Yesterday, Virginia Judge Henry Hudson found the individual health care mandate – a key part of national health care reform proposed by President Obama – unconstitutional. Putting the kibosh on this mandate, namely the provision that says Americans without health coverage must purchase their own insurance starting in 2014, may be the first in a line of rulings on the constitutionality of the Obama-care law and its impact on states.

A proud Ken Cuccinelli, Virginia’s Attorney General, claimed victory saying the ruling was the right thing for Virginians who now won’t be forced to buy health insurance. He said Congress had gone too far and that it was unfair to require individuals to purchase a product from a private entity – in this case – an insurance company.

Judge Hudson agreed, ruling that the health care mandate exceeds the federal government’s authority under the “Commerce Clause” and that it was beyond Congressional power under the Constitution.

The focus of the ruling was on economic activity. The judge felt the federal government was attempting to regulate your decision to do nothing. As “doing nothing” isn’t doing anything that affects commerce, such a mandate on ordinary people is beyond the scope of the commerce clause. This puts insurance companies in a bit of turmoil. Under the new law, they would have been required to cover people who are sick while healthy people would be required to have insurance by 2014. If there’s no mandate, people would have the choice to wait until they get sick before purchasing coverage.

The ruling opens the door to arguments over whether parts of the law imposed as mandates are actually a “tax” or a “penalty” (think “tax” and “fee” in California terms).

The U.S. Department of Justice says they still think the law is constitutional and that Congress acted within its authority. However, if the individual mandate is unconstitutional, there is no way the law can get its intended funding. Congress could have passed a tax bill at the time they passed the health care bill, but fearing backlash from voters on the Obama agenda, Congress used this bill to circumvent that vote. Now, it’s all under review.

The law, its challenges, and its constitutionality are reminiscent of the California legislature’s attempt at single payer health care and its judicial challenges on employer mandates under ERISA at the U.S. Department of Labor. That time the federal government was run by the Bush Administration whose legal minds stopped the California employer mandate.

Watch for Florida’s expected ruling later this week. Florida Attorney General Bill McCollum, a former Member of Congress is in the driver’s seat. Nineteen other states are also in the middle of lawsuits. McCollum expects Judge Vincent (Florida) to rule similarly and potentially also challenge another provision – a federal mandate to add 1.9 million Floridians to health care rolls under Medicaid. McCollum says this will cause billions of dollars more in economic burden on states and their taxpayers.

In January, a new Congress run by the Republicans will evaluate where they are in the process. Who knows – it may open the door for further discussions offering consumers increased flexibility in the form of health savings accounts and association health plans – key proposals small businesses support. It will be an interesting New Year.