What was the significance of National Federation of Independent Business v. Sebelius (2012)?

• A. It struck down the individual mandate.
• B. It required states to expand Medicaid in all cases.
• C. It ruled that health exchanges were unconstitutional.
• D. It upheld the individual mandate and made Medicaid expansion optional for states.

Answer: (D)

The key idea here is how the Supreme Court interpreted the Affordable Care Act in a way that preserved its major framework while drawing a line on federal power over the states. The Court upheld the individual mandate by treating the penalty for not buying insurance as a tax. That means Congress can influence health coverage by tax-powered incentives, even if the mandate isn’t framed as a traditional regulation of commerce.

At the same time, it said that making Medicaid expansion mandatory for all states would be too coercive. States could choose whether to expand, with the federal government offering funds for those that do but not stripping all existing funds from those that declined. In other words, Medicaid expansion was allowed but opt-in rather than forced.

Together, these rulings kept the ACA’s major features—such as the health insurance exchanges and subsidies—intact, while establishing limits on federal power over states in the Medicaid program.