On Monday a federal judge in Virginia ruled that a key provision of President Obama’s health care reform that requires most Americans to purchase health insurance is unconstitutional. Judge Henry Hudson of the US District Court for the Eastern District of Virginia ruled that while states might be able to require individuals to purchase health insurance–a provision known as the individual mandate–there is no constitutional basis for the federal government to do so.

While Judge Hudson didn’t strike down the entire law, his decision may mark the beginning of the end for health care reform.

The key assumption behind the health care bill was that every citizen would be required to carry insurance, spreading the cost burden across almost all Americans. Without the individual mandate even popular provisions that prohibit insurers from denying coverage to those with preexisting conditions become economically unfeasible.

With no easy resolution in sight, the issue will inevitability end up before the Supreme Court unless Congress takes action. What it means for investors is that the health care sector will face significant volatility for some time. Health care-related exchange-traded funds (ETF) will likely bear the brunt of this uncertainty.

With a focus on managed care organizations, pharmacy benefit managers, diagnostic firms and hospital operators, iShares Dow Jones US Healthcare Provider ETF (NYSE: IHF) will be in for a bumpy ride as health care once again dominates the headlines. Insurers such as UnitedHealth Group (NYSE: UNH), WellPoint (NYSE: WLP) and Aetna (NYSE: AET) make up more than a third of the fund’s portfolio. As long as it appears that health care reform will be picked apart piecemeal or invalidated outright by the courts, look for the fund to take off.

What’s New

Direxion Shares launched three new funds last week: Direxion Airline Shares (NYSE: FLYX), Direxion Daily Gold Miners Bull 2X (NYSE: NUGT) and Direxion Daily Gold Miners Bear 2X (NYSE: DUST).

Aside from clever ticker symbols, the new funds offer little to long-term investors.

Airlines are notoriously bad long-term bets, though it’s true that there haven’t been any high-profile bankruptcies in the industry for some time. Direxion Airline Shares is a me-too fund, following in the footsteps of Guggenheim Airline ETF (NYSE: FAA). The Direxion offering however sports an expense ratio of 0.55 percent compared to 0.65 percent for the Guggenheim fund.

Direxion Daily Gold Miners Bull 2X and Direxion Daily Gold Miners Bear 2X are basically leveraged directional bets on the spot price of gold. As I’ve said before, I’m not a believer in leveraged funds because their frequent rebalances–daily rebalances in this case–can lead to unpredictable performance. But if you’re a short-term trader, you might fund this pair of funds useful.

Rydex Investments continued to fill out its stable of equal-weighted index products, with new additions that encompass the domestic Russell Index and the MSCI Emerging Markets Index. I’m fond of equal-weighted index ETFs because their structure mutes the capitalization bias found in so many index products. This stability makes equal-weighted products the definition of a portfolio’s core holding. The new additions include:

• Rydex MSCI Emerging Markets Equal Weight ETF (NYSE: EWEM)
• Rydex MSCI EAFE Equal Weight ETF (NYSE EWEF)
• Rydex Russell Midcap Equal Weight ETF (NYSE: EWRM)
• Rydex Russell 2000 Equal Weight ETF (NYSE: EWRS)
• Rydex Russell 1000 Equal Weight ETF (NYSE: EWRI)

The funds look promising and carry low expense ratios: 0.40 percent for the Russell-based funds, 0.55 percent for the MSCI EAFE fund, and 0.70 percent for the emerging markets offering. These ETFs should be extremely useful for investors running allocation-based strategies. Equal weighting an index helps investors avoid one of the pitfalls of index investing: Overvalued stocks receive outsized allocations while undervalued names get limited exposure.

Finally, Royal Bank of Scotland Group launched RBS US Large Cap Trendpilot ETN (NYSE: TRND). The exchange-traded note acts much like an absolute return fund. When the S&P 500 Total Return Index trades above its 200-day simple moving average for five consecutive trading days, the ETN will go long the S&P 500 Total Return Index. When the index trades below its 200-day simple moving average for five consecutive trading days, the ETN shifts its exposure to a three-month US Treasury bill index.

It’s an interesting strategy that should reduce volatility. But the ETN is more a novelty rather than a useful product for most investors. Its expense structure is also a bit unusual, accruing expenses at an annual rate of 1 percent when invested in the S&P 500 and 0.5 percent when invested in Treasury bills.