The exaction the Patient Protection and Affordable Care Act of 2010 imposes on those without health insurance looks like a tax in many respects. The “shared responsibility payment,” as the statute entitles it, is paid into the Treasury by “taxpayers” when they file their tax returns. 26 U.S.C.S. § 5000A(b). It does not apply to individuals who do not pay federal income taxes because their household income is less than the filing threshold articulated in the Internal Revenue Code. § 5000A(e)(2). For taxpayers who do owe the payment, the amount is determined by such familiar factors as taxable income, number of dependents, and joint filing status. § 5000A(b)(3), (c)(2), (c)(4). The requirement to pay is found in the Internal Revenue Code and enforced by the Internal Revenue Service, which must assess and collect it in the same manner as taxes. This process yields the essential feature of any tax: it produces at least some revenue for the government. It is, of course, true that the Act describes the payment as a "penalty," not a "tax," but while that label is fatal to the application of the Anti-Injunction Act, 26 U.S.C.S. § 7421, it does not determine whether the payment may be viewed as an exercise of Congress's taxing power.
In 2010, Congress enacted the Patient Protection and Affordable Care Act in order to increase the number of Americans covered by health insurance and decrease the cost of health care. One key provision is the individual mandate, which requires most Americans to maintain “minimum essential” health insurance coverage. 26 U.S.C. §5000A. For individuals who are not exempt, and who do not receive health insurance through an employer or government program, the means of satisfying the requirement is to purchase insurance from a private company. Beginning in 2014, those who do not comply with the mandate must make a shared responsibility payment to the Federal Government. Twenty-six states, several individuals, and the National Federation of Independent Business brought suit in Federal District Court, challenging the constitutionality of the individual mandate and the Medicaid expansion. The Court of Appeals for the Eleventh Circuit upheld the Medicaid expansion as a valid exercise of Congress's spending power, but concluded that Congress lacked authority to enact the individual mandate. Finding the mandate severable from the Act's other provisions, the Eleventh Circuit left the rest of the Act intact.
Whether the individual mandate provision of 26 U.S.C.S. § 5000A, which imposed a “shared responsibility payment” on individuals who failed to maintain health insurance should be upheld.
The Court declined to uphold the individual mandate under the Commerce Clause, U.S. Const. art. I, § 8, cl. 3, or the Necessary and Proper Clause, U.S. Const. art. I, § 8, cl. 18. However, the mandate was a valid exercise of the taxing power under U.S. Const. art. I, § 8, cl. 1. Although § 5000A’s characterization of the shared responsibility payment as a “penalty” prevented the Anti-Injunction Act, 26 U.S.C.S. § 7421(a), from barring the suit, that description was not binding for constitutional purposes. Factors such as the manner of collection indicated that the payment was a tax rather than a penalty. Moreover, the Court held that 42 U.S.C.S. § 1396c could not constitutionally be applied to withdraw existing Medicaid funds from a state for failure to comply with the expanded coverage requirements. The remedy was to bar the federal government from imposing such a sanction, without striking down other portions of the Act.