WASHINGTON (Legal Newsline) - The U.S. Supreme Court ruled on Thursday that the controversial provision of health care reform requiring individuals to purchase insurance or face a financial penalty is a constitutional tax.

More than two years after President Barack Obama's Patient Protection and Affordable Care Act was signed into law, the nation's highest court ruled 5-4 that most of it is constitutional.

The chief issue was a mandate that imposed a $695 annual penalty on individuals who did not purchase health insurance. Obama's own budget director said in February that the mandate was not a tax.

"The Affordable Care Act's requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax," Chief Justice John Roberts wrote.

"Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness."

Roberts was joined in the majority by Obama-appointees Sonia Sotomayor and Elena Kagan, as well as Ruth Bader Ginsburg and Stephen Breyer. Voting against the ACA were justices Anthony Kennedy, Antonin Scalia, Clarence Thomas and Samuel Alito.

Jeffrey Zients, who was made acting budget director in January, made the tax comment in a hearing of the House Budget Committee, according to the Washington Examiner. The administration has maintained that it had the power to impose the mandate because is acting as a tax, and that Congress has the authority to create taxes.

Rep. Scott Garrett, R-N.J., grilled Zients for a minute on the administration's stance that no new taxes would be imposed on households that make $250,000 or less.

"That's not a tax?" Garrett asked about the mandate, which requires an annual $695 payment.

"No," Zients responded.

"I just wanted to be clear on that because that's not the argument the administration is making," Garrett said.

The U.S. Court of Appeals for the 11th Circuit had ruled the mandate unconstitutional in a case brought by 26 states, upholding a lower court ruling by U.S. District Judge Roger Vinson of Florida.

That ruling said Congress was unlawfully regulating economic inactivity. Thursday's dissent said Congress' exceeded its power.

"What is absolutely clear, affirmed by the text of the 1789 Constitution, by the Tenth Amendment ratified in 1791, and by innumerable cases of ours in the 220 years since, is that there are structural limits upon federal power-upon what it can prescribe with respect to private conduct, and upon what it can impose upon the sovereign States," the dissent says.

"Whatever may be the conceptual limits upon the Commerce Clause and upon the power to tax and spend, they cannot be such as will enable the Federal Government to regulate all private conduct and to compel the States to function as administrators of federal programs."

The Fourth Circuit ruled in Virginia Attorney General Ken Cuccinelli's case that he did not have standing to challenge the law on behalf of the state of Virginia because the State wouldn't be affected by the mandate. Only individual Virginians would be, the court said in overturning a district judge's ruling.

The Sixth Circuit sided with the federal government in a 2-1 decision, writing that Congress could conclude that the actions of the self-insured substantially affect interstate commerce.

The Third Circuit ruled in August that a group of New Jersey doctors did not have standing to challenge the law. The doctors could not allege an "actual" injury, the court ruled.

The D.C. Circuit upheld the mandate earlier this year, ruling, "The right to be free from federal regulation is not absolute."

Thursday's opinion said if a state does not comply with new eligibility requirements for Medicaid, the states can only lose new funds available instead of all of their funding.

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