On December 13, 2010, Judge Henry E. Hudson of the U.S. District Court for the Eastern District of Virginia declared portions of the Patient Protection and Affordable Care Act (PPACA) unconstitutional. The lawsuit challenging PPACA’s “individual mandate,” which, starting in 2014, requires citizens to pay a penalty if they do not purchase health insurance, was brought by Virginia’s Attorney General, Ken Cuccinelli.

Cuccinelli argued the federal government does not have the constitutional authority to impose the individual mandate. This marks the first decision by a judge striking down any portion of PPACA. Final resolution on the “individual mandate” will not be immediate. Two other federal courts recently rendered decisions upholding PPACA and observers unanimously agree the Supreme Court eventually will determine PPACA’s constitutionality. Many commentators have suggested for months that, regardless of how the legal issues play out, the relatively modest penalties imposed by the individual mandate would prove insufficient to cause uninsured people to buy health insurance (particularly younger and healthier people) and that Congress might well delay the implementation of the mandate for political reasons.

The December 13 decision needs to be studied carefully, and in relationship to all of the components of the recently enacted U.S. health care reform law. How and to what extent this ruling affects other aspects of the health reform bill, either directly through legal susceptibility or indirectly due to the practical interdependence of the parts, is yet to be seen. What is critical, however, and should not be lost in the headlines, is that the result of the PPACA legislation is a transformation of how employers, consumers, insurance companies and providers work together to meet the demand for health care services that can be delivered at lower cost, with higher quality and with outcomes that can be measured that will then serve as a basis for payment.

Regardless of the constitutionality of the insurance mandate, hospitals, physicians and public and private insurers are being pushed and pulled by the market, as well as new government programs, to develop alternatives to fee-for-service payment models. Patients, employers and public and private insurers will continue to demand that providers focus on outcomes, cost reduction and quality of care. The underlying market reality will continue to demand that the quality curve bend up and the cost curve down.