A federal appeals court in Atlanta struck down a pillar of President Obama's national healthcare law, ruling Congress does not have the power to require all Americans to buy insurance and setting the stage for a Supreme Court decision ahead of the 2012 election.
The 2-1 decision is a victory for Republican leaders in 26 states who challenged the law last year, testing whether the signature accomplishment of Obama's presidency would stand.
The Atlanta-based judges echoed the complaint that the mandate represents an "unprecedented" expansion of federal power.
"The individual mandate is breathtaking in its expansive scope," two judges of the 11th Circuit Court of Appeals wrote in their 207-page majority opinion.
Even during the Great Depression or World War II, "Congress never sought to require the purchase of wheat or war bonds, force a higher savings rate or greater consumption of American goods," they observed. Though Congress may regulate those who buy insurance, it may not regulate those who "have not entered the insurance market and have no intention of doing so," they said.
Conversely, other judges have upheld the law. In June, the Obama administration prevailed before the federal appellate court in Cincinnati, which in a split opinion ruled that the mandate represented a constitutional exercise of Congress' authority to regulate commerce.
About 50 million Americans lack basic health insurance. As a result, hospitals and taxpayers are forced to pay about $43 billion a year to cover the costs of those who are treated but cannot pay.
Many healthcare experts believe an insurance mandate is crucial not only to controlling this cost shift but also to guaranteeing that all Americans can get insurance, a right provided by the law. Without such a requirement, they argue, consumers would be able to wait until they were sick to buy insurance. That in turn would push up premiums.
However, the mandate galvanized GOP opposition to the law and helped fuel the "tea party" movement.
Senate Minority Leader Mitch McConnell (R-KY.) said the ruling "only strengthens and adds more momentum to the efforts of those of us who are working to repeal."
The White House, meanwhile, minimized the opinion, citing the divided rulings by multiple federal courts around the country.
"Today's ruling is one of many decisions on the Affordable Care Act that we will see in the weeks and months ahead," Obama aide Stephanie Cutter wrote in a blog posting.
The ruling was not a total victory for the challengers. The appeals court rejected the states' claim that Congress went too far by expanding the Medicaid program for low-income Americans. The judges also agreed the rest of the healthcare law could stand, even if the insurance mandate is struck down.
The Atlanta-based court has a conservative reputation and had been seen as the best forum for those challenging the law. The majority was made up of Chief Judge Joel Dubina, an appointee of President George H.W. Bush, and Judge Frank Hull, a female appointee of President Clinton. The dissenter, Judge Stanley Marcus, was also a Clinton appointee.
In dissent, Marcus said judges have a duty to act with "caution, restraint and great humility" and uphold the laws enacted by the elected representatives.
"At bottom, Congress rationally concluded that the uninsured's consumption of healthcare services shifts enormous costs unto others … and the individual mandate directly addresses this cost-shifting problem," said Marcus in dissent.
The administration can appeal Friday's decision directly to the Supreme Court. If an appeal petition is filed in the fall, the justices are likely to hear the case early next year and rule by late June.
Striking down the mandate could have dramatic consequences if insurance premiums surge, as many experts fear.
That could put more pressure on the federal treasury because millions of Americans are expected to qualify for federal subsidies starting in 2014 to help them buy insurance.
Ballooning subsidy costs could increase pressure to cut back other healthcare initiatives in the law, including the expansion of state Medicaid programs for low-income Americans.
Eliminating the mandate would probably have less impact on other parts of the healthcare overhaul, including portions of the law designed to make Medicare more efficient and to improve the quality of care that hospitals and doctors provide.
In another ruling Friday, three judges of the U.S. 9th Circuit Court of Appeals rejected a challenge to the insurance mandate brought by former state legislator Steven Baldwin and the Pacific Justice Institute, ruling they had no standing to sue.