President Obama said the law enshrines "the core principle that everybody should have some basic security when it comes to their health care."

The nonpartisan Congressional Budget Office said the legislation would extend coverage to 32 million Americans who lack it now. It will ban insurers from denying coverage on the basis of pre-existing medical conditions and from dumping policyholders if they become ill.

However, opponents vowed to continue fighting to stop the law's implementation–particularly the mandate, beginning in 2014, to purchase insurance or face a penalty.

Virginia Gov. Bob McDonnell signed legislation outlawing the U.S. government from requiring state residents to buy medical insurance, while 14 state attorneys general, including Virginia's, filed federal court lawsuits to overturn the new law.

The Virginia measure states in part that no resident "shall be required to obtain or maintain a policy of individual insurance coverage except as required by a court or the Department of Social Services…"

Virginia Attorney General Ken Cuccinelli filed a lawsuit in U.S. District Court in Richmond, arguing the Virginia law is valid despite the Supremacy Clause in the U.S. Constitution because the federal act is unconstitutional. The suit argues that the federal health reform law is an impermissible overreaching of the government's ability to regulate U.S. business under the Commerce Clause.

In Florida, a suit challenging the reform law was filed in U.S. District Court in Pensacola by 12 Republican attorneys general and one Democrat.

The Democrat who signed on was Attorney General James Caldwell of Louisiana, who said he did so after Republican Gov. Bobby Jindal made a request, which he agreed with.

The filing argues that the health reform act is an "unprecedented encroachment of the sovereignty of the states," and that it has a tax penalty for the uninsured that violates sections of the Constitution.

White House Domestic Policy Chief Melody Barnes was quoted by Associated Press as saying of the suits, "Bring it on," adding: "If you want to look in the face of a parent whose child now has health care insurance and say we're repealing that…go right ahead." She also cited the failure of legal challenges brought after passage of Social Security and the Voting Rights Act.

Senior White House adviser David Axelrod commented that every single major piece of legislation "that's ever been passed in this country has engendered lawsuits. That's the nature of our system, and we expected that. We're not concerned about these lawsuits."

Robert P. Hartwig, president of the Insurance Information Institute, noted that the majority of states have not sued, and he said he believed that legally such a challenge is "a steep uphill climb."

Some insurers may agree and some may disagree with the legislation, "but ultimately every industry is going to adjust to the new health care bill," he added.

Among the provisions that insurers should appreciate, he said, is one that allows them to charge smokers 50 percent more for coverage. "They have to pay more, [just] like a bad driver," he noted.

Another provision provides that employees enrolled in a company wellness program or meeting certain health standards can get a 30 percent reduction in premiums, which could prove to be a benefit for disability and workers' comp insurers if it prods employees to improve their health and lower their number of claims.

"The American work force is a ticking time bomb. In many states the majority of the work force is overweight," which produces more medical claims, he noted.

David Sampson, president and chief executive officer of the Property Casualty Insurers Association of America, lauded Congress' decision to exclude from the bill provisions repealing the exemption from antitrust provisions afforded to health insurers under the McCarran-Ferguson Act.

"We appreciate that Congress recognized repealing McCarran-Ferguson would not provide any benefits to the consumer or the insurance marketplace," he said.

However, insurance and employer groups voiced deep concerns over what they see as a lack of provisions in the new law designed to reduce costs, as well as impose a higher tax burden on small businesses.

Karen Ignagni, president and CEO of America's Health Insurance Plans, said "the access expansions are a significant step forward, but this legislation will exacerbate the health care cost crisis facing many working families and small businesses."

The Independent Insurance Agents and Brokers of America's president and CEO, Robert Rusbuldt, said the measure "does little to stem the skyrocketing cost of health care, and will be financed on the backs of small businesses during one of the most delicate financial periods in American history."

Under the legislation, for the first time the Medicare payroll tax would be applied to investment income, beginning in 2013. The reconciliation bill would also impose a new 3.8 percent tax on interest, dividends, capital gains and other investment income for individuals making more than $200,000 a year and couples making more than $250,000.

The bill will increase the Medicare payroll tax by 0.9 percentage point to 2.35 percent on wages above $200,000 for individuals and $250,000 for married couples filing jointly.

"A tax increase, especially during today's tough economic climate, will put many small businesses in the untenable position of deciding between job cuts, employee pay cuts, or shutting their doors," said Charles Symington, IIABA's senior vice president of government affairs. "Health care reform should not be financed on the backs of small businesses that are struggling to make ends meet in this very difficult economic time."

Janet Trautwein, CEO of the National Association of Health Underwriters, said the bill that became law last week "does little" to truly rein in health care costs. She also said the bill contains "an unworkable individual mandate which will encourage people to wait until they are sick to purchase coverage, causing premiums to skyrocket significantly for everyone."

Joel Kopperud, director of government relations at the Council of Insurance Agents and Brokers, said that "while the bill is significantly flawed and risks damaging the employer-provided benefits system, we're relieved to see the role of agents and brokers secured in the state exchanges, and a workable minimum medical loss ratio."

However, he said he hoped Congress would "strengthen the weak mandates that were included in the Senate bill" as part of the reconciliation measure. Without stronger mandates, he said, "the market reforms that are effective immediately may result in even higher premiums."

Tom Currey, president of the National Association of Insurance and Financial Agents, said that NAIFA members "are pleased that Congress has recognized the positive role that health insurance agents can play in helping small businesses and individuals acquire appropriate health insurance plans," noting that the bill makes it possible for agents to continue to perform their traditional role.

James Klein, president of the American Benefits Council, said the "truth about the bill is more complicated than that voiced by its supporters and critics."

He said the legislation "significantly expands coverage for millions of Americans, and takes steps toward aligning what we pay for health care and the quality of those services." However, he added, several provisions will inevitably increase, rather than mitigate, health care costs. "The overall financial integrity of the measure depends on future Congresses and presidents making very tough political decisions," he said.

One of the most controversial provisions in the reconciliation bill–one that would allow the Department of Health and Human Services to pre-empt state rate regulation–was deleted. Health insurance industry officials told National Underwriter it was left out because the Senate parliamentarian ruled that including such a provision would not comply with the rules that only budgetary issues be considered in the reconciliation process.

Among other provisions critical to the industry in the reconciliation measure, the medical loss ratio will be 85 percent for Medicare Advantage plans, meaning 85 percent of premiums must be spent on purchasing medical services. Otherwise, the MLR provisions track with the Senate-passed bill–85 percent for plans of more than 100; 80 percent for small plans.

REGULATOR REACTION

State insurance commissioners said they will work to implement aspects of federal health care reform where they are required to do so, but acknowledged that state legislatures could still challenge the reforms.

Oklahoma Commissioner Kim Holland, who is secretary/treasurer of the National Association of Insurance Commissioners, said during the teleconference she expects her state's legislature may push back against the upcoming federal law. Oklahoma is a conservative state, and the health care reform bill represents "extraordinary preemption," she said.

In that case, she said, it is the role of insurance commissioners to provide impartial information as it is requested so the legislators can make decisions.

In agreement was Kansas Insurance Commissioner Sandy Praeger, who chairs the NAIC Health Insurance and Managed Care Committee, explaining that regulators are responsible for making sure when legislatures do make decisions, they are based on accurate information and experiences from insurance departments.

Speaking to the threats of lawsuits that have cropped up from some states since the passage of the bill in the House of Representatives, Commissioner Praeger said such actions will not delay insurance commissioners from beginning work on implementing reforms where they are required to do so.

Jane Cline, NAIC's president and West Virginia's insurance commissioner, said her department is "going to be proactive in making sure we move forward in areas identified for us to move forward."

But Commissioner Holland said there are still issues that will require action from state legislatures, and the speed of implementation could differ among the states, depending on how legislatures react.

Speaking to the bill itself, Commissioner Praeger said the biggest impact will be protections afforded to consumers in the individual market. For example, she said consumers who want to leave their job to start their own business will be able to do so without worrying whether a pre-existing condition will complicate obtaining medical coverage.

As far as costs, Commissioner Praeger said there should not be any big changes in employer-based health coverage. Any impact in that arena, she said, could be positive if more people are insured.

But with the rating bands in the individual market established by the reforms, Commissioner Praeger said healthy young people may have to pay more at first, as the law stipulates they can only be charged a third of what an older person is charged.

Commissioner Holland said inadequate penalties for not buying coverage may not provide the proper motivation to get "young invincibles" into the marketplace.

Commissioner Holland also said an area of criticism has been the lack of focus on reducing costs. She said many of the reforms will actually increase premium costs. While out-of-pocket costs may be reduced by the reforms, insurance costs are likely to be "substantially more," and she said there is concern among many that the cost of the bill will loom to a larger extent than predicted.

(Additional reporting by Phil Gusman.)