This week’s ruling by a federal judge could force Congress to rework the new health law to avoid a health insurance market collapse. But the decision had little to no effect on investor sentiment toward WellPoint Inc. and its peers.

Judge Henry Hudson in Virginia declared unconstitutional the individual mandate—the health reform provision that requires most Americans to purchase health insurance or else pay a fine. Hudson said that part of the law goes beyond Congress’ authority to regulate interstate commerce.

Hudson did not, however, declare the entire health care law unconstitutional, which leaves in place another new rule that requires health insurers to accept all customers regardless of their health status.

The ruling strikes at the heart of health reform. The grand bargain between President Obama and the health insurers in 2009 was to guarantee them millions of new customers (and generous subsidies) through the individual mandate in exchange for a ban on insurers’ turning away sick customers.

The insurers, led by Indianapolis-based WellPoint, soured on that bargain in the fall of 2009 when Congress reduced the fines for not having insurance to a level the insurers thought was too low to be effective.

But since Hudson did not strike down the entire law, his ruling leaves in place the ban on turning away sick customers, also known as medical underwriting. Nearly all—including the Obama administration—agree that having one provision without the other is a recipe for disaster.

“Banning medical underwriting without an individual mandate will wreak havoc on the market for individual insurance, perhaps causing many or most insurers to withdraw, as they’ve already done in the market for child-only insurance,” Mark Hall, a professor at the Wake Forest School of Law, wrote in a blog post.  “Despite all of that, the judge severed and struck only the individual mandate, leaving to Congress or administrative agencies the task of avoiding the train wreck of potential market collapse.”

In spite of such dire consequences, Wall Street shrugged at the ruling. WellPoint’s stock has been flat this week, closing Tuesday at $58.11. The stocks of other big health insurers also treaded water.

That’s because investors already expected Hudson, a George W. Bush appointee, to rule against the individual mandate. Two other federal judges had already dismissed legal challenges to the law. And a fourth case is pending in Florida.

“It has been clear for some time that this case was going to the Supreme Court and that this [ruling] is one stop on that path,” Les Funtleyder, who advises hedge funds on health care stocks for Miller Tabak & Co. in New York, wrote in a research note.

He acknowledged that Hudson’s decision could create “volatility” in the insurance markets, but said the fundamentals of the health insurance business are so strong right now, they will cloud out health reform news until at least the next election. In WellPoint's case, analysts are expecting the company to end the year with a profit of $2.8 billion, a 17-percent surge from last year, excluding a one-time gain in 2009 from selling a subsidiary.

“With respect to the managed care stocks, we believe until the 2012 election fundamentals will trump what will be a very noisy political environment,” Funtleyder wrote. “We continue to have a constructive stance on the group.”