Updated at 7 p.m.

The U.S. Court of Appeals for the Fifth Circuit on Wednesday ruled that the Affordable Care Act's individual mandate is unconstitutional, but sent the matter back down to a district court to determine whether that provision can be removed from the rest of the Obama-era healthcare law.

The split panel found that both groups of states in the case have standing, one to challenge the Obama-era health policy and the other to defend it. The panel also found the individual mandate is now unconstitutional because it can no longer be read as a tax, but remanded the case to the district court to provide additional analysis on severability.

"The individual mandate is unconstitutional because it can no longer be read as a tax, and there is no other constitutional provision that justifies this exercise of congressional power," the opinion by Judge Jennifer Walker Elrod reads, pointing back to U.S. Supreme Court Chief Justice John Roberts' 2012 opinion upholding the Affordable Care Act.

Elrod wrote that the "decision breaks no new ground," as the mandate was "originally cognizable as either a command or a tax. Today, it is only cognizable as a command."

The majority opinion said that the panel would not rule on whether the mandate could be separated from the rest of the landmark healthcare law. Elrod wrote that the case "involves a challenging legal doctrine applied to an extensive, complex, and oft-amended statutory scheme."

"All together, these observations highlight the need for a careful, granular approach to carrying out the inherently difficult task of severability analysis in the specific context of this case," the judge continued, while saying the original district court opinion "does not address the ACA's provisions with specificity, nor does it discuss how the individual mandate fits within the post-2017 regulatory scheme of the ACA."

Judge Carolyn Dineen King said she agreed with the bulk of the majority's ruling but dissented to remanding on severability. King said that is an issue the panel could review de novo.

"Regardless of whether the ACA is good or bad policy, it is undoubtedly significant policy. It is unlikely that Congress would want a statute on which millions of people rely for their healthcare and livelihoods to disappear overnight with the wave of a judicial wand."

U.S. District Judge Reed O'Connor of the Northern District of Texas ruled in December that a congressional tax law passed in 2017—which zeroed out the penalty imposed by the ACA's individual mandate—rendered the entire health care law unconstitutional. Scholars have blasted the ruling as "embarrassingly bad" and "unmoored."

King criticized O'Connor's decision in her dissenting opinion, labeling it "textbook judicial overreach."

"The majority perpetuates that overreach and, in remanding, ensures that no end for this litigation is in sight," she wrote.

A coalition of states, led by California Attorney General Xavier Becerra, have defended the law after the Justice Department made the controversial decision to drop its defense. The U.S. House of Representatives also stepped in to argue for the law.

The Fifth Circuit's decision likely sets the groundwork for former U.S. Solicitor General Don Verrilli, who was hired by the House for the current litigation, to return to the Supreme Court. Verrlilli successfully defended the Obama-era health care law during its first challenge at the high court six years ago.

Xavier Becerra California Attorney General Xavier Becerra. Photo: Diego M. Radzinschi/ALM

Becerra said Wednesday he will "move swiftly" to petition the U.S. Supreme Court to overturn the decision, potentially reigniting the political debate over healthcare as the 2020 election season heats up.

"It's time to get rid of the uncertainty," Becerra said. "Many of us believe this is a merry-go-round. The last thing Americans need is to have their healthcare and the healthcare of their kids jerked around by these circular arguments." He added: "Let's get finality."

The attorney general said his office would ask the high court to uphold "every aspect" of the law, including the individual mandate to obtain insurance.

Texas Attorney General Ken Paxton and several other states are leading the challenge to the landmark healthcare law.

The three-judge panel seemed wary of the law during oral arguments back in July. The only judge appointed by a Democratic president, Judge King, did not ask any questions during arguments.

But the two Republican-appointed judges, Judges Jennifer Elrod and Kurt Engelhardt, peppered attorneys from all parties with questions, including whether the individual mandate could be severed from the rest of Obamacare.

Some legal experts suggested that the panel could rule to strike down the individual mandate, while ruling in favor of the rest of the law.

And shortly before oral arguments were held, the panel raised the question of whether the states and the House even had standing in the case. That debate also took up a significant part of oral arguments in the case.

While the case was initially thought to rocket up to the Supreme Court at the height of the 2020 election, this decision may push off such a high-stakes showdown at least for the time being as the district court takes over the case once again.

The Washington Post had reported that officials planned to ask for a stay on any ruling on the healthcare law.

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The Fifth Circuit's ruling in Texas v. United States is posted below:

'Embarrassingly Bad,' 'Unmoored': Legal Scholars Bash Texas Judge's ACA Takedown

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Cheryl Miller contributed reporting from Sacramento.