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Appeals court says key parts of health-care reform unconstitutional

By Bill Mears, CNN Supreme Court Producer
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Parts of 'Obamacare' unconstitutional
  • Appeals court says individual mandate exceeds congressional power
  • The ruling conflicts with another appeals court ruling
  • Lawsuit was brought by 26 states; two others have also sued
  • The case will probably end up before the Supreme Court

Washington (CNN) -- A federal appeals court has tossed out key provisions of the sweeping health care reform bill championed by President Obama, setting up a likely election-year showdown at the Supreme Court over the landmark legislation.

A 2-1 panel of the 11th Circuit U.S. Court of Appeals in Atlanta on Friday found that the law's "individual mandate" section -- requiring nearly all Americans to purchase health insurance by 2014 or face financial penalties -- was an improper exercise of federal authority.

"The individual mandate exceeds Congress's enumerated commerce power and is unconstitutional," Chief Judge Joel Dubina wrote. "This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy, and to make them re-purchase that insurance product every month for their entire lives."

Significantly, the court concluded that even though that key section is unconstitutional, the entire law need not be set aside. In fact, the judges said law's expansion of the federal Medicaid program was constitutional, since states -- which administer it -- would not bear "the costs of the program's amplified enrollments."

This appeal resulted from in a massive lawsuit brought by Florida and 25 other states opposing the Patient Protection and Affordable Care Act.

This ruling conflicts with another federal appeals court in Cincinnati that found the "individual mandate" to be lawful. That sets up an almost certain oral argument and final ruling on the matter from the Supreme Court in coming months.

A federal appeals court in Richmond is also deciding the issue, and an opinion is expected there in the next few weeks.

More than two dozen other legal challenges to the law are floating in lower federal courts.

The health care reform act was passed by the Democratic Congress last year, with wide support from the president.

The 11th Circuit ruling came from Dubina, who was named to the bench by President George H.W. Bush. His daughter is a first-term GOP congresswoman from Alabama, Rep. Martha Dubina Roby.

He was backed by Judge Frank Hull, a Clinton appointee.

In dissent, Judge Stanley Marcus said Congress had authority to intervene.

"Congress rationally found that the individual mandate would address the powerful economic problems associated with cost shifting from the uninsured to the insured and to health care providers, and with the inability of millions of uninsured individuals to obtain health insurance," said Marcus, also a Clinton appointee. "Thus, to the extent the plaintiffs' individual liberty concerns are rooted in the Fifth Amendment's Due Process Clause, they must fail."

Supporters of the bill may be heartened by two key legal issues surrounding the act.

The judges rejected the states' arguments on the issue of "coercion." Basically, the 26 states claimed the requirement that states expand Medicaid coverage amounts to legislative and administrative coercion, as well as an unfunded mandate, in violation of the 10th Amendment to the U.S. Constitution.

The judges also heard arguments on "severability": whether the determination that one provision of the law is unconstitutional invalidates the entire act. U.S. District Court Judge Robert Vinson, who heard the case last year, ruled that the unconstitutionality of the individual mandate voided the entire piece of legislation.

But the appeals panel disagreed.

"The individual mandate, however, can be severed from the remainder of the Act's myriad reforms," Dubina wrote. "The Act's other provisions remain legally operative after the mandate's excision, and the high burden needed under Supreme Court precedent to rebut the presumption of severability has not been met."

Joining Florida in its challenge are Alabama, Alaska, Arizona, Colorado, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Ohio, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Washington, Wisconsin and Wyoming.

Virginia and Oklahoma have filed separated challenges, along with other groups and individuals opposed to the law.

A White House spokeswoman said "we strongly disagree with this decision."

"By bringing everyone into the health insurance system, we can not only lower costs for everyone but also finally ban discrimination against individuals with pre-existing conditions," said Stephanie Cutter, assistant to the president. "Today's ruling is one of many decisions on the Affordable Care Act that we will see in the weeks and months ahead. In the end, we are confident the Act will ultimately be upheld as constitutional."

But Republicans expressed confidence the high court would eventually rule against the provision's legality.

"Today's decision only strengthens and adds more momentum to the efforts of those of us who are working to repeal" the individual mandate, said Senate Minority Leader Mitch McConnell, R-Kentucky. "Congress should repeal this costly and burdensome law and replace it with the kind of common-sense reforms Americans really want."

There are about 450 components to the health care law. Some will not go into effect for another two years, but some have already gone into effect.

The high court could be asked this fall to take formal jurisdiction over one or more health care appeals, and it could decide the matter perhaps by 2012, a presidential election year.

The business community applauded the latest ruling.

"Small-business owners across the country have been vindicated by the 11th Circuit's ruling that the individual mandate in the health-care law is unconstitutional," said Karen Harned of the National Federation of Independent Business. "The court reaffirmed what small businesses already knew: There are limits to Congress' power. And the individual mandate, which compels every American to buy health insurance or pay a fine, is a bridge too far."

There was no immediate reaction from congressional leaders or the White House.

One pressing concern is whether parts of the law already in effect can continue to be enforced. Those sections currently being administered include small business tax credits, federal grants and consumer protection measures. The federal government wants to know whether these provisions can continue while the issue is under appeal, particularly in the 28 states that have filed suit.

Other questions that could prompt a high court review include:

-- If one provision of the law is found unconstitutional, does the entire act become invalidated?

-- Should employers be forced to provide some level of health insurance to their workers?

-- Can religious, moral and other objections to the law be considered?

-- Do states and private groups have "standing," or legal authority to bring their claims, or is congressional taxing authority ultimately exempt from such lawsuits?

Federal judges in Florida and Virginia last year had found parts of the law unconstitutional, but colleagues in Michigan and Virginia upheld the provisions. That set up the intermediate step of the appeals court deciding, with the final word to probably come from the high court.

Health care reform, a top Democratic priority since the Truman administration, was passed by the last Congress in a series of virtually party-line votes. Obama signed the act into law in March 2010. The law is widely considered to be the signature legislative accomplishment of the president's first two years in office.

Among other things, the measure was designed to help millions of uninsured and underinsured Americans receive adequate and affordable health care through a series of government-imposed mandates and subsidies. The federal government stated in court briefs that 45 million Americans last year were without health insurance, roughly 15 percent of the country's population.

Critics have equated the measure to socialized medicine, fearing that a bloated government bureaucracy will result in higher taxes and diminished health care services.

Opponents derisively labeled the measure "Obamacare." Republican leaders, who captured the House of Representatives in the midterm elections, have vowed to overturn or severely trim the law.

The cases are State of Florida v. U.S. Department of Health and Human Services (11-11021, 11-11067).