KING: It's been less than a week since President Obama signed health insurance reform into law and already it looks like the administration's worried insurance companies might be looking for loopholes. The administration's point person in this fight the Health and Human Services Secretary Kathleen Sebelius joins me now to go "One-on-One".

Madam Secretary, thank you. I'm going to hold up a copy of what I will call a "don't you dare" letter that you sent to the insurance industry tonight essentially saying you're worried that they're looking for loopholes specifically to the provision that says you cannot deny a child coverage for a pre-existing condition or not allow them to be on their parent's insurance policy because of a pre- existing condition. Do you know they were trying to do this or do you just suspect it?

KATHLEEN SEBELIUS, HHS SECRETARY: Well there was some discussion in a couple of articles over the weekend, John that suggested that companies were looking at the legislative language. And we just thought it was appropriate as we are in the process of developing regulations for the policy that will be the law in September of this year to make it very clear that parents shouldn't worry.

The law is that children with pre-existing conditions must be covered under their parents' policies. The services that they need for those pre-existing conditions must be covered. The regs will be out shortly to make that very clear. But in the meantime, we thought it was appropriate to put the companies on notice that that's the legislative intent, that's what we intend to do, we intend to follow the law.

KING: I want to read a line from your letter. "Now is not the time to search for nonexistent loopholes that preserve a broken system" -- doesn't sound like there's much trust at all between the administration and the insurance industry here. Do you believe that's what they're doing, reading the fine print looking for any ambiguity in the language they can?

SEBELIUS: Well, again, we had seen some articles which suggested just that is going on and I think it's fair to parents to tell them good news is on the way. Six months from the date that the president signed the bill, which was March 23rd, this is the new policy of the land, that if you have an insurance policy your child cannot be excluded because of his or her pre-existing condition, nor can the treatments that they need be excluded. And lots and lots of parents are anxious for that day in September to come. We want to make it clear that it is coming. That's what the regulations will say. That's what Congress and the president intended. And that's what the law will say.

KING: Help us understand the scope of your challenge now. You mentioned on this particular issue, children's coverage that you're working on the regulations. How much more authority, how much more power and how much of a task do you have now in implementing it through all these regulations?

SEBELIUS: Well the good news for Americans is that there are lots of these provisions that actually begin in 2010. We've talked about the kids with pre-existing conditions. We're about to put states on notice that they'll be eligible to receive some funding for high risk pools. So adults right now who don't have insurance because of a pre-existing condition will have some safety net coverage.

We've got changes in Medicare that are coming this year. We've got new rules for insurance companies about dropping people from coverage or stopping treatments in the middle of coverage, so we've got -- we've got a job to make sure and get these notices out quickly in a timely fashion and -- but as the president said, to do it right, to make sure that the rules are understood, implemented and that we publicize what's going to happen to Americans.

We look forward to having a very robust Web site to having a lot of information to answer people's questions online. But it's going to be a step-by-step process to get the new pieces of the puzzle in place. The good news for working Americans, health security is on the way, but also to get the regulations written so it happens.

KING: If you listen to the administration's Republican critics and some critics out in corporate America, AT&T, Deere, Caterpillar among the companies that have said look, under this bill our health care costs are going to go way up and they're taking charges. Do the Republicans have a point; do those companies have a point that at least in the short-term there could be an adverse economic impact here?

SEBELIUS: Well one of the things that companies are looking at is a change in the tax deduction. They have been actually taking tax deductions on money that the government has given them in the first place. That will cease under this bill. And the way accounting rules work, John, is they have to notice shareholders that that's going to come over the next 30 years, so they have to put them on notice.

When we talked to company execs, they admit at the outset that what they will give up in terms of closing that kind of a loophole on tax benefits is well overcome by the kind of savings they're looking at with not only incentives for businesses to keep health insurance for their employees, but the kind of wellness and prevention efforts to lower costs in the long run. So on balance, I think it's very good news. Small business owners are one of the big recipients of some of these early benefits. And again, we want to get that word out that four million business owners this year are eligible for tax credits to bring them back into the insurance market, to help them buy health insurance for their employees. They should plan for it right now because it's going to be available for tax year 2010, and we think that's very good news.

KING: You are a former governor who under administrations both Democratic and Republican would be among the governors sometimes raising their hand in the State Capitol saying Washington please stop sending mandates our way. Do you have any concerns at all that these challenges being mounted mostly be Republican governors and Republican attorneys general, but do you have any concern at all that they might have a point, that Washington does not have the authority to tell states that people must buy insurance?

SEBELIUS: Well in talking to our legal team I'm well convinced that this bill is on solid constitutional grounds. There is plenty of precedent for having this kind of effort move forward. And I think this is one of the most state friendly pieces of legislation that I certainly have seen in a long time. I was, as you say, a recipient of a lot of Washington mandates.

There is no expectation that a state have to do anything until the year 2014, and at that point, the first several years are 100 percent federally funded. I've never been in a situation as a governor where that kind of partnership was anticipated, that exchanges start at the state level, insurance regulation is assumed to be at the state level. We're actually putting money on the table right now to help states provide for some of these changes to take place.

So I think this is a collaborative effort. I look forward to working with my former colleagues, both insurance commissioners and governors because I've served as one of each.

KING: Secretary of Health and Human Services Kathleen Sebelius. Madam Secretary, thanks for your time tonight.

SEBELIUS: Great to visit with you.