C. Challenges to the ACA

Immediately upon enactment of the ACA, thirteen states  challenged the legality of the new reform bill in the United States District Court for the Northern District of Florida.  An additional thirteen states joined the lawsuit. These twenty-six states argued that the individual mandate provisions violated the Commerce Clause. Judge Roger Vinson denied the federal government's motion to dismiss in this case,  and instead held on summary judgment that the *109 individual mandate provision violated the Commerce Clause.  Judge Vinson reasoned that the Commerce Clause does not permit the Federal Government to regulate inactivity, and therefore, the refusal to purchase health insurance does not constitute economic activity that can be regulated under the Commerce Clause.

Furthermore, he held that because the statute omitted a severability clause, the entire statute was unconstitutional, not just the individual mandate provision.  Vinson elected not to issue an injunction against the enforcement of the ACA, citing a “long-standing presumption” that the federal government would respect the court's decision. On August 12, 2011, a panel of the Eleventh Circuit, in a two-to-one decision upheld the district court's finding of unconstitutionality but ruled that the personal mandate provision could be severed.  After the Department of Justice indicated that it would not appeal for en banc review from the Court of Appeals, the Supreme Court granted certiorari on November 14, 2011.

On June 28, 2012, in National Federation of Independent Business v. Sebelius, the Supreme Court largely upheld the Patient Protection and Affordable Care Act.  The decision included an opinion by Chief Justice Roberts, an opinion by Justice Ginsburg, a dissenting opinion joined by Justices Scalia, Kennedy, Thomas and Alito, and a dissenting opinion by Justice Thomas.

The Court first addressed the Anti-Injunction Act issue. The Anti-Injunction Act prohibits challenges to a tax before the tax has gone into effect. As Chief Justice Roberts explained in his majority opinion, the Anti-Injunction Act only applies if Congress intended the payment to be treated as a tax. Because the ACA referred to the “shared responsibility payment” imposed by the individual mandate as a “penalty” instead of a “tax,” the Anti-Injunction Act did not apply to block further consideration of the case on its merits.

The Court then addressed the individual mandate. The Court found the provision exceeded Congress's powers under the Commerce Clause.  Accepting the States' argument that the individual mandate created commerce, instead of regulating existing commerce, a majority found that allowing Congress to *110 compel commerce it intended to regulate would provide Congress with an unconstitutionally broad reach.

However, a majority of the Court ultimately upheld the individual mandate as constitutional under Congress's taxing powers.  Although described as a “penalty,” the Justices held that because the “shared responsibility payment” could be reasonably construed to function as a tax, it was found to be constitutional under the Taxing Clause.  Because a majority of the Court found that the individual mandate was constitutional, the Court did not consider the issue of severability.

Lastly, the Court considered the constitutionality of the ACA's Medicaid expansion under the Spending Clause. The ACA's Medicaid expansion would compel states to expand their Medicaid coverage to individuals at or under 133% of the federal poverty level, including extending coverage to financially eligible childless adults.  The federal government would extend funds to the states to undertake the expansion, however if a state refused to expand its Medicaid coverage, section 1396(c) of the ACA would enable the federal government to penalize the state by not only withholding potential expansion funds, but by also withholding funding for existing Medicaid programs.  Chief Justice Roberts, Justices Breyer, Kagan, Kennedy, Alito, Thomas and Scalia considered the Medicaid expansion unconstitutionally coercive under the Spending Clause.  They accepted the States' argument that their reliance on federal funds to administer their Medicaid programs was such that if the federal government removed existing Medicaid funding to penalize states for refusing to expand coverage under their Medicaid programs that states would have no choice other than to accept the expansion.

A different composition of Justices, including Chief Justice Roberts, Justices Ginsburg, Breyer, Sotomayor and Kagan found that the remedy to the coercive nature of the Medicaid expansion was to strike the provision that would have allowed the federal government to penalize states by withholding existing funding.  The federal government may still predicate Medicaid expansion funding on a state's compliance with the Medicaid expansion program, but the federal government may not remove current Medicaid funding to compel a state to comply to expand the program.