A U.S. appeals court has ruled that part of the Obama administration's overhaul of the health care system is unconstitutional.

A divided three-judge panel Friday struck down the provision of the law that requires all Americans to pay for health insurance by 2014 or face a penalty.

In its decision, the panel wrote that the so-called individual mandate goes too far, representing a “potentially unbound assertion of congressional authority.” But unlike a lower court ruling, the panel upheld the rest of the health care reforms as legal.

The ruling sides with a challenge filed by 26 states, which complained the law was unconstitutional, but conflicts with a separate appeals court ruling in June that upheld the individual health care insurance requirement.

Administration officials have long defended the need to require all Americans to have health insurance.

The fate of the requirement could ultimately be determined by the Supreme Court .