RICHMOND, Va. (AP) -- Virginia's lawsuit challenging the Obama administration's health care reform package cleared its first legal hurdle Monday when a federal judge ruled the law raises a host of complex constitutional issues.
Virginia Attorney General Ken Cuccinelli claims in the lawsuit that Congress doesn't have the authority to require citizens to buy health insurance or pay a penalty.
U.S. District Judge Henry Hudson's ruling denied the Justice Department's attempt to have the lawsuit dismissed, saying further hearings were needed to weigh the merits of the case. An Oct. 18 hearing had previously been set.
"Unquestionably, this regulation radically changes the landscape of health insurance coverage in America," Hudson wrote in his 32-page decision.
The Virginia General Assembly passed legislation this year exempting state residents from the federal coverage mandate. Hudson wrote that the attorney general had a right to defend that state law.
Cuccinelli announced in March that he would challenge the national law. More than a dozen other state attorneys general have joined to file a separate lawsuit in Florida against it, but Virginia's is the first to go before a judge.
Hudson said Virginia's case raises constitutional issues -- mainly whether Congress has the right under the Commerce Clause to regulate and tax a person's decision not to participate in interstate commerce.
The health care law aims to ensure coverage for all, requiring most U.S. residents to carry insurance starting in 2014.
Insurers would not be able to refuse coverage for sick people under the law, which also expands Medicaid to help the poor. It also provides tax credits to help middle-class residents pay premiums. People facing financial hardship would be exempt from the coverage requirement. However, people who can afford insurance but refuse to sign up would face a tax penalty.
On Monday, Health and Human Services Secretary Kathleen Sebelius said during a teleconference that Hudson's decision was a procedural step that cleared the way for a hearing.
"We remain confident that the case is solid and there is full constitutional backing for the passing of the Affordable Care Act," she said.
Stephanie Cutter, a veteran political operative tapped by Obama to guide efforts to explain the law's benefits, wrote in a White House blog post that the government expected to prevail.
"We do not leave people to die at the emergency room door -- whether they have insurance or not," she wrote.
Republican Gov. Bob McDonnell, a former state attorney general who enthusiastically supported the lawsuit, praised the ruling. So did Cuccinelli, who said during a news conference he hoped the courts would ultimately rule that the federal government exceeded its powers.
"We've won this round," he said. "We recognized there are plenty of rounds left to go."
Shortly after he took office in January, McDonnell signed into law the legislation intended to block the requirement that individuals buy health insurance. It was the first such legislation in the U.S. to take effect as a state law.
Supporters of the federal legislation began questioning Hudson's impartiality on Monday, noting that he had received dividends between 2003 and 2008 on stock he owned in Campaign Solutions Inc., a company Cuccinelli paid $11,191 to for website services during his attorney general campaign.
The Alexandria-based firm is headed by Republican consultant R. Rebecca Donatelli.
Donatelli said in a statement that Hudson was a "passive investor" who had owned stock for the past 13 years. The judge, who was appointed to the federal bench in 2002 by former President George W. Bush, had no knowledge of the firm's day-to-day operations.
Walter Dellinger, a Harvard University and Duke University law professor, said he disagreed with Hudson's ruling but that it was not necessarily of great consequence. Speaking on a news conference call sponsored by the liberal Center for American Progress, Dellinger said the lawsuit didn't have merit because the federal law doesn't put a burden on Virginia's government.
"You can't just pass a law and create a lawsuit where none (cause of action) exists before," Dellinger said. He compared it to past legal attempts by some states to thwart federal civil rights and voting rights laws.
If Virginia's lawsuit prevails, Dellinger said, "it could be that any state could pass any statute declaring any federal law -- whether it's the Selective Service law or the Social Security law -- invalid in that state and then allow that state to bring a lawsuit to challenge the federal law."
Health officials say an estimated 1.2 million uninsured Virginians will gain coverage under the new health care reform law, 684,000 residents will qualify for tax credits to help them buy insurance, and 93,400 small businesses in the state could get tax credits for coverage for their employees.