NFIB v. Sebelius (2012)

The Patient Protection and Affordable Care Act, signed by President Barack Obama on March 23, 2010, required most Americans to maintain health insurance or pay a penalty to the Internal Revenue Service, and expanded Medicaid to cover adults with incomes up to 138 percent of the poverty line, threatening states that refused with the loss of all their existing Medicaid funds. Twenty-six states, the National Federation of Independent Business, and individuals challenged both provisions.

On June 28, 2012, Chief Justice John Roberts wrote the controlling opinion. Five justices concluded that the Commerce Clause does not let Congress compel people to buy a product, since that would regulate inactivity, and that the Necessary and Proper Clause could not save the mandate. But Roberts, joined by the four liberal justices, upheld the penalty as a valid exercise of the taxing power. Seven justices held that threatening states with the loss of all Medicaid funds was unconstitutionally coercive under the Spending Clause, and the remedy made the expansion effectively optional for states.

The ruling preserved the law while setting new limits on federal power. Congress reduced the mandate penalty to zero beginning in 2019, and the Court dismissed a later challenge for lack of standing in California v. Texas in 2021. Because expansion became optional, states have divided, with 41 including the District of Columbia adopting it, and its future has been shaped by later laws, including 2025 changes adding work requirements. Supporters praised Roberts for restraint, while critics on the left faulted the commerce holding and critics on the right said the tax reasoning rewrote the statute.