By Jane Norman, CQ HealthBeat Associate Editor

December 17, 2010 -- The National Association of Insurance Commissioners (NAIC) has recommended a standard form to the federal government that insurers would fill out to justify "unreasonable" increases in health insurance premiums.

The Department of Health and Human Services (HHS) is expected sometime within the next few days to issue its proposed regulation on how to define an "unreasonable" increase—an issue the NAIC did not tackle—and the form insurers would use to justify any rate hike HHS officials determine unreasonable. The regulation is now under review by the Office of Management and Budget.

Both insurers and consumer advocates are keeping a close eye on the regulation's release. The health care law (PL 111-148, PL 111-152) didn't put a cap on health care premium increases. Instead it instructed HHS to work with states—the traditional overseers of insurance—to set up a process to review rate increases.

The proposed form, which would disclose a great deal more information than is generally available to the public, was adopted Thursday in a conference call of NAIC committee members. "Our work is a fitting capstone to a year of tremendous effort and collaboration," said Jane L. Cline, president of the NAIC and the West Virginia insurance commissioner.

However, HHS is under no obligation to use the wording and structure in the form recommended by the state insurance regulators.

NAIC members cautioned in a published summary that "adoption of this form is not intended to be considered an endorsement of any definition of unreasonable that HHS ultimately may develop and the form clearly states it does not apply to the large group market."

The regulators also appear somewhat uneasy with the regulation. They note they have been "very clear" that the term "potentially unreasonable" rather than "unreasonable" should be considered by HHS.

They said they have also cautioned HHS to avoid an arbitrary standard in defining unreasonable "since there are many valid reasons for rate increases." A simple standard could identify a rate increase as unreasonable when in fact it is actuarially justified, they said.

Under the health care law, HHS is supposed to work with states to conduct annual reviews of increases that are considered "unreasonable" though HHS gets the final word on defining the term (See related story).

Insurers that have levied increases deemed unreasonable will have to provide detailed explanations and financial information to the states, the federal government and consumers. All the information will have to be posted on plan Web sites.

The form adopted by the NAIC includes that information as well as sections on the rate request, the components of the average rate increase or decrease, the basis of the rate request, the projected results of the proposed rates and more.

The NAIC also cleared draft model exchange act legislation that saw only minor changes from earlier versions.

By John Reichard, CQ HealthBeat Editor

December 16, 2010 -- The first of a two-day, closed-door, HHS meeting with representatives from 44 states suggested that in many cases states will delay passing laws to create health insurance exchanges until 2012, according to one attendee.

"The bottom line is that there are a lot of unanswered questions states have about creating exchanges" under the health care law, said the attendee, who asked not to be identified because the meeting was private.

States have flexibility under the law to structure exchanges in different ways. HHS has urged that, if possible, they begin passing legislation in 2011 to get that process underway.

States must prove to HHS by January 2013 that they will have an effective exchange ready to go by January 2014 or else the federal government will operate the new health insurance marketplaces.

One issue facing the states is what to do if they have laws on the book that mandate benefits that exceed those required in any federal minimum benefits package for exchanges.

States must either adopt the federal package or pay the added costs of care required under any more extensive state mandate.

But it was clear at the meeting that state officials won't know what is in the federally-mandated package before late next year, complicating decisions on what would go into state legislation, the attendee said.

"Instead of seeing a lot of states take this up [in 2011] I think we'll see some states" do so, the participant said.

The attendee added that HHS officials appear to be listening to concerns expressed by state representatives. "When we talk, they incorporate the feedback," the attendee said. Federal officials are "forthcoming that they can't be forthcoming."

Asked why they can't be forthcoming, the attendee cited the slow nature of rulemaking relating to exchanges and said it appears that key policy decisions haven't yet been made at the federal level relating to aspects of these insurance marketplaces.

Are state officials becoming more pessimistic about getting the job done on time? "I didn't see anybody throw up their hands and say 'we give up," the attendee responded.

By John Reichard, CQ HealthBeat Editor

December 16, 2010 -- Running any enterprise is an exercise in finding the right balance between being firm and being flexible. If you're not firm enough, the enterprise won't move forward; if you're too firm, it will break down.

For Joel Ario, the enterprise is carrying out the health care law requirement that insurance exchanges be up and running in every state by 2014.

Ario, who is head of the Office of Exchanges at the Department of Health and Human Services, must find that balance in dealing with many different players whose cooperation he will need to make exchanges successful.
It's quite a lineup: officials from 50 states with different ideas about how exchanges should work; insurers historically hostile to exchanges; small businesses and the individual consumers who will shop at exchanges, and hospitals and other providers looking to make up losses from Medicare cuts with newly insured patients enrolled in health plans offered on the exchanges.

Affable, quick, and business-like, the 57-year-old Ario appears to have the temperament and experience to get the job done. Whether he has the tools, however, is uncertain. States worry about the funding, staffing, and technical expertise needed to operate effective exchanges. Republicans don't like the blueprint the overhaul law creates for these new insurance marketplaces. And the timelines are deceptively tight.

But Ario says the law allows the experimentation needed to make states willing partners. He says it structures the exchanges in a way that will draw in many consumers. And insurers have too much riding on the success of exchanges to let them fail, he adds.

"If this doesn't work, I don't think very many of them believe that we'll go back to a system in which they will be more in charge, rather than less in charge," Ario said in an interview.

For Ario, exchanges are a way to heal an insurance market that is broken. Millions of Americans not on the payroll of the federal government or big businesses can't get access to affordable, comprehensive coverage. Exchanges, which spread treatment costs across large pools of people, "are a powerful antidote," he says.

But however much insurance companies have riding on the success of exchanges, these companies are run by executives who must meet short-term profit goals. If insurers think exchanges are going to get in the way with heavy-handed regulations, they have GOP allies in Congress only too happy to go after all things "Obamacare."

That means federal officials like Ario will have to have a deft touch with insurers. And that requires a practical understanding of what insurers need to operate.

At first glance, he might not seem like the guy for the job.

Divinity School, Harvard Law, and "PIRGs"

Take a quick look at his background and Ario might seem like a paranoid insurance executive's worst nightmare—a guy with a Harvard Law degree apparently eager to take on corporate America, and maybe even a person who thinks he has some kind of divine calling to do it. After all, he enrolled in Harvard Divinity School before getting his law degree.

If anything, the divinity school experience seems to reflect a drive to question and analyze dogma, not to rigidly force it on people. And while Ario is willing to reflect on his experience at divinity school when asked, he doesn't call attention to it in the speeches he gives.

A chuckling Ario says that people make fun of him because his divinity degree came before law school, suggesting that it should have been the other way around because "after law school you need to go cleanse yourself."
A 1975 graduate of St. Olaf College in Northfield, Minnesota, Ario said that one of his college professors suggested he go to divinity school.

"I said, 'why would I do that? I was confirmed...but I haven't really paid much attention to the church all the way through college.' And he said 'Because you ask the kind of questions people ask in divinity school.'" Ario got a full scholarship through a program designed for people willing to seriously consider the ministry who otherwise would have gone into another profession.

"I said at that point, 'well, I'm an interested agnostic.'" At divinity school Ario found "my professor was right. These guys ask exactly the kinds of questions I'd ask"—questions on "the meaning of life, and social justice, and how you make a good life for yourself, and how do you make for a good society."

"My best buddy at that point wanted to be a Lutheran minister and he'd come home and complain about how Harvard divinity school was not training ministers. I'd say, 'I know. It'd be boring if everyone just wanted to learn how to be a minister. This is a place to search your soul and answer the big questions. So I did that for three years,'" Ario said.

"I kind of thought about the ministry, and considered it, even prayed about it, but it was never a close call."

"Reinhold Niehbuhr said the purpose of the ministry is to comfort the afflicted and afflict the comforted. I was always good at number two and not so much at number one, either in my own life or for others...I just couldn't be pastoral with somebody who lost their two-year-old kid for no reason. I mean I'd be angry about that."

But Ario said even though he didn't become a minister, the divinity school training has had a lasting impact on his career, including in his current post.

"It's made me very nimble in the way I look at issues. You can be in a lot of situations where you're trying to think through an issue and there's the received wisdom on the issue. I want to question why you're starting with the assumption behind that question, let's back up and think about first principles. I use that all the time when people get into kind of group think about an issue where it seems like the premises are too narrow."

"Afflict the comforted" was a theme of his career after he graduated from law school in 1981. He organized and ran Public Interest Research Groups (PIRGs), Ralph Nader inspired organizations which lobby for consumers on product safety, public health, the environment, and other issues. After organizing a PIRG in Wisconsin and directing Oregon's PIRG for seven years, Ario moved into state government in Oregon where he worked on an overhaul of the small group insurance market that instituted "guaranteed issue" provisions.

Several years later, he was named the top insurance regulator in Oregon, serving in that position from 2000 to 2007. He was Pennsylvania's insurance commissioner from 2007 to 2010.

A Flexible Approach

State insurance regulators must protect consumers. But they also have to safeguard insurers by taking steps to assure their solvency. That may mean no knee-jerk denials of rate hikes, for example. To do their jobs, regulators must develop a sophisticated understanding of how insurance companies work and apply regulations in a way that doesn't severely disrupt markets.

"As regulators, we don't have the luxury, the time, or the capacity really to be ideological," said Illinois Insurance Director Michael T. McRaith, who worked with Ario on exchange issues at the National Association of Insurance Commissioners earlier this year before Ario was named to the HHS post.

Ario "is an excellent listener, open to learning and hearing different angles of one specific issue. More importantly perhaps is that Joel is guided by priorities and principles but is very practical in his approach to problem solving," says McRaith.

An interest in dialogue, in re-examining assumptions, and a pragmatic knowledge of insurance markets suggests that Ario isn't a rigid moral crusader to be feared by insurance executives. And some in the industry even say nice things about him. At a conference of industry executives in November, America's Health Insurance Plans President Karen Ignagni introduced Ario by praising him as a fair regulator.

He earned similar praise during his tenure as Oregon's insurance administrator. "I'm from an association that deals with regulators in nine states, and Joel is No. 1," said Clark Sitzes, executive vice president of the Vancouver-based Professional Insurance Agents Western Alliance, in a 2006 profile of Ario in the Portland Business Journal. The alliance represents 1,000 independent property and casualty insurance agents in nine states. "He's receptive to our opinions and concerns where others are less so."

Ario emphasizes that he wants states to take advantage of the overhaul law's provisions that allow for the creation of exchanges that reflect their particular markets. Even states that choose to let Washington run their exchanges will be closely involved in any federal effort in that regard, he says.

Two states have signaled that they won't do their own exchanges by not filing for initial planning grants. But Ario said he expects that officials in one of them, Minnesota, will reverse that decision now that there's a new governor. Democrat Mark Dayton is replacing Republican Tim Pawlenty, who may run for president in 2012 based in part on his opposition to the health care overhaul law. Ario says he hasn't given up on the second state, Alaska, opening its own exchange either.

Ario adds that some states may take advantage of the flexibility the overhaul allows to create regional exchanges. Thus Maine, New Hampshire, and Vermont, for example, which have similar regulatory schemes, might take a regional approach toward some exchange functions while performing others themselves. Similarly, "spine of the West" states like Montana, Wyoming Utah, and New Mexico might join in a regional effort, he said.

The law also permits states to decide whether or not to combine individuals and small businesses in the same exchange. Pooling different groups raises concerns among one or the other that their costs will go up. Ario suggested that states will be cautious about doing so. "Most people would have a bias toward saying, 'Let's not create new changes in the marketplace until we're sure they can work."

Ario sees states moving ahead to create their own exchanges even as many Republicans hostile to the overhaul law move into state houses next year. "There's all this talk now about governors changing, and is everything going to change—well, most of the people who do the day to day work don't change every time the governor changes." Staff in state agencies such as the insurance department, Medicaid, and the health department "know that this law will make things better. That's where our focus is, to get in with those people."

Skepticism and Doubt

As open as Ario might be to discussion, and as much as the overhaul might allow some experimentation, insurers are wary of the Obama administration. And state officials are worried that they don't have the know-how and the resources to prove to HHS by the January 1, 2013 deadline that they'll have an effective exchange ready to go by 2014. If they can't, the feds must do the job.

A veteran managed care executive who requested anonymity said "most of us are reserving judgement" about Ario. The executive said he thinks Ario prefers the "prudent purchaser" type of exchange in which insurers who don't offer low enough premiums can be excluded from participation. The overhaul law lets states decide whether they want that kind of exchange, or whether they will basically offer all plans that meet certain basic requirements.

Insurers feel burned by the administration after the Centers for Medicare and Medicaid Services rejected certain plans' bids to participate in the Medicare Advantage program earlier this year. The affected plans complained that they were given little time to revise their bids and had no specific guidance on how to make them acceptable. That kind of unpredictability could be a hallmark of prudent purchaser exchanges, the executive said. "It's the same issue; it's just playing out in different contexts."

The executive acknowledged that states have the power to reject that model. In states with Republican governors and Republican legislatures, exchanges probably won't follow the prudent purchaser model. "But it is an industry concern," he said.

Ario also has come in for some criticism from the state of Louisiana.

"We still don't have the most basic set of guidance from HHS on setting up an exchange, said Louisiana Secretary for Health and Hospitals Bruce Greenstein on Nov. 30, Greenstein made the comment despite the issuance by HHS of "preliminary guidance" on exchanges.

States have to tap into various data sources held by federal agencies to handle enrollment in plans offered by exchanges and to pay subsidies to buy coverage.

"We don't know how information from the Social Security Administration gets transmitted, what the definitions look like with regard to certain income types,'' Greenstein said. Systems to establish eligibility of consumers for the exchanges and the subsidies they provide "are hard to spec out without having more guidance,'' he added.

The managed care executive said that the HHS preliminary guidance document "was necessary, but not sufficient. It didn't do enough. All of this data is supposed to interchange at the state level. Are the feds going to make that happen? If that capability is not funded and put in place very soon, you're not going to have an efficient exchange."

But Ario and his office are stepping up their meetings with state representatives from 44 states on exchange issues. More grant money and guidance is in the works.

A Moral Dimension

States and insurers can expect pressure from Ario to perform, despite his willingness to be flexible. Ario doesn't deny that he sees a moral dimension to the job he's doing either.

"I have the capacity to see most issues that I work on as having a missional aspect to them and can be preachy at times," he said. "I try not to be but I can be," he adds softly.

"If you ask me the basic thing, I thinks it's a travesty that we live in a country that hasn't figured out how to cover everybody in the system and also make the system affordable for everybody."

By Jane Norman, CQ HealthBeat Associate Editor

December 15, 2010 -- White House officials are holding a meeting with health care providers—apparently mostly physicians—to "exchange ideas on areas in need of attention" in connection with the health care law, according to a letter sent out to invitees that was circulated by Republicans on the Hill.

Leading physician organizations such as the American Medical Association (AMA) backed the law and were viewed as key allies in its passage. But since then doctors have been unhappy about cuts in Medicare physician reimbursements and overdue Medicare payments. The cuts have been postponed for a year but doctors remain worried about such areas of the law as the formation of accountable-care organizations, which some fear will bring independent physicians under the control of hospitals or large provider groups.

The speakers at the meeting are expected to be Donald M. Berwick, administrator of the Centers for Medicare and Medicaid Services, and Ezekiel J. Emanuel, special adviser for health policy in the Office of Management and Budget. The meeting apparently is the first in a series.

Julius Hobson, a former AMA lobbyist who now serves as a senior policy adviser to the law firm Polsinelli Shughart, said he thinks the White House wants to meet with doctors to smooth implementation of the overhaul law.

Hobson said it is significant that invitations were sent to "community physicians," suggesting that the administration is particularly concerned about primary-care physicians. Their ranks must be strengthened if Americans who obtain insurance under the law are going to get actual access to care, analysts say.

Hobson also noted that doctors are worried about taking a back seat to hospitals in accountable-care organizations created under the law. He said hospitals are busy buying physician practices. "There's a lot of concern in the physician community that they won't be leaders in an ACO," Hobson said.

The White House and Department of Health and Human Services did not respond to a request for a list of the organizations invited. Officials also did not say whether the meeting will be open for press coverage. A spokesman said in a statement that the meeting is intended to bring together stakeholders as the law gradually is put in place (PL 111-148, PL 111-152).

"The administration is focused on implementing the health reform law, and we will continue to seek input from experts across the country," said Nick Papas, spokesman for the White House Office of Health Reform. "Just as we engage with members of Congress, we believe it's critical to seek input from providers and leaders in the medical community. Listening to doctors, academic leaders and other experts has been and will continue to be one of our top priorities."

Republicans used the letter to launch yet another attack on Berwick, a regular target of criticism for the GOP, as well as closed meetings. Chris Jacobs, a health policy analyst for the Senate Republican Policy Committee, in a memo asked if lobbyists would be present and whether C-SPAN cameras would be allowed in the room.

Obama during his campaign said that when the health care law was written, "we'll have the negotiations televised on C-SPAN, so that people can see who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies."

The White House does have a policy on voluntary disclosure of visitor records, but in general disclosures are made on a monthly basis.

The White House letter, sent under Emanuel's signature, said he and Berwick will be hosting the meeting "to provide an update on delivery system reforms."

Emanuel added, "While it will be a short briefing, the primary focus of this meeting will be an open dialogue, so all participants are invited to come prepared with any questions or concerns they would like to raise."

He asks that each organization invited nominate two of its "top community physicians" to attend.

By Dena Bunis, CQ HealthBeat Managing Editor

December 16, 2010 -- The rise in the average per capita cost of health care services has slowed marginally over the past year due to a moderation of prices and less use of health care—not as a result of any impact of the new health care law, says the Standard & Poor's analyst in charge of the data released.

The S&P Healthcare Economic Composite Index indicates that the average per capita cost of health care services covered by commercial insurance and Medicare programs rose 6.7 percent from October 2009 to October 2010. That contrasts with a 7.1 percent increase S&P reported for the 12 months ending in September 2010.

For people covered under private insurance plans, costs rose 8.2 percent over the past year. But Medicare claim costs rose at about half that rate—4.2 percent. S&P officials said that is the lowest annual growth rate for Medicare claims costs since January 2008, when it was 4 percent.

David M. Blitzer, chairman of S&P's Index Committee, said he doesn't have an easy answer for why Medicare cost increases are slowing down so much faster than commercial costs. "The long term trend is that commercial costs rise faster than Medicare costs," he said. One answer could be found in the different populations who are insured under Medicare compared with private insurers, Blitzer suggested.

America's Health Insurance Plans, the health insurance lobby, explains the difference in cost increases "by the cost shift from public programs to those with private coverage," said spokesman Robert Zirkelbach. "Medicare simply dictates the prices they pay for medical services. When doctors and hospitals receive less money from Medicare and Medicaid, they pass those costs along to families and employers with private coverage."

Zirkelbach said that according to the Milliman actuarial firm, an average family of four pays $1,500 more in premiums each year to cover the shortfalls of Medicare and Medicaid.

Blitzer said S&P's report shows "some slight improvement in health care expenditures. Despite that, it's still several times higher than the general rate of inflation or any other broad economic measures. And . . . we see a continual split between expenditures related to providing health care through Medicare and the private sector. That gap over the last six months has gotten bigger, not smaller."

Blitzer said that given the publicity surrounding the recent legal battle over the health law, he believes people on both sides of the debate will try to read more into these numbers than would be accurate.

He added that the growing number of privately insured Americans under the law "will initially cause an increase in spending. That doesn't say whether it will or will not push prices higher." Much will depend, he said, on what happens both on the commercial-insurance side and on the level at which the Department of Health and Human Services sets Medicare rates and how Congress reacts to those rates.

S&P's data is based on economic models, not actual claims data. The company has been doing these monthly studies for about a year and a half, Blitzer said, and is still working to refine their accuracy.

He also cautioned that it will take some time to see whether cost moderation continues.

"As we go into the implementation of a huge new law and we pass a key date and the next couple of months are still good I'd smile and be pleased but not declare that we've won the war," he said. The "numbers look a little bit better, but let's not get carried away."

By Jane Norman, CQ HealthBeat Associate Editor

December 13, 2010 -- A U.S. District Court judge in Virginia struck down the centerpiece of President Obama's health care law, saying that the requirement that all Americans have health insurance coverage "exceeds the constitutional boundaries of congressional power." Judge Henry E. Hudson's ruling came in a case filed by the Commonwealth of Virginia against the federal government.

Hudson's decision is the first to find the individual mandate unconstitutional. His decision is expected to be appealed to the 4th U.S. Circuit in Richmond, Va., and the case filed by Virginia Attorney General Kenneth Cuccinelli will likely wind up in the U.S. Supreme Court.

"The unchecked expansion of congressional power to the limits suggested by the Minimum Essential Coverage Provision would invite unbridled exercise of federal police powers," Hudson wrote. "At its core, this dispute is not simply about regulating the business of insurance—or crafting a scheme of universal health insurance coverage—it's about an individual's right to choose to participate."

The ruling set off a flurry of reaction among politicians and interest groups. Congressional Republicans pushing hard for repeal seized upon it as evidence of fundamental problems with the eight-month-old law. Democrats said it is just one of more than a dozen rulings on the constitutionality of the measure that have been rendered—all of them until now favorable to the Obama administration.

Supporters of the law pointed out that Hudson did not strike down the entire law as requested by the plaintiffs but instead said that just the individual mandate is unconstitutional. However, they also said that the law would be unworkable without the mandate because people would wait until they were sick to purchase health insurance, driving up costs.

The court decisions on this case and others do not directly affect the Obama administration's work to put the law into effect, though the rulings will give Republicans a cudgel to use as they seek to "repeal and replace" the law and attack its funding. Hudson declined to grant a request for an injunction that would have halted implementation of the law. He said there were no "compelling exigencies" because key provisions on the law do not take effect until 2013 at the earliest. "Therefore, the likelihood of any irreparable harm pending certain appellate review is somewhat minimal," he said.

Administration officials said they were unperturbed by the ruling in the Eastern District of Virginia in Richmond. "We are confident that the Affordable Care Act will be upheld," said White House Press Secretary Robert Gibbs at his daily briefing.

Stephanie Cutter, assistant to the president for special projects, said in a blog post that the Department of Justice is "considering its options" for appeal. "We are pleased that Judge Hudson agrees that implementation of the law will continue uninterrupted," she said.

Cutter added that "history and facts are on our side" and similar legal challenges against landmark laws such as the Voting Rights Act, the Civil Rights Act and Social Security Act also failed.

The ruling was not a surprise. In August, Hudson had refused to dismiss the suit and was critical in his comments during oral arguments in October about the government's case, leading observers to predict that he would rule against the law.

There have been 14 other cases filed against the law that have been dismissed by district court judges for various reasons, including a lack of standing and on the merits of the law. Some have been appealed or are expected to be appealed.

Commerce Clause at Issue

Cuccinelli had argued that the Commerce Clause of the Constitution would bar the individual mandate requiring health insurance. Hudson wrote in his decision that in his review of constitutional law he found no decisions from any federal appellate courts extending the Commerce Clause "to encompass regulation of a person's decision not to purchase a product."

Hudson also wrote in a passage that appeared key to his opinion on the Commerce Clause: "Every application of Commerce Clause power found to be constitutionally sound by the Supreme Court involved some form of action, transaction or deed placed in motion by an individual or legal entity. The constitutional viability of Minimum Essential Coverage Provision in this case turns on whether or not a person's decision to refuse to purchase health care insurance is such an activity."

Hudson rejected arguments by the government that the penalty for not purchasing insurance is a "tax penalty" and allowed under congressional power of taxation. He wrote that early versions of the health care legislation included the "more politically toxic term 'tax'" when referring to the assessment for noncompliance with the mandate. In the final version, the word "penalty" is substituted for tax, Hudson wrote.

"A logical inference can be drawn that the substitution of this critical language was a conscious and deliberate act on the part of Congress," said Hudson. "This shift in terminology during the final hours preceding an extremely close floor vote undermines the contention that the terms 'penalty' and 'tax' are synonymous."

Other sections of the law specifically include the term "tax," including the tax on indoor tanning and taxes on certain high-income taxpayers, said Hudson. "The legislature's apparent careful choice of words supports the conclusion that the term "tax" was not used indiscriminately," he said.

Cuccinelli has argued that the term "tax" was avoided for political reasons.

Cuccinelli said in a conference call with reporters that the case was not about health care or health insurance but the limits of what government can compel individuals to do. The idea behind the law of expanding access to health insurance was "noble" but the individual mandate was not the way to accomplish that, he said.

"For now we've beaten it back here in Virginia—of course we will see where the final decision brings us," he said. "But if we cross this line with health care now, this unconstitutional line, where the government can force us to buy a private product and say it's for our own good, then we will have given the government the power to force us to buy other products—cars, gym memberships, asparagus. The list goes on."

He said he expects it may take the case a year to work its way through the appellate process and another year before it reaches the Supreme Court. And Cuccinelli pointed out that repeal of the law is "a major priority for the Tea Party here in Virginia."

The challenge to the law came after the General Assembly in Virginia approved and the governor signed into law a measure saying the federal government cannot require individuals to be insured. That law went into effect in July.
Tracy Schmaler, a spokeswoman for the Department of Justice, said the government expects to ultimately prevail because the law clearly follows legal precedent.

"We are disappointed in today's ruling but continue to believe—as other federal courts in Virginia and Michigan have found—that the Affordable Care Act is constitutional," said Schmaler. "There is clear and well-established legal precedent that Congress acted within its constitutional authority in passing this law and we are confident that we will ultimately prevail."

Ron Pollack, head of Families USA, which backs the law, said Virginia lost its attempt to have the entire law declared invalid. "As a result, the litigation scoreboard now shows two complete victories on the merits for the Affordable Care Act, 12 procedural victories for the Act, and one partial victory," said Pollack. "This means that the process for implementing the Affordable Care Act will continue to move forward around the country."

Only Individual Mandate Struck Down

In his ruling, Hudson severed the individual mandate, leaving the rest of the law intact. He wrote that he had to consider whether Congress would have enacted the balance of the law without the mandate, but it was difficult to determine given the speed with which the law was written.

"The final element of the analysis is difficult to apply in this case given the haste with which the final version of the 2,700 page bill was rushed to the floor for a Christmas Eve vote," he said. "It would be virtually impossible within the present record to determine whether Congress would have passed this bill, encompassing a wide variety of topics related and unrelated to health care, without Section 1501. Even then, the court's conclusions would be speculative at best."

However, Hudson said that in his ruling he was severing not just the mandate but also the "directly dependent provisions which make specific reference" to the section of law that included the individual mandate. Opinions were split as to what that meant.

Cuccinelli told reporters he believes it means the judge was including with the mandate the ban on discrimination against people with pre-existing conditions and other sections of the law aimed at ending insurance company abuses. However, Timothy Jost, a law professor at Washington and Lee University and an expert on the health care law, said he did not believe the ruling included those sections, though he said as a "practical matter" it would be difficult to implement the measure without the individual mandate.

The insurance industry has been among the biggest boosters of the individual mandate, arguing that the law could not go forward without it. Robert Zirkelbach, a spokesman for America's Health Insurance Plans, which represents the industry, said there was broad agreement throughout the debate that there would be "significant disruption and skyrocketing costs" unless all Americans have coverage.

Liberal-leaning backers of the law agreed with insurers that losing the mandate would be bad news. "If his decision is upheld, it would give the green light for insurance companies to deny people care based on pre-existing conditions," said Ethan Rome of Health Care for America Now. "Putting insurance companies back in charge of our health care is the wrong way to go."

The Politics of Judging

The question of which president appointed which judge in the various cases loomed large for some critics of the Hudson ruling. Hudson was nominated for the federal bench by President George W. Bush in 2002.

Two judges appointed by Democratic presidents have ruled in favor of the administration and dismissed challenges to the law. U.S. District Judge George Caram Steeh denied a request for a preliminary injunction brought by the Thomas More Law Center of Ann Arbor, Mich., and dismissed claims the center made against the individual mandate included in the law and penalties for not complying.

Steeh, who was appointed by President Clinton in 1998, said that Congress had the power under the Commerce Clause of the Constitution to enact the health care law.

Judge Norman K. Moon of the Western District of Virginia said in a ruling in late November that the law's requirement that Americans obtain health insurance was constitutional and a regulation of interstate commerce allowed under the Commerce Clause of the Constitution. The challenge was brought by Liberty University and five individuals. Moon is also a Clinton nominee.

Cuccinelli said there have been "cordial discussions" with government lawyers about his request that they bypass the appeals process and ask the Supreme Court to take the case. But the government has not agreed.

Rep. Eric Cantor, R-Va., on Monday called on the president and Attorney General Eric H. Holder Jr. to echo Cuccinelli's request. "In this challenging environment, we must not burden our states, employers and families with the costs and uncertainty created by this unconstitutional law and we must take all steps to resolve this issue immediately," said Cantor, the presumed incoming majority leader in the House.

But Jost said in the call with reporters that he sees that outcome as "very unlikely." He predicted that the appeals court will uphold the law.

Lawmakers React on Party Lines

Several Democratic lawmakers noted that previous challenges had been dismissed and said they were confident the law would be upheld by appellate decisions.

"There have been and will continue to be a wide range of attempts to weaken this law," said House Speaker Nancy Pelosi, D-Calif. "But as in previous court rulings across the country, I am confident that the Affordable Care Act will ultimately be sustained and will keep benefiting our middle class, our families, and our businesses, indeed every American. In Congress, we will stand firm against attempts to roll back the law, including the Patient's Bill of Rights and the critical consumer protections enacted by health insurance reform."

"A quality health care system for all Americans is built on the premise that responsibility is shared between employers, the government, and the individual," said House Ways and Means Committee Chairman Sander M. Levin, D-Mich. "Fourteen similar cases have been dismissed or decided in favor of the Affordable Care Act, recognizing the importance of a functioning, affordable health care market, and I am confident that after review at the appellate level, this case will also be decided in favor of the Affordable Care Act."

But Sen. Orrin G. Hatch, R-Utah, hailed the ruling as a victory for limited government.

"If the government can tell you what to buy, then what limits on federal power exist?" Hatch said. "The $2.6 trillion health law is an astonishing expansion of that power and bursts the limits that the Constitution imposes on the federal government."

Sen. Jim DeMint, R-S.C., called it the "beginning of the end for Obamacare." Sen. Charles E. Grassley, R-Iowa, who was the top Republican on the Finance Committee when the bill was passed by the Senate, said that the Congressional Research Service called requiring people to buy a good or service or be penalized a "novel issue."

Grassley added, "The ruling is likely to be appealed, but it's a clear signal that the constitutionality of the law, which was moved through Congress with a lot of controversy and partisanship, isn't as certain as its supporters have argued."

Rep. Fred Upton, R-Mich., praised the decision and promised many hearings on the law when he becomes Energy and Commerce chairman early next year.

"While the legal fights over the health care law are just beginning, our committee will vigorously weigh in and assert our oversight authority to ensure that the federal government is returned to its properly limited role," said Upton. "Our top priority in the new Congress will be repealing the job-killing health care law."

Arguments are scheduled for Thursday in a case in Florida federal court in which 20 states and the National Federation of Independent Business have challenged the individual mandate as well as the Medicaid expansion included in the law. Cuccinelli said that he expects that by the time new attorneys general and governors take office next year, more than half the states will join that suit. "I am not aware of that ever happening before" in an action against the federal government, he said.

Florida Attorney General Bill McCollum, the lead lawyer in the suit, said in a statement that it would cost states "hundreds of millions of dollars" to implement the law. States in 2020 will have to pick up 10 percent of the cost of those newly eligible for Medicaid under the law.