Obama signs historic healthcare overhaul into law

WASHINGTON (Reuters) - A jubilant President Barack Obama signed the most sweeping U.S. social policy legislation in decades into law on Tuesday, putting his name on a healthcare bill that will help shape his legacy and the Democrats' chances of holding on to power in Congress.

"We have now just enshrined, as soon as I sign this bill, the core principle that everybody should have some basic security when it comes to their healthcare," Obama said in a ceremony in the East Room of the White House, with Democratic members of Congress and other supporters cheering.

Fourteen states quickly filed suit in federal court to challenge the law, arguing that it undercuts states' rights, and congressional Republicans, who had unanimously opposed the bill, vowed to keep fighting it.

Designed to revamp the $2.5 trillion U.S. healthcare industry, the law will extend health insurance to 32 million Americans who currently have none. It will bar practices like insurers' refusing coverage to people with pre-existing medical conditions, expand the Medicaid government health insurance program for the poor, and impose new taxes on the wealthy.

The law will require people to obtain health coverage, impose fines on those who don't and provide federal subsidies to help low and middle-income families afford the insurance.

Republicans fought bitterly but failed to prevent Democrats in Congress from passing the bill on Sunday. Republicans hope public skepticism over the measure will help them regain control of Congress in November's elections.

The Senate began debating a package of changes aimed at improving the $940 billion overhaul. Republicans have vowed to fight those changes, but Democratic leaders say they are confident they have the votes to pass the package.

Democrats are using special budget rules that allow a simple 51 vote majority to pass the package instead of the 60 usually needed in the 100-member Senate to approve controversial bills. Republicans have vowed a flurry of amendments to alter the package and force it back to the House of Representatives for another vote.

State attorneys general -- all but one of them Republicans -- filed two separate suits challenging the law on the grounds that it violates states' rights enshrined in the U.S. Constitution. Thirteen sued in Florida minutes after Obama signed the bill. Virginia brought its own case.

The Justice Department will "vigorously defend" the new healthcare law and is "confident that this statute is constitutional," spokesman Charles Miller said in a statement.

Critics said Congress lacks authority to require people to purchase health insurance.

"It forces people to do something -- in the sense of buying a health care policy or paying a penalty, a tax or a fine -- that simply the Constitution does not allow Congress to do," said Florida Attorney General Bill McCollum, a Republican who is running for governor.

ELECTION ISSUE

Republicans vowed to make the new law a major campaign issue in the upcoming congressional elections.

Senate Majority Leader Mitch McConnell said the Republican campaign slogan for November would be "repeal and replace," acknowledging that many feel that at least some change is needed to the current costly healthcare system.

Meanwhile, the liberal Health Care for America Now advocacy group joined the American Federation of State, County, and Municipal Employees (AFSCME) to launch an ad campaigns thanking Democrats who voted for the bill. The AFL-CIO, a federation of labor unions, said it would undertake a massive telephone campaign also thanking House Democrats who backed it.

The healthcare revamp was the latest step in a series of Democratic moves to drive the United States "down a road toward a European-style government," said Republican Senator Judd Gregg told reporters.

The drive "started off by essentially quasi-nationalization of the financial system, nationalization of the automobiles, quasi-nationalization of the health industry, and now this bill has in it, which nobody has focused on, the nationalization of the student loan industry," he said.

The "reconciliation" package of healthcare changes being debated by the Senate also would revamp the federal student loan program to end government subsidies to private lenders, shifting almost all student loan activity to the government.

As investors digested the healthcare law, the Morgan Stanley Healthcare Payor index of insurers was down about 1 percent in a roughly flat broader market. Shares of Coventry Health Care were down 1.4 percent and Humana was off 1.0 percent.

A USA Today/Gallup Poll said Americans by 9 percentage points have a favorable view of the new law. By 49 to 40 percent, they say it was "a good thing" Congress passed the bill, USA Today said. That is better than earlier polling data showing public skepticism about the overhaul.

Obama used an unusually large number of pens -- about 20 -- to sign the measure. They will be distributed as souvenirs, many to legislators instrumental in pushing it through.

He continued his victory tour at a second ceremony as he launched a publicity blitz that Democrats hope will overcome widespread public doubt about the overhaul.

Obama urged Americans wary of reform and those he said had been confused by "all the noise" to check the facts. "I'm confident you'll like what you see," he said.

(Additional reporting by Jeff Mason and Alister Bull in Washington, Jane Sutton in Miami and Lewis Krauskopf in New York; editing by Caren Bohan, Anthony Boadle and Chris Wilson)