Concept
NFIB and Inactivity
Commerce Clause
NFIB and Inactivity
Lopez and Morrison limited the substantial-effects category by asking whether the regulated activity is economic, and Raich showed that economic activity inside a comprehensive scheme stays within reach. National Federation of Independent Business v. Sebelius adds a third limit that comes logically earlier than either, because it asks whether the person regulated is doing anything in commerce for Congress to regulate. The case arose from the individual mandate in the Affordable Care Act of 2010, which required most Americans to maintain minimum essential health insurance beginning in 2014 or make a shared responsibility payment calculated as a percentage of household income.1 Congress adopted the mandate to solve a problem that its own insurance reforms had created. The guaranteed-issue and community-rating provisions forbid insurers to deny coverage because of pre-existing conditions or to charge unhealthy people higher premiums than healthy ones, and those reforms give healthy individuals a reason to delay buying insurance until they become sick.2 Insurers would then have to accept costly customers at rates that do not cover the cost, and premiums would rise for everyone. The mandate was the proposed remedy: by requiring purchase, it would stop cost shifting by people who go without insurance and bring healthy people into the risk pool, whose premiums on average exceed their health care expenses and so help pay for covering the unhealthy.3
The Government defended the mandate under the Commerce Clause and the Necessary and Proper Clause on the ground that failing to buy insurance has a substantial and harmful effect on interstate commerce by creating the cost-shifting problem.4 The Court granted that Congress's authority under the Clause is broad and extends even to activities that affect commerce only when aggregated with similar activities of others, but it observed that Congress had never before relied on the power to compel individuals not engaged in commerce to purchase an unwanted product.5 Five Justices, the Chief Justice and the four Justices who signed the joint dissent, concluded that neither clause authorizes the mandate.6 The idea that decides the commerce question is that the power reaches existing commercial activity and does not allow Congress to compel people to become active in commerce.7
The limit has a structural reason that echoes Lopez. In Wickard the farmer was actively engaged in producing wheat, and the Government could regulate that activity because of its effect on commerce.8 The Government's theory in NFIB would go further, because price can be supported by increasing demand as well as by decreasing supply, so Congress could command people who are not buying a product to buy it whenever enough of them abstain.9 A rule of that kind would justify a mandatory purchase to solve almost any problem, since people often fail to do things that would be good for them or for society, and in the Court's example Congress could address the health costs of poor diets by ordering everyone to buy vegetables.10 A limit is useful only if it leaves something outside federal power, and the activity requirement is the line the Court drew. A different majority of the Court sustained the same payment as a tax under the Taxing Clause, which the neighboring reading on the taxing power teaches.11 The commerce holding takes two steps here. Regulating Existing Activity comes first and begins with the word regulate itself, and Necessary and Proper Limits then asks why the Government's second argument, that the mandate is essential to the Act's insurance reforms, does not rescue it.
Regulating Existing Activity
The principal commerce holding in National Federation of Independent Business v. Sebelius starts from a single word in the clause. The Constitution gives Congress the power to regulate commerce, and the Chief Justice reasoned that to regulate something is to govern what already exists, so the power presupposes commercial activity waiting to be regulated.12 The neighboring grants in Article I, Section 8 support that reading. The Constitution gives Congress the power to coin money and, separately, the power to regulate its value. It gives the power to raise armies and maintain a navy, and separately the power to make rules for governing the forces. If a power to regulate a subject already included the power to bring the subject into being, those separate grants would have been unnecessary.13 Pairing a creating verb with a regulating verb shows that the drafters treated the two as different powers, and the Commerce Clause contains only the second.
Decided cases point the same way. However broadly the Court has read the commerce power, its decisions uniformly describe it as reaching activity, and the word is nearly impossible to avoid when quoting them.14 Lopez spoke of regulating economic activity, Perez of a class of activities, Wickard of an activity that is local but exerts a substantial economic effect, and Jones & Laughlin of intrastate activities with a close and substantial relation to interstate commerce.15 In each of those cases the person regulated was already doing something, such as lending money or growing wheat, and the question was whether that existing conduct reached far enough into the national market to justify federal control. The individual mandate poses a different question. It does not regulate existing commercial activity. It compels individuals to become active in commerce by buying a product, on the ground that their failure to buy affects interstate commerce.16
The reason the Court drew its line at activity is that effects reasoning applied to inaction has no natural boundary. Every day individuals do not do an infinite number of things, and some of those omissions, joined with similar omissions by others, will have measurable economic consequences. If Congress could justify regulation by pointing to the effect of inaction on commerce, countless decisions an individual might make would fall within federal regulation, and Congress could make those decisions for the individual.17 The aggregation principle counts the combined conduct of people who are doing the same thing. Without an activity requirement, it would become a device for counting people who are doing nothing, and a limit that excludes nothing cannot be a limit.
Wickard shows how far the Government's logic would travel. Roscoe Filburn grew more wheat than his federal quota allowed, and the Court sustained the penalty because growing wheat for use on his own farm let him avoid buying wheat on the market, a choice that, aggregated with the similar choices of other farmers, would have had a substantial effect on the interstate wheat market.18 The Government's theory in NFIB borrowed that structure and extended it. Price can be supported by increasing demand as well as by decreasing supply, and the aggregated decisions of consumers not to buy wheat affect its price just as decisions not to buy insurance affect the price of insurance. On the Government's reasoning, Congress could therefore command people who are not buying wheat to buy it.19 The farmer in Wickard was at least actively engaged in producing wheat, and the Government could regulate that activity because of its effect on commerce. The theory in NFIB would remove that limitation and permit regulation of individuals whenever enough of them are not doing something the Government would have them do.20
The Court gave a second illustration from the health care market to show that the theory has no stopping point. Many Americans do not eat a balanced diet, that group is larger than the group of the uninsured, and poor diets raise health care costs that other Americans bear through higher premiums, just as the uninsured shift costs to the insured. Congress answered the insurance problem by ordering everyone to buy insurance, and under the Government's theory it could answer the diet problem by ordering everyone to buy vegetables.21 The example works because the cost-shifting chain fits almost any shared problem. People often fail, for reasons of their own, to do things that would be good for them or for society, and those failures joined with the failures of others can readily have a substantial effect on commerce.22 Congress already regulates much of what people do, so accepting the theory would give it the same license over what people do not do and would change the relation between citizen and federal government.23 The concern is the one that drove Lopez, a commerce power that grows into a general police power.
The Government's main answer was that the uninsured are not inactive at all. Because sickness and injury are unpredictable but unavoidable, it argued, "the uninsured as a class are active in the market for health care," which they regularly seek and obtain, and the mandate merely regulates how they pay for that participation.24 The Court held that the phrase has no constitutional significance. A person 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, and most of those the mandate reaches are not currently engaged in any commercial activity involving health care.25 That fact defeated the effort to regulate the uninsured as a class, because the precedents recognize Congress's power over classes of activities, not classes of individuals apart from any activity in which they are engaged.26 An activity-based class contains only people who are doing the regulated thing now, while the Government's class was defined by a prediction that its members would someday need care.
The strongest objection holds that the line between activity and inactivity is artificial. The Chief Justice conceded the economic premise, observing that to an economist there may be no difference between the two, since both have measurable effects on commerce.27 Justice Ginsburg, dissenting from the commerce holding, would have sustained the mandate on the reasoning that the uninsured, by definition, are active in the health care market, because they consume services and pay for them out of pocket or shift the cost to others. On that view their economic activity substantially affects interstate commerce, and the mandate is a rational means of regulating it.28 The majority replied that the distinction between doing something and doing nothing would not have been lost on the Framers, who were practical statesmen. It added that they gave Congress the power to regulate commerce and not to compel it, and that both decisions and congressional practice for over 200 years reflect that understanding.29 The four Justices who signed the joint dissent read the text the same way, since a power that presupposes commerce cannot reach a compulsion that creates it.30 The disagreement therefore concerns when market participation is measured. The objection measures it across a person's lifetime, which makes nearly everyone active, while the majority measures it at the time of regulation, which leaves a category of people the commerce power does not reach. The practical reach of the limit is modest, because Congress had never before used the commerce power to compel individuals not engaged in commerce to buy an unwanted product, and a different majority sustained the same payment as a tax.31
On an exam, the usual error is stopping at the observation that inaction affects commerce. A fact pattern that stresses the large aggregate cost of people failing to buy, join, or do something invites that shortcut, because the substantial-effects category has always counted aggregate effects. The answer should first ask whether the statute regulates anything the person is already doing. The opposite error is to read the holding as shrinking Wickard, since a person actively engaged in producing or selling a commodity is regulated as an active participant and the limit never comes into play.
Necessary and Proper Limits
The commerce argument was not the Government's only route to the individual mandate. Its fallback was that, even if compelling a purchase is not itself a regulation of commerce, the mandate is a law “necessary and proper” for carrying the commerce power into execution, because the Act's insurance reforms cannot work without it.33 The reforms forbid insurers to deny coverage because of pre-existing conditions or to charge unhealthy people more than healthy ones, and that combination gives healthy individuals a reason to delay buying insurance until they become sick.34 Insurers then must accept costly customers without being able to price for them, so premiums rise for everyone. The mandate was Congress's answer: by requiring purchase, it would stop cost shifting by those who go without insurance and would bring healthy people, whose premiums on average exceed their expenses, into the risk pool to help pay for covering the unhealthy.35 The clause the Government invoked is the last grant in Article I, Section 8, and it authorizes Congress to make all laws necessary and proper for carrying into execution the powers listed before it and the other powers the Constitution vests in the national government.36
National Federation of Independent Business v. Sebelius held that the clause could not carry the mandate, and the holding depends on what kind of power the clause confers. A power to carry other powers into execution is incidental to those powers, which is how the clause has long been understood. The Chief Justice reasoned that reading the clause to permit a compelled purchase would make it something other than an authority “narrow in scope” or “incidental” to the commerce power, and would instead work a substantial expansion of federal authority.37 Congress would no longer be limited to regulating under the Commerce Clause those who by some pre-existing activity bring themselves within the sphere of federal regulation, and it could reach past the natural limit of its authority to draw in people who otherwise would be outside it.38 The conclusion follows: even if the mandate is necessary to the Act's insurance reforms, such an expansion of federal power is not a proper means of making those reforms effective.39
That holding treats “necessary” and “proper” as separate requirements, and each has its own logic. Necessity asks about fit, meaning whether the means chosen would actually help carry the power into execution, and the Court left that question unresolved because the mandate failed even if it fit.40 Propriety asks whether this particular means respects the limits that come with the power it serves. The commerce power reaches those who are already engaged in commercial activity, as the previous subsection explained, so a means that conscripts people who are doing nothing in the market enlarges the power it was meant to execute. The reason propriety must be an independent check is structural. Congress designs the regulatory schemes it enacts, and so it controls what each scheme needs. If any need of a scheme could justify reaching past the natural limit of the commerce power, Congress could erase the limit by writing a scheme that requires more participants than the market supplies. The mandate itself shows how that pattern works, since the reforms created the incentive to delay buying insurance that the mandate was meant to cure.41 A limit that disappears whenever Congress finds it administratively convenient to extend it is no limit at all.
The Government's main authority was Gonzales v. Raich, and the Court's treatment of that case shows where the line falls. Raich involved comprehensive legislation regulating the interstate market in marijuana, and certain individuals asked to be exempted because they only possessed and consumed marijuana within one State.42 The Court denied the exemption because marijuana is a fungible commodity that can readily be diverted into the interstate market, so the attempt to regulate that market would have been substantially undercut if Congress could not also regulate intrastate possession and consumption.43 In the Court's later description, Raich did not involve the exercise of any “great substantive and independent power” of the sort at issue in the mandate case, and concerned only “individual applications of a concededly valid statutory scheme.”44 The fact that separates the two cases is who was being reached. The challengers in Raich were already doing the thing the scheme regulated, growing and possessing a commodity with an established market, and they asked only to be carved out of a scheme whose validity was conceded. The mandate reached people who were doing nothing in the insurance market and made them participants, so it would have created a new power over nonparticipants where Raich applied an existing power to participants. This also fits the earlier discussion of comprehensive schemes: a court may not excise trivial applications from a regulated class, but the clause gives Congress no authority to enlarge the class itself.
The contrary view appears in dissent. Justice Ginsburg would have sustained the mandate as a rational means of regulating the activity of the uninsured in the health care market, on the theory that the uninsured consume services and shift the cost to others.45 That position treats a rational fit between the mandate and the regulated market as sufficient. The majority's reply is that fit settles only necessity, which is why it went on to ask whether the means is proper. The joint dissent of four other Justices agreed with the Chief Justice that the clause does not authorize the mandate, so five Justices rejected the clause as support for it.46
The result also connects to the concurrence in the judgment in Raich, which treated the Necessary and Proper Clause as a distinct source of power for regulating local activity when that regulation is needed to make a regulation of interstate commerce effective. That concurrence attached two limits: the power can be exercised only in conjunction with congressional regulation of an interstate market, and it extends only to measures necessary to make that regulation effective.47 The principal dissent in Raich likewise described the substantial-effects power as one that derives from the conjunction of the Commerce Clause and the Necessary and Proper Clause.48 No opinion in Raich, then, treated the clause as an empty label. Justice Scalia, who wrote that concurrence, joined the joint dissent in the mandate case, which concluded that the clause does not authorize the mandate.49 His recognition of the clause as a distinct power therefore did not carry it as far as the Government asked. Because neither the commerce power nor the Necessary and Proper Clause supported the mandate, the Court turned to a separate enumerated power, which the later reading on the taxing power addresses.50
On an exam, the usual error is treating necessity as the whole inquiry. A fact pattern that stresses how badly a program needs more participants invites the answer that the clause must support the compulsion, because the program cannot work without it. The second requirement asks whether Congress is applying its power to people already within the regulated activity or creating a power over people outside it. The opposite error is to read the holding as cutting back the clause generally, since an application of a valid scheme to those already engaged in the regulated activity, as in Raich, remains supported.51