* Appellate court upholds lower court ruling
* Backs individual mandate requiring coverage for all
WASHINGTON, Nov 8 (Reuters) - President Barack Obama's signature healthcare law got a boost on Tuesday when a U.S. appeals court agreed with a lower court that dismissed a challenge and found the law's minimum coverage requirement was constitutional.
The U.S. Appeals Court for the District of Columbia Circuit upheld a lower court ruling that had found it constitutional to require Americans to buy healthcare insurance coverage by early 2014 or face a penalty and had dismissed a lawsuit challenging it.
"It certainly is an encroachment on individual liberty, but it is no more so than a command that restaurants or hotels are obliged to serve all customers regardless of race ... or that a farmer cannot grow enough wheat to support his own family," wrote Judge Laurence Silberman in the majority opinion, citing past federal mandates that inspired legal fights.
"The right to be free from federal regulation is not absolute, and yields to the imperative that Congress be free to forge national solutions to national problems, no matter how local -- or seemingly passive -- their individual origins."
It was the latest victory for the Obama administration, which sought the new law to try to stem the soaring costs of healthcare and to increase coverage for the more than 35 million Americans without healthcare insurance.
Silberman, a noted conservative judge, was appointed by President Ronald Reagan and was joined by Judge Harry Edwards who was appointed by President Jimmy Carter. The dissenting judge was Brett Kavanaugh, appointed by President George W. Bush.
Two federal courts have thrown out the so-called individual mandate but others have upheld it. The Supreme Court is expected to take up the matter this term.
In the latest case, Kavanaugh broke with the other two judges on the panel because he said the court did not have jurisdiction to decide the case because the penalty charged for not having insurance is effectively a tax.
In his 65-page dissent he wrote that the Anti-Injunction Act, "limits the jurisdiction of federal courts over tax-related matters" and thus should not touch the case until 2015 when the penalties could be imposed and challenged.
Kavanaugh also cautioned the courts against rushing to decide the constitutionality of the law.
"We should hesitate to unnecessarily decide a case that could usher in a significant expansion of congressional authority with no obvious principled limit," he wrote.
Last month the Obama administration asked the Supreme Court for a quick ruling on the requirement. The high court could resolve the uncertainty over the law that is affecting the federal government, states and companies. The court's current term runs through June 2012.
"We're confident that, like today, we will prevail," said Stephanie Cutter, assistant to Obama and his deputy senior adviser, in a statement noting "the ruling also marks the third time a federal appeals court has ruled in favor of the law."
"People who make a decision to forego health insurance do not opt out of the health care market. Their action is not felt by themselves alone," she said.
More than half the states have sued to challenge the law, saying Congress overstepped its constitutional authority.
A three-judge panel of the 11th Circuit Court agreed, saying in August that the law is not protected by the Commerce Clause of the U.S. Constitution, which allows Congress to regulate commerce among states.
It too said the penalty for not having insurance was akin to a tax, which the U.S. government was not entitled to levy.
But a U.S. Appeals Court in Cincinnati said the individual mandate was constitutional.
Meanwhile, Virginia is asking the Supreme Court to overturn a decision throwing out its challenge that contends a federal law cannot trump a state one allowing residents to forego health insurance.