Washington, Aug 13 (IANS): In a major blow to President Barack Obama, a US federal appeals court has tossed out key provisions of his sweeping health care reform bill making insurance mandatory for most Americans.

In a 2-1 ruling the 11th Circuit US Court of Appeals in Atlanta 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 verdict sets up a likely election-year showdown at the Supreme Court over the landmark legislation as another federal appeals court in Cincinnati has ruled the "individual mandate" to be lawful.

"The individual mandate exceeds Congress's enumerated commerce power and is unconstitutional," Chief Judge Joel Dubina wrote for the Atlanta panel.

"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 programme was constitutional, since states -- which administer it -- would not bear "the costs of the programme's amplified enrolments."

The decision marks a significant victory for the 26 Republican attorneys general and governors who challenged the health-care law on behalf of their states.

A White House spokesperson 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," she said downplaying the significance of the verdict.

But Republicans expressed confidence the Supreme Court would eventually rule against the provision's legality.