetheless uphold it as an exercise of Congress’s power to tax. According to the Government, even if Congress lacks the power to direct individuals to buy insurance, the only effect of the individual mandate is to raise taxes on those who do not do so, and thus the law may be upheld as a tax.
A
The Government’s first argument is that the individual
mandate is a valid exercise of Congress’s power under the Commerce Clause and
the Necessary and Proper Clause. According to the Government, the health care
market is characterized by a significant cost-shifting problem. Everyone will
eventually need health care at a time and to an extent they cannot predict, but
if they do not have insurance, they often will not be able to pay for it.
Because state and federal laws nonetheless require hospitals to provide a
certain degree of care to individuals without regard to their ability to pay,
see, e.g., 42 U. S. C. §1395dd; Fla. Stat. Ann. §395.1041, hospitals end up
receiving compensation for only a portion of the services they provide. To
recoup the losses, hospitals pass on the cost to insurers through higher rates,
and insurers, in turn, pass on the cost to policy holders in the form of higher
premiums. Congress estimated that the cost of uncompensated care raises family
health insurance premiums, on average, by over $1,000 per year. 42 U. S. C.
§18091(2)(F).
In the Affordable Care Act, Congress addressed the problem
of those who cannot obtain insurance coverage because of preexisting conditions
or other health issues. It did so through the Act’s “guaranteed-issue” and
“community-rating” provisions. These provisions together prohibit insurance
companies from denying coverage to those with such conditions or charging
unhealthy individuals higher premiums than healthy individuals. See §§300gg,
300gg–1, 300gg–3, 300gg–4.
The guaranteed-issue and community-rating reforms do not,
however, address the issue of healthy individuals who choose not to purchase
insurance to cover potential health care needs. In fact, the reforms sharply
exacerbate that problem, by providing an incentive for individuals to delay
purchasing health insurance until they become sick, relying on the promise of
guaranteed and affordable coverage. The reforms also threaten to impose massive
new costs on insurers, who are required to accept unhealthy individuals but
prohibited from charging them rates necessary to pay for their coverage. This
will lead insurers to significantly increase premiums on everyone. See Brief
for America’s Health Insurance Plans et al. as Amici Curiae in No. 11–393 etc.
8–9.
The individual mandate was Congress’s solution to these
problems. By requiring that individuals purchase health insurance, the mandate
prevents cost-shifting by those who would otherwise go without it. In addition,
the mandate forces into the insurance risk pool more healthy individuals, whose
premiums on average will be higher than their health care expenses. This allows
insurers to subsidize the costs of covering the unhealthy individuals the
reforms require them to accept. The Government claims that Congress has power
under the Commerce and Necessary and Proper Clauses to enact this solution.
1
The Government contends that the individual mandate is
within Congress’s power because the failure to purchase insurance “has a
substantial and deleterious effect on interstate commerce” by creating the
cost-shifting problem. Brief for United States 34. The
path of our Commerce Clause decisions has not always run smooth,
see United States v. Lopez, 514 U. S.
549–559 (1995), but it is now well established that Congress has broad
authority under the Clause. We have recognized, for example, that “[t]he power
of Congress over interstate commerce is not confined to the regulation of
commerce among the states,” but extends to activities that “have a substantial
effect on interstate commerce.” United
States v. Darby, 312 U. S. 100–119 (1941). Congress’s power, more-over, is
not limited to regulation of an activity that by itself substantially affects
interstate commerce, but also extends to activities that do so only when aggregated
with similar activities of others. See Wickard, 317 U. S., at 127–128.
Given its expansive scope, it is no surprise that Congress
has employed the commerce power in a wide variety of ways to address the
pressing needs of the time. But Congress has never attempted to rely on that
power to compel individuals not engaged in commerce to purchase an unwanted
product. 3 Legislative novelty is not necessarily
fatal; there is a first time for everything. But sometimes
“the most telling indication of [a] severe constitutional problem . . . is the
lack of historical precedent” for Congress’s action. Free Enterprise Fund v. Public Com pany Accounting Oversight Bd., 561 U. S. ___, ___
(2010) (slip op., at 25) (internal quotation marks omitted). At the very least,
we should “pause to consider the implications of the Government’s arguments”
when confronted with such new conceptions of federal power. Lopez, supra, at 564.
The Constitution grants Congress the power to “regulate
Commerce.” Art. I, §8, cl. 3 (emphasis added). The power to regulate commerce
presupposes the existence of commercial activity to be regulated. If the power
to “regulate” something included the power to create it, many of the provisions
in the Constitution would be superfluous. For example, the Constitution gives
Congress the power to “coin Money,” in addition to the power to “regulate the
Value thereof.” Id., cl. 5. And it gives Congress the
power to “raise and support Armies” and to “provide and maintain a Navy,” in
addition to the power to “make Rules for the Government and Regulation of the
land and naval Forces.” Id., cls.
12–14. If the power to regulate the armed forces or
the value of money included the power to bring the subject of the regulation
into existence, the specific grant of such powers would have been unnecessary.
The language of the Constitution reflects the natural understanding that the
power to regulate assumes there is already something to be regulated. See
Gibbons, 9 Wheat., at 188 (“[T]he enlightened patriots who framed our
constitution, and the people who adopted it, must be understood to have
employed words in their natural sense, and to have intended what they have
said”). 4
Our precedent also reflects this understanding. As expansive
as our cases construing the scope of the commerce power have been, they all
have one thing in common: They uniformly describe the power as reaching “activity.”
It is nearly impossible to avoid the word when quoting them. See, e.g., Lopez,
supra, at 560 (“Where economic activity substantially affects interstate
commerce, legislation regulating that activity will be sustained”); Perez, 402
U. S., at 154 (“Where the class of activities is regulated and that class is
within the reach of federal power, the courts have no power to excise, as trivial,
individual instances of the class” (emphasis in original; internal quotation
marks omitted)); Wickard,
supra, at 125 (“[E]ven if appellee’s activity be
local and though it may not be regarded as commerce, it may still, whatever its
nature, be reached by Congress if it exerts a substantial economic effect on
interstate commerce”); NLRB v. Jones
& Laughlin Steel Corp., 301 U. S. 1, 37 (1937) (“Although activities
may be intrastate in character when separately considered, if they have such a
close and substantial relation to interstate commerce that their control is
essential or appropriate to protect that commerce from burdens and
obstructions, Congress cannot be denied the power to exercise that control”);
see also post, at 15, 25–26, 28, 32 (Ginsburg, J., concurring in part,
concurring in judgment in part, and dissenting in part). 5
The individual mandate, however, 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. Construing the Commerce Clause to permit Congress
to regulate individuals precisely because they are doing nothing would open a
new and potentially vast domain to congressional authority. Every day
individuals do not do an infinite number of things. In some cases they decide
not to do something; in others they simply fail to do it. Allowing Congress to
justify federal regulation by pointing to the effect of inaction on commerce
would bring countless decisions an individual could potentially make within the
scope of federal regulation, and—under the Government’s theory—empower Congress
to make those decisions for him.
Applying the Government’s logic to the familiar case of Wickard v. Filburn shows
how far that logic would carry us from the notion of a government of limited
powers. In Wickard,
the Court famously upheld a federal penalty imposed on a farmer for growing
wheat for consumption on his own farm. 317 U. S., at 114–115, 128–129. That amount
of wheat caused the farmer to exceed his quota under a program designed to
support the price of wheat by limiting supply. The Court rejected the farmer’s
argument that growing wheat for home consumption was beyond the reach of the
commerce power. It did so on the ground that the
farmer’s decision to grow wheat for his own use allowed him to avoid purchasing
wheat in the market. That decision, when considered in the aggregate along with
similar decisions of others, would have had a substantial effect on the
interstate market for wheat. Id., at 127–129.
Wickard
has long been regarded as “perhaps the most far reaching example of Commerce
Clause authority over intrastate activity,” Lopez,
514 U. S., at 560, but the Government’s theory in this case would go much
further. Under Wickard
it is within Congress’s power to regulate the market for wheat by supporting
its price. But price can be supported by increasing demand as well as by
decreasing supply. The aggregated decisions of some consumers not to purchase
wheat have a substantial effect on the price of wheat, just as decisions not to
purchase health insurance have on the price of insurance. Congress can
therefore command that those not buying wheat do so, just as it argues here
that it may command that those not buying health insurance do so. The farmer in
Wickard was at least actively engaged in the
production of wheat, and the Government could regulate that activity because of
its effect on commerce. The Government’s theory here would effectively override
that limitation, by establishing that individuals may be regulated under the
Commerce Clause whenever enough of them are not doing something the Government
would have them do.
Indeed, the Government’s logic would justify a mandatory
purchase to solve almost any problem. See Seven-Sky, 661 F. 3d, at 14–15
(noting the Government’s inability to “identify any mandate to purchase a
product or service in interstate commerce that would be unconstitutional” under
its theory of the commerce power). To consider a different example in the
health care market, many Americans do not eat a balanced diet. That group makes
up a larger percentage of the total population than those without health
insurance. See, e.g., Dept. of Agriculture and Dept. of Health and Human Services,
Dietary Guidelines for Americans 1 (2010). The failure of that group to have a
healthy diet increases health care costs, to a greater extent than the failure
of the uninsured to purchase insurance. See, e.g., Finkelstein, Trogdon, Cohen, & Dietz, Annual Medical Spending
Attributable to Obesity: Payer- and Service-Specific Estimates, 28 Health
Affairs w822 (2009) (detailing the “undeniable link between rising rates of
obesity and rising medical spending,” and estimating that “the annual medical
burden of obesity has risen to almost 10 percent of all medical spending and
could amount to $147 billion per year in 2008”). Those in-creased costs are
borne in part by other Americans who must pay more, just as the uninsured shift
costs to the insured. See Center for Applied Ethics, Voluntary Health Risks:
Who Should Pay?, 6 Issues in Ethics 6 (1993) (noting “overwhelming evidence
that individuals with unhealthy habits pay only a fraction of the costs
associated with their behaviors; most of the expense is borne by the rest of
society in the form of higher insurance premiums, government expenditures for
health care, and disability benefits”). Congress addressed the insurance
problem by ordering everyone to buy insurance. Under the Government’s theory,
Congress could address the diet problem by ordering everyone to buy vegetables.
See Dietary Guidelines, supra, at 19 (“Improved nutrition, appropriate eating
behaviors, and increased physical activity have tremendous potential to . . .
reduce health care costs”).
People, for reasons of their own, often fail to do things
that would be good for them or good for society. Those failures—joined with the
similar failures of others—can readily have a substantial effect on interstate
commerce. Under the Government’s logic, that authorizes Congress to use its
commerce power to compel citizens to act as the Government would have them act.
That is not the country the Framers of our Constitution
envisioned. James Madison explained that the Commerce Clause was “an addition
which few oppose and from which no apprehensions are entertained.” The Federalist No. 45, at 293. While Congress’s authority
under the Commerce Clause has of course expanded with the growth of the
national economy, our cases have “always recognized that the power to regulate
commerce, though broad indeed, has limits.” Maryland
v. Wirtz, 392 U. S. 183, 196 (1968) . The Government’s theory would erode those limits,
permitting Congress to reach beyond the natural extent of its authority,
“everywhere extending the sphere of its activity and drawing all power into its
impetuous vortex.” The
Federalist No. 48, at 309 (J. Madison). Congress already enjoys vast
power to regulate much of what we do. Accepting the Government’s theory would
give Congress the same license to regulate what we do not do, fundamentally
changing the relation between the citizen and the Federal Government. 6
To an economist, perhaps, there is no difference between
activity and inactivity; both have measurable economic effects on commerce. But
the distinction between doing something and doing nothing would not have been
lost on the Framers, who were “practical statesmen,” not metaphysical
philosophers. Industrial
Union Dept., AFL–CIO v. American Petroleum Institute, 448 U. S. 607, 673
(1980) (Rehnquist, J., concurring in judgment). As we have explained,
“the framers of the Constitution were not mere visionaries, toying with
speculations or theories, but practical men, dealing with the facts of
political life as they understood them, putting into form the government they
were creating, and prescribing in language clear and intelligible the powers
that government was to take.” South
Carolina v. United States, 199 U. S. 437, 449 (1905) .
The Framers gave Congress the power to regulate commerce, not to compel it, and
for over 200 years both our decisions and Congress’s actions have reflected
this understanding. There is no reason to depart from that understanding now.
The Government sees things differently. It argues that
because sickness and injury are unpredictable but unavoidable, “the uninsured
as a class are active in the market for health care, which they regularly seek
and obtain.” Brief for United States 50. The
individual mandate “merely regulates how individuals finance and pay for that
active participation—requiring that they do so through insurance, rather than
through attempted self-insurance with the back-stop of shifting costs to
others.” Ibid.
The Government repeats the phrase “active in the market for
health care” throughout its brief, see id., at 7, 18, 34, 50, but that concept
has no constitutional significance. An individual who bought a car two years
ago and may buy another in the future is not “active in the car market” in any
pertinent sense. The phrase “active in the market” cannot obscure the fact that
most of those regulated by the individual mandate are not currently engaged in
any commercial activity involving health care, and that fact is fatal to the
Government’s effort to “regulate the uninsured as a class.” Id.,
at 42. Our precedents recognize Congress’s power to regulate “class[es] of activities,” Gonzales v. Raich,
545 U. S. 1, 17 (2005) (emphasis added), not classes of individuals, apart from
any activity in which they are engaged, see, e.g., Perez, 402 U. S., at 153 (“Petitioner is clearly a member of the
class which engages in ‘extortionate credit transactions’ . . . .” (emphasis
deleted)).
The individual mandate’s regulation of the uninsured as a
class is, in fact, particularly divorced from any link to existing commercial
activity. The mandate primarily affects healthy, often young adults who are
less likely to need significant health care and have other priorities for
spending their money. It is precisely because these individuals, as an
actuarial class, incur relatively low health care costs that the mandate helps
counter the effect of forcing insurance companies to cover others who impose
greater costs than their premiums are allowed to reflect. See 42 U. S. C.
§18091(2)(I) (recognizing that the mandate would
“broaden the health insurance risk pool to include healthy individuals, which
will lower health insurance premiums”). If the individual mandate is targeted
at a class, it is a class whose commercial inactivity rather than activity is
its defining feature.
The Government, however, claims that this does not matter.
The Government regards it as sufficient to trigger Congress’s authority that
almost all those who are uninsured will, at some unknown point in the future,
engage in a health care transaction. Asserting that “[t]here is no temporal
limitation in the Commerce Clause,” the Government argues that because “[e]veryone subject to this regulation is in or will be in the
health care market,” they can be “regulated in advance.” Tr. of Oral Arg. 109
(Mar. 27, 2012).
The proposition that Congress may dictate the conduct of an
individual today because of prophesied future activity finds no support in our
precedent. We have said that Congress can anticipate the effects on commerce of
an economic activity. See, e.g., Consolidated
Edison Co. v. NLRB, 305 U. S. 197 (1938) (regulating the labor practices of
utility companies); Heart of Atlanta
Motel, Inc. v. United States, 379 U. S. 241 (1964) (prohibiting
discrimination by hotel operators); Katzenbach v. McClung,
379 U. S. 294 (1964) (prohibiting discrimination by restaurant owners). But we
have never permitted Congress to anticipate that activity itself in order to
regulate individuals not currently engaged in commerce. Each one of our cases,
including those cited by Justice Ginsburg, post, at 20–21, involved preexisting
economic activity. See, e.g., Wickard, 317 U. S., at 127–129
(producing wheat); Raich,
supra, at 25 (growing marijuana).
Everyone will likely participate in the markets for food,
clothing, transportation, shelter, or energy; that does not authorize Congress
to direct them to purchase particular products in those or other markets today.
The Commerce Clause is not a general license to regulate an individual from
cradle to grave, simply because he will predictably engage in particular
transactions. Any police power to regulate individuals as such, as opposed to
their activities, remains vested in the States.
The Government argues that the individual mandate can be
sustained as a sort of exception to this rule, because health insurance is a
unique product. According to the Government, upholding the individual mandate
would not justify mandatory purchases of items such as cars or broccoli
because, as the Government puts it, “[h]ealth insurance
is not purchased for its own sake like a car or broccoli; it is a means of
financing health-care consumption and covering universal risks.” Reply Brief
for United States 19. But cars and broccoli are no more purchased for their
“own sake” than health insurance. They are purchased to cover the need for
transportation and food.
The Government says that health insurance and health care financing are “inherently integrated.” Brief for United States 41. But that does not mean the compelled purchase of the first is properly regarded as a regulation of the second. No matter how “inherently integrated” health insurance and health care consumption may be, they are not the same thing: They involve different transactions, entered into at different times, with different providers. And for most of those targeted by the mandate, significant health care needs will be years, or even decades, away. The proximity and degree of connection between the mandate and the subsequent commercial activity is too lacking to justify an exception of the sort urged by the Government. The individual mandate forces individuals into commerce precisely because they elected to refrain from commercial activity. Such a law cannot be sustained under a clause authorizing Congress to “regulate Commerce.”
* * * *
Ginsburg, J., filed an opinion concurring in part, concurring in the judgment in part, and dissenting in part, in which Sotomayor, J., joined, and in which Breyer and Kagan, JJ., joined as to Parts I, II, III, and IV. Scalia, Kennedy, Thomas, and Alito, JJ., filed a dissenting opinion. Thomas, J., filed a dissenting opinion.