WASHINGTON – A judge in Virginia on Monday declared unconstitutional a key part of President Barack Obama's landmarkhealthcare law in the first major setback on an issue that will likely end up at the Supreme Court.
U.S. District Judge Henry Hudson, appointed to the bench by President George W. Bush in 2002, backed arguments by the state of Virginia that Congress exceeded its authority by requiring that individuals buy health insurance by 2014 or face a fine.
"The Minimum Essential Coverage Provision is neither within the letter nor the spirit of the Constitution," Hudson wrote in a 42-page decision. However, he declined to invalidate the entire healthcare law, a small victory for Obama.
The Obama administration will likely appeal as the law has become a cornerstone of Obama's presidency, aiming to expand health insurance to cover millions of uninsured Americans while curbing costs.
The healthcare industry opposed Obama's reform but insurers, which include companies such as Aetna Inc and WellPoint Inc, favor the individual mandate as it means more customers.
Shares of health insurers rose as investors saw the ruling as evidence that the healthcare law can be adjusted in the courts without a full overhaul and the uncertainty that would accompany it.
Virginia's lawyers argued that the federal government could not regulate someone for not buying a good or service under the U.S. Constitution's Commerce Clause and could not penalize them for failing to buy health insurance.
Hudson said that neither the Supreme Court nor the various appeals courts had ever extended the "Commerce Clause powers to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market."
"This dispute is not simply about regulating the business of insurance -- or crafting a scheme of universal health insurance coverage -- it's about an individual's right to choose to participate," Hudson wrote.
FIRST MAJOR OBSTACLE
The decision is the first finding against the law that was passed in March and aimed at overhauling the $2.5 trillion U.S. healthcare system.
Two judges rejected other challenges to the law, including one in Virginia last month.
At least 24 suits have so far been filed in federal courts by states and private parties, and constitutional scholars expect one of them to reach the Supreme Court.
Justice Department lawyers have been sent around the country to defend the law in federal courts.
Republican leaders in Congress have said one of their top priorities next year when they control the House of Representatives is to repeal the law. But chances of that are slim because Obama's Democrats still control the Senate.
"Congress must obey the Constitution rather than make it up as we go along. Liberty requires limits on government, and today those limits have been upheld," said Republican Sen. Orrin Hatch, a longstanding critic of the individual coverage mandate.
The Obama administration has vigorously defended the law and said that the state of Virginia did not have the legal standing to challenge it on behalf of its citizens, particularly for something that has yet to take effect.
The individual coverage mandate is a major component of the overhaul law, a bid by the Obama administration to expand coverage to the tens of millions of Americans who are without insurance and to thereby help lower exploding healthcare costs.
"As delighted as we are about the judge's decision rejecting the challenge to the entire statute, we believe his ruling on the 'individual responsibility' provision is short-sighted," said the consumers' group Families USA. "Since everyone, at some point in their lives, receives healthcare, it is simply incorrect to assume that the law requires people to enter the health care marketplace."
Later this week, a judge will hear arguments in a multi-state lawsuit against the law in Florida.
"Eventually this whole thing probably has to go through the Supreme Court," said Ana Gupte, analyst with Sanford Bernstein, who covers health insurers, in New York. "I would be surprised at the end of the day if the Supreme Court rules against the individual mandate."
She added, the individual mandate is a "critical component of the law."
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