A federal appeals court in Atlanta ruled Friday that a provision in President Obama's health care law requiring citizens to buy health insurance is unconstitutional, but the court didn't strike down the rest of the law.

The decision is a major setback for the White House, which had appealed a ruling by a lower court judge who struck down the entire law in January. But given that another appeals court, in Cincinnati, has upheld the law, it is increasingly clear that the Supreme Court will have the final say.

"We strongly disagree with this decision and we are confident it will not stand," White House spokeswoman Stephanie Cutter said in a statement.

On Friday, the divided three-judge panel of the 11th Circuit Court of Appeals sided with 26 states that filed a lawsuit to block Obama's signature domestic initiative. The panel said that Congress exceeded its constitutional authority by requiring Americans to buy insurance or face penalties.

"This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority," the panel said in the majority opinion.

The majority also said that a basic objective of the law is to "make health insurance coverage accessible and thereby to reduce the number of uninsured persons." Without the individual mandate, the majority said, the law "retains many other provisions that help to accomplish some of the same objectives as the individual mandate."

The decision is a review of a sweeping ruling by a Florida judge, who not only struck down a requirement that nearly all Americans carry health insurance, but he also threw out other provisions ranging from Medicare discounts for some seniors to a change that allows adult children up to age 26 to remain on their parents' coverage.

The states urged the 11th Circuit to uphold U.S. District Judge Roger Vinson's ruling, saying in a court filing that letting the law stand would set a troubling precedent that "would imperil individual liberty, render Congress's other enumerated powers superfluous, and allow Congress to usurp the general police power reserved to the states."

The Justice Department countered that Congress had the power to require most people to buy health insurance or face tax penalties because Congress has the authority to regulate interstate business. It said the legislative branch was exercising its "quintessential" rights when it adopted the new law.

During oral arguments in June, the three-judge panel repeatedly raised questions about the overhaul and expressed unease with the insurance requirement. Each of the three worried aloud if upholding the landmark law could open the door to Congress adopting other sweeping economic mandates.

The arguments unfolded in what's considered one of the nation's most conservative appeals courts. But the randomly selected panel represents different judicial perspectives. None of the three is considered either a stalwart conservative or an unfaltering liberal.

The National Federation of Independent Business (NFIB), the only private group to join the 26 states in the lawsuit, cheered the decision.

"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, executive director of the group's legal center.

"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," she said.

Source: foxnews.com - The Associated Press contributed to this report.